DENNY WIEKHORST EQUIPMENT v. TRI-STATE

• Decision Date: 25 February 2005
• Docket Number: No. S-03-1114.,S-03-1114.
• Citation: 693 N.W.2d 506,269 Neb. 354
• Parties: DENNY WIEKHORST EQUIPMENT, INC., a Nebraska corporation, appellant and cross-appellee, v. TRI-STATE OUTDOOR MEDIA GROUP, INC., appellee and cross-appellant.
• Court: Nebraska Supreme Court

693 N.W.2d 506

269 Neb. 354

DENNY WIEKHORST EQUIPMENT, INC., a Nebraska corporation, appellant and cross-appellee, v. TRI-STATE OUTDOOR MEDIA GROUP, INC., appellee and cross-appellant.

No. S-03-1114.

Supreme Court of Nebraska.

February 25, 2005.

William E. Gast, of William E. Gast, P.C., L.L.O., Omaha, and Gene M. Eckel, for appellant.

Richard A. Drews, of Taylor, Peters & Drews, Omaha, for appellee.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, and MILLER-LERMAN, JJ.

WRIGHT, J.

NATURE OF CASE

The Douglas County District Court enjoined Tri-State Outdoor Media Group, Inc. (Tri-State), from removing an advertising structure (billboard) on land owned by Denny Wiekhorst Equipment, Inc. (Wiekhorst), until on or after July 2007. The court also ordered Tri-State to pay annual rent in a sum equaling 25 percent of the annual gross rent it received for advertising fees. Wiekhorst timely appealed, and Tri-State has filed a cross-appeal.

SCOPE OF REVIEW

An action for injunction sounds in equity. In an appeal of an equity action, an appellate court tries the factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court. Rath v. City of Sutton, 267 Neb. 265, 673 N.W.2d 869 (2004).

FACTS

In 1985, Western Outdoor Advertising Company (Western) erected a billboard on property owned by Roy A. Smith, who operated H.P. Smith Motors. The billboard measures 14 by 48 feet and has two faces. It is attached to a 36-inch diameter, single-pole all-steel structure. The property on which the billboard is located overlooks Interstate 80 in Omaha, Nebraska.

The lease agreement between Western and Smith, dated July 1, 1985, provided for an initial 5-year term, renewable for "an additional" 5-year period, in the event that Western gave written notice of its intention to exercise the option to renew at least 10 days "prior to the expiration of the initial five-year period of this lease." The lease stated that Western was to pay rent of $1 per year, in return for which Smith received a discounted rate on advertising his business on the billboard. The lease was renewed once for a 5-year term beginning on November 11, 1991. The record does not indicate that any party attempted to renew the lease after this first renewal.

The record is unclear as to the precise date, but in 1997 or 1998, Tri-State purchased Western, allegedly acquiring its property, equipment, structures, and display and lease contracts. There is no evidence in the record concerning this transaction, and we are unable to determine what Tri-State actually purchased. Tri-State had no communication with Smith concerning its acquisition of Western's leases. Tri-State continued to renew permits to operate the billboard and to collect advertising fees without rendering payment of rent or other consideration to Smith. Nor did Tri-State account to Smith for advertising fees received. Smith sold his automobile dealership in 1997, and he had apparently forgotten about the lease until he was contacted by Wiekhorst about purchasing the property on which the billboard stands.

On or about April 25, 2002, Tri-State filed for bankruptcy protection under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Middle District of Georgia, Columbus Division.

In July 2002, Wiekhorst purchased the real estate upon which the billboard is located from Smith for $500 in cash and a $7,000 donation to a charity of Smith's choice. The warranty deed was recorded on July 31. The property is approximately 5 feet wide at one end and 28 feet wide on the other, and approximately 60 feet long. One of the co-owners of Wiekhorst stated that the property is of little use for any purpose other than a billboard.

Wiekhorst sought relief from the automatic stay of the bankruptcy court and asked for a determination that the lease agreement concerning the billboard was terminated or had expired. In Tri-State's proposed chapter 11 plan, it sought to assume the alleged executory contract or unexpired lease at issue. Wiekhorst objected. The bankruptcy court found that the lease between Smith and Western had terminated or expired prior to the filing of the bankruptcy action, so there was no executory contract or valid unexpired lease for Tri-State to assume or reject. For this reason, the bankruptcy court granted Wiekhorst relief from the stay and sustained its objection to Tri-State's proposed assumption of the alleged lease. The bankruptcy court directed Tri-State to pay Wiekhorst an administrative fee of $3,600, based on $600 per month for 6 months.

Wiekhorst subsequently learned that Tri-State intended to remove the billboard from the property. Wiekhorst agreed, but insisted that removal could be accomplished only by compliance with certain conditions. The parties were unable to agree on the proper method of removal.

On February 28, 2003, Tri-State sent crews to Omaha to simply cut off the billboard pole at the ground and leave the foundation buried in the ground. Tri-State was prevented by Wiekhorst from entering the property to remove the billboard and subsequently claimed that it was damaged in the amount of $2,550 for expenses incurred, including labor and travel for the crews sent to remove the billboard.

On April 8, 2003, Wiekhorst filed an amended petition in Douglas County District Court, in which it stated that Tri-State claimed some ownership rights in the billboard through a lease agreement entered into on or before July 1, 1985, by and between Smith and Western. Wiekhorst alleged that Tri-State and/or Western had been in breach of the obligations stated in the lease agreement and that no consideration had been paid under the lease agreement since at least July 1997. Wiekhorst alleged that the lease agreement specifically provided that the billboard at issue was a part of the demised premises which reverted to the owner of the property upon expiration or breach of the lease. Wiekhorst asserted that it was the owner of the billboard and that Tri-State had no right to remove it.

The trial court found that the value of the property was totally dependent upon its use as a site for advertising and that if the billboard were removed 18 years after its construction and after changes to the Omaha Municipal Code, the property would become worthless. It found that Wiekhorst, as the owner of the property, would suffer irreparable injury if Tri-State were allowed to remove the billboard.

The trial court found that the billboard had not been removed during the term of the lease or any extension thereof and that there had not been any attempt to remove the billboard within a reasonable time after the expiration of the lease. It also found that Tri-State continued to collect fees for billboard advertisements without paying rent to the owner of the property.

The trial court concluded that Tri-State had conducted business after expiration of the lease as if it had a "de facto lease" with the landowner, first Smith and then Wiekhorst. It therefore enjoined Tri-State from removing the billboard from Wiekhorst's property until on or after July 2007, the completion of the fifth year of the parties' de facto lease. Tri-State was ordered to pay annual rent to Wiekhorst in a sum equaling 25 percent of the annual gross rent received by Tri-State for advertising fees.

As to Tri-State's counterclaim, the trial court found that Tri-State should not have dispatched sign removal crews to Omaha until a mutual agreement concerning removal had been reached. Since the parties had not agreed as to the method of removal, Tri-State was on notice that Wiekhorst would not consent to Tri-State's planned method of removal. The court dismissed Tri-State's counterclaim with prejudice.

Wiekhorst appeals from the order, and Tri-State has filed a cross-appeal.

ASSIGNMENTS OF ERROR

Wiekhorst asserts that the trial court erred (1) in finding that a 5-year de facto lease existed between the parties, notwithstanding the fact that on February 19, 2003, the U.S. Bankruptcy Court for the Middle District of Georgia found that there was no valid unexpired lease from and after the April 2003 filing of Tri-State's bankruptcy petition; (2) in ruling that Tri-State owned the billboard at the time of trial, notwithstanding the fact that Tri-State failed to remove it within a reasonable time following the July 2000 expiration of the lease between the parties' predecessors in interest; and (3) in ruling, in effect, that Tri-State could remove the billboard at the termination of a de facto lease in July 2007.

On cross-appeal, Tri-State asserts that the trial court erred (1) in finding that a 5-year de facto lease existed between Tri-State and Wiekhorst from and after July 2002, after it was determined on February 19, 2003, by the bankruptcy court that there was no valid unexpired lease between the parties; (2) in finding that Tri-State failed to remove the billboard within a reasonable time after expiration of the lease, without determining that Tri-State had ever abandoned the billboard; (3) in finding that Wiekhorst would suffer irreparable harm without an adequate remedy at law, which would justify injunctive relief preventing Tri-State from removing the billboard until July 2007; and (4) in denying Tri-State recovery of expenses incurred in sending crews to Omaha to remove its billboard, when the crews were prevented from doing so by a temporary restraining order obtained by Wiekhorst in violation of the automatic stay in Tri-State's bankruptcy case.

ANALYSIS

Wiekhorst commenced this action in Douglas County District Court seeking an injunction and other equitable relief. An action for injunction sounds in equity. In an appeal of an equity action, an appellate court tries the factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court. Rath v. City of Sutton, 267 Neb. 265, 673 N.W.2d 869 (2004).

We first...