Hicks v. Brookings Mall, Inc.

• Decision Date: 19 April 1984
• Docket Number: No. 14357,14357
• Citation: 353 N.W.2d 54
• Parties: Darla Patrick HICKS, Plaintiff and Appellee, v. BROOKINGS MALL, INC., a corporation, Defendant and Appellant. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 54

353 N.W.2d 54

Darla Patrick HICKS, Plaintiff and Appellee, v. BROOKINGS MALL, INC., a corporation, Defendant and Appellant.

No. 14357.

Supreme Court of South Dakota.

Considered on Briefs April 19, 1984.

Decided Aug. 15, 1984.

Robert G. Fite, Brookings, for plaintiff and appellee.

Ronald C. Aho, Brookings, for defendant and appellant.

HENDERSON, Justice.

This is an appeal from a declaratory judgment cancelling a written lease on space rented for a shoe store in the Brookings Mall located at Brookings, South Dakota. We affirm.

Appellant, Brookings Mall, Inc., operates a shopping mall. Appellee Hicks operates a shoe store within the Brookings Mall under an assigned lease agreement. The lease agreement was originally entered into between the Mall and Lee and Connie Colburn on October 10, 1977, which lease was a partially preprinted, standard form lease prepared by appellant.

Under the terms of the lease agreement, the lease period commenced on February 18, 1978, and was to continue for ten years following January 31, 1979, unless sooner terminated pursuant to the terms of the agreement. A critical clause of the lease stated as follows:

LANDLORD grants unto TENANT the right to cancel this Lease Agreement upon ninety (90) days' notice, at the end of the fourth full lease year, if TENANT's gross sales are not in excess of Seventy Thousand Dollars ($70,000) per year.

In October 1982, and pursuant to this provision, appellee notified appellant that she wished to cancel the lease agreement effective January 31, 1983.

A dispute arose between the parties as to whether the requirements for cancellation had been met. Appellee, therefore, instituted an action for declaratory judgment to determine her rights under the lease. Judgment was rendered by the trial court declaring appellee had the right to cancel the lease agreement as of January 31, 1983.

Two questions are posed by this appeal: (1) Did the trial court err in determining appellee had met the requirements for early cancellation of the lease agreement; and (2) did appellee at all times operate her business in good faith in order to maximize sales and make a profit? We shall treat these issues applying the law to the facts of this case.

"With respect to declaratory orders, judgments, and decrees, appellant bears the burden of showing that the trial court's findings are clearly erroneous. SDCL 21-24-13; SDCL 15-6-52(a)." Rapid City Area Sch. Dist. v. Black Hills, 303 N.W.2d 811, 813 (S.D.1981).

The dispute rests on interpretation of the early cancellation clause in the lease agreement. Appellant insists there is an ambiguity triggering two possible interpretations. Appellant claims the clear import of the wording confines the time frame to the end of four full lease years and then allows cancellation only if gross sales for those four years do not exceed $70,000. Thus, only the years from February 1, 1979, through January 31, 1983, may be considered in determining the amount of gross sales. Any possible ambiguity hinges on determining whether gross sales must be less than $70,000 for each of the four years or only in the fourth year. Under either interpretation, appellant insists it should prevail because an average of the four full lease year's gross sales amounts to $70,021.89 and the gross sales for the fourth year were $84,854.34.

The trial court determined that the logical intent of the phrase "if TENANT's gross sales are not in excess of Seventy Thousand Dollars ($70,000) per year" is that the overall average per year sales from the first day of occupancy until and through January 31, 1983, should be considered. Thus, the trial court computed gross sales for the full period in which the store operated, February 18, 1978, to January 31, 1983, with a proration for the 17 days in February 1978 in which the store was not open for business. The average gross sales for this full period amount to $69,735, sufficiently below the $70,000 figure to warrant cancellation.

Appellant claims it was error for the trial court to include the first year of the lease in computing gross sales because it was not a "full lease year" as defined in the agreement.

The term "lease year", as used herein, shall mean the period beginning with the commencement of the term of this lease as herein determined and ending with the next January 31, and each...