Powers v. Powers
| Decision Date | 11 May 2022 |
| Docket Number | 29561-a-PJD |
| Citation | 2022 S.D. 25 |
| Parties | JEROME POWERS, Plaintiff and Appellant, v. DENNIS POWERS, Defendant and Appellee, and PREVAILING WINDS, LLC and PREVAILING WIND PARK, LLC, Defendants and Appellees. |
| Court | South Dakota Supreme Court |
2022 S.D. 25
JEROME POWERS, Plaintiff and Appellant,
v.
DENNIS POWERS, Defendant and Appellee,
and PREVAILING WINDS, LLC and PREVAILING WIND PARK, LLC, Defendants and Appellees.
No. 29561-a-PJD
Supreme Court of South Dakota
May 11, 2022
ARGUED NOVEMBER 8, 2021
APPEAL FROM THE CIRCUIT COURT OF THE FIRST JUDICIAL CIRCUIT CHARLES MIX COUNTY, SOUTH DAKOTA THE HONORABLE DAVID KNOFF Judge
R. SHAWN TORNOW Sioux Falls, South Dakota Attorney for plaintiff and appellant.
JOHN P. BLACKBURN of Blackburn & Stevens, Prof. LLC Yankton, South Dakota Attorneys for defendant and appellee Dennis Powers. PATRICK D.J. MAHLBERG LISA M. AGRIMONTI of Fredrikson & Byron, P.A. Minneapolis, Minnesota
JOSEPH ERICKSON LEE SCHOENBECK of Schoenbeck Law, P.C. Watertown, South Dakota Attorneys for defendants and appellees Prevailing Winds, LLC and Prevailing Wind Park, LLC.
DEVANEY, Justice
[¶1.] This appeal concerns the interpretation of a right of first refusal entered into by Jerome Powers and his son, Dennis Powers, related to approximately 630 acres of agricultural property. After Dennis entered into a wind energy lease and easement agreement with Prevailing Wind Park, LLC (Prevailing Wind), Jerome brought suit against Dennis and Prevailing Wind, alleging breach of contract and seeking declaratory relief and specific performance. Prevailing Wind moved for summary judgment, asserting that the right of first refusal was not triggered and, alternatively, that it is void as an unreasonable restraint on alienation. Dennis joined Prevailing Wind's motion, and after a hearing, the circuit court granted summary judgment dismissing all claims against both defendants. The court interpreted the right of first refusal to apply only to fee interest transfers of the property and, alternatively, concluded that it is void as an unreasonable restraint on alienation. Jerome appeals, and we affirm.
Factual and Procedural Background
[¶2.] In 2003, Jerome and Dennis jointly purchased roughly 630 acres of land in Bon Homme and Charles Mix counties for less than fair market value on a contract for deed from Jerome's parents/Dennis's grandparents. Thereafter, Jerome and Dennis farmed the property together. In 2005, Jerome sought to sell his interest in the property because he was facing a prison sentence related to illegal drug activity. Jerome testified that he wanted to keep the property in the family and not burden his wife with debt. He also testified that his siblings did not want to purchase his interest in the property, but that Dennis, who was 22 years old at
the time, expressed interest. In the spring of 2005, Jerome quitclaimed his interest in the property and assigned his interest in the contract for deed to Dennis. Dennis paid Jerome the amount that Jerome had paid on the contract, and then Dennis became responsible for the remaining amount due on the entire contract for deed.
[¶3.] As part of the transfer of ownership, Jerome and Dennis executed a "First Right of Refusal" (ROFR).[1] The ROFR provides in relevant part:
SECTION TWO FIRST RIGHT OF REFUSAL
In the event GRANTOR [Dennis] offers the above-described property, or any interest therein, for sale, transfer or conveyance, GRANTOR shall not sell, transfer, or convey the above-described property, nor any interest therein, unless and until he shall have first offered to sell such property or any interest therein, to GRANTEE [Jerome]. If GRANTOR intends to make a bona fide sale of the above-described property, or any interest therein, he shall give to GRANTEE written notice of such intention, which notice shall contain the basic terms and conditions demanded by GRANTOR for the sale of such property
Within thirty (30) days of receipt of such notice and information, GRANTEE [Jerome] shall either exercise his First Right of Refusal by providing written notice of his acceptance to GRANTOR [Dennis], or waive his First Right of Refusal by failing to provide GRANTOR with such written notification of his acceptance or rejection of the First Right of Refusal within such time.
SECTION THREE TERMS
Should GRANTOR [Dennis] accept the offer of GRANTEE [Jerome] to purchase the property, it shall be on the following terms:
1. GRANTEE shall pay GRANTOR the sum of $420.00 per acre, which shall be paid in cash or cash equivalent at closing.
2. GRANTOR shall convey fee title, which title shall be merchantable, as shown by abstract or title insurance.
3. Closing shall take place within thirty (30) days of GRANTOR delivering title insurance or abstracts to the property.
4. GRANTEE shall have possession of the property at closing.
If GRANTEE [Jerome] fails to exercise his First Right of Refusal, GRANTOR [Dennis] may proceed to sell, transfer and convey the property to any other person or entity free from any restrictions of this Agreement.
[¶4.] After the purchase, Dennis continued to personally farm the property. He testified that he converted 230 acres from pastureland into more valuable, tillable cropland. He also testified that he and Jerome entered into an oral agreement whereby Jerome could use the property for his hunting business. In 2006 or 2007, Dennis gave an easement to the B-Y Water District to install a pipeline to deliver rural water to his residence on the property. Jerome testified that he was aware that the pipe was being installed but not that an easement was involved.
[¶5.] In 2010, Dennis decided to stop farming the land himself and began to pursue other business interests. He planned to lease the land to third parties and claimed that he talked about his plan with his grandfather and Jerome. In 2011, Dennis entered into an oral lease agreement with a third party for the property. Jerome testified that he was aware of this lease. In 2012, Dennis paid off the balance on the contract for deed. He then deeded a one-half interest in the property to his wife, April, via warranty deed. Between 2013 and 2017, Dennis and April
entered into multiple financing agreements related to the property. Dennis also entered into additional lease agreements with third parties for the property after the 2011 lease. Jerome testified that he was aware that Dennis leased the property to other third parties after 2011.
[¶6.] In 2017, Prevailing Wind applied for a permit from the South Dakota Public Utilities Commission for a wind farm, which involved obtaining lease agreements and easements from property owners in Bon Homme and Charles Mix counties. Dennis was interested in participating in Prevailing Wind's project and was given a draft of the wind energy lease and easement agreement. Jerome, on the other hand, did not support Prevailing Wind's application request and attended public meetings to voice objections against the project because, in his view, it would cause adverse health effects and have a negative impact on his hunting business. In 2018, Dennis and April entered into a wind energy lease and easement agreement (Agreement) with Prevailing Wind. The parties dispute whether Dennis and Jerome discussed the terms of the ROFR prior to Dennis and April signing the Agreement, but it is undisputed that Dennis's decision strained Jerome and Dennis's relationship.
[¶7.] Prevailing Wind was aware of the ROFR and, in 2019, requested that Jerome consent to the Agreement between Prevailing Wind and Dennis and April. Jerome refused, and in June 2019, he brought suit against both Dennis and Prevailing Wind. He alleged that Dennis's act of entering into the Agreement triggered the ROFR and that Dennis breached the ROFR by failing to first offer the entire property for sale to Jerome. Jerome sought declaratory relief, requesting
that the circuit court find the ROFR enforceable and order specific performance as the remedy. Jerome also alleged that because of Dennis's breach of the ROFR, he is entitled to purchase the property "unencumbered" by Prevailing Wind's lease and easement. Finally, Jerome requested that the court void the Agreement because, in his view, it was obtained in violation of the ROFR.
[¶8.] Prevailing Wind's answer asserted affirmative defenses, including waiver, laches, and that Jerome's claims were barred by the statute of limitations. In a separate answer, Dennis asserted multiple defenses, including that the ROFR is void as an unreasonable restraint on alienation. After taking deposition testimony from Dennis and Jerome, Prevailing Wind filed a motion for summary judgment stating that the motion "is supported by the accompanying" statement of undisputed material facts, affidavits, and "all of the filings and proceedings herein." Prevailing Wind also filed a brief, labeled as a "memorandum in support." Dennis filed a joinder, indicating that he "has and does join" Prevailing Wind's motion for summary judgment and memorandum in support and later filed a joinder in Prevailing Wind's reply brief.
[¶9.] The summary judgment motion and Jerome's opposition to the same centered on the interpretation of the ROFR. Prevailing Wind argued that the language in Section Two, referring to the sale, transfer, or conveyance of "any interest therein," means only fee simple sales, transfers, or conveyances. As support, Prevailing Wind relied on the language of the ROFR as a whole and, in particular, pointed to the...
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