Thunderstik Lodge, Inc. v. Reuer, s. 20313

• Citation: 1998 SD 110,585 N.W.2d 819
• Decision Date: 16 September 1998
• Docket Number: 20327,Nos. 20313,s. 20313
• Court: Supreme Court of South Dakota
• Parties: THUNDERSTIK LODGE, INC., Harold Becker, William Becker, Charles Ross, & Edwin S. Gage, Owners and Lessees, Plaintiffs and Appellees, v. Alvin & Elva REUER, Defendants and Appellants, and LeRoy Reuer, Defendant. . Considered on Briefs

Page 819

585 N.W.2d 819

1998 SD 110

THUNDERSTIK LODGE, INC., Harold Becker, William Becker, Charles Ross, & Edwin S. Gage, Owners and Lessees, Plaintiffs and Appellees, v. Alvin & Elva REUER, Defendants and Appellants, and LeRoy Reuer, Defendant.

Nos. 20313, 20327.

Supreme Court of South Dakota.

Considered on Briefs Sept. 16, 1998.

Decided Nov. 4, 1998.

Steven R. Smith of Andera and Smith, Chamberlain, for plaintiffs and appellees.

Rick Johnson of Johnson, Eklund, Nicholson, Peterson & Fox, Gregory, for defendants and appellants.

GILBERTSON, Justice.

¶1 This action arises out of a landlord/tenant dispute. Alvin and Elva Reuer filed a forced entry and detainer suit against Thunderstik Lodge Inc., (Thunderstik). Thunderstik also filed a separate suit against Alvin and Elva Reuer. Pursuant to the lease agreement, the Fourth Judicial Circuit, Brule County, compelled arbitration. The court later adopted the arbitration panel's decision and entered judgment. The Reuers appealed and Thunderstik filed a notice of review. We affirm.

FACTS AND PROCEDURE

¶2 Thunderstik is a commercial hunting establishment located near Chamberlain, South Dakota. Guests at Thunderstik pay approximately $1,800.00 per person for a three-day hunting trip. This price includes private suites, gourmet food, complimentary beverages, cleaning and packaging of all game, ammunition, hunting guides and trained dogs. Thunderstik is open during pheasant, duck and goose hunting seasons.

¶3 Thunderstik, Alvin Reuer, Elva Reuer (husband and wife) and their son LeRoy and his wife Kathleen (the Reuers) entered into a lease on May 6, 1988, for the use of the Reuers' property in Brule County, South Dakota. The signing of this lease followed extensive negotiations between the parties and their respective attorneys. The lease term was for ten (10) years and Thunderstik had the option to renew for two (2) additional terms.

¶4 Several clauses in the lease are relevant to this matter. First, the lease provided the "premises may be used by [Thunderstik] for any legal purpose, including by way of description and not limitation, agricultural, hunting and fishing, and any other related purpose." (Emphasis added). Second, the lease contained a clause that gave the Reuers a right of re-entry if Thunderstik failed to keep any of the covenants or agreements within the lease.

The Lessee agrees that if it shall fail to keep any of the covenants and agreements contained in this lease ... then ... the Lessor may re-enter the premises and take absolute possession of the premises, and may lease or sublet the premises at such terms as the Lessor may elect.... Lessor shall be obligated to mitigate any damages. Lessor's rights herein shall not be enforceable by Lessor until Lessor has given Lessee written notice of the event which allows Lessor to re-enter the premises. Lessee shall have sixty (60) days from receipt of written notice to remedy the event complained of....

(Emphasis added). Third, the lease provided "[a]ny differences between the parties as to their several rights and obligations under this lease that are not settled by mutual agreement after thorough discussion shall be submitted for arbitration to a committee of three disinterested persons...."

¶5 In 1996, the parties' relationship began to deteriorate. LeRoy was terminated from his job at Thunderstik. ¹ The Reuers and Thunderstik employees were involved in several confrontations. Alvin Reuer began to habitually call the State Department of Game, Fish and Parks, to report alleged illegal hunting on the leased land. Before the opening of the waterfowl season, Alvin Reuer observed corn rows knocked down in the center of the corn field on the leased property. ² Rather than invoking the lease provision to settle disputes by mutual agreement after thorough discussion, Reuer again called the Game, Fish and Parks Department to report a potentially baited field.

¶6 On October 15, 1996, Thunderstik Lodge and three of its employees were charged by federal officers with violating the misdemeanor provision of the Migratory Bird Treaty Act (MBTA). More specifically, they were charged with aiding and abetting the taking of migratory birds over a baited field. ³ This was the same field where Alvin had observed the fallen corn rows. Thunderstik and its employees plead guilty to the charges, paid the fine and immediately corrected the problem to the game warden's satisfaction. ⁴

¶7 In February 1997, Reuers filed a forcible entry and detainer action against Thunderstik pursuant to SDCL ch. 21-16. The Reuers claimed Thunderstik breached the "legal purpose" clause of the lease by conducting illegal hunting activities on the leased land. On March 31, 1997, the Reuers served a notice to quit on Thunderstik. On April 3, 1997, Thunderstik filed suit in circuit court against the Reuers. In its complaint Thunderstik alleged breach of contract, slander, tortious interference with contract, breach of the covenant of quiet enjoyment and conversion. Thunderstik also requested declaratory judgment relief. On May 28, 1997, the judge issued an order directing specific performance to compel the parties to submit their disputes to arbitration.

¶8 The arbitration panel (panel) issued its memorandum opinion and award on August 1, 1997. Two of the three panelists agreed and one panelist dissented. The entire panel found Thunderstik did breach the "legal purpose" provision of the lease by violating the MBTA. However, the majority found the breach was "minor" and did not justify a forfeiture of the leasehold. The panel also found the right of re-entry did not vest in the Reuers. This finding was premised on the express provision in the contract that the right to re-entry "shall not be enforceable" until written notice of the breach is given and Thunderstik is allowed sixty (60) days to remedy the breach. The panel granted Thunderstik's motion for declaratory judgment, it found the lease was valid and enforceable, allowed Thunderstik to exercise its option to renew for an additional ten years and concluded the Reuers' forcible entry and detainer action should be dismissed on the merits and with prejudice. It expressed no opinion as to the merits of Thunderstik's remaining claims.

¶9 The circuit court confirmed the arbitration award and issued a judgment adopting the award. The court also ruled that Thunderstik would remain in possession of the original leased lands, be allowed to exercise its option to renew and be given quiet enjoyment of the premises.

¶10 On December 5, 1997, the Reuers filed a motion for summary judgment contesting the validity of the lease agreement. At this time, the circuit court has not disposed of this motion or the other unresolved claims in Thunderstik's suit.

¶11 The Reuers appeal the arbitration award as confirmed by the circuit court. ⁵ They raise the following issues:

1. Whether a lease provision calling for arbitration of differences, limits the lessor to that remedy, or may the lessor instead use forcible entry and detainer relief.

2. Whether the act of baiting a field, in violation of the MBTA, is a material breach of the lease that allows the Reuers to exercise their right of re-entry.

STANDARD OF REVIEW

¶12 On appeal, this Court can read a contract itself without any presumption in favor of the trial court's determination. Spring Brook Acres Water Users v. George, 505 N.W.2d 778, 780 (S.D.1993) (citing Baker v. Wilburn, 456 N.W.2d 304, 306 (S.D.1990)). Contract interpretation is a question of law. Kobbeman v. Oleson, 1998 SD 20, p 4, 574 N.W.2d 633, 635 (citation omitted). As such we review the issue de novo. Lane v. Travelers Indem. Co., 1997 SD 58, p 12, 563 N.W.2d 423, 425 (citing De Smet Ins. Co. v. Gibson, 1996 SD 102, p 5, 552 N.W.2d 98, 99). Arbitration awards are presumptively correct. Azcon Const. Co. v. Golden Hills Resort, 498 N.W.2d 630, 635 (S.D.1993) (citing Western Casualty & Surety Co. v. Gridley, 362 N.W.2d 100, 102 (S.D.1985)). The party alleging error in the award has the burden to show by the record that an error has occurred. Azcon, 498 N.W.2d at 635 (citation omitted). Judicial review of an arbitration award is very narrow. Id.

ANALYSIS AND DECISION

¶13 1. Whether a lease provision calling for arbitration of differences, limits the lessor to that remedy or may the lessor instead use forcible entry and detainer relief.

¶14 We have consistently favored the resolution of disputes by arbitration. See Tjeerdsma v. Global Steel Bldgs., Inc., 466 N.W.2d 643, 645 (S.D.1991); City of Hot Springs v. Gunderson's Inc., 322 N.W.2d 8 (S.D.1982). The purpose of arbitrating disputes is to provide a relatively quick and inexpensive resolution without the cost and delay that may come with legal proceedings. Azcon, 498 N.W.2d at 633 (citation omitted). It is an overriding policy that arbitration will be favored, when provided for in a contract provision, as a means to the resolution of disputes. See Tjeerdsma, 466 N.W.2d at 645.

¶15 Moreover, South Dakota has adopted the Uniform Arbitration Act. See SDCL ch. 21-25A. SDCL 21-25A-1 states:

A written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract.

(Emphasis added). If any party to an agreement providing for arbitration had any doubt whether the case should be resolved by traditional judicial means or by arbitration, arbitration will control. Gunderson's, 322 N.W.2d at 10.

¶16 The lease in question called for arbitration in the event "differences between the parties" arose. The Reuers allege there were no "differences between the parties," therefore, the arbitration clause did not control and they were free to proceed with a forcible entry and detainer action under SDCL 21-16-1(7). The...