Truhe v. Turnac Group, LLC, 20631.

• Decision Date: 01 September 1999
• Docket Number: No. 20631.,20631.
• Parties: Marvin D. TRUHE, Plaintiff and Appellee, v. The TURNAC GROUP, L.L.C., a South Dakota Limited Liability Company, Defendant and Appellant.
• Court: South Dakota Supreme Court

599 N.W.2d 378
1999 SD 118

Marvin D. TRUHE, Plaintiff and Appellee,
v.
The TURNAC GROUP, L.L.C., a South Dakota Limited Liability Company, Defendant and Appellant

No. 20631.

Supreme Court of South Dakota.

Considered on Briefs April 27, 1999.

Decided September 1, 1999.

Edward C. Carpenter and Heather M. Lammers of Costello, Porter, Hill, Heisterkamp, Bushnell & Carpenter, Rapid City, South Dakota, Attorneys for plaintiff and appellee.

John K. Nooney and Penny Tibke Platnick of Morrill Thomas Nooney & Braun, LLP, Rapid City, South Dakota, Attorneys for defendant and appellant.

LOVRIEN, Circuit Judge.

[¶ 1.] This case concerns a dispute between Marvin Truhe (Tenant) and Turnac Group (Landlord), regarding a written contract allowing Tenant to lease space in a building owned by Landlord. The parties later orally agreed to cancel the lease despite a provision in the lease which required all modifications to the lease be in writing. The trial court found that despite this clause, the oral agreement effectively operated to cancel the lease. Landlord appeals and we affirm.

599 N.W.2d 379

FACTS

[¶ 2.] In 1988, Tenant began leasing office space in the First National Bank Building, in Rapid City, South Dakota. Tenant is an attorney in Rapid City and his rented office space occupied approximately 2,300 square feet, known as Suite 508. Landlord purchased the building in the fall of 1995. After the purchase, the parties began negotiating a different lease than the one Tenant had been operating under with the previous owners.

[¶ 3.] The lease negotiations occurred between Tenant and Dr. John Sabow, Landlord's principal owner, acting as agent for the company. On January 10, 1996, a new lease was signed and it is this lease which is the subject of this litigation. The lease contained the following provisions:

28. Miscellaneous.

(b) All of the agreements of landlord and tenant, whether written or oral, with respect to the premises are contained in this lease, and no modification of this lease or any of its conditions or provisions shall be binding upon landlord or tenant unless in writing signed by the party sought to be charged.

[¶ 4.] In February 1997, four attorneys joined Tenant in his legal practice, creating the need for more space in the law office. Tenant contacted Sabow regarding the possibility of leasing additional office space in the building to accommodate the new attorneys. Simultaneously, Tenant began looking at office space outside the building and was in fact negotiating the lease of space in an adjacent building owned by Black Hills Corporation.

[¶ 5.] On March 6, 1997, Sabow and Tenant met to discuss the situation. Sabow indicated that Landlord would be willing to lease additional space to Tenant, but at a rent forty percent higher than the current price Tenant was paying. Tenant replied that this amount was too high, so his group would be leaving the building and he would try to find someone to sublet their current space.¹ Sabow responded that he would prefer to release Tenant from the remainder of his lease if a replacement tenant could be found at the higher rent amount, rather than let Tenant sublet under the current lease at the lower price.² The trial court found this exchange to be an oral agreement to surrender and cancel the lease. For purposes of this appeal, neither party now disputes this finding.³

[¶ 6.] Following this oral agreement to terminate the lease between Tenant and Landlord, Tenant entered into a lease with Black Hills Corporation for space in its building. Tenant also attempted to get Sabow to commit to the oral cancellation agreement in writing but Sabow refused to honor the oral agreement, claiming it never occurred.

[¶ 7.] In light of Landlord's refusal to honor the cancellation agreement and given the fact that Tenant had already entered

599 N.W.2d 380

into another lease, Tenant decided to try and sublet the space to someone under the current lease and hired a Realtor to find a sublettor. These efforts were not successful.⁴ Tenant vacated the space on May 2, 1997, and moved his office to the new location in the Black Hills Corporation building

[¶ 8.] Tenant continued to pay rent to Landlord for May and June 1997. In July 1997, Tenant stopped paying rent and brought suit in circuit court against Landlord to determine the obligations of the parties under the contract. Landlord counterclaimed for nonpayment of rents for the period remaining under the lease.

[¶ 9.] The matter was tried to the circuit court on April 14, 1998. The trial court ordered the lease to be of no further force or effect and entered judgment in favor of Tenant plus damages of $6,917.47.⁵ The trial court also dismissed Landlord's counterclaim with prejudice.⁶

[¶ 10.] On appeal, Landlord has raised a number of issues, only one of which we need address:

Could the lease be effectively canceled by an oral agreement when the terms of the lease expressly provided that any amendments, waivers, or modifications must be in writing signed by the party sought to be charged?

STANDARD OF REVIEW

[¶ 11.] This matter presents no issue of material fact. Instead, we must decide the legal effect of an oral rescission on a written contract, which is a question of law. Olson v. U.S. Fidelity and Guar. Co., 1996 SD 66, ¶ 6, 549 N.W.2d 199, 200; Colonial Ins. Co. of Cal. v. Lundquist, 539 N.W.2d 871, 873 (S.D.1995). As a question of law, it is fully reviewable on appeal. Lane v. Travelers Indemnity Co., 1997 SD 58, ¶ 12, 563 N.W.2d 423, 425; De Smet Ins. Co. v. Gibson, 1996 SD 102, ¶ 5, 552 N.W.2d 98, 99.

[¶ 12.] Under such de novo review, no deference is...