Fraternal Order of Eagles v. Hasse
Annotate this CaseFRATERNAL ORDER OF EAGLES #2421 OF VERMILLION, SOUTH DAKOTA
Plaintiff and Appellee
v.
PAUL HASSE, d/b/a COYOTE VENDING AND LOTTERY COMPANY
Defendant and Appellant
[2000 SD 139]
South Dakota Supreme Court
Appeal from the Circuit Court of
The First Judicial Circuit
Clay County, South Dakota
Hon. Kathleen K. Caldwell, Judge
CRAIG K. THOMPSON
Vermillion, South Dakota
Attorney for plaintiff and appellee
JAMES E. McCULLOCH
Vermillion, South Dakota
Attorney for defendant and appellant
Considered on Briefs September 18, 2000
Opinion Filed 11/8/2000
MILLER, Chief Justice
[¶1.] In this declaratory judgment action, we hold that a video lottery lease was not effectively terminated.
FACTS[¶2.] The Fraternal Order of Eagles #2421 (F.O.E.) of Vermillion, South Dakota entered into a written lease with Paul Hasse on September 6, 1989. The lease provided that F.O.E. would lease floor space to Hasse for installation of video lottery machines in return for Hasse’s remittance of a specified percentage of the net proceeds earned by the machines. According to the terms of the lease, it would automatically renew every four years unless either party exercised the termination provision contained therein. Under this provision, either party could cancel the lease by providing written notice to the other by certified mail no less than sixty days prior to the end of the current four year term. Neither party exercised the option to terminate in 1993, so the lease, according to its terms, automatically renewed for another four years beginning September 6, 1993.
[¶3.] On June 22, 1994, ten months after the lease automatically renewed, this Court declared video lottery unconstitutional. Poppen v. Walker, 520 NW2d 238 (SD 1994). Hasse’s video lottery machines at the F.O.E. building were turned off. The machines were again activated on November 22, 1994 subsequent to a general election where South Dakota voters amended the South Dakota State Constitution by permitting video lottery. The constitutional amendment authorizing video lottery contained a specific savings clause ratifying and approving leases of the type between F.O.E. and Hasse.[1] However, on November 16, 1994 under the mistaken belief that pursuant to Poppen the 1989 lease was null and void F.O.E. sent Hasse a letter requesting that he remove his machines within forty-eight hours of receipt of its letter. This letter precipitated a meeting between the parties to discuss modifying the original lease. Out of this meeting, F.O.E.’s attorney produced a Memorandum Agreement purporting to modify the original lease. Neither party ever signed the agreement. Hasse’s machines continued to operate at the F.O.E. and he continued to make payments according to the terms in the 1989 lease.
[¶4.] On August 8, 1997, F.O.E. sent Hasse another letter purporting to terminate the lease pursuant to the unsigned Memorandum Agreement. Again Hasse met with F.O.E. on September 9, 1997 to discuss the lease. According to notes from the meeting, the stated purpose was to maximize profits for F.O.E. The parties discussed ways to accomplish this goal and proceeded forward. Hasse continued to operate the machines in F.O.E.’s building and pay it the percentage of net proceeds provided for under the 1989 lease.
[¶5.] On February 19, 1999, F.O.E. sent Hasse a letter asking him to attend a meeting to discuss the relationship between the parties. Hasse met with F.O.E., but he refused to negotiate. F.O.E then sent Hasse a certified letter on April 5, 1999 stating its desire to end any further lease relationship with him. The letter stated F.O.E.’s position that it was unsure whether the parties were operating under the 1989 lease or the Memorandum Agreement’s purported modification of the 1989 lease. The letter reiterated F.O.E.’s mistaken belief that this Court’s Poppen decision invalidated the 1989 lease. F.O.E. filed a notice of termination in circuit court on May 20, 1999 and sent Hasse a certified letter of such notice. The letter stated F.O.E.’s desire to terminate any and all contracts or leases existing between the parties.
[¶6.] Hasse’s video lottery machines have remained in the F.O.E. building at all pertinent times. Except for the brief period between our Poppen decision and the constitutional amendment, Hasse has continued to operate the machines and pay F.O.E. according to the terms set forth in the 1989 lease.
[¶7.] F.O.E. commenced this declaratory judgment action in circuit court asking the court to determine whether the 1989 lease, the Memorandum Agreement or some other arrangement governed the relationship between the parties. The complaint also asked the court to determine the effective termination date of the parties’ contractual relationship. The circuit court held that the 1989 lease governed the parties’ relationship and that the November 16, 1994 letter effectively terminated the lease as of September 6, 1997. Hasse appeals. We reverse.
STANDARD OF REVIEW [¶18.] SABERS, AMUNDSON, KONENKAMP, and GILBERTSON, Justices, concur.[1]. The savings clause in South Dakota Constitution article III, section 25 states:
SDCL 42-7A, and its amendments, regulations, and related laws, and all acts and contracts relying for authority upon such laws and regulations, beginning July 1, 1987, to the effective date of this amendment, are ratified and approved.
[2]. We note in the record that F.O.E. did ultimately provide Hasse with an effective notice of termination. Accordingly, the lease will terminate September 5, 2001 and will not renew itself on September 6, 2001, absent contrary agreement by the parties.
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