S.D. Board of Regents v. Madison Housing

#30813-r-PJD
2025 S.D. 50

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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SOUTH DAKOTA BOARD OF
REGENTS, as the governing board for
DAKOTA STATE UNIVERSITY, Plaintiff and Appellee,

v.

MADISON HOUSING AND
REDEVELOPMENT COMMISSION, Defendant and Appellant.

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APPEAL FROM THE CIRCUIT COURT OF
THE THIRD JUDICIAL CIRCUIT
LAKE COUNTY, SOUTH DAKOTA

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THE HONORABLE PATRICK T. PARDY
Judge

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JACOB D. DAWSON
WILSON KLEIBACKER of
Lammers, Kleibacker, Dawson
& Miller, LLP
Madison, South Dakota Attorneys for defendant and
appellant.

RICHARD L. ERICKSON
JOHN NELSON of
Nelson & Erickson Law Office,Prof. LLC
Madison, South Dakota Attorneys for plaintiff and
appellee.

****

CONSIDERED ON BRIEFS
JUNE 2, 2025
OPINION FILED 08/20/25
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DEVANEY, Justice

[¶1.] Dakota State University (DSU), a state-operated post-secondary

institution in Madison, operates under the authority and direction of the South

Dakota Board of Regents. In 2000, representatives from DSU sought to address

increased demand for student housing and entered into negotiations with the

Madison Housing and Redevelopment Commission (the Commission). After

extensive negotiations, the Commission agreed to construct and finance two

eight-plex apartment buildings (the Property) and lease them to DSU, with DSU

having an option to purchase.1 Through this arrangement, the Commission would

obtain financing for the construction of the Property, with the debt to be serviced by

the lease payments from DSU. Prior to construction, and several times since, the

parties executed written leases and DSU continuously leased the Property.

[¶2.] In 2020, DSU notified the Commission of its intent to exercise the

option to purchase. The parties disagreed on the amount of the purchase price

based on their differing interpretations of the buy-out language in the lease. There

was also a dispute regarding whether DSU was entitled to a set-off, or credit, with

funds it alleged were to be kept by the Commission in a reserve account. No such

reserve account existed when DSU provided notice of its intent to exercise the

option.

[¶3.] DSU brought an action seeking a declaration of the parties’ legal

status and rights and alleging breach of contract, and the Commission

1. The Commission also constructed and financed two four-plex apartment
buildings. These four-plex units are not the subject of the leases at issue in
this appeal.

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counterclaimed, seeking declaratory relief and alleging breach of contract. The

parties filed cross-motions for partial summary judgment. The circuit court granted

partial summary judgment in favor of DSU and denied the Commission’s motion.

After a court trial to determine the amount of the buy-out and related calculations,

the court ruled in favor of DSU and entered a final judgment and order. The

Commission appeals, challenging these rulings. We reverse and remand.

Factual and Procedural Background

2000 Lease

[¶4.] On October 30, 2000, DSU and the Commission executed their first

written lease agreement, which obligated the Commission to construct the Property

and lease it to DSU. Relevant provisions include paragraph 2, which states in its

entirety that “[t]he initial term of this lease shall commence on the 1st day of

August, 2001, and shall continue thereafter for a period of ten (10) years. [DSU]

may renew this lease for like term by providing [the Commission] sixty (60) days’

written notice of its intention to do so.” In paragraph 3, rent was set at $103,680

annually, to be paid in equal monthly installments starting August 1, 2001. This

paragraph further stated:

The annual rental amount is premised upon construction costs
not in excess of [$1,272,000] to be financed at an interest rate of
6.25%. In the event that lower construction costs or lower
interest rates would permit a lower annual payment, the
difference between [$103,680] and the lower payment will be
deposited in a reserve account. Monies in the reserve account
will be disbursed to [DSU] (a) if it elects not to renew this lease
as provided in paragraph 2, or (b) if it elects to exercise its
option to purchase the leased premises as permitted in
paragraph 16. . . . [[T]he Commission] will retain any earnings
from the investment of any reserve funds.

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[¶5.] Additionally, the lease provided that if DSU exercised “its right of

renewal under paragraph 2, the rental rate will be adjusted to [sic] upon retirement

of [the Commission’s] obligations associated with the original construction

financing. The new rental rate will reflect [the Commission’s] actual costs

associated with its ownership and administration of the facility.”

[¶6.] DSU was given the option to purchase the Property, as set forth in

paragraph 16 of the lease, which provided that “[DSU] shall have the option to

purchase the leased premises at any time after the initial term of this lease for an

amount equal to the then existing mortgage principal and interest balance, upon

reasonable notice to [the Commission].”

[¶7.] The lease did not include language requiring the Commission to

provide documentation or reporting of its actual construction costs for the Property,

the terms of the financing it acquired for the construction, or any other information

related to the Commission’s financing of the Property; nor did it require reporting

information regarding a reserve account, if any, created under paragraph 3.

[¶8.] The lease also contained terms regarding ongoing expenses.

Specifically, DSU was responsible for taxes and insurance. The parties further

agreed that DSU “shall, at its own expense, make all repairs, replacements, and

maintenance to or upon the leased premises, and to pay all utilities and operational

expenses whatsoever . . . Major building maintenance, that is not the result of the

use by [DSU], is the responsibility of [the Commission].” Any permanent

improvements to the premises requested by DSU, if agreed to by the Commission,

would be made at the Commission’s expense. It was acknowledged that this could

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result in increased lease payments if agreed to by the parties before the

improvements were made. Although not expressly stated in the lease, DSU alleged

in its complaint that the reserve account referenced in the lease was to be used for

maintenance and repair of the Property, with any amounts remaining in the fund to

be paid or credited to DSU if it exercised the option to purchase. Both parties

agreed, in their cross-motions for partial summary judgment, that any reserve

account could be used for maintenance and repair.

2011 Lease

[¶9.] DSU did not renew the lease for another ten-year term, as permitted

by the 2000 Lease. Instead, prior to the expiration of the initial ten-year term, the

parties negotiated a new lease that they signed in July 2011. The 2011 Lease did

not refer to the 2000 Lease and was different in form and, in many respects, in

substance compared to the 2000 Lease. Its term was changed to three years, from

August 1, 2011 to July 31, 2014, “renewing automatically for successive two-year

terms.” Although the rental amount stayed the same, the language governing

payment differed from the 2000 Lease. The payment paragraph stated in its

entirety:

2. RENTAL PAYMENT: [DSU] shall pay an annual rent
amount of $103,680, with equal monthly installments
commencing on August 1st, 2011, and coming due on the first of
each month thereafter.

If [DSU] exercises its right of renewal, the rental rate will be
adjusted to [sic] upon [the Commission’s] obligations associated
with the project. This adjustment will reflect [the Commission’s]
actual costs associated with its ownership and administration of
the project.

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[¶10.] Unlike the 2000 Lease, the 2011 Lease did not contain language

contemplating lower annual payments to service the debt in the event the

Commission obtained a lower financing rate, or that any resulting difference

between the lower amount and the $103,680 annual rental payment would be

placed in a reserve account and disbursed upon DSU’s exercise of the option to

purchase. In fact, this lease had no language regarding a reserve account.

[¶11.] With respect to an option to purchase, the 2011 Lease stated that DSU

“shall have the option to purchase the leased premises at any time for an amount

equal to the then existing mortgage principal and interest balance, upon reasonable

notice to [the Commission].”

[¶12.] Like the first lease, the 2011 Lease contained provisions relating to the

Commission’s obligation to pay for permanent improvements, which may result in

increased lease payments. However, it also included new language providing more

specificity regarding the parties’ respective responsibilities for repairs,

replacements, and maintenance, including several provisions in an addendum

attached to the lease.

2014 Lease

[¶13.] In July 2014, the parties signed a new lease that was similar to the

2011 Lease, although its term was for two years beginning August 1, 2014, and

expiring July 31, 2016. It retained identical payment terms and language as in

paragraph 2 of the 2011 Lease, and it included the same provision regarding DSU’s

option to purchase. It did not mention a reserve account. Changes from the 2011

Lease included removing the automatic renewal provision; adding language

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requiring annual inspections by the Commission of the building systems and

performing timely repair or replacement; and changing the provision regarding the

timing of any lease termination notice by the Commission. This lease did not refer

to the prior leases.

2017 Lease

[¶14.] The next lease reflected in the record2 was signed by the parties in

May 2017, and was a three-year lease for the period from August 1, 2017, to July

31, 2020. It contained the same language as the 2014 Lease except the parties

increased the amount of the annual rental payment for each year of the lease: year

one was $135,000, year two was $146,000, and year three was $152,000, with the

monthly payments adjusted accordingly. It also included the same language giving

DSU the option to purchase the Property “for an amount equal to the then existing

mortgage principal and interest balance, upon reasonable notice to [the

Commission].” As with the 2011 and 2014 Leases, the 2017 Lease did not include a

provision requiring a reserve account. The 2017 Lease did not refer to any of the

prior leases.

Notice of intent to exercise option to purchase and subsequent events

[¶15.] As permitted under the 2017 Lease, on April 6, 2020, DSU gave the

Commission written notice that it wished to purchase the Property and requested

2. After the Commission filed its initial appellate brief, DSU filed a motion with
this Court to supplement the record with a one-year lease executed by the
parties in June and July of 2016 and covering the term from August 1, 2016
to July 31, 2017. Although DSU possessed this lease, it was not introduced
below nor considered by the circuit court. We denied the motion to
supplement the record and do not consider this lease in this appeal.

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the pay-off amount of the “then existing mortgage principal and interest balance.”

A dispute arose between the parties over the purchase price based on their differing

interpretations of the phrase “then existing mortgage,” in light of the fact that the

Commission had refinanced the original debt.3 Also in dispute was whether DSU

was entitled to an offset (credit) with funds it alleged were to be kept by the

Commission in a reserve account, which was referenced in the 2000 Lease but not

mentioned in subsequent leases, and whether the Commission had a continuing

obligation after the 2000 Lease expired to maintain such a reserve account. No

reserve account existed when DSU provided notice to exercise the option.

[¶16.] DSU continued to lease the Property as the parties attempted to

resolve the dispute. In September 2020, the parties signed a lease addendum that

stated, “WHEREAS, on or about the 30th day of October, 2000, [the Commission

and DSU] entered into a Lease that was changed a number of times, including the

last Lease dated August 1, 2017, a copy of which is attached hereto, marked as

Exhibit ‘A,’ and incorporated herein by this reference[.]” The document contained

additional “whereas” statements explaining that the parties were in the process of

negotiating DSU’s purchase of the Property and they desired to continue the lease

while attempting to resolve the matter and “work toward a settlement[.]” The

document then provided that the parties agreed DSU would continue to lease the

3. According to evidence admitted at the court trial, the Commission’s initial
financing was through the issuance in 2000 of $1,800,000 in revenue bonds,
amortized over 30 years with payments starting August 1, 2001. In May
2017, the Commission executed a conventional real estate mortgage and note
with a local bank to refinance the outstanding balance of the revenue bonds
($1,172,922) and to provide capital for roof replacement and improvements to
the Property and to the four-plex units. The note was for $1,300,000.

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Property through December 31, 2020, stating the monthly amount due, and that

“the terms of Exhibit ‘A’ shall remain in full force and effect.” It also included this

agreement: “The parties acknowledge that they are in the process of negotiating a

settlement, and any statements made, whether set forth in this document or

otherwise, shall not be used against the party making said statement in the event

that the parties are not able to successfully negotiate a conclusion to this matter.”

[¶17.] On January 29, 2021, the parties executed a second addendum

containing identical provisions as the first addendum and extending the lease until

May 7, 2021. Thereafter, DSU continued to lease the Property but without a

written lease.

[¶18.] The parties failed to reach an agreement and on March 25, 2022, the

Commission served DSU with a notice to quit requiring DSU to give up possession

of the Property. On April 29, 2022, DSU filed the lawsuit at issue seeking a

declaration of the parties’ legal status and rights under the leases and a

determination of the amount owed for the purchase of the Property. DSU’s

complaint also alleged breach of contract. The Commission filed its answer

asserting various defenses and making its own counterclaims for declaratory relief,

forcible entry and detainer, and breach of contract, alleging that DSU failed to pay

for certain repairs and maintenance as required by the leases.

[¶19.] The parties conducted discovery, and thereafter filed cross-motions

seeking partial summary judgment. In its motion and supporting documents, DSU

contended that, over the lifetime of its leasing of the Property, it paid the

Commission, via its lease payments, more than was necessary to service the original

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debt. It claimed that any excess payments should have been held in a reserve

account and the funds made available to DSU if and when it exercised the option to

purchase. DSU argued that the Commission was obligated by the 2000 Lease to

establish a reserve account and maintain it beyond the expiration of the initial ten-

year lease. It further contended that the 2000 Lease and all subsequent leases

memorialized a single, ongoing transaction, and that “each lease was a continuation

of the original lease and all material terms were proliferated to each and every

instrument.” DSU asserted that the express terms in the 2000 Lease relating to the

Commission’s duties concerning the reserve fund were implied terms in all

subsequent leases, and that the Commission’s failure to maintain the reserve

account constituted a breach of the implied duty of good faith and fair dealing.

[¶20.] Regarding the purchase price for the buy-out, DSU asked the court to

rule that the “then existing mortgage” language in the option provision referred to

the balance of the original construction financing contemplated in paragraph 3 of

the 2000 Lease, and not any outstanding balance that included additional debt the

Commission incurred when it later re-mortgaged the Property. Alternatively, DSU

argued that if the court determined that the “then existing mortgage” language was

ambiguous, it could consider extrinsic evidence to determine the parties’ intentions.

[¶21.] In support of its motion for partial summary judgment, DSU filed

affidavits and deposition testimony from several individuals, including a DSU

employee and past or current board members of the Commission.4 They provided

4. DSU also included an affidavit prepared by a former law school professor and
lawyer who offered his legal interpretation of the leases. In response, the
(continued . . .)
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information regarding the discussions leading to the execution of the leases and, in

some instances, their interpretations of the meaning of the phrase “then existing

mortgage” contained in the buy-out provisions. The DSU employee also stated that

DSU did not agree to the removal of the reserve account obligation and that the

matter was never discussed.

[¶22.] The Commission filed a response to DSU’s statement of undisputed

material facts, as well as a cross-motion for partial summary judgment and

supporting documents. With respect to the option to purchase provision in the 2017

Lease, the Commission argued that the plain and unambiguous meaning of the

“then existing mortgage” provision related to “the actual amount of indebtedness

secured by mortgage upon the [P]roperty at the time that DSU offers its intent to

exercise the option.” It noted that none of the leases contained language foreclosing

the Commission from refinancing or increasing the indebtedness associated with

the Property.

[¶23.] Additionally, the Commission argued that the leases were each

separately bargained-for agreements, rather than one continuous transaction or

contract. This was evidenced, according to the Commission, by the different terms

contained in the 2011 and later leases compared to the 2000 Lease. It argued that

________________________
(. . . continued)
Commission submitted a similar affidavit from an attorney not involved in
the lawsuit. Affidavits in support of summary judgment motions that merely
offer legal arguments, opinions, and conclusions need not be considered by
the court. See United States v. Coleman Cap. Corp., 295 F. Supp. 1016,
1020−21 (N.D. Ill. 1969), cited in Maryland Cas. Co. v. Delzer, 283 N.W.2d
244, 249 (S.D. 1979) (holding that an affidavit that merely argues the law
may be disregarded). The circuit court did not refer to either of these
affidavits in its rulings, nor do we.

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there was no requirement to maintain a reserve account after the expiration of the

2000 Lease, and no provision existed in the 2017 Lease that would require such

funds to be disbursed or credited to DSU for the purchase of the Property.

[¶24.] In support of its motion, the Commission also relied on affidavits and

deposition testimony, including the deposition of a former Commission board

member, who indicated that he was on the board at the time the 2011 Lease was

negotiated and signed. He testified that the board had negotiated different terms in

the 2011 Lease, and the changes were intentional. He further testified that the

reserve account provision was purposefully left out of the 2011 Lease.

[¶25.] The circuit court held a hearing on the parties’ cross-motions for

partial summary judgment; a transcript of this hearing does not appear in the

settled record. On November 8, 2023, the court issued its memorandum decision on

the motions, finding that DSU was entitled to partial summary judgment as a

matter of law on its asserted interpretation of the relevant lease provisions and

denying the Commission’s cross-motion for partial summary judgment on the same

legal issues. The court ruled that the leases should be read together as a single

transaction, determining that under this Court’s precedent, it was not critical that

the agreements were not executed at the same time, with the same terms. It also

relied, in part, on the language in the September 2020 addendum that referenced

the 2000 and 2017 Leases.

[¶26.] According to the court, because the leases represented one continuous

transaction or contract, it concluded that the reserve account provision in the 2000

Lease was still in effect and, consequently, the Commission’s responsibility to

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maintain the account remained in effect. The court determined there was no

genuine dispute as to the fact that the Commission has not performed its obligation

and thus its failure to maintain the reserve account was a breach of its implied duty

of good faith and fair dealing.

[¶27.] Finally, the court determined that the “then existing mortgage”

language was not ambiguous, so it declined to consider extrinsic evidence to

determine the meaning the parties intended. The court ruled that the phrase

referred to the original financing that the Commission obtained as contemplated in

the first lease, and not the refinanced mortgage. The court provided limited

analysis of this issue, and its decision rested upon its view that the Commission’s

interpretation would mean that DSU “would be required to pay the entire balance

of the refinanced mortgage, which includes the debt of multiple properties owned by

[the Commission] rather than just the two eight-plex units that were contracted

for.” It viewed such an interpretation as “not reasonable” and one that leads to “an

absurd result.” The court subsequently entered its partial summary judgment

order in favor of DSU and denied the Commission’s cross-motion.

[¶28.] The Commission thereafter filed a motion for reconsideration. It

asserted that comments in the court’s memorandum decision indicate that the court

misunderstood some of the evidence and arguments it had presented in response to

questioning that had occurred at the motion hearing. Among other arguments, the

Commission noted that it was apparent from the memorandum decision that the

court believed the Commission’s position was that DSU should pay “the balance on

the mortgage securing the ‘disputed property,’ as well as any other property secured

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by the same mortgage.” The Commission denied that this was its position and

emphasized that it did not expect DSU to pay for mortgage debt on any property

that is not subject to the parties’ contract. The next day, in an email to the parties,

the court summarily denied the motion to reconsider without explanation.

[¶29.] A court trial was later held to determine the only issue remaining, i.e.,

the amount DSU would pay to purchase the Property as a result of exercising its

option. This included calculating the remaining balance on the “then existing

mortgage,” as previously interpreted by the circuit court, and the amount of any

credit or set-off attributable to a reserve account that the court ruled was required

under the leases. After hearing testimony and the arguments of counsel, the court

accepted DSU’s calculations and its position that no additional amount was owed to

the Commission and it was entitled to a refund. The court entered judgment for

DSU in the amount of $23,310.79 and further ordered that title to the Property be

transferred to DSU.

[¶30.] The Commission appeals from the circuit court’s partial summary

judgment and final judgment in favor of DSU. Although the Commission structures

its arguments in terms of the denial of its motion for partial summary judgment

and the granting of DSU’s opposing motion, both rulings hinge on whether the

circuit court correctly decided, as a matter of law, issues that we re-state as follows:

1. Whether the circuit court erred when it ruled that the
terms of the 2000 Lease regarding the reserve account
were still in effect when DSU exercised its option to
purchase the Property.

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2. Whether the circuit court erred in its interpretation of the
phrase “then existing mortgage” in the lease’s buy-out
provision.

3. Whether the circuit court erred when determining the
buy-out amount to purchase the Property.

Standard of Review

[¶31.] “Contract interpretation is a question of law reviewable de novo.”

Ziegler Furniture & Funeral Home, Inc. v. Cicmanec, 2006 S.D. 6, ¶ 14, 709 N.W.2d

350, 354 (citation omitted). Similarly, this Court reviews a circuit court’s grant of

summary judgment under the de novo standard. State v. BP plc, 2020 S.D. 47, ¶ 18,

948 N.W.2d 45, 52 (citation omitted). Where the parties have filed cross-motions for

summary judgment and the material facts are undisputed, “this Court’s review is

limited to determining whether the circuit court correctly applied the law.”

Buchholz v. Storsve, 2007 S.D. 101, ¶ 7, 740 N.W.2d 107, 110 (cleaned up) (citation

omitted).

Analysis and Decision

1. Whether the circuit court erred when it ruled that
the terms of the 2000 Lease regarding the reserve
account were still in effect when DSU exercised its
option to purchase the Property.

[¶32.] When DSU sent notice of its intent to exercise its option to purchase in

April 2020, the parties were operating under the 2017 Lease. It is undisputed that

the 2017 Lease does not have language regarding a reserve account, nor do any of

the leases from 2011 forward. The Commission contends that any obligation it had

under the 2000 Lease to keep and maintain a reserve account does not exist in

subsequent leases. DSU asserts that the Commission was obligated throughout the

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years to keep a reserve account and make its funds available to DSU when it

exercised the option. As it argued below, DSU contends that all the leases should

be read together as a single, continuous transaction and that the express terms

regarding the reserve account in the 2000 Lease are implied in all subsequent

leases.

[¶33.] “Contracting parties are held to the terms of their agreement, and

disputes cannot be resolved by adding words the parties left out.” Edgar v. Mills,

2017 S.D. 7, ¶ 29, 892 N.W.2d 223, 231 (citation omitted); see Coffey v. Coffey, 2016

S.D. 96, ¶ 18, 888 N.W.2d 805, 812−13 (explaining that we “cannot add terms to the

language of [an agreement] but rather ‘are bound by the words chosen by the

parties’” (citation omitted)). “This Court need only look to the language that the

parties used in the contract to determine their intention. . . . If that intention is

clearly manifested by the language of the agreement, it is the duty of this Court to

declare and enforce it.” Ziegler Furniture & Funeral Home, Inc., 2006 S.D. 6, ¶ 16,

709 N.W.2d at 355 (cleaned up) (citation omitted).

Single, continuous contract

[¶34.] The circuit court determined that the absence of express terms

regarding the reserve account in later leases is not dispositive because all the leases

are to be read together as a single, continuous contract. On this basis, the court

concluded that the obligations regarding the reserve account in the 2000 Lease still

existed even after the lease expired. However, the cases cited by the court do not

support this conclusion. The scenarios in cases in which we have found multiple

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writings to constitute a single contract are far different than the scenario presented

here.

[¶35.] We have recognized that “all writings executed as part of a single

transaction must be interpreted together.” Talley v. Talley, 1997 S.D. 88, ¶ 22, 566

N.W.2d 846, 851 (interpreting as one contract a series of four contracts executed

simultaneously by the same parties as part of a transaction to transfer interest in a

ranch) (emphasis added); see also Kramer v. William F. Murphy Self-Declaration of

Tr., 2012 S.D. 53, ¶ 13, 816 N.W.2d 813, 815 (interpreting documents executed on

the same day to transfer ownership of a pipeline as one contract; documents were

attached, ordered sequentially, and execution of one agreement was dependent upon

the execution of other agreements). “[W]hen two or more instruments are executed

at the same time by the same parties, for the same purpose and as part of the same

transaction, the court must consider and construe the instruments as one contract.”

GMS, Inc. v. Deadwood Soc. Club, Inc., 333 N.W.2d 442, 444 (S.D. 1983)

(interpreting two separate documents as one contract where the same parties

executed the documents simultaneously, as part of the same transaction for sale of

property).

[¶36.] Moreover, we have held that “[w]here several writings are connected

by internal references to each other, even if they were executed on different dates

and were not among all of the same parties, they will constitute a single contract as

long as they involve the same subject matter and prove to be parts of an entire

transaction.” Baker v. Wilburn, 456 N.W.2d 304, 306 (S.D. 1990) (interpreting

multiple documents executed as part of a change of ownership of business as one

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contract, where the parties required them to be executed at the same time); see also

St. Paul Fire & Marine Ins. Co. v. Tennefos Const. Co., 396 F.2d 623, 628 (8th Cir.

1968) (holding that documents signed within months of each other, some of which

expressly referred to each other, represented “successive steps . . . to accomplish a

single purpose” related to a highway construction project).

[¶37.] These decisions illustrate how the documents were significantly

connected because they were dependent upon each other to effectuate a single,

overarching transaction or purpose. But none of these decisions involved situations

where a party was attempting to establish a relationship between documents

executed years apart. Here, there was a span of 17 years between the 2000 and

2017 Leases, with separately executed leases in between. And other than the

parties and the leased property being the same, the various leases were not

executed for the purpose of a singular transaction, as reflected in our prior

decisions. The purpose of each document was to lease the property for a separate

and specific period; each lease stood on its own, expired on its own terms, and was

not dependent upon the execution of another.

[¶38.] In this case, the 2000 Lease—the only document containing the reserve

account provision that DSU seeks to enforce—is not referenced in any of the later

leases. In fact, the only documents that refer to the 2000 Lease were the 2020 and

2021 addenda, executed after the parties had disagreed about this very issue and

were in the process of attempting to settle their dispute. As it did below, DSU relies

on the fact that the addenda reference the 2000 and 2017 Leases to support its

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argument that the documents should be read together. The circuit court also

mentions these references in its decision.

[¶39.] However, the entire purpose of the addenda was to continue the 2017

Lease—the most recent lease in effect and the only one that is specifically

incorporated by reference in the addenda—while the parties negotiated a

settlement of their dispute. When the addenda are read in context, the mere

mention of the earlier existence of the long-expired 2000 Lease does not resurrect

that lease nor incorporate all its terms into the later 2017 Lease. Moreover, the

addenda include recitations that the parties were not “acknowledging or admitting

any facts,” and also contain the parties’ express agreement that the statements

contained therein “shall not be used against the party making said statement in the

event that the parties are not able to successfully negotiate a conclusion to this

matter.” See SDCL 19-19-408 (a)(2) (a statement made during compromise

negotiations about a claim is not admissible to prove or disprove the validity of a

disputed claim). For these reasons, the circuit court should not have relied on this

mention of the 2000 Lease in the addenda to support its interpretation that there

was one continuing contract here.

[¶40.] DSU nevertheless argues that “each lease was a continuation of the

original [2000] lease, and all material terms were proliferated to each and every

instrument[.]” DSU’s argument that the 2000 Lease and its terms—specifically, the

provisions regarding the reserve account—continued beyond the July 2011

expiration of the lease and were maintained throughout the years is unavailing.

DSU fails to address how a continuation of the 2000 Lease is reconcilable with the

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existence of all the subsequent leases, some of which have conflicting or at least

differing terms.

[¶41.] For example, the 2000 Lease was for a term of ten years, with DSU

having the right to renew “for like term,” i.e., another ten years. But that did not

happen. Instead, the term written into the 2011 Lease was only three years, with

an automatic renewal provision for successive two-year terms. Neither the 2014

Lease, which had a two-year term, nor the 2017 Lease, with its three-year term,

contained an automatic renewal clause.

[¶42.] Additionally, the language regarding the rental rate adjustment upon

renewal is also different. While the 2000 Lease states that if DSU exercised its

right of renewal, the rental rate would be adjusted “upon retirement of [the

Commission’s] obligations associated with the original construction financing[,]” the

2011 Lease and those thereafter do not tie the adjustment of the rental rate upon

renewal to the retirement of the Commission’s obligations associated with the

original construction financing. Instead, they state that upon renewal, the rental

rate would be adjusted to reflect “the [Commission’s] obligations associated with the

project.” (Emphasis added.)

[¶43.] Further, all the leases after the 2000 Lease contain additional detailed

language identifying and clarifying the parties’ respective responsibilities for

maintenance and repair. They also contain several new provisions governing

termination of the lease that were not present in the 2000 Lease.

[¶44.] But the most striking difference, and particularly relevant to the

issues in this case, are the changes to the rental payment paragraph. While the

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amount of rent stayed the same in 2011, most of the language that appeared in

paragraph 3 of the 2000 Lease was eliminated and never re-appeared. There is no

reference to the financing of the initial construction mortgage. And notably, none of

the language regarding a reserve account, including any obligation to disburse

funds from that account to DSU upon its exercise of the option to purchase, was

included in the 2011 Lease or in any lease thereafter, including the 2017 Lease

being interpreted here. The 2017 Lease is unambiguous in this regard, and this is

the lease that the parties signed.

[¶45.] DSU points to the fact that the option-to-purchase provision in

paragraph 16 of the 2000 Lease stated that the option could only be exercised after

the initial ten-year lease. DSU then suggests that this indicates the conditional

obligation in paragraph 3 of that lease, requiring disbursement of funds from the

reserve account if DSU exercises the option to purchase, survived the termination of

the initial lease. But this argument ignores the fact that, regardless of what

paragraph 3 of the 2000 Lease may have said, that version of the lease expired, as

did the obligation to maintain a reserve account. Thus, starting with the 2011

Lease, that conditional obligation no longer existed going forward.

[¶46.] It is apparent that, although the parties have maintained a leasing

relationship over the years, it has existed by way of a series of written lease

renewals with new terms and conditions, not a continuation of the original 2000

Lease. See Jermar Properties, LLC v. Lamar Advert. Co., 2015 S.D. 26, ¶ 9, 864

N.W.2d 1, 4 (interpreting a lease and noting that a “renewal” is “[t]he re-creation of

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a legal relationship or the replacement of an old contract with a new contract”

(quoting Black’s Law Dictionary (10th ed. 2014))).

[¶47.] For all the foregoing reasons, we conclude that the circuit court erred

in determining that the multiple leases constitute a single, continuous contract. As

this was the basis for the court’s determination that the Commission had an

obligation to maintain a reserve account and disburse or credit such funds to DSU,

we reverse the court’s summary judgment determination in favor of DSU that these

obligations continued after the expiration of the 2000 Lease. Instead, partial

summary judgment should have been granted in the Commission’s favor on this

issue.

2. Whether the circuit court erred in its interpretation
of the phrase “then existing mortgage” in the lease’s
buy-out provision.

[¶48.] Under a provision in the 2017 Lease, DSU had the option to purchase

the Property “at any time for an amount equal to the then existing mortgage

principal and interest balance[.]” The question for the Court is whether the circuit

court properly interpreted that provision to mean that the buy-out amount is to be

determined with reference to the financing the Commission initially obtained in

2000 to fund the construction of the Property, as DSU asserts. On the other hand,

the Commission takes the position that the provision refers to “the balance owed on

any mortgage on the subject property at the time DSU exercises its option to

purchase.”

[¶49.] On appeal, the Commission argues that its position is supported by the

plain language of the provision, which it contends is not ambiguous and should be

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read literally. The Commission also argues that nothing in the lease prohibited the

Commission from re-financing the original mortgage and the parties had ample

opportunity to have included such restrictions in the various leases if that was

intended. However, the Commission contends that if it is deemed necessary to

evaluate the parties’ intent behind the drafting of this provision, then extrinsic

evidence would have to be considered on this disputed fact and summary judgment

was not appropriate.

[¶50.] DSU argues that nothing in the leases contemplated that the Property

could be remortgaged. DSU claims that all the circumstances surrounding the

execution of the original lease and subsequent leases supports its interpretation. It

argues the language in the buy-out provision in the leases, including the initial

lease, “clearly refer to the mortgage financing the parties contemplated [that the

Commission] would first secure during the ten-year term of the original lease”

rather than any subsequent re-financing by the Commission.

[¶51.] “Generally, we have held that the parties’ unambiguous agreement

controls in subsequent disputes concerning their intent.” Sturzenbecher v. Sioux

Cnty. Ranch, LLC, 2025 S.D. 24, ¶ 21, 20 N.W.3d 419, 426. It is well understood

that “[a] contract is not rendered ambiguous simply because the parties do not agree

on its proper construction or their intent upon executing the contract. Rather, a

contract is ambiguous only when it is capable of more than one meaning when

viewed objectively by a reasonably intelligent person who has examined the context

of the entire integrated agreement.” Ziegler Furniture & Funeral Home, Inc., 2006

S.D. 6, ¶ 16, 709 N.W.2d at 355 (alteration in original) (citation omitted); see Ass

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Kickin Ranch, LLC v. North Star Mut. Ins. Co., 2012 S.D. 73, ¶ 9, 822 N.W.2d 724,

727 (noting that “[t]he fact that the parties differ as to the contract’s interpretation

does not create an ambiguity” (citation omitted)). “If the contract is plain and

unambiguous[,] ‘extrinsic evidence is not considered because the intent of the

parties can be derived from within the four corners of the contract.’” Kernelburner,

LLC v. MitchHart Mfg., Inc., 2009 S.D. 33, ¶ 7, 765 N.W.2d 740, 742 (alteration

added) (citations omitted).

[¶52.] The circuit court found that the language in the buy-out provision was

not ambiguous, and the parties do not claim on appeal that it is. We agree.

Therefore, we will interpret the provision on its face, without resorting to extrinsic

evidence.

[¶53.] In its memorandum decision, the court agreed with DSU’s position

that the language in the buy-out provision refers to the mortgage the Commission

obtained at the onset of the construction, but the court did not explain why it

believed this to be so, other than to say the Commission’s interpretation would lead

to an absurd result. In this regard, the court’s ruling appeared to be colored by its

impression that the Commission sought to require DSU to pay that portion of the

existing refinanced mortgage attributable to the Commission’s other properties as

well. The Commission filed a motion for reconsideration to, in part, correct this

premise, advising the court that the Commission “did not intend, and have not

taken the position, that [DSU] ought to pay any mortgage debt on property which is

not subject to this contract.” Despite the Commission’s clarification affecting the

court’s stated premise underlying its decision, the court did not alter its ruling.

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[¶54.] But even if the Commission was improperly requesting more than

what can be attributed to the “then existing mortgage” associated with only the

eight-plexes, this would only constitute an absurd application of the contract

language, and perhaps a breach of the contract terms. There is nothing inherently

absurd about the contract term itself, i.e., that a buyer of property pay a price that

would satisfy an existing debt associated with the property it is purchasing.

[¶55.] More importantly, the circuit court’s interpretation of the phrase “then

existing mortgage” is inconsistent with a plain and ordinary reading of the language

the parties actually used. Liebel v. Liebel, 2024 S.D. 34, ¶ 17, 9 N.W.3d 505, 511

(noting that this Court will “examine the contract as a whole and give words their

plain and ordinary meaning” (citation omitted)). Here, the parties’ intentions are

clearly manifested by the language they agreed to in this provision. Thus, we are

obligated “to declare and enforce it.” Ziegler Furniture & Funeral Home, Inc., 2006

S.D. 6, ¶ 16, 709 N.W.2d at 355 (citation omitted).

[¶56.] The buy-out provision is clear and unambiguous. It refers to the “then

existing” mortgage at a point in the future, sometime after the execution of the

lease (“at any time”), when DSU elects to exercise the option. It contains no

limiting language, nor did it refer to the initial construction mortgage from 2000 or

the original financing terms. If the parties had wanted to include that language,

they could have done so. It is well-established that “we will not rewrite the parties’

contract or add to its language.” Edgar, 2017 S.D. 7, ¶ 29, 892 N.W.2d at 231. We

conclude that the circuit court erred in its interpretation of the “then existing

mortgage” provision. Instead, the buy-out price must be calculated with reference

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to the balance of the re-financed mortgage associated with the Property at the time

of DSU’s exercise of the option to purchase. As such, the court should have granted

partial summary judgment in favor of the Commission instead of DSU on this issue.

3. Whether the circuit court erred when determining
the buy-out amount to purchase the Property.

[¶57.] The circuit court’s determination of the option buy-out price was based

on what we have concluded to be an erroneous interpretation of the governing lease.

Therefore, we also reverse the court’s determination in this regard.

Conclusion

[¶58.] We reverse the court’s entry of partial summary judgment in favor of

DSU on the above two issues relating to the reserve account and buy-out provision,

and vacate the final judgment and order entered by the court. We remand for

further proceedings consistent with this opinion, including the entry of partial

summary judgment in favor of the Commission on the first two issues.

[¶59.] JENSEN, Chief Justice, and KERN, SALTER, and MYREN, Justices,

concur.

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