The HONORABLE DANIEL M. FRIEDMAN, United States Circuit

*

Judge for the Federal Circuit, sitting by designation.

 The HONORABLE JOHN B. JONES, United States District Judge for 1

the District of South Dakota.

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No. 96-1042

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Carmen Heppler; K.D. Heppler, *

*

Plaintiffs - Appellants, *

*

v. * Appeal from the United States

* District Court for the 

Thomson Newspapers, Inc.; * District of South Dakota.

Thomson Newspapers Holdings, *

Inc., *

*

Defendants - Appellees, *

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 Submitted: November 19, 1996

 Filed: January 29, 1997

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Before BEAM, FRIEDMAN, and LOKEN, Circuit Judges. *

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LOKEN, Circuit Judge.

Carmen Heppler, a Shopko Stores employee, was injured when she fell

into a hole in the floor of warehouse space Shopko leased from Thomson

Newspapers, Inc. Heppler sued Thomson and its successor for negligence.

The district court granted summary judgment in Thomson's favor, concluding 1

that it did not control the leased premises and therefore did not breach

a duty to Shopko or Heppler. Heppler appeals. Reviewing the grant of

summary judgment de novo, we affirm.
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I.

In March 1987, Shopko leased from Thomson the second and third floors

of an old three-story building in Mitchell, South Dakota. Shopko used the

leased premises to store goods for a nearby store. A newspaper owned by

Thomson occupied the first floor and one storage room on the second floor.

Before Shopko took possession, representatives of Shopko and Thomson toured

the leased premises. They noticed a twenty-eight inch square hole in the

third floor, created when a ventilation fan for the second floor was

removed in the late 1960s. The hole was covered by a plywood board mounted

on a metal bar that allowed the board to swivel. A Shopko employee who

took this tour testified that he recalled a discussion of the hole but

could not recall what was said. The summary judgment record contains no

testimony by the former employee who took this tour on behalf of Thomson.

After the lease began, Shopko usually placed pallets of stored

products or empty pallets over the hole, eliminating the risk that an

employee would fall through the hole. At one time, a Shopko employee

noticed that the plywood cover sagged under the weight of pallets and

placed a second board over the hole to reinforce its cover. Many Shopko

employees were aware of the hole, including the general manager and the

employee responsible for work safety. Thomson did nothing about the hole

before or after Shopko took possession. Shopko did not complain to Thomson

or request that the hole be repaired during the five years prior to

Heppler's fall. 

On December 9, 1992, Heppler and her supervisor came to the third

floor to load supplies. Neither knew of the hole in the floor. The

supervisor asked Heppler to move the boards covering the hole because they

were in his way. Heppler picked up the boards, was surprised to discover

the large hole, and fell into it. She caught herself before falling

sixteen feet to the floor below but was seriously injured in the process.

This lawsuit followed. 
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The district court granted summary judgment for Thomson because it did not

control the leased premises and had no contractual duty to remedy this

known, potentially dangerous condition.

II.

South Dakota law governs this diversity case. South Dakota follows

the general rule that "a landlord, having parted with full possession of

the premises to the tenant is not liable for injury to third persons caused

by the tenant's negligence." Clauson v. Kempffer, 477 N.W.2d 257, 259

(S.D. 1991). In the case of a partially leased building, the landlord must

exercise reasonable care to discover and remedy dangerous conditions in

common areas that remain under the landlord's control, such as the

stairways and freight elevator in the building in question, but has a

lesser duty as to areas under the tenant's control. See Boe v. Healey, 168

N.W.2d 710, 712-13 (S.D. 1969); John Moodie Dry Goods Co. v. Gilruth, 153

N.W. 383, 384 (S.D. 1915).

Clauson concerned a dangerous condition created by the tenant after

the lease commenced. The Supreme Court of South Dakota cited approvingly

§ 355 of the Restatement (Second) of Torts, which provides that a landlord

generally is not liable for a "dangerous condition which comes into

existence after the lessee has taken possession." The court in Clauson

went on to discuss favorably exceptions to § 355's general rule found in

§§ 357, 358, 361, and 362 of that Restatement. In this case, Heppler was

injured by a dangerous condition existing when the Shopko lease began. The

general rule for that kind of hazard is found in § 356 of the Restatement:

Except as stated in §§ 357-362, a lessor of land is not liable

to his lessee or to others on the land for physical harm caused

by any dangerous condition, whether natural or artificial,

which existed when the lessee took possession.
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The parties assume, and we agree, that the Supreme Court of South Dakota

would follow § 356, appearing as it does in the midst of a series of

Restatement principles discussed favorably in Clauson. Thus, to avoid

summary judgment, Heppler must come forward with evidence that creates a

jury issue on whether her claim falls within an exception to the general

rule in § 356.

A. Heppler first argues that her claim comes within the exception in

§ 357 of the Restatement because Thomson "contracted by a covenant in the

lease or otherwise to keep the land in repair" and negligently failed to

remedy "a condition of disrepair existing before" Shopko took possession.

The critical question on this appeal is whether Thomson contracted to

repair the leased premises. Heppler finds such a covenant in Paragraph 3

of the lease:

Prior to said Lessee occupancy, Lessor shall prepare the

premises in a broom-clean condition, and in case of an existing

building, Lessor shall repair all locks, doors, windows,

lights, electrical and mechanical systems and repair and

replace all other defects in the demised premises and its

appurtenances. Lessor shall repair latent defects in the

premises or its appurtenances. 

As the district court recognized, the problem with Heppler's contention is

that Paragraph 3 is a covenant to repair defects "prior to [Shopko's]

occupancy," not a covenant to keep the premises in repair during the lease

term. It is undisputed that the leased premises were closed to the public,

and Thomson could not enter without Shopko's permission. Paragraph 22

provided that, at the end of the lease, Shopko must surrender the premises

"broom-clean, in good order and repair." Thomson's maintenance man

testified, without contradiction, that Shopko was responsible for cleaning

and maintenance of the leased premises. 

There is simply no evidence that Thomson contracted to keep the

leased premises in repair during the lease term. Heppler notes that

Thomson repaired a collapsed ceiling during the lease term and
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points to Paragraph 17 of the lease, which gave Thomson the right to enter

the premises "to make such repairs or alterations therein as may be

necessary for the safety and preservation thereof, without unduly

disturbing the operations of the Lessee." However, comment b to

Restatement § 357 states that this exception to the general rule "has no

application where the lessor does not contract to repair, but merely

reserves the privilege to enter and make repairs if he sees fit to do so."

See Henze v. Texaco, Inc., 508 A.2d 1200, 1202-03 (Pa. Super. Ct. 1986).

There is also no probative evidence that Thompson breached a specific

pre-occupancy covenant to repair the hole. The hole was not a latent

defect because Shopko knew of it no later than its pre-occupancy tour of

the premises. The hole was not the sort of condition covered by the

general pre-occupancy covenant to "repair and replace all other defects,"

because the proper remedy for this kind of condition turns on the lessee's

intended use of the property. For example, if Shopko planned to cover the

hole with permanent shelving, no remedy would be needed. On the other

hand, if Shopko intended to cover the hole at all times with moveable

plywood and pallets, instructions and warnings to warehouse employees --

a remedy most effectively implemented by Shopko -- would render the

condition reasonably safe in a non-public warehouse environment. In these

circumstances, the lack of a specific contractual undertaking by Thomson,

either in the written contract or during the pre-occupancy tour, supported

by the lack of evidence that Shopko ever complained of Thomson's failure

to repair the hole, make summary judgment appropriate on Heppler's claim

that Thomson negligently breached a contractual duty to repair. 

B. Alternatively, Heppler argues that her claim falls under another

exception to § 356, namely, that a landlord is liable if its negligent

repairs have "made the land more dangerous for use or given it a deceptive

appearance of safety." Restatement § 362. Prior to Heppler's injury, in

repairing the building's exterior
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walls, Thomson covered the third floor windows. Heppler argues that this

diminished the third floor lighting, making the hole a more dangerous

condition for third floor users. However, the exception in § 362 applies

only if the lessee "neither knows nor should know" that the leased premises

have been made more dangerous for use. Here, Shopko was aware of the

reduced lighting, provided temporary lighting and flashlights for employees

using the third floor, and had discussed upgrading the lighting with

Thomson prior to the accident. The exception in § 362 does not apply. See

Parrish v. Witt, 555 P.2d 741, 743 (Mont. 1976). 

To summarize, because the hole in the floor was not a latent defect;

because Thomson did not control the leased premises and neither

specifically agreed to remedy the hole, nor generally agreed to keep the

leased premises in good repair; and because Shopko was aware of and took

action to remedy the reduced third floor lighting, we conclude that

Heppler's accident must be attributed to tenant negligence as a matter of

South Dakota law. Therefore, the district court's grant of summary

judgment in favor of Thomson is affirmed. 

A true copy.

Attest:

 CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.