### The HONORABLE DANIEL M. FRIEDMAN, United States Circui t * 

### Judge for the Federal Circuit, sitting by designation. The HONORABLE JOHN B. JONES, United State s District Judge for 1 

### the District of South Dakota. ___________ No. 96-1042

___________ 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, *

___________ Submitted: November 19, 1996 Filed: January 29, 1997

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

___________ LOKEN, Circuit Judge.

Carmen He ppler, a Shopko Stores employee, was injured when she fell into a hole in the floor of warehouse space Shopko leased from Thomso n 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 t o Shopko or Heppler. Heppler appeals. Reviewing the grant o f summary judgment de novo, we affirm.

### -2- I.
In March 1987, Shopko leased from Thomson the second and third floors of an old three-story building in Mitchell, Sout h 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 toure d the leased premises. They noticed a twenty-eight inch square hole in the thir d floor, created when a ventilation fan for the second floor wa s removed in the late 1960s. The hole was covered by a plywood board mounte d
on a metal bar that allowed the board to swivel. A Shopko employee wh o took this tour testified that he recalled a discussion of the hole bu t could not recall what was said. The summary judgment record contains no testimony by the form er employee who took this tour on behalf of Thomson.

After the lease began, Shopko usually placed pallets of store d products o r empty pallets over the hole, eliminating the risk that a n emp loyee would fall through the hole. At one time, a Shopko employe e noticed th at the plywood cover sagged under the weight of pallets an d placed a second board over the hole to reinforce its cover. Many Shopko employees were aware of the hole, including the general manager and th e employee responsible for work safety. Thomson did nothing about the hole before or after Shopko took possession. Shopko did not complain to Thomso n
or reques t that the hole be repaired during the five years prior t o Heppler's fall.

On December 9, 1992, Heppler and her supervisor came to the thir d fl oor to load supplies. Neither knew of the hole in the floor. Th e supervisor asked Heppler to move the boards cove ring the hole because they were in his way. Hep pler picked up the boards, was surprised to discover the la rge hole, and fell into it. She caught herself before fallin g sixteen feet to the f loor below but was seriously injured in the process. This lawsuit followed.

### -3-

The district court granted summary judgment for Thomson because it did not contr ol the leased premises and had no contractual duty to remedy thi s known, potentially dangerous condition.

II.

South Dak ota 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 cause d by th e tenant's negligence." Clauson v. Kempffer , 477 N.W.2d 257, 25 9 (S.D. 1991). In the case of a partially leased building, the landlord mus t exerci se reasonable care to discover and remedy dangerous conditions i n
common a reas that remain under the landlord's control, such as th e 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 , 16 8 N.W.2d 710, 712-13 (S .D. 1969); John Moodie Dry Goods Co. v. Gilruth , 153 N.W. 383, 384 (S.D. 1915).

Clausonc oncerned 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, whic h provides that a landlord generally is not liable for a "dangerous condition which comes int o existence after the lessee has taken possession." The court in Clauso n went on to discuss favorably exceptions to § 355's general rule found in §§ 357, 358, 361, and362 of that Restatement. In this case, Heppler was injured by a dangerous condition existing when the Shopko lease began. Th e general rule for that kind of hazard is found in§ 356 of the Restatement:
Except as stated in §§ 3 57-362, 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.

### -4-

The parties assume, and we agree, that the Supreme Court of South Dakota
wo uld follow § 356, appearing as it does in the midst of a series o f Restat ement principles discussed favorably in Clauson . Thus, to avoi d summaryjudgment, Heppler must come forward with evidence that creates a juryissue on whether her claim falls within an exception to the general rule in § 356.

A. Heppler first argues that her cla im comes within the exception in § 357 of the Restatem ent because Thomson "contracted by a covenant in the lease or otherwise to keep the land in repair" and negligently failed to remedy "a condition o f disrepair existing before" Shopko took possession. The cri tical question on this appeal is whether Thomson contracted t o repair the leased pre mises. Heppler finds such a covenant in Paragraph 3 of the lease:

Pr ior to said Lessee occupancy, Lessor shall prepare th e premises in a broom-clean condition, and in case of an existing build ing, Lessor shall repair all locks, doors, windows , light s, electrical and mechanical systems and repair an d rep lace all other defects in the demised premises and it s appurte nances. Lessor shall repair latent defects in th e premises or its appurtenances.
As the district court recognized, the problem wi th Heppler's contention is that Parag raph 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 2 2 provided that, at the end of the lease, Shopko must surrender the premises "broom -clean, in good order and repair." Thomson's maintenance ma n testified, without contradiction, that Shopko wa s responsible for cleaning and maintenance of the leased premises.

There is simply no evidence that Thomson contracted to keep th e leas ed premises in repair during the lease term. Heppler notes tha t Thomson repaired a collapsed ceiling during the lease term and

### -5-

points to Paragraph 17 of the lease, which gave Thomson the right to enter the premi ses "to make such repairs or alterations therein as may b e
nec essaryfor the safety and preservation thereof, without undul y di sturbing the operations of the Lessee." However, comment b t o Restatement § 357 states that this exception to the general rule "has no appl ication where the lessor does not contract to repair, but merel y 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 sp ecific pre -occupancy covenant to repair the hole. The hole was not a laten t defect because Shopko knew of it no later than its pre-occupancy tour of the premis es. The hole was not the sort of condition covered by th e general pre-occupancy covenant to "repair and replace all other defects," because the proper remedy for this kind of condi tion turns on the lessee's intended use of the property. For example, if S hopko planned to cover the hole with permanent shelving, no remedy would be needed. On the othe r han d, if Shopko intended to cover the hole at all times with moveabl e plywood and pallets, instructions and warnings to warehouse employees --
a remedy most effectively implemented by Shopko -- would render th e condition reasonably safe in a non-public wareho use environment. In these circumstances, the la ck 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. Altern atively, Heppler argues that her claim falls under another exception to § 356, namely, that a landlord is liable if its negligen t repairs have "made the land more dangerous for u se or given it a deceptive appearance of safety. " Restatement § 362. Prior to Heppler's injury, in repairing the building's exterior

### -6-

walls, Thomson covere d the third floor windows. Heppler argues that this diminis hed the third floor lighting, making the hole a more dangerou s condition for third f loor users. However, the exception in § 362 applies only if the lessee "neither knows nor should know" that the leased premise s have been made more dangerous for use. Here, Shopko was aware of th e reduced lighting, provided temporary lighting and flashlights for employee s usin g the third floor, and had discussed upgrading the lighting wit h Thomson prior to the accident. The exception in § 362 does not apply. Se e Parrish v. Witt , 555 P.2d 741, 743 (Mont. 1976).
To summarize, because the hole in th e floor was not a latent defect; becaus e Thomson did not control the leased premises and neithe r specificallyagreed 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 tha t Heppler's accident mu st be attributed to tenant negligence as a matter of South Dakota law. Therefore, the district court's grant of summar y judgment in favor of Thomson is affirmed.

A true copy.

Attest:

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