Opinion ID: 900889
Heading Depth: 1
Heading Rank: 8

Heading: Waiver by the Lease

Text: [¶ 18.] The lease provided that the tenant, Iron Horse, would prevent the attachment of any mechanic's lien. However, parties to contracts can waive certain contractual provisions. The doctrine of waiver is applicable where one in possession of any right, whether conferred by law or by contract, and with full knowledge of the material facts, does or forbears the doing of something inconsistent with the exercise of the right. To support the defense of waiver, there must be a showing of a clear, unequivocal and decisive act or acts showing an intention to relinquish the existing right. Norwest Bank South Dakota v. Venners, 440 N.W.2d 774, 775 (S.D.1989) (quoting Subsurfco, Inc. v. B-Y Water Dist., 337 N.W.2d 448, 456 (S.D.1983)). In addition, a creditor is not bound by a contractual provision in an agreement to which the creditor is not a party. See Weaver v. Boortz, 301 N.W.2d 673 (S.D.1981). [¶ 19.] Four Square remained the actual owner of the property while Iron Horse was merely a tenant. Four Square knew improvements were being made. Four Square knew that Iron Horse was in a precarious financial situation. After Iron Horse defaulted on the lease by failing to pay the rent for several months, Four Square granted a series of extensions to Iron Horse. Four Square agreed to take $60,000 worth of penalty stock in lieu of delinquent rent. Four Square permitted Iron Horse to continue to make improvements even after Iron Horse could not pay the rent. [¶ 20.] Four Square obviously knew Iron Horse could not pay for the improvements if Iron Horse could not even pay the rent. Damon Reel, one of the four general partners in Four Square, was treasurer of Iron Horse and knew its shaky financial condition. Four Square did not post any notice of non-liability as required by SDCL 44-9-4 and did not object to any improvement Iron Horse was making. Therefore, Four Square waived its right to protection under the lease provision preventing the attachment of mechanic's liens.