Court Opinion

ID: 4233125
Source: CourtListenerOpinion
Date Created: 2017-12-28 18:00:34.126471+00
Date Added: 2024-06-11T14:43:18.763906
License: Public Domain

FILED
                                                                       United States Court of Appeals
                                       PUBLISH                                 Tenth Circuit

                      UNITED STATES COURT OF APPEALS                        December 28, 2017

                                                                          Elisabeth A. Shumaker
                             FOR THE TENTH CIRCUIT                            Clerk of Court
                         _________________________________

UNITED STATES OF AMERICA,

      Plaintiff - Appellee,

v.                                                            No. 16-7090

RICHARD ELBERT TURLEY,

      Defendant - Appellant.
                      _________________________________

                     Appeal from the United States District Court
                        for the Eastern District of Oklahoma
                           (D.C. No. 6:15-CV-00078-JHP)
                       _________________________________

Ron Wright, Wright, Stout & Wilburn, PLLC, Muskogee, Oklahoma (Reid E. Robison,
and Mark D. Spencer, McAfee & Taft, P.C., Oklahoma City, Oklahoma, with him on the
briefs), for Defendant-Appellant.

Michelle Windmueller, United States Postal Service Law Department, Washington, D.C.
(Douglas A. Horn, Acting United States Attorney, and Robert Gay Guthrie, Assistant
United States Attorney, Muskogee, Oklahoma, and Stephan J. Boardman, United States
Postal Service Law Department, Washington, D.C., with her on the brief), for Plaintiff-
Appellee.
                        _________________________________

Before LUCERO, BALDOCK, and HARTZ, Circuit Judges.
                  _________________________________

HARTZ, Circuit Judge.
                         _________________________________

       Richard Turley appeals from a summary judgment granting the United States,

acting on behalf of the United States Postal Service, specific performance of an option to
purchase real estate from Turley.1 The purchase option was contained in a lease of the

premises that the Postal Service had renewed on several occasions.

       Turley makes three arguments against enforcement of the purchase option: (1) the

lease had expired when the Postal Service attempted to exercise the purchase option

because he had not received notice that the government was exercising its final option to

renew the lease; (2) even if the lease was renewed, the Postal Service did not properly

exercise the purchase option because it continued to negotiate for a new lease after it

purported to exercise the option; and (3) equity precludes enforcement of the purchase

option because the Postal Service attempted to use the purchase option as leverage to

negotiate a better lease agreement. We are not persuaded. The lease-renewal option was

properly exercised when the notice was delivered to the proper address, even though

Turley refused to retrieve it. And Turley has presented no legal or equitable doctrine that

would forbid a party who exercises (and is bound by) an option to purchase from

pursuing an alternative arrangement.

       I.     BACKGROUND

       In 1964 the government entered into a 20-year lease with Turley for property in

Henryetta, Oklahoma (the Property) to be used as a post office. The lease provided

options to renew for six additional five-year terms and included an option to purchase at

the end of each renewal term. Written notice of renewal was due 90 days before the new

1
       For convenience, we do not distinguish between Turley and his predecessors in
interest with respect to the lease or between the Postal Service and its predecessor.
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term began. Notice of the option to purchase was due a year before expiration of the

lease term.

       Because the last five-year lease term was set to begin on November 15, 2009,

notice was due by August 15, 2009. In February 2008 the Postal Service sent its renewal

notice by certified mail to Turley at a New York City post office box. The certified mail

was returned with a stamped notification stating, “RETURN TO

SENDER/UNCLAIMED/UNABLE TO FORWARD.” Aplt. App’x Vol. 2 at 331.

Although in district court Turley had suggested that the notice had not been sent to the

correct address, Postal Service records showed that Turley had cashed lease payments

sent to that address both before and after the date of the certified mail. Unsurprisingly,

Turley does not dispute on appeal that the certified mail was sent to the correct address.

His argument is that the notice was not effective because he did not personally receive it.

For the same reason, he says that he was not bound by a notice purportedly sent by the

Postal Service by regular mail the following month. His response to a request for

admission said that he did not remember receiving a renewal notice.

       In any event, the Postal Service continued to occupy the building and pay rent,

and Turley continued to provide services required by the lease. Turley claims that he

allowed the Postal Service to stay only as a holdover tenant.

       During 2013 the Postal Service was considering negotiating a new lease with

Turley upon the end of the last renewal term in November 2014, but its internal emails

suggest it was also considering the purchase option. The deadline to exercise the option

(assuming that the lease had been renewed in 2009) was November 15, 2013. In October
                                                3
2013, CBRE, a company retained by the Postal Service to negotiate leases on its

properties, sent Turley a proposal for a new lease to begin after November 15, 2014. On

November 7, 2013, however, the Postal Service sent a letter exercising its option to

purchase the Property, and Turley acknowledges that he received it on November 8. This

did not stop CBRE from continuing to contact Turley about leasing the property. The

parties disagree about whether CBRE was authorized to continue this negotiation.

Claiming the Postal Service could not and did not properly exercise the purchase option,

Turley refused to participate in two closings to sell the property to the Postal Service,

causing the Postal Service to file this suit in the United States District Court for the

Eastern District of Oklahoma.

       After the parties filed cross motions for summary judgment, the district court

granted summary judgment in favor of the Postal Service for specific performance.

Turley appealed. We have jurisdiction under 28 U.S.C. § 1291 and affirm the summary

judgment.

       II.    DISCUSSION

              A. Standard of Review

       We review summary judgments de novo, applying the same standards that the

district court should apply. See Camuglia v. City of Albuquerque, 448 F.3d 1214, 1218

(10th Cir. 2006). “When reviewing a grant of summary judgment, this court must

examine the record to determine whether any genuine issue of material fact pertinent to

the ruling remains and, if not, whether the substantive law was correctly applied.” APC

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Operating P’ship v. Mackey, 841 F.2d 1031, 1033 (10th Cir. 1988); see Fed. R. Civ. P.

56(a).

                B. Applicable Law

         “[O]bligations to and rights of the United States under its contracts are governed

exclusively by federal law.” Boyle v. United Techs. Corp., 487 U.S. 500, 504 (1988).

But federal law may adopt state-law rules. See O’Melveny & Myers v. F.D.I.C., 512 U.S.

79, 85 (1994). Thus, “knowing whether federal law governs . . . does not much advance

the ball.” Id. (internal quotation marks omitted). Indeed, there is a “presumption that

state law should be incorporated into federal common law.” Kamen v. Kemper Fin.

Servs., Inc., 500 U.S. 90, 98 (1991). “Displacement [of state law] will occur only where

. . . a significant conflict exists between an identifiable federal policy or interest and the

operation of state law or the application of state law would frustrate specific objectives of

federal legislation.” Boyle, 487 U.S. at 507 (citations, brackets, and internal quotation

marks omitted). We agree with the Ninth Circuit that state law should apply in the

present circumstances because “[l]ease contracts for the postal service do not inherently

implicate clear and substantial interests of the National Government, which cannot be

served consistently with respect for state interests.” U.S. Postal Serv. v. Ester, 836 F.3d

1189, 1195 (9th Cir. 2016) (ellipsis and internal quotation marks omitted); cf. Powers v.

U.S. Postal Serv., 671 F.2d 1041, 1045 (7th Cir. 1982) (setting forth reasons to apply

state law to decide Postal Service’s rights under a lease).

         Because Oklahoma is the state where the Property is located, we conclude that

Oklahoma law should govern this dispute. See Denney v. Teel, 688 P.2d 803, 806 (Okla.
                                                 5
1984) (“Disputes concerning interests in real property are properly governed by the law

of the state where the land is located.”). We determine what that law is in the same

manner that we resolve questions of state law under our diversity jurisdiction. See

generally Bryan A. Garner et al., The Law of Judicial Precedent 598–616 (2016). We

must follow the latest holdings of the state’s highest court. See Wankier v. Crown Equip.

Corp., 353 F.3d 862, 866 (10th Cir. 2003). In the absence of a definitive resolution of the

legal issue by the highest court, our task is to predict how that court would rule. See

United States v. DeGasso, 369 F.3d 1139, 1145 (10th Cir. 2004). There are various tools

at our disposal for making that prediction, including decisions by lower courts of the

state. See id. We are bound, however, by precedents of this court construing state law,

absent an intervening decision by the state’s highest court or a legislative change. See

Wankier, 353 F.3d at 866.

              C. 2009 Lease Renewal Option

       Turley’s chief argument against the judgment below is that the Postal Service

never renewed its lease for the term beginning November 15, 2009, and therefore the

purchase option was no longer valid when the Postal Service attempted to exercise it in

2013. He contends that the 2009 lease-renewal option could be effective only if he

received notice of exercise of the option, but he never received the certified mail

containing the renewal notice. We are not persuaded.

       We have a controlling precedent. In APC Operating Partnership, 841 F.2d at

1032–33, a lessee of mineral rights, in exercising its option to renew a lease by tendering

the designated sum, mailed the required checks by registered mail, postage paid and
                                               6
return receipt requested, to the lessors at their addresses. See id. at 1033. But the lessors

failed to claim the mail and it was returned. See id. Applying Oklahoma law, we held

that the exercise of the option was effective. See id. at 1035. “There was no error or fault

on the part of the lessee, and payment would have been made but for the failure of the

[lessors] to collect their mail, an intervening factor beyond the control of the lessee.” Id.

at 1036. Although there was no evidence that the lessors intended to avoid receipt of

payment, that was “immaterial.” Id.; see id. at 1034 (refusing to “effectively give the

lessor the power to revoke the option—a power inconsistent with the very nature of an

option contract”). We see no principled way to distinguish our precedent from this case.

The Postal Service did all it could do to exercise the option by sending a timely notice by

certified mail to the proper address. Notice would have been received “but for [Turley’s]

failure . . . to collect [his] mail, an intervening factor beyond the control of [the Postal

Service].” Id. at 1036. Because the notice by certified mail was effective, we need not

address the Postal Service’s alternative arguments in favor of determining that the lease

had been renewed.2

2
       On appeal Turley also makes an argument based on the contents of the Postal
Service website that maintains information on leases held by the Postal Service. It
purportedly listed the Property as not having a purchase option. He contends that this
constitutes an admission by the Postal Service that it had not exercised the option. We
are skeptical of the argument, in part because his redactions from the website document
make it meaningless. In any event, we need not address the argument because it was not
raised below. Turley presented the website evidence to the district court only in support
of an argument that when the contract was assigned to Turley by earlier lessors, the
purchase option did not survive.

                                                 7
       Turley contends that the Postal Service expressly waived its reliance on APC

Operating when it noted in its brief that “the Postal Service has never argued in this case

that the notice became effective with the date of mailing.” Aplee. Br. at 18 n.2. But this

concession related only to the timing of the exercise of the renewal option, not whether

notice was adequate. The same distinction was made in our opinion in APC Operating.

We noted that the Oklahoma Court of Appeals had “chosen to extend the ‘mailbox’ rule

to option contracts,” holding “that an option was properly exercised where the acceptance

was mailed, even though it was never received.” 841 F.2d at 1035 (citing Worms v.

Burgess, 620 P.2d 455, 458–59 (Okla. Civ. App. 1980)). But we said that it was

unnecessary for us to go that far to resolve the case before us. We wrote:

       In any event, this provision is not strictly necessary to determine the
       outcome here, because the payments were mailed in sufficient time to be
       delivered to the [lessors] before the primary term of the lease expired. In
       either case, whether acceptance is effective at mailing or delivery, it is
       effective on these facts and the lease was properly renewed.

Id. Likewise, here, notice from the Postal Service was timely whether it was effective at

the time of mailing or the time of delivery to the post office. The real question is whether

the notice was adequate despite Turley’s failure to retrieve the certified letter. And APC

Operating provides the answer.

              D. Effect of Continuing Lease Negotiations

       We can quickly resolve Turley’s remaining contentions. They are all based on

evidence that even after it sent its notice to exercise the option to purchase, the Postal

Service continued to try to negotiate terms of the lease for the Property. Turley argues

that the lease negotiations created uncertainty about the Postal Service’s intentions,

                                                8
undermining the purpose of requiring that notice be given a year before expiration of the

lease term. But there was no uncertainty that the Postal Service was bound to purchase

the Property once it had given notice that it was exercising its option. See Davenport v.

Doyle Petroleum Corp., 126 P.2d 57, 61 (Okla. 1942) (“An option so long as it remains

unaccepted, is a unilateral writing lacking the mutual elements of a contract, but when it

is accepted by the optionee an executory contract arises, mutually binding upon the

parties” (internal quotation marks omitted)). Turley knew, or at least should have known,

that if he did nothing, he would be required to transfer the Property to the Postal Service

for a sum certain. The Postal Service was merely giving him the opportunity to reach an

alternative agreement—leasing the Property on terms agreeable to Turley. If those terms

were good enough, the Postal Service would not enforce its rights under the option, just

as Turley would not exercise his right to require the Postal Service to pay the designated

amount and obtain the Property. See Richardson v. Lawler, 231 P.2d 671, 674 (Okla.

1951) (“Parties competent to contract may as validly agree to rescind a contract as to

enter into the original agreement.”).

       Nor was there anything inequitable in the Postal Service’s negotiating lease terms

after exercising the option. To be sure, its bargaining position in those negotiations was

enhanced by its having the enforceable right to acquire the Property at the option price.

But the owner of property typically has the bargaining chip of being free to keep the

property. Turley points to no evidence of any misrepresentations, unclean hands,

improper motives, or bad-faith actions that would present an equitable ground for

denying the Postal Service specific performance of its option contract.
                                               9
       We also see no factual support for Turley’s claim of waiver or equitable estoppel.

As stated by the Oklahoma Supreme Court:

       A waiver occurs when one in possession of any right, whether conferred by
       law or by contract, and with full information of the material facts, does or
       forbears the doing of some things inconsistent with the existence of the
       right or his intention to rely upon it; thereupon he is said to have waived it,
       and he is precluded from claiming anything by reason of it afterward.

Whitmire v. Zolbe, 403 P.2d 445, 448 (Okla. 1965) (internal quotation marks omitted).

But there was nothing inconsistent about the Postal Service’s conduct. One who owns or

expects to own property (as did the Postal Service, armed with its exercised option to

purchase) can reasonably and fairly pursue other possibilities for the property. For the

same reason, equitable estoppel cannot prevent specific performance in this case. As

Turley acknowledges in his brief, “‘Equitable estoppel allows one party to prevent

another from taking a legal position inconsistent with an earlier statement or action that

places his adversary at a disadvantage.’” Aplt. Br. at 49–50 (quoting Kowalczyk v. I.N.S.,

245 F.3d 1143, 1149 (10th Cir. 2001) (further internal quotation marks omitted)). But,

again, there was nothing inconsistent in the Postal Service’s continuing to negotiate,

given that the two parties could have mutually agreed to forgo the purchase option in

favor of a new lease. See Richardson, 231 P.2d at 674.

       Finally, contrary to Turley’s contention the Postal Service did not slumber on its

rights to the purchase option by continuing to negotiate for a lease. Turley contends that

the Postal Service “was not ‘willing’ or ‘eager’ to perform that contract at all times” and

thus was not entitled to specific performance. Aplt. Br. at 44. But he presents no

                                               10
evidence that the Postal Service indicated that it would refuse to perform its obligations

under the exercised option absent an alternative agreement with Turley.

       III.   CONCLUSION

       We AFFIRM the district court’s entry of summary judgment.

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