Appeal from the District Court of Sweetwater County, The Honorable Jere A. Ryckman, Judge.
The opinion of the court was delivered by: Kite, Justice.
Before VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.
[¶1] Lamar Advertising (Lamar) appeals from the district court‟s order granting summary judgment in favor of Larry and Vickie Nicholls, LLC (Nicholls). The district court ruled that a lease allowing Lamar to maintain a billboard on Nicholls‟ property was void as an unreasonable restraint on alienation. We conclude that the district court applied the wrong legal test when it considered the reasonableness of the restraint. The correct test requires only a showing of a rational justification for the lease. Applying that test to the undisputed facts, we conclude, as a matter of law, the lease did not constitute an improper restraint on alienation. Consequently, we reverse.
[¶2] Lamar states the issue on appeal as:
Whether the District Court erred by applying the test for a direct restraint on alienation to determine whether a lease between these parties is an unreasonable restraint on alienation.
Nicholls phrases the issue as:
Whether the District Court was correct in applying a reasonableness test to determine the validity of a Lease which created a restraint on alienability.
[¶3]The underlying facts of this case are essentially undisputed. Effective March 1, 1990, Frontier Outdoor Advertising (Frontier) entered into a lease with Cyril Rahonce allowing Frontier to maintain a billboard on Mr. Rahonce‟s property in Rock Springs, Wyoming. The lease provided that the initial term would be fifteen years, with a provision for automatic renewal if neither party gave notice of its intent to terminate thirty days prior to the end of term. In exchange for allowing Frontier to use his property, Mr. Rahonce was to receive an annual payment of $400. The lease provided it was subject to assignment and its terms would apply to the parties‟ successors. The lease was not recorded.
[¶4] Over the years, ownership of the property changed several times. In 1993, Mr. Rahonce conveyed the property to High Country Landscaping, and Frontier paid the annual lease payment to the new owner. In 1997, Larry and Vickie Nicholls purchased the property from High Country Landscaping. The disputed property was subsequently transferred to the plaintiff limited liability company, Larry and Vickie Nicholls, LLC. Plains Tire and Battery (Plains Tire) was located adjacent to the disputed property, and Mr. and Mrs. Nicholls owned the company that was the majority shareholder of Plains Tire. Plains Tire used the property for parking.
[¶5] The lessee also changed after the lease was executed. In 1998, Lamar purchased Frontier and acquired its interest in the lease at issue here. During the time that Nicholls owned the property, Lamar tendered the annual lease payments to Plains Tire and the payments were accepted until 2006.
[¶6] On July 26, 2005, Nicholls notified Lamar that the lease had expired and would not be renewed. Lamar claimed the lease had renewed automatically because Nicholls did not give notice of its intent to terminate thirty days prior to the end of the first term. Nicholls filed a complaint in the district court, seeking a declaratory judgment that Lamar‟s lease was not valid and requesting an order quieting title to the disputed property to Nicholls.
[¶7] After answering the complaint and generally denying Nicholls‟ allegations, Lamar filed a motion for summary judgment seeking a ruling that the lease was effective. Nicholls filed an opposing summary judgment motion, arguing it was a bona fide purchaser and the lease was not binding upon it because it was not notified of the lease when it purchased the property. Nicholls also claimed the lease was void as an unreasonable restraint on alienation.*fn1 The district court ruled that Nicholls had inquiry notice of the lease, but granted ...