You can’t enforce terms of an illegal lease.  That’s the lesson of Kunz dba Primark Outdoor v. Lobo Lodge.  Here are the facts.

• In December 1990 Donrey Outdoor Advertising (“Donrey”) and Lobo Lodge, Inc (“Lobo Lodge”) entered into two ten year leases to permit Donrey to place billboards on land owned by Lobo Lodge.
• The lease provided that the lease may be terminated on 90 days written notice in the event construction of a building if Lobo Lodge mailed a copy of a building permit and building plans.
• Prior to the lease taking effect the city amended the sign ordinance to prohibit maintenance of billboards on certain classes of property, including the Lobo Lodge property.  The ordinance also required that all signs in the city have a permit and that the permit fee must be paid.
• Donrey did not obtain a permit or pay any permit fees.
• Donrey assigned its interest in the lease to Kunz and Company dba Primark Outdoor (“Kunz”).
• In March 1995 Logo Lodge filed a 90 day notice of termination of the lease with Kunz in connection with a sale of the land to Safeway.
• Safeway removed both billboards at expiry of 90 day notice periods.
• In June 1995 Kunz filed a complaint against Safeway and Lobo Lodge alleging breach of contract, conversion, negligent destruction of property and intentional interference with business relationships.  Lobo Lodge filed a motion for summary judgement asking that the case be thrown out due to the illegality of the lease.
• A district court and appeals court ruled the lease was unenforceable because it was illegal: “When Kunz took assignment of the leases from Donrey, it had knowledge of the continuing illegality of the leases’ purpose…Kunz does not dispute that it had knowledge of the leases’ claimed illegality.  Kunz continued to maintain the prohibited uses without securing the required permits or paying the mandated fees.  Kunz assumed the risks inherent in an ongoing illegal agreement…On the facts of the case, we adopt the rule generally applicable to illegal contracts and leave the parties where we find them, i.e. with no enforceable agreement.”

Insider’s take:  You can’t pursue legal remedies for an illegal sign.  Even if the lease was legal Insider doubts the out of home company could have prevailed because there was clear language in the lease that it could be terminated on 90 days notice in the event of construction of a building.

[wpforms id=”9787″]

Paid Advertisement