Lamar Advertising of South Dakota, L.L.C. v. City of Rapid City

#28903, #28923-a-PJD
2020 S.D. 30

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

****

LAMAR ADVERTISING OF SOUTH
DAKOTA, L.L.C., a South Dakota
Limited Liability Company, Plaintiff and Appellant,

v.

CITY OF RAPID CITY, a South
Dakota Municipal Corporation, and
EPIC OUTDOOR ADVERTISING,
a South Dakota Corporation, Defendants and Appellees.

****

APPEAL FROM THE CIRCUIT COURT OF
THE SEVENTH JUDICIAL CIRCUIT
PENNINGTON COUNTY, SOUTH DAKOTA

****

THE HONORABLE CRAIG A. PFEIFLE
Judge

****

EDWARD C. CARPENTER of
Costello, Porter, Hill, Heisterkamp,
Bushnell & Carpenter, LLP
Rapid City, South Dakota Attorneys for plaintiff and
appellant.

****

CONSIDERED ON BRIEFS
NOVEMBER 4, 2019
OPINION FILED 06/03/20
JOEL P. LANDEEN
CARLA R. CUSHMAN of
City of Rapid City
Rapid City, South Dakota Attorneys for defendant and
appellee City of Rapid City.

MICHAEL K. SABERS of
Clayborne, Loos & Sabers, LLP
Rapid City, South Dakota Attorneys for defendant and
appellee Epic Outdoor
Advertising.
#28903, #28923

DEVANEY, Justice

[¶1.] In this appeal, Lamar Advertising contends that the circuit court erred

in failing to declare that the City of Rapid City unlawfully bargained away its police

power when it entered into a settlement agreement with Epic Outdoor Advertising

under which the City agreed to amend certain sign code ordinances and grant Epic

two sign permits. By notice of review, Epic asserts the circuit court erred in

denying Epic’s request that the court declare invalid a similar settlement

agreement previously executed between Lamar and the City. We affirm.

Factual and Procedural Background

[¶2.] In 2015, Epic petitioned the circuit court for a writ of certiorari,

challenging the Rapid City Board of Adjustment’s (the Board) decision to prohibit

Epic’s use of four video signs. The signs were constructed prior to the City’s ban on

video signs, and the City applied its ban retroactively against Epic’s signs. The

circuit court granted Epic’s petition and reversed and remanded the Board’s

decision. Both the City and Epic appealed the circuit court’s decision to this Court.

While the appeal was pending, however, the parties negotiated a proposed

settlement agreement “to memorialize the terms of a settlement reached between

the parties for the complete and final disposition of their claims, differences, and

causes of action arising out of” the above lawsuit. The agreement specifically

provided that it did not resolve any claim related to a separate lawsuit pending

between Epic and the City.

[¶3.] On March 23, 2018, the City posted a summary of the proposed

settlement agreement as an agenda item for its March 28, 2018 legal and finance

-1-
#28903, #28923

committee meeting. The summary explained the reason for the agreement and

identified the proposed terms. The “Recommendations” section related the

following: “Action: Approve or Deny[;] Notes: Since the parties have briefs they will

need to file time is of the essence. Epic needs an up or down vote.” The summary

explained the following options: “If you approve the settlement agreement staff will

begin working on the ordinance amendments necessary to fulfill the City’s

commitments. Once the ordinance amendments are approved and become effective,

the lawsuits will be dismissed. If you reject the parties will continue the appeal on

this case to a final resolution.”

[¶4.] The settlement agreement was listed as an agenda item at the City

Council’s April 2, 2018 meeting. The agreement had been revised prior to the City

Council meeting, and at the meeting, the City attorney explained the revision. Also

during the meeting, counsel for Epic related a history of the lawsuit and the

rationale behind the settlement agreement. Multiple citizens opposed the

agreement. Of those opposing, one citizen expressed the need for the City “to

change the way the industry is allowed to operate” and another specifically asked

that the Council not sign the agreement.

[¶5.] A motion was made to deny the agreement, and during a discussion on

the motion, a council member expressed concern over approving an agreement

without knowing the proposed changes to the ordinance. This council member

specifically opposed the agreement, believing it would essentially tie the Council’s

hands. Counsel for the City remarked that “it would be a breach of the agreement if

council didn’t sign the future ordinance.”

-2-
#28903, #28923

[¶6.] After additional concerns were shared, a substitute motion was made

to approve the settlement agreement. A council member, although supporting the

motion to approve, noted frustration regarding efforts made to eliminate the

presence of billboards. He explained that the City “gets sued” and “lose[s]” and the

City “keep[s] spending the taxpayer’s dollars over and over to lose again.” Epic’s

counsel answered questions regarding the settlement agreement, and after

considering additional comments from council members, the council voted 7 to 3 to

approve the agreement.

[¶7.] The settlement agreement provides in relevant part:

1. Within ninety (90) days of this Agreement being approved by
the City, the City agrees to amend its ordinances to increase the
maximum size of off-premises signs (billboards) along Interstate
90 within the City to Six Hundred and Seventy-two (672) square
feet. The City also agrees as part of this ordinance amendment
to increase the maximum sign pole height for off-premises signs
along Interstate 90 from thirty (30) feet to forty (40) feet as
measured from the base of the pole to the top of the pole. The
City can accomplish these changes through the creation of a
zoning overlay district along the Interstate.

2. Within ninety (90) days of this Agreement being approved by
the City, the City agrees to amend its ordinances to remove any
requirement to obtain a conditional use permit for any work to
an existing off-premises sign. The City will continue to require
that a conditional use permit be obtained for any new off-
premises signs.
....

5. That Epic and the City agree that it has been and is
important to the City that there is not a proliferation of
billboards. With that understanding, Epic has already obtained
a conditional use permit on a location commonly referred to as
Dyess Avenue where it can currently construct a digital
billboard in a size commonly known as poster size. This
settlement would allow Epic to construct the digital billboard
but in the size allowed in the interstate district as provided
herein. The City of Rapid City agrees that this larger board will

-3-
#28903, #28923

be permitted as provided for in Exhibit 1 and that will be
granted contemporaneous with this agreement being signed.
The parties agree that the issuance of the Dyess Avenue Board
will require the use of two sign credits. The second board
discussed is the Deadwood Avenue billboard which is an older
existing billboard controlled by the same owner as my client
[Epic]. The City agrees that by ratifying this agreement it
would also be approving the permit for the Deadwood Avenue
sign under the interstate district contemplated herein and
attached as Exhibit 2. The ratification of this agreement results
in no billboards that are already approved or otherwise in
existence. The parties agree that the issuance of the Deadwood
Avenue Board would also require the use of two sign credits as
required under the existing ordinance.
....

7. If this Agreement is ratified, the parties will jointly file a
motion to the South Dakota Supreme Court seeking to continue
the filing dates for the current appeal or otherwise hold this
matter in abeyance pending the City fulfilling its obligations
under this Agreement. Within ten (10) days after the
ordinances identified in sub-sections (1) and (2) have been
approved and the period in which they can be referred has past,
the parties authorize their attorneys to execute a Stipulation for
the Court to enter a Judgment of Dismissal of the claims they
each have made against the other in the pending lawsuit
identified in Section One of this Agreement.
....

The terms of this agreement are non-severable and, unless
otherwise agreed to by the parties, this Agreement shall
terminate if any term or provision of this Agreement fails or is
held by a court of competent jurisdiction or other competent
authority to be invalid, void, or otherwise unenforceable.

On April 3, 2018, following approval of the settlement agreement, Epic and the City

filed a joint application under SDCL 15-26A-76 to stay the appeal pending before

this Court. We granted the stay, and a subsequent application for a similar stay.

[¶8.] In May 2018, prior to any amendments being made to the ordinances,

Lamar filed a declaratory judgment action against the City and Epic, requesting

that the circuit court declare the settlement agreement invalid. According to

-4-
#28903, #28923

Lamar, the City bargained away its zoning authority by agreeing to rezone in

advance of the required notice and hearing and by agreeing to issue sign permits to

Epic in violation of the existing sign code. Lamar requested that the circuit court

find “that any actions taken pursuant to the [agreement] are void ab initio and of no

legal force[.]”

[¶9.] Epic and the City filed separate answers. The City denied that it had

bargained away its zoning authority, indicating that any amendments to the

ordinances “will go through the required legal process where they may be approved

or rejected by the City Council.” The City further claimed that the settlement

agreement is conditional. Alternatively, the City asserted the affirmative defenses

of waiver and estoppel. It claimed that because Lamar and the City entered into a

similar settlement agreement in 2016, Lamar should be barred from claiming that

the settlement agreement between Epic and the City is void.

[¶10.] Epic likewise asserted that the settlement agreement is valid and that

Lamar should be estopped from asserting that Epic’s agreement is invalid because

Lamar waived that claim by entering into its similar agreement with the City.

Alternatively, Epic requested that in the event Lamar “is successful in its legal

allegations claiming the Epic Agreement is somehow invalid,” the court should also

declare the settlement agreement between Lamar and the City invalid. Epic

further asserted a counterclaim against Lamar for tortious interference with

contractual relations.

[¶11.] Lamar filed a motion for summary judgment on its request for

declaratory relief and Epic’s counterclaim for tortious interference with contractual

-5-
#28903, #28923

relations. The City and Epic opposed Lamar’s motion but did not file cross-motions

for summary judgment requesting that the court declare Epic’s agreement valid.

However, Epic filed a motion for summary judgment on its request that the court

declare the 2016 agreement between Lamar and the City invalid.

[¶12.] While the parties litigated Lamar’s suit, the City drafted amendments

to the sign code pursuant to the settlement agreement with Epic. On June 15,

2018, an assistant city attorney issued a memo to the Planning Commission,

explaining that the “amendments are being submitted to the Planning Commission

for its recommendation, and ultimately to the Council for its approval, pursuant to

a settlement agreement entered into between the City and Epic Outdoor

Advertising.” In regard to increasing the maximum size and height of off-premises

signs along Interstate 90, the memo related that conversations had occurred at the

City for several years concerning the correlation between the size and height of a

sign and the speed limit on the adjacent roadway. The memo identified that “the

higher visual impact is justified by the higher speeds of travelers along the

Interstate.” In regard to the amendment to the conditional use provision, the memo

related that the amendment would apply only to existing signs and would merely

remove the requirement to get new conditional use approval (after already having

obtained approval) every time work is done to an existing sign.

[¶13.] The Planning Commission held a meeting on June 21, 2018. During

the meeting, an assistant city attorney explained the reason for the amendments.

One commission member expressed disagreement with the proposed changes and

made a motion to deny the amendment. During a discussion on the motion, the

-6-
#28903, #28923

assistant city attorney confirmed that if approved, the Council could revise the

amended ordinance “as it goes forward if that is what they decide.” The motion to

deny failed, and a subsequent motion to approve was passed by a vote of 7 to 2.

[¶14.] Thereafter, at a June 27, 2018 meeting of the legal and finance

committee, one committee member expressed that she was not opposed to “taking a

look at a district along the Interstate,” although she was opposed to the settlement

agreement. She indicated that she would vote against this amendment because it

was drafted pursuant to the terms of the agreement. An assistant city attorney

replied, “[W]e cannot change our ordinances through an agreement[.] [I]t has to go

through the readings and the processes required by State law. This ordinance will

go through two readings like any other ordinance[;] you can choose to make changes

or choose not to make changes.” A motion to approve the amendment ultimately

passed by a vote of 3 to 1.

[¶15.] Finally, the proposed amendment to the sign code ordinances was

considered at a July 2, 2018 Council meeting. During a discussion on a motion to

approve the amendment, several council members expressed disapproval.

Nonetheless, the motion passed by a vote of 8 to 2, and the proposed amendment

was set for a second reading in two weeks. The amendment was read a second time

on July 11, 2018 before the legal and finance committee and passed with a 3-to-1

vote. It similarly passed after a second reading before the Council on July 16, 2018,

and became effective twenty days after its publication. See SDCL 9-19-13

(providing that an ordinance becomes effective “on the twentieth day after its

publication unless suspended by operation of a referendum”).

-7-
#28903, #28923

[¶16.] On September 18, 2018, the circuit court held a hearing on the parties’

motions for summary judgment. During the hearing, Lamar acknowledged that the

ordinances were amended after the required notices were given and hearings held.

It nonetheless argued that such process was pro forma because the City had already

formally bound itself to amend the ordinances by entering into the settlement

agreement. Lamar alleged that the City engaged in unlawful contract zoning; thus

the amended ordinances were invalid and the sign permits issued to Epic were

unlawful. In response, Epic and the City argued that the settlement agreement was

conditional and that the City validly exercised its police power in amending the

ordinances and issuing the permits. The circuit court directed the parties to submit

supplemental briefing on the issue of the sign permits.

[¶17.] After a second hearing before a different judge, the circuit court issued

an order denying Lamar’s motion for summary judgment on its request for

declaratory relief. Noting that the facts were undisputed, the court concluded that

the City did not bargain away its zoning powers. According to the court, “the

discussion and divided votes at the Planning Commission and City Council

meetings demonstrate a meaningful legislative process that merits a presumption of

validity.” The court further concluded that “[t]he continuation of the legal suit

confirms that the parties conditioned their settlement [on] the City’s exercise of its

police power to regulate signs,” and thus the settlement agreement was not “a strict

contract granting vested rights.” In regard to the sign permits, the court

determined that Lamar “failed to appeal the permit as specified in RCMC §

17.54.010(B)(3)(a),” and did not present “an extraordinary factual situation that

-8-
#28903, #28923

would render the situation proper for judicial review.” Finally, the court denied

Epic’s motion for summary judgment requesting that the court declare Lamar’s

agreement with the City void, and granted Lamar’s motion for summary judgment

on Epic’s counterclaim for tortious interference with contractual relations.

[¶18.] Lamar appeals, asserting that: (1) the City unlawfully contracted away

its police powers by agreeing to amend its zoning ordinances by settlement

agreement; and (2) Lamar was not required to exhaust its administrative remedies

before challenging sign permits purportedly guaranteed to Epic in the settlement

agreement. By notice of review, Epic argues the circuit court erred when it denied

summary judgment on Epic’s request that the court declare the agreement between

Lamar and the City void. 1

1. Epic suggests that this Court does not have jurisdiction to consider Lamar’s
appeal because Lamar did not have the circuit court’s order certified under
SDCL 15-6-54(b) and Lamar did not timely petition for discretionary appeal
under SDCL 15-26A-13. Under SDCL 15-26A-3(1), an appeal may be taken
from “[a] judgment” of the circuit court. We have “interpreted the term
‘judgment’ to refer to a judgment which is final rather than interlocutory.”
Smith v. Tobin, 311 N.W.2d 209, 210 (S.D. 1981). “[T]he substance of the
decision[,] rather than its form or name[,]” determines finality. O’Neill v.
O’Neill, 2016 S.D. 15, ¶ 31, 876 N.W.2d 486, 498 (quoting Griffin v. Dwyer, 88
S.D. 357, 359, 220 N.W.2d 1, 2 (1974)). Therefore, the controlling inquiry is
whether the order “finally and completely adjudicate[d] all of the issues of
fact and law presented by the parties for litigation.” Smith, 311 N.W.2d at
210. Here, the circuit court’s order determined with finality the issues
between the parties, and this Court has appellate jurisdiction. The court
ruled as a matter of law that the settlement agreement between Epic and the
City is valid. The court’s order further forecloses Lamar’s ability to proceed
on its challenge to the sign permits issued to Epic because of Lamar’s failure
to exhaust its administrative remedies. Finally, Epic’s claim alleging the
invalidity of the agreement between Lamar and the City was an alternative
claim that the circuit court need not have reached given its determination
that the City had not unlawfully contracted away its police power in its
settlement agreement with Epic. In any event, in denying Epic’s motion for
(continued . . .)
-9-
#28903, #28923

Standard of Review

[¶19.] We review a grant or denial of summary judgment de novo. Abata v.

Pennington Cty. Bd. of Comm’rs, 2019 S.D. 39, ¶ 8, 931 N.W.2d 714, 718. “Our task

on appeal is to determine only whether a genuine issue of material fact exists and

whether the law was correctly applied. If there exists any basis which supports the

ruling of the trial court, affirmance of a summary judgment is proper.” Millard v.

City of Sioux Falls, 1999 S.D. 18, ¶ 8, 589 N.W.2d 217, 218 (quoting Walther v.

KPKA Meadowlands Ltd. P’ship, 1998 S.D. 78, ¶ 14, 581 N.W.2d 527, 531).

Analysis and Decision

1. Whether the City contracted away its police powers by
agreeing to amend the sign code.

[¶20.] Lamar acknowledges that the City has the power and authority to

enter into settlement agreements to resolve litigation concerning land use disputes.

See, e.g., Hauck v. Bull, 79 S.D. 242, 110 N.W.2d 506, 509 (1961); accord State v.

Davis, 11 S.D. 111, 75 N.W. 897 (1898). However, Lamar contends that the “City’s

power to settle claims does not allow it to disregard the limitations on its powers”

and enter into a private agreement dictating the terms of a public ordinance “under

the guise of compromise[.]”

[¶21.] In Ericksen v. City of Sioux Falls, we examined the validity of a

contract between the Sioux Falls and Morrell & Company wherein the City gave

Morrell the right to empty its sewage into the City’s system for 15 years. 70 S.D.

________________________
(. . . continued)
summary judgment, the court effectively issued a decision against Epic on
the merits of this claim.

-10-
#28903, #28923

40, 14 N.W.2d 89 (1944). In declaring the contract invalid, the Court explained that

“[i]t is not within the power of a city to guarantee that it will successfully operate a

sewage disposal plant or an adequate system.” Id. at 53, 14 N.W.2d at 95. The

regulation of the City’s sewers is a police function; therefore, the City must at all

times retain the power to regulate its sewers “and any attempt by way of contract to

deprive the city of that control is void.” Id. at 54, 14 N.W.2d at 95.

[¶22.] Similarly, Rapid City’s regulation of signage is a police function and

the City may not, by way of contract, surrender its police powers. However, unlike

the contract in Ericksen, Rapid City’s settlement with Epic in no way prevents

future councils from regulating signage in the City or from further amending the

sign code in a manner contrary to the amendments set forth in the settlement

agreement. Moreover, unlike the agreement in Ericksen, which conferred a special

benefit to Morrell over and above what other citizens would be entitled to, Rapid

City’s amendment to the sign code conferred no special benefit to Epic; rather, the

benefit of the amendments would be available to all sign companies. 2

[¶23.] Lamar asserts that it is immaterial that the settlement agreement

confers no special benefit to Epic and does not bind future councils. Rather,

according to Lamar, by entering into the settlement agreement with Epic, the City

violated the fundamental rule applied in Ericksen—that the City’s police power

2. Lamar further asserts that because the settlement agreement included
provisions that were not related to the dispute in the underlying lawsuit
between Epic and the City, the settlement was an improper “device” which
allowed Epic, a private party, “to wheedle massive changes in unrelated City
ordinances.” Because Lamar has not cited controlling or persuasive authority
to support this claim, it does not merit further examination.

-11-
#28903, #28923

“cannot be bargained away by contract[.]” See id. at 54, 14 N.W.2d at 95. Lamar

argues that the City engaged in unlawful “contract zoning” by making specific

promises to amend the sign code in a specified manner before notice and hearing

procedures occurred. Lamar further suggests that even though the City ultimately

observed the notice and hearing procedures before amending the ordinances, this

fact is irrelevant because at that point any proceedings held upon the matter were

merely pro forma.

[¶24.] In response, the City contends that the language of the agreement

itself supports that it was conditioned on the City’s exercise of its police power to

regulate signs. The City further emphasizes that the settlement agreement

conferred no special rights to Epic beyond those available to other citizens in Rapid

City. On this point, the City highlights that it did not agree to rezone specific

property, but rather agreed to pursue an amendment of generally applicable zoning

regulations. Finally, the City contends its exercise of its police powers was not pro

forma, noting specifically that it adhered to public notice and hearing requirements,

and at these hearings, citizens offered public comment in opposition and the vote of

the Council was divided.

[¶25.] Epic advances arguments similar to those asserted by the City.

However, Epic also contends that great deference should be afforded to the City’s

decision to negotiate and settle a lawsuit to negate the risk of expending additional

taxpayer funds that would otherwise be incurred in ongoing litigation. Epic further

contends that because “[t]he appropriate process was followed, and it was a

disputed process with close votes at the Planning Commission, and split votes at

-12-
#28903, #28923

both readings before Council[,]” Lamar has failed to establish that the City acted

arbitrarily and unreasonably.

[¶26.] This Court has not before examined the concept of “contract zoning.”

However, other courts have consistently defined contract zoning as “an agreement

between a municipality and another party in which the municipality’s consideration

consists of either a promise to zone property in a requested manner or the actual act

of zoning the property in that manner.” Dacy v. Village of Ruidoso, 845 P.2d 793,

796 (N.M. 1992); accord McLean Hosp. Corp. v. Town of Belmont, 778 N.E.2d 1016,

1020 (Mass. App. Ct. 2002); Old Canton Hills Homeowners Ass’n v. City of Jackson,

749 So. 2d 54, 57 (Miss. 1999); Citizens for Safety & Clean Air v. City of Clinton, 434

S.W.3d 122, 128 (Tenn. Ct. App. 2013). Contract zoning has been criticized because

the situation ordinarily involves a municipality using its zoning power as a

bargaining chip, which limits the municipality’s right and duty to act on behalf of

the public. Citizens for Safety, 434 S.W.3d at 129; Old Canton, 749 So. 2d at 58;

Warner Co. v. Sutton, 644 A.2d 656, 659–60 (N.J. Super. Ct. App. Div. 1994). Such

contracts, therefore, conflict with the well-settled premise that a municipality’s

zoning police power, like any other police power, “may not be surrendered or

curtailed by bargain or its exercise controlled by the considerations which enter into

the law of contracts.” V.F. Zahodiakin Eng’g Corp. v. City of Summit, 86 A.2d 127,

131 (N.J. 1952).

[¶27.] To assure that zoning remains an exercise of police power to serve the

public good, some courts have declared contract zoning invalid per se regardless of

the attendant circumstances. Chung v. Sarasota Cty., 686 So. 2d 1358, 1360 (Fla.

-13-
#28903, #28923

Dist. Ct. App. 1996) (holding that the obligation to follow requirements for public

hearings must occur before the decision to rezone occurs); accord Hartman v.

Buckson, 467 A.2d 694, 699 (Del. Ch. 1983); Zupancic v. Schimenz, 174 N.W.2d 533,

537 (Wis. 1970). To these courts, any private agreement to zone property in a

specific way is invalid because the ultimate zoning decision is based on an improper

motivation. Zupancic, 174 N.W.2d at 537 (holding that “[c]ontract zoning is illegal

not because of the result but because of the method”). Such courts have found it

immaterial that notice and hearing procedures occurred, viewing such procedures

as pro forma, and have thus held all action taken as a result of the precipitating

agreement to be void. Chung, 686 So. 2d at 1360.

[¶28.] Other courts, however, recognize that “[p]rivate interests are inherent

in any zoning matter; therefore, it is disingenuous to condemn a method of zoning

because it benefits private interests in some way.” Dacy, 845 P.2d at 798; see also

108 Holdings, Ltd. v. City of Rohnert Park, 38 Cal. Rptr. 3d 589, 596 (Cal. Ct. App.

2006); Old Canton, 749 So. 2d at 57–58; Citizens for Safety, 434 S.W.3d at 129.

Courts holding this view also point to the fact that judicial review protects private

citizens from potential misconduct that might occur through a municipality’s

exercise of its zoning police power. Dacy, 845 P.2d at 798. Therefore, the

dispositive question is whether the municipality bargained away its police power,

namely whether it lost the crucial element of control. 108 Holdings, 38 Cal. Rptr.

3d at 596 (examining whether the agreement “amount[s] to a surrender,

abnegation, or bargaining away of the City’s legislative power”). Similarly, courts

addressing this issue consider whether the municipality committed itself to a

-14-
#28903, #28923

specific zoning decision before the hearing, such that the commitment circumvented

statutory notice and hearing procedures. Dacy, 845 P.2d at 797–98.

[¶29.] With these principles in mind, we review the settlement agreement

between the City and Epic. Lamar is correct in that the agreement was premised

on the City amending its ordinances. However, these provisions were not self-

executing upon ratification of the settlement agreement, and nothing in the

agreement prevented the City from performing its duty to act on behalf of the

public. In fact, the agreement tied the parties’ dismissal of the pending lawsuit to

the possibility that any amendment to the ordinances might ultimately fail by

conditioning the filing of a dismissal on the actual approval of the ordinances. The

settlement agreement also specifically provided that the terms of the agreement

were non-severable and that it would terminate—and the parties would be free to

continue their underlying litigation—in the event “any term or provision” of the

agreement “fails or is held by a court of competent jurisdiction or other competent

authority to be invalid, void, or otherwise unenforceable.”

[¶30.] Lamar cites Endres v. Warriner, 307 N.W.2d 146 (S.D. 1981), for the

unremarkable proposition that a contract contingent on a future event is

nevertheless valid and enforceable. What Lamar fails to acknowledge, however, is

that the enforceability of a contract contingent on a future event is dependent on

the agreed upon condition being met. See, e.g., Johnson v. Coss, 2003 S.D. 86, ¶ 13

667 N.W.2d 701, 705–06 (“A condition precedent is a contract term distinguishable

from a normal contractual promise in that it does not create a right or duty, but

instead is a limitation on the contractual obligations of the parties.”). Here, the

-15-
#28903, #28923

settlement agreement specifically contemplated that the City’s attempt to enact the

amendments at issue could fail, under which scenario, the agreement would

terminate. Epic would then have no agreement to enforce, and the City and Epic

would simply return to the status quo and proceed with their pending lawsuit.

[¶31.] Thus, like the circuit court, we conclude that the settlement here was a

lawful conditional agreement, as illustrated by the parties’ continuance of the

pending litigation until all the agreed-upon contingencies occurred. See Old

Canton, 749 So. 2d at 58 (“The absence of an enforceable promise by either party

distinguishes conditional zoning from contract zoning.” (quoting Dacy, 845 P.2d at

796)). The City did not, solely by entering into the settlement agreement, commit

“to rezone property in such a manner as to circumvent the notice and hearing

process or to compromise the rights of affected persons.” See id.

[¶32.] This, however, does not end the inquiry because Lamar also attacks

the validity of the amendments, arguing that the notice and hearing procedures

were pro forma. Lamar quotes selected excerpts from the proceedings and asserts

that the Council “felt” that it was “obliged to approve the amendments without

change because changes would ‘complicate the lawsuit[.]’”

[¶33.] The enactment of a municipal ordinance “is a legislative act

representing a legislative determination and judgment, and like all legislative

enactments a zoning law is presumed to be reasonable, valid and constitutional.”

Schrank v. Pennington Cty. Bd. of Comm’rs, 2000 S.D. 62, ¶ 4, 610 N.W.2d 90, 92;

accord Daily v. City of Sioux Falls, 2011 S.D. 48, ¶ 11, 802 N.W.2d 905, 910. To

overcome this presumption of validity here, Lamar, as the party attacking the

-16-
#28903, #28923

ordinance, must show that the amended sign code “is both unreasonable and

arbitrary.” See City of Pierre v. Blackwell, 2001 S.D. 127, ¶ 9, 635 N.W.2d 581, 584.

[¶34.] From our review of the record in its entirety, versus the isolated

statements quoted by Lamar, the City’s notice and hearing proceedings illustrate

that the decision to amend resulted from a deliberative legislative process. First,

although the settlement agreement prompted the City to propose amendments to

the ordinances, the Council was informed of justifications unrelated to the

agreement warranting the increase in size and height requirements for certain

billboards and the removal of the requirement to obtain additional conditional use

authorization for existing signs. Second, a review of the minutes from these

hearings reveals that multiple citizens attended and voiced specific reasons for

opposing the agreement and the amendments, and that certain council members

expressed opposition to amending the ordinances. Finally, the divided vote at these

hearings indicates that the Council reached its decision, not as a matter of form, but

in contemplation of the best interests of the public as a whole.

[¶35.] Because the City did not contract away its present or future police

powers when it entered into the settlement agreement with Epic, and because

Lamar has not established that the City acted unreasonably and arbitrarily when it

amended the sign code, the circuit court properly denied Lamar’s motion for

summary judgment requesting a declaration that the settlement agreement and the

ordinance amendments were invalid.

2. Whether Lamar was required to exhaust its administrative
remedies in order to challenge the sign permits.

-17-
#28903, #28923

[¶36.] Lamar contends the circuit court erred by determining that in order to

challenge the issuance of Epic’s sign permits, Lamar was required to appeal to the

City’s Board of Adjustment. Lamar argues that it properly challenged the permits

in this declaratory judgment action because the City unlawfully contracted away its

police power by purporting to grant the permits via the settlement agreement before

the City Building Official had even been presented with the permit applications.

[¶37.] Although some of the language of the settlement agreement suggested

that the permits would be issued immediately upon the ratification of the

agreement, it is undisputed that the two sign permits were not in fact granted

contemporaneously to the City’s approval of the agreement. The agreement was

ratified on April 2, 2018, but Epic did not submit its applications for the sign

permits to the City official until August 10, 2018, the date upon which the

amendments to the ordinances became effective. Only then did the official

responsible for issuing permits approve Epic’s requests under the newly adopted

regulations.

[¶38.] Lamar nevertheless directs this Court to cases from other jurisdictions

for the proposition that a government may not, by settlement agreement, require its

officials to act without regard to the controlling zoning ordinances. See, e.g., The

Lamar Co., LLC v. City of Columbia, 512 S.W.3d 774, 785 (Mo. Ct. App. 2016)

(concluding that a settlement agreement was void because “[t]he plain language of

the Agreement prohibited the City from enforcing its billboard ordinance”). Here,

however, the terms in the settlement agreement pertaining to the two permits

follow the provisions in the agreement relating to the necessary amendments to the

-18-
#28903, #28923

sign ordinance upon which the approval of the permits hinged. The agreement also

expressly states that “[t]he ratification of this agreement results in no billboards

that are already approved or otherwise in existence.” If the City had not approved

the sign ordinance amendments through its formal process for amending

ordinances, Epic would not have been eligible for the sign permits contemplated in

the settlement agreement, and the terms relating to the permits would not have

been enforceable.

[¶39.] Because the settlement agreement did not contain language exempting

Epic from complying with the City’s sign code and did not require the City Building

Official to disregard controlling ordinances in determining whether to approve

Epic’s permit applications, the City did not contract away its duty to issue sign

permits in accord with the governing zoning ordinances. Therefore, Lamar’s

contention that the permits were void ab initio is without merit.

[¶40.] Lamar further argues that notwithstanding the validity of the

amended ordinances, it was not required to administratively appeal the City

Building Official’s decision to issue the sign permits to Epic because there is no

evidence the City official considered matters necessary to granting them. 3 In

particular, Lamar asserts that Epic’s permit for the Deadwood Avenue sign violates

the ordinance allowing only the current permit holder to reconstruct an existing off-

premises sign. Further, it claims that the City failed to require conditional use

3. Lamar refers to the face of the permit applications, noting that the spaces for
the signature of the reviewing official were left blank, as were certain
sections requiring findings that the appropriate sign and site information had
been provided and that the applications had been approved.

-19-
#28903, #28923

permits for both the Deadwood Avenue and the Dyess Avenue signs when the

applications identified them as “new” signs rather than “existing” signs.

[¶41.] Under SDCL 11-4-19, an aggrieved person has the right to appeal an

administrative official’s decision “which is not a ministerial act[.]” The statute

further provides that the appeal is to “be taken within a reasonable time, as

provided by the rules of such board, by filing with the officer from whom the appeal

is taken and with the board of adjustment a notice of appeal specifying the grounds

thereof.” Id. Here, the bylaws governing appeals before the Board of Adjustment

provide that an “appeal shall be taken within 30 days of the decision of the

administrative officer[.]” See Art. V, sec. 2; RCMC § 17.54.010(B)(3)(a).

[¶42.] Lamar asserts that SDCL 11-4-19 is inapplicable here because the

City’s issuance of these sign permits to Epic was a ministerial act. In support of

this argument, Lamar cites our definition of “ministerial” in a case involving a

county’s submission of an initiated zoning ordinance to a public vote, an action

mandated by statute. See Heine Farms v. Yankton Cty., 2002 S.D. 88, ¶ 12, 649

N.W.2d 597, 600 (citation omitted) (defining a ministerial act as one in which “the

law requires a public officer to do a specified act in a specified way, upon a conceded

state of facts, without regard to his own judgment as to the propriety of the act, and

with no power to exercise discretion”). Lamar has not directed this Court to any law

or decision holding that a city official’s decision to issue permits is a ministerial act,

as opposed to one which involves the exercise of that official’s own judgment.

[¶43.] More importantly, the lack of an administrative record from which we

can review the legality of the City Building Official’s decision to issue the sign

-20-
#28903, #28923

permits is particularly problematic given Lamar’s specific challenges to the City

official’s actions here. Lamar disputes the official’s interpretation of language in

the governing ordinances regarding “the current permit holder”; the official’s

determination whether the signs were in fact “new” or “existing” signs; and the

official’s corresponding reasoning as to why conditional use permits were not

required in conjunction with these sign permits. 4 Had Lamar administratively

appealed the issuance of the permits, “[t]he officer from whom the appeal is taken”

would have “transmit[ed] to the board all the papers constituting the record upon

which the action appealed from was taken.” See SDCL 11-4-19. Thereafter, a stay

of the proceedings (i.e., the issuance of the permits) would have gone into effect

under SDCL 11-4-20, and the Board would have held a public hearing on Lamar’s

appeal as required by SDCL 11-4-21, and issued a decision as allowed under SDCL

11-4-22. 5

4. Lamar previously held a license to operate a sign at the Deadwood Avenue
location. Lamar demolished its sign after a new owner acquired the real
estate in 2018 and terminated Lamar’s lease. Lamar asserts that after it
demolished its sign, the City could not issue Epic a sign permit without
requiring that Epic obtain a conditional use permit because Epic was not a
current permit holder. The City argues in response that the current permit
holder is the party entitled to rebuild the sign, and when an entity obtains a
sign building permit, that entity becomes the current permit holder.
Therefore, in the City’s view, when the City granted Epic the sign permit,
Epic became the current permit holder and did not need to obtain a
conditional use permit to reconstruct the Deadwood Avenue sign. Because
Lamar failed to administratively appeal the City’s issuance of the permit, we
need not determine the propriety of either argument.

5. Epic points out the difficulties that would ensue if a holder of a building
permit, which has a limited duration, could not rely upon the certainty and
finality of a decision of a public body or official due to a collateral attack being
allowed outside the timeframes of an administrative appeal.

-21-
#28903, #28923

[¶44.] “The doctrine of exhaustion of administrative remedies is one of the

fundamental principles of administrative law and jurisprudence.” Dollar Loan Ctr.

of S.D., LLC v. Dep’t of Labor and Regulation, 2018 S.D. 77, ¶ 19, 920 N.W.2d 321,

326 (quoting Johnson v. Kolman, 412 N.W.2d 109, 111 (S.D. 1987)). Exhaustion is

necessary because it allows “the administrative agency to exercise its discretion,

apply its expertise, and make a factual record upon which to base subsequent

judicial review.” Id. (quoting Read v. McKennan Hosp., 2000 S.D. 66, ¶ 12, 610

N.W.2d 782, 785). Here, the City ordinances establish that these types of actions

are not ministerial. See RCMC § 17.50.080(B) (The Building Official is vested with

“the power to render interpretations of this [Rapid City Sign Code] and to adopt and

enforce rules and supplemental regulations in order to clarify the application of its

provisions.”). Therefore, the manner in which the City Building Official exercises

his discretion in carrying out these duties must be determined by a review of the

administrative record. Lamar’s remedy was an appeal to the Board under SDCL

11-4-19. Because Lamar failed to exhaust this administrative remedy, the circuit

court properly declined to exercise jurisdiction.

[¶45.] We further conclude that the circuit court properly determined that

this case did not present an extraordinary factual situation warranting review

despite the failure to exhaust administrative remedies. See Robinson v. Human

Relations Comm’n, 416 N.W.2d 864, 866 (S.D. 1987) (“Judicial interference [in]

administrative proceedings is justified only where the plaintiff has presented an

extraordinary factual situation on appeal.”). Notably, at the time Lamar

commenced its declaratory action, its request that any actions taken pursuant to

-22-
#28903, #28923

the allegedly unlawful settlement agreement be declared void ab initio was

prospective in nature, given that it pertained to events that had not yet occurred.

Lamar was aware that the sign permits were later issued on August 10, 2018, but

identifies no reason why it was precluded at that time from exercising its right to

administratively appeal this decision to the Board of Adjustment pursuant to the

requisite statutory procedures.

[¶46.] Instead, Lamar asserts that it could not have obtained the relief it was

seeking (a declaration that the settlement agreement and the ordinances are

invalid) by appealing to the Board of Adjustment. More specifically, Lamar argues

that because a board of adjustment does not have the authority to declare an

ordinance void, an injured property owner may attack the validity of the ordinances

in a direct action in circuit court. Thus, Lamar contends that its declaratory

judgment action requesting that the ordinances upon which the permits were issued

be declared void was the proper avenue to challenge the validity of the permits.

[¶47.] Although property owners may challenge the validity of an ordinance

through a declaratory judgment action, see, e.g., Abata, 2019 S.D. 39, 931 N.W.2d

74, Lamar’s challenge to the City’s issuance of the sign permits is distinct from its

challenge to the validity of the underlying settlement agreement and amendments

to the sign code. Challenges to the granting of permits, such as those brought by

Lamar here, must be pursued through the administrative process outlined above. 6

6. Notably, had Lamar unsuccessfully appealed the issuance of the sign permits
to the Board, Lamar could have filed a petition for a writ of certiorari
challenging the Board’s decision in circuit court. As part of that challenge,
Lamar could have argued that the permits were improperly issued because,
(continued . . .)
-23-
#28903, #28923

3. The settlement agreement between Lamar and the City.

[¶48.] By notice of review, Epic argues that the circuit court erred in failing

to find the settlement agreement previously entered into between Lamar and the

City invalid. Epic’s claim originated as an alternative argument advanced in the

event the circuit court declared the settlement agreement between Epic and the

City invalid. Regardless of how this claim was presented, Epic has neither alleged

nor established that the City, by entering into the settlement agreement with

Lamar, circumvented the notice and hearing procedures, bargained away its police

powers, or acted unreasonably and arbitrarily. Moreover, the provisions in Lamar’s

agreement regarding the repeal and amendment of specific City ordinances allowed

the City to adopt “any reasonable regulations related to off-premises signs . . . in the

future.” Therefore, we conclude that the circuit court properly denied Epic’s

alternative claim.

[¶49.] Affirmed.

[¶50.] GILBERTSON, Chief Justice, and JENSEN, SALTER, Justices, and

MAYER, Circuit Court Judge, concur.

[¶51.] MAYER, Circuit Court Judge, sitting for KERN, Justice, disqualified.

________________________
(. . . continued)
in its view, the amended ordinances were invalid. See, e.g., Wedel v. Beadle
Cty. Comm’n, 2016 S.D. 59, ¶ 16, 884 N.W.2d 755, 759. Although the circuit
court cannot declare ordinances invalid in such an appeal, the court can
nonetheless consider the validity of the ordinances in resolving challenges to
the issuance of permits.

-24-