author: PORITSKY, Judge.

text:
    TWINCO ROMAX AUTOMOTIVE WAREHOUSE, INC., Appellant, v. OLSON GENERAL CONTRACTORS, INC., Five Star Welding and Fabricating, Inc., Lucas Corporation, Nucor Corporation, Respondent.
    No. C2-01-1763.
    Court of Appeals of Minnesota.
    May 7, 2002.

      Paul V. Esposito, pro hac vice, Clausen Miller, P.C., Chicago, IL; and Ted E. Sullivan, William L. Davidson, Lind, Jensen, Sullivan, Peterson, P.A., Minneapolis, for appellant.
    John M. Anderson, Matthew J. Franken, Bassford, Lockhart, Truesdell & Briggs, P.A., Minneapolis, for respondent Olson General Contractors, Inc.
    Peter J. Manderfeld, Joseph M. Goldberg, Sandra J. Grove, Joseph Goldberg & Associates, St. Louis Park, for respondent Five Star Welding and Fabricating, Inc.
    William M. Beadie, Moore, Costello & Hart, P.L.L.P., Minneapolis, for respondent Lucas Corp.
    Dean B. Thomson, Jocelyn L. Knoll, Fa-byanske, Westra & Hart, P.A., Minneapolis, for respondent Nucor Corp.
    Considered and decided by SCHUMACHER, Presiding Judge, HANSON, Judge, and PORITSKY, Judge.
   OPINION

PORITSKY, Judge.

Appellant brought this action, alleging that roof joists designed, supplied, and/or installed by respondents were defective. Respondents moved for dismissal and summary judgment, arguing that appellant’s suit was subject to the two-year statute of limitations for suits involving defects in improvements to real property. The district court agreed and dismissed appellant’s claim. On appeal, appellant contends that its claim is subject to an exception to the two-year limitations statute because the allegedly defective roof joists qualify as “equipment or machinery.”

FACTS

Twinco Romax Automotive Warehouse, Inc. (Twinco) is a distributor of ancillary automotive parts. Through its real estate development corporate affiliate, Twinco contracted with Olson General Contractors, Inc. (Olson) to build a warehouse.

Olson prepared the initial architectural and engineering design drawings, and then, acting as general contractor, subcontracted with Five Star Welding and Fabricating, Inc. (Five Star) to provide a roof structure. Five Star subcontracted with Lucas Corporation (Lucas) for the preparation of shop-trace drawings (i.e., structural steel details on Olson’s drawings) and the bill listing of structural steel and other materials to be incorporated into the project. Five Star also contracted with the Vulcraft division of Nucor Corporation (Nucor) to design, engineer, and manufacture the joists.

A major failure occurred at some point in the design process. In order to accommodate future expansion of the warehouse, the roof structure required custom joists. But the design documents only showed a standard joist with an extended end. Olson approved the defective design, the incorrect joists were built and supplied, and the warehouse was built using the inadequate Vulcraft joists.

On January 4, 1997, following a snowstorm, the roof of the Twinco warehouse collapsed. The cause of the collapse was determined to be defective roof joists. Twinco’s warehouse and its contents sustained extensive damage.

On January 3, 2001, Twinco filed and served a multi-count complaint against Olson, Five Star, Lucas, and Nucor alleging breach of contract, negligence, breach of express warranty, and strict liability against all or some of the defendants. Respondents, through motions to dismiss and for summary judgment, asserted that the action was time-barred under Minn.Stat. § 541.051 (2000), which is the two-year statute of limitations for defects in improvements to real property.

Twinco responded by arguing that the joists were “equipment or machinery.” Therefore, Twinco contended, its claims were exempt from the two-year statute of limitations found in section 541.051, and were instead subject to the general six-and four-year statutes of limitation contained in Minn.Stat. § 541.05 (2000), with regard to their claims of breach of contract, breach of express warranty, negligence, and strict liability.

On August 13, 2001, the district court concluded that the roof joists were ordinary building materials, and not equipment or machinery under Minn.Stat. § 541.051, subd. (l)(d), and, treating defendants’ motions as a single motion for summary judgment, dismissed the case by applying the two-year statute of limitations for defects in improvements to real property to all of the claims. This appeal followed.

ISSUE

Are roof joists that are specially designed for a particular structure “equipment or machinery” within the meaning of Minn.Stat. § 541.051, subd. 1(d) (2000)?

ANALYSIS

The district court granted summary judgment by concluding that “joists are ordinary building materials and not equipment or machinery,” rendering Twinco’s claims time-barred. On an appeal from summary judgment, we ask whether there are any genuine issues of material fact and whether the district court erred in applying the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn.1990).

Minnesota’s general statute of limitations provides for a six-year limitation for actions upon express or implied contract, statutory liabilities, trespass, and injury to personal property, and a four-year limit for strict liability. Minn.Stat. § 541.05 (2000). However, Minn.Stat. § 541.051, subd. 1 provides:

(a) Except where fraud is involved, no action by any person in contract, tort, or otherwise to recover damages for any injury to property, real or personal, * * * arising out of the defective and unsafe condition of an improvement to real property, * * * shall be brought against any person performing or furnishing the design, planning, supervision, materials, or observation of construction or construction of the improvement to real property or against the owner of the real property more than two years after discovery of the injury * * *.
* * * *
(d) The limitations prescribed in this section do not apply to the manufacturer or supplier of any equipment or machinery installed upon real property.

(Emphasis added.)

Twinco does not argue that its claims do not arise out of a defective and unsafe condition of an improvement to real property. Rather, it argues that the joists are equipment or machinery and therefore the exception contained in subdivision 1(d) applies, removing its claims from the purview of the two-year statute of limitations. Thus, the issue is whether the joists at issues are “equipment or machinery.” This issue is a matter of statutory construction, which this court reviews de novo. Brookfield Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 398 (Minn.1998). Summary judgment is appropriate if the respondents establish that they were not manufacturers or suppliers of equipment or machinery installed on the real property-

Minn.Stat. § 541.051, subd. 1(d), is modeled after a similar Virginia statute. Red Wing Motel Investors v. Red Wing Fire Dep’t, 552 N.W.2d 295, 297 n. 2 (Minn.App.1996), review denied (Minn. Oct. 29, 1996). In general, while Minnesota may accord weight to decisions interpreting the Virginia statute, see id., they are not binding precedent on Minnesota courts. Because some of the cases construing the Virginia statute are not entirely consistent with each other, we find those cases to have limited persuasive value. If, however, a Minnesota court in a particular case chooses to follow a Virginia case, as this court did in Red Wing Motel, then the Virginia case has the same prece-dential value of the Minnesota case that adopted it.

In Red Wing Motel, this court noted that the purpose of section 541.051, subdivision 1, is

to eliminate suits against architects, designers and contractors who have completed the work, turned the improvement to real property over to the owners, and no longer have any interest or control in it.

552 N.W.2d at 297 (quoting Sartori v. Harnischfeger Corp., 432 N.W.2d 448, 454 (Minn.1988)). This court proceeded to adopt the Virginia Supreme Court’s reasoning in Cape Henry Towers, Inc. v. National Gypsum Co., 229 Va. 596, 331 S.E.2d 476 (1985). There the Virginia court distinguished ordinary building materials from equipment or machinery by explaining that ordinary building materials are “incorporated into construction work outside the control of their manufacturers or suppliers, at the direction of architects, designers, and contractors;” while equipment and machinery “are subject to close quality control at the factory and may be made subject to independent manufacturer’s warranties.” Red Wing Motel, 552 N.W.2d at 297 (quoting Cape Henry Towers, 331 S.E.2d at 480).

There may be certain items, such as the sprinkler system in Red Wing Motel, that fall into a gray area between building materials and equipment or machinery, and may require further analysis to determine in which category they belong. However, at a minimum, ordinary building materials are those items that are essential to the existence of the building. Thus the definition of ordinary building materials includes foundations, floors, windows, doors, roofs, and materials necessary to supporting roofs, such as joists. That is, those items that are “incorporated into construction work outside the control of their manufacturers or suppliers, at the direction of architects, designers, and contractors.” Id. (quotation omitted). We therefore conclude that the joists in question are building materials and are subject to the two-year statute of limitations.

DECISION

Because the joists installed to support the roof of the Twinco facility were ordinary building materials and not “equipment or machinery” within the meaning of Minn.Stat. § 541.051, subd. 1(d) (2000), the district court did not err in determining that Twinco’s claims were time-barred.

Affirmed.

       Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const, art. VI, § 10.

      . Compare Grice v. Hungerford Mech. Corp., 236 Va. 305, 374 S.E.2d 17, 19 (1988) (finding electrical panel box and component parts to be ordinary building materials because quality and quantity of component parts of electrical panel boxes and instructions for assembling, wiring, grounding, and installing them during construction of a particular building were “determined by the plans and specifications provided by the architect or other design professional” and no instructions were received from manufacturer), with Cooper Indus. v. Melendez, 260 Va. 578, 537 S.E.2d 580, 590 (2000) (concluding that even though switchers and circuit breakers used to convey electricity to docked submarines were functional equivalent to electrical panel box, albeit enormous, they were nevertheless "equipment or machinery” because they were (1) not essential to existence of structure on which they were attached, (2) self contained and fully assembled by their respective manufacturers, and (3) not fungible or generic), and City of Richmond, Va. v. Madison Mgmt. Group, Inc., 918 F.2d 438, 445 (4th Cir.1990) (relatively sophisticated discrete materials such as the steel-reinforced concrete pipe used in water transmission main are "equipment and machinery” because materials at issue were "subject to close quality control at the factory,” and the pipes’ integration into the overall project was not "outside the control” of manufacturer because manufacturer, general contractor, and city engineers collaborated in designing the main), with Luebbers v. Fort Wayne Plastics, Inc., 255 Va. 368, 498 S.E.2d 911, 913 (Va.1998) (swimming pool components were ordinary building materials because they were fungible and manufacturer of parts exercised no oversight over construction of pools).

      . In Red Wing Motel, this court determined that damage resulting from faults in the installation of a sprinkler system was not recoverable from the designer/installer more than two years after the damage occurred because the pipes and sprinkler heads provided by the designer/installer were ordinary building materials and not machinery or equipment. 552 N.W.2d at 297. In dictum, this court noted that, "[h]ad the sprinkler heads themselves failed, their manufacturer might, however, fall within the * * * exception.” Id. at 297-98.


source: Caselaw Access Project

author: KLAPHAKE, Judge.

license: Public Domain

text:
    STATE of Minnesota, Respondent, v. Michael Tibor VEREB, Appellant.
    No. C8-01-1055.
    Court of Appeals of Minnesota.
    May 7, 2002.

      Mike Hatch, Attorney General, John B. Galus, Assistant Attorney General, Caia Johnson, Certified Student Attorney, St. Paul, MN; and Conrad I. Freeberg, Morrison County Attorney, Little Falls, MN, for respondent.
    Daniel S. Adkins, Richard Sand Associates, P.A., St. Paul, MN, for appellant.
    Considered and decided by LANSING, Presiding Judge, KLAPHAKE, Judge, and HUSPENI, Judge

       Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const, art. VI, § 10.

   OPINION

KLAPHAKE, Judge.

After the district court denied his pretrial suppression motion, appellant entered into a Lothenbach stipulation and, based upon the police reports, was found guilty by the court of conspiracy to manufacture methamphetamine, a first-degree controlled substance crime, and possession of more than six grams of methamphetamine, a second-degree controlled substance crime. Minn.Stat. §§ 152.021, subd. 2a, 022, subd. 2(1), .96, subd. 1 (2000). Pursuant to the parties’ agreement, the district court merged the two counts for sentencing and imposed a 72-month sentence, which represents a departure from the presumptive 86-month sentence set out in the guidelines for a person with a zero criminal history score who commits a severity level VIII offense. See Minn. Sentencing Guidelines IV (grid).

On appeal, appellant challenges the legality of the initial stop of the vehicle in which he was riding and his warrantless arrest. Because there was a reasonable articulable basis for the stop and probable cause to arrest appellant, we affirm.

FACTS

On October 18, 2000, Little Falls Police Chief Michael Pender received a telephone call from a Wal-Mart employee. The employee reported that two individuals, whom police later identified as Shane Allen Saarela and appellant Michael Tibor Ver-eb, had just purchased a large quantity of cold tablets. The employee also reported that the two men had made several trips into the store to purchase the cold tablets. Chief Pender knew from his training and experience that cold medicine usually contains ephedrine or pseudoephedrine, which are common precursor ingredients used to manufacture methamphetamine.

When Chief Pender arrived at the store, an employee met him and stated that the men had just left in a vehicle. Because the employee knew which way the vehicle was traveling, he accompanied Chief Pen-der to search for the vehicle. The employee sighted the vehicle and Chief Pender attempted to follow it, but its speed soon exceeded 75 miles per hour and it began to pull away. Chief Pender requested backup from the state patrol, and State Trooper Eugene Okerlund responded and stopped the vehicle.

Saarela, the driver, did not have a driver’s license with him and was unable to produce other identification, but claimed that his name was “Thomas Oscar Strand-lien.” Appellant also failed to produce identification and, according to Chief Pen-der, was initially “reluctant” to give his name. Neither party could produce any insurance information on the vehicle.

According to Chief Pender’s report, appellant appeared confused and evasive during questioning. Appellant initially offered no explanation as to why he had purchased a large quantity of cold tablets or why he and Saarela had attempted to evade the officers. Appellant explained that the vehicle belonged to his girlfriend, and he consented to its search. In the trunk, Chief Pender found a number of plastic bags containing more than 30 boxes of cold tablets and several packages of “AA” lithium batteries, which are also known to be used in the manufacture of methamphetamine. Appellant told Chief Pender that he had a head cold and that the cold tablets were his, but then told Chief Pender that the cold tablets were for a Mend. When asked if he had any illegal drugs or money, appellant admitted that he had money for “supplies.” From his pockets, he produced $570 in cash and two cash register receipts from Wal-Mart. The receipts included purchases of cold tablets and batteries.

Appellant and Saarela were taken to police headquarters for farther questioning by drug task force agents, and the vehicle was towed. Both men were given Miranda warnings prior to questioning. Saarela waived his right to an attorney and agreed to questioning; appellant stated that he understood his rights but did not wish to speak with agents. Approximately two hours and 15 minutes after the initial stop, appellant was formally placed under arrest for conspiracy to manufacture methamphetamine.

During booking, appellant was asked to change clothes. While picking up appellant’s clothes, police found two plastic baggies and a black pouch, each of which contained a white powdery substance. The substance was later tested and proved to contain approximately 20 grams of methamphetamine.

ISSUES

1. Was there reasonable articulable suspicion to stop the vehicle in which appellant was riding?

2. Was there probable cause to support appellant’s warrantless arrest for conspiracy to manufacture methamphetamine?

ANALYSIS

“When reviewing pretrial orders on motions to suppress evidence, we may independently review the facts and determine, as a matter of law, whether the district court erred in suppressing- — or not suppressing — the evidence.” State v. Harris, 590 N.W.2d 90, 98 (Minn.1999) (citation omitted). On issues involving the legality of a limited investigatory stop, an appellate court reviews the district court’s determination of reasonable suspicion de novo and its findings of fact for “clear error.” State v. Britton, 604 N.W.2d 84, 87 (Minn.2000). When determining whether probable cause exists to make a war-rantless arrest, an appellate court “independently reviews the facts to determine the reasonableness of the conduct of police.” State v. Riley, 568 N.W.2d 518, 523 (Minn.1997) (citation omitted).

I.

Appellant first challenges the legality of the stop of the vehicle in which he was riding. He argues that police lacked probable cause to stop it because the mere report that he had purchased cold tablets was insufficient to provide reasonable suspicion that appellant had committed a crime or was about to commit a crime.

An investigatory stop requires only reasonable suspicion of criminal activity, not probable cause. State v. Pike, 551 N.W.2d 919, 921 (Minn.1996) (citing Terry v. Ohio, 392 U.S. 1, 21-22, 88 S.Ct. 1868, 1880, 20 L.Ed.2d 889 (1968)). Limited investigatory stops are allowed if police have a reasonable articulable suspicion of a motor vehicle violation or of criminal activity. Id. The stop must be based on more than a “hunch” and cannot be the “product of mere whim, caprice or idle curiosity.” State v. George, 557 N.W.2d 575, 578 (Minn.1997); Pike, 551 N.W.2d at 921.

An officer need not personally observe facts to establish reasonable artic-ulable suspicion and may rely on facts provided by a third person. Marben v. State, Dep’t of Pub. Safety, 294 N.W.2d 697, 699 (Minn.1980). Reasonable articula-ble suspicion may be based on an informant’s tip if police know enough about the informant to believe he or she is credible and the information given to police appears to have some factual basis. See State v. Davis, 393 N.W.2d 179, 181 (Minn.1986) (informant’s face-to-face report of traffic violation justified stop). Direct contact between an informant and an officer enhances an informant’s credibility, because an informant can be held accountable for any false information. In re Welfare of G.M., 560 N.W.2d 687, 691 (Minn.1997) (citing Davis, 393 N.W.2d at 181).

Here, we conclude that police had reasonable suspicion of criminal activity to support the stop of the vehicle, based on the following facts: (1) Chief Pender received a report from a Wal-Mart employee who observed two men purchasing a large number of cold tablets; (2) Chief Pender knew that cold tablets are precursor materials commonly used in the production of methamphetamine; (3) when Chief Pender arrived at the store, an employee met him and told him that the men had just left in a vehicle; (4) the employee observed the direction the vehicle had traveled and rode along with Chief Pender to search for the vehicle; and (5) Chief Pender observed the vehicle attempting to evade his pursuit by traveling at excessive speeds.

The speeding violation and evasive driving conduct alone justified the stop. See State v. Fiebke, 554 N.W.2d 755, 756-57 (Minn.App.1996). These facts, coupled with appellant’s and Saarvela’s other suspicious conduct at the store, provided a reasonable articulable basis to stop the vehicle to investigate a possible traffic or controlled substance violation. See State v. Brown, 345 N.W.2d 233, 237 (Minn.1984) (police had right and duty to respond to and investigate report of suspicious activity); see also State v. Johnson, 444 N.W.2d 824, 827 (Minn.1989) (driver’s evasive conduct provided articulable suspicion of criminal activity to warrant stop). We therefore conclude that the stop was lawful.

II.

Appellant next challenges the basis for his warrantless arrest for conspiracy to manufacture methamphetamine. He argues that his legitimate possession of cold tablets and batteries does not establish probable cause to arrest him merely because those items are precursor materials used to manufacture methamphetamine.

An investigative detention following a lawful stop may last only “as long as reasonably necessary to effectuate the purpose of the stop.” State v. Blacksten, 507 N.W.2d 842, 846 (Minn.1993) (citation omitted). Although police did not formally arrest appellant until after they had detained and transported him to police headquarters, we conclude that once he believed he was not free to leave, his continued detention became a “de facto” arrest requiring probable cause. See id. at 847 (arrest occurs when defendant handcuffed, placed in squad car, and not free to leave); State v. Carver, 577 N.W.2d 245, 247 (Minn.App.1998) (arrest occurs when reasonable person would feel he was under arrest and not free to leave). Even a “de facto” arrest, however, is legal if supported by probable cause. Id.

Probable cause exists when police have facts and circumstances that would warrant a prudent person in the officer’s position to reasonably conclude that the person committed a crime. G.M., 560 N.W.2d at 695; see also United States v. Hartje, 251 F.3d 771, 775 (8th Cir.2001) (probable cause exists “when at the moment of arrest police have knowledge of facts and circumstances grounded in reasonably trustworthy information sufficient to warrant a belief by a prudent person that an offense has been or is being committed”). “While probable cause requires something more than mere suspicion [of criminal activity], it requires less than the evidence necessary for conviction.” State v. Horner, 617 N.W.2d 789, 796 (Minn.2000).

To determine if probable cause exists to make a warrantless arrest, a court must look to the “information that police took into consideration when making the arrest, not what they uncovered thereafter.” State v. Walker, 584 N.W.2d 763, 766 (Minn.1998). The existence of probable cause is examined under the “totality of the circumstances” test. State v. McCloskey, 453 N.W.2d 700, 702-03 (Minn.1990).

Appellant argues there was insufficient evidence to arrest him for conspiracy to manufacture methamphetamine because there was no evidence of any agreement between him and Saarela to commit the crime. Conspiracy requires an agreement with another to commit a crime and an overt act in furtherance of the agreement. Minn.Stat. § 609.175, subd. 2 (2000). A conspiracy need not be established by direct evidence, but can be inferred from the circumstances. State v. Hatfield, 639 N.W.2d 372, 376 (Minn.2002); State v. Watson, 433 N.W.2d 110, 114-15 (Minn.App.1988), review denied (Minn. Feb. 10, 1989).

Here, the overt act requirement was satisfied by the purchase of a large quantity of cold tablets and batteries by appellant and Saarela. In addition, police had other circumstantial evidence from which they could infer, for purposes of probable cause, that appellant and Saarela had entered into some type of agreement to participate in a crime, as follows: (1) police knew at the time of appellant’s arrest that he and Saarela had entered the Wal-Mart store several times to purchase a large quantity of cold tablets and lithium batteries, which are precursor materials used to manufacture methamphetamine; (2) police observed evasive driving conduct on Saare-la’s part; (3) appellant appeared confused and evasive when questioned; (4) neither appellant nor Saarela could produce identification; and (5) appellant produced $570 in cash from his pockets, which he claimed was for “supplies.”

While these facts alone might not justify a conviction, they are sufficient to “lead a person of ordinary care and prudence to entertain an honest and strong suspicion that the person under consideration is guilty of a crime.” State v. Carlson, 267 N.W.2d 170, 173-74 (Minn.1978). We therefore conclude that because police could reasonably infer that appellant and Saarela had a plan or agreement to manufacture methamphetamine, the evidence was sufficient to provide probable cause for appellant’s warrantless arrest.

Finally, we recognize that the supreme court recently affirmed this court’s reversal of a conviction for conspiracy to manufacture methamphetamine on sufficiency of the evidence grounds. Hatfield, 639 N.W.2d at 377 (insufficient evidence of an agreement necessary for a conspiracy, where co-conspirator testified that he did not know anything about the manufacture of methamphetamine and did not know that anhydrous ammonia was in either a propane tank or in a red cooler that the defendant had asked him to bring to his garage). As we have already noted, however, there is á substantial difference between sufficiency of the evidence to support probable cause for an arrest, which is the issue here, and sufficiency of the evidence to support a conviction, which was the issue in Hatfield. See Homer, 617 N.W.2d at 796.

In addition, the issue regarding sufficiency of the evidence to support the conviction was not raised below or addressed by the district court, nor has appellant specifically raised or briefed this issue on appeal. We decline to sua sponte determine whether the evidence was sufficient to support appellant’s conviction for conspiracy to manufacture methamphetamine. Cf. State v. Pinkerton, 628 N.W.2d 159, 161-62 (Minn.App.2001) (noting that while “this court will not decide an issue that was not raised” below, we “may deviate from this rule when (1) the interests of justice require consideration of an issue and (2) consideration would not unfairly surprise a party to the appeal”), review denied (Minn. July 24, 2001); State v. Clow, 600 N.W.2d 724, 726-27 (Minn.App.1999) (same), review denied (Minn. Oct. 21, 1999).

DECISION

The district court did not err in determining that police had reasonable articula-ble suspicion of criminal activity to justify a stop of the vehicle in which appellant was riding. The district court also did not err in concluding that, after further investigation, police had probable cause to arrest appellant for conspiracy to manufacture methamphetamine. The evidence was sufficient to show, for purposes of establishing probable cause, that appellant and Saarela had an agreement to commit a crime and acted in furtherance of that agreement. We therefore affirm the district court’s decision denying appellant’s suppression motion.

Affirmed.

      . At the plea and sentencing hearing, the parties agreed to correct the statutory citation in Count I of the complaint, which charged appellant with conspiracy to commit a first-degree controlled substance crime, from Minn.Stat. § 152.021, subd. 2(a), which involves possession of a controlled substance, to Minn.Stat. § 152.021, subd. 2a, which makes it a crime to manufacture any amount of methamphetamine. Count II of the complaint remained unchanged and charged appellant with second-degree possession of a controlled substance under Minn.Stat. § 152.022, subd. 2(1).

      . Following appellant’s de facto arrest, police uncovered other evidence from the vehicle, including two more cash register receipts from Wal-Mart, dated October 17, 2000, the previous day. Police also discovered that Saarela had given them a false name when he was initially stopped, because they found his driver’s license in the vehicle. Further, in response to questioning at headquarters, Saarela admitted that appellant had handed him $20 to purchase two boxes of cold tablets, but claimed that he did not know what methamphetamine was and had no knowledge that cold tablets and lithium batteries were items used to manufacture methamphetamine. Saarela later admitted that "it was possible that [he] had purchased three boxes instead of two.” When Chief Pender spoke again with the employee at Wal-Mart, however, he learned that Saarela purchased six boxes of cold tablets and that appellant purchased six packages of batteries and nine boxes of assorted cold tablets. This evidence may support appellant’s eventual conviction, but we do not consider it in determining whether probable cause existed to support appellant's arrest.


author: R.A. RANDALL, Judge.

text:
    STATE of Minnesota, Respondent, v. George Kostas PAPADAKIS, Appellant.
    No. C1-01-961.
    Court of Appeals of Minnesota.
    May 7, 2002.

      Mike Hatch, Attorney General, St. Paul, MN; and Thomas J. Harbinson, Scott County Attorney, Eva L. Cheney, Assistant Scott County Attorney, Shakopee, MN, (for respondent).
    Barry V. Voss, Minneapolis, MN, (for appellant).
    Considered and decided by RANDALL, Presiding Judge, LANSING, Judge, and KLAPHAKE, Judge.
   OPINION

R.A. RANDALL, Judge.

After a bench trial, the district court found appellant guilty of second-degree eontrolled-substance possession in violation of Minn.Stat. § 152.022, subds. 2(1), 3(a) (2000). The district court took seven counts of fifth-degree controlled-substance-possession under advisement and found appellant guilty of all counts. See Minn.Stat. § 152.025, subds. 2(1), 3(a). Appellant alleges (1) there is insufficient evidence to convict him of second-degree and fifth-degree eontrolled-substance possession; (2) there is not a substantial basis to conclude that the search warrant was based on probable cause; (3) the district court abused its discretion in refusing to consider appellant’s motion to reconsider; and (4) appellant’s seven fifth-degree eon-trolled-substance convictions are based on the same criminal act and should be vacated.

(1) Appellant’s actual knowledge of the amount of the controlled substance possessed is not an essential element; (2) the district court had a substantial basis to issue the search warrant; (3) the district court did not abuse its discretion in refusing a motion to reconsider; (4) the seven fifth-degree eontrolled-substance convictions were part of a single behavioral incident but were not the same criminal act. Affirmed.

FACTS

In May 1999, an individual contacted the Savage Police Department stating that he personally saw a large amount of short-term traffic at a Savage residence. The informant left his name, address and telephone number. Detective Steve Bolluyt, an Eagan police detective assigned to the South Metro Drug Task Force, telephoned the informant to confirm the information. The informant gave Bolluyt the appellant’s and his wife’s names identifying them as the individuals residing at the address. To verify the information, Bolluyt checked Savage Police Department records and telephone records. He discovered that police had last contacted appellant in January 1999. Bolluyt also learned that appellant was previously arrested in 1996 at the same address. The telephone company records verified appellant and his wife as residing at the Savage address.

Within 72 hours before applying for the search warrant, Bolluyt went to the Savage address, saw garbage cans at the curb, and contacted the refuse hauler to obtain the refuse from the address. During a search of the garbage, Bolluyt discovered correspondence addressed to appellant and his wife, a spoon with burn marks on the bottom, and plastic bags with drug residue later identified as cocaine.

Based on this information, a search warrant was issued on June 28, 1999, for the Savage address. On July 1, Bolluyt and other officers executed the search warrant. At that time, appellant was not at home, but appellant’s wife was. Detective McCormick found bottles, syringes, vials, and packages later identified as steroids in appellant’s bedroom. Bolluyt was responsible for cataloging evidence and he listed the items on the search warrant inventory and return.

Detective Grant discovered a lock box in the garage, which contained two scales, a baggie with a white powdery substance, a credit card in appellant’s name, a brown chunk-like substance, and $8,885 in cash. Grant photographed the items and gave the box and contents to Detective King, who gave them to Bolluyt. Bolluyt listed the items as “lock box and its contents” dn search warrant inventory and return.

Bolluyt then brought all items to the South Metro Drug Task Force where he divided and separately packaged the items from the lock box, labeled them, placed them in the evidence locker, and retained the key. After securing the evidence, Bol-luyt drove to appellant’s place of employment to find him. Appellant was not there, so Bolluyt called appellant’s home and left a voice mail message. Appellant returned the call, went to the police station that day, and met with Bolluyt. During the interview, appellant admitted that the cocaine was his, he identified the items from the lock box, and he admitted the steroids were his.

On July 2, 1999, Bolluyt brought the seized evidence to Rebecca Carlson, a chemist at the Minneapolis Public Health Department, for testing. Carlson determined that the.white powdery substance was approximately 11.58 grams of cocaine and the brown chunk was hashish, and there were six different types of steroids.

ISSUES

I. Was there sufficient evidence to convict appellant of second-degree and fifth-degree controlled-substance possession?

II. Was there a substantial basis for concluding that the search warrant application established probable cause?

III. Did the district court abuse its discretion in refusing to consider appellant’s motion to reconsider?

IV. Was appellant properly convicted on seven counts of fifth-degree controlled-substance offense?

ANALYSIS

I. Was there sufficient evidence to convict appellant of second-degree and fifth-degree controlled-substance possession?

Appellant alleges there was insufficient evidence to sustain his conviction because the state did not prove that he knew the quantity of the controlled substance he possessed. The state argues that knowledge of the amount of the drugs possessed is not an essential element and it need only prove that appellant had knowledge of the substance possessed.

When the sufficiency of evidence is challenged, an appellate court’s review is limited to analysis of the record to determine whether the evidence, when viewed in the light most favorable to the conviction, is sufficient to allow the fact-finder to reach the verdict that it did. State v. Webb, 440 N.W.2d 426, 430 (Minn.1989). The same standard of review is applied to bench trials and to jury trials. State v. Cox, 278 N.W.2d 62, 65 (Minn.1979). The district court’s findings will be upheld if the appellant could reasonably have been found guilty of the charged crimes. Webb, 440 N.W.2d at 430. To sustain a conviction, the state must prove all essential elements of the charged crime beyond a reasonable doubt. State v. Ewing, 250 Minn. 436, 441, 84 N.W.2d 904, 909 (1957).

Minn. Stat § 152.022, subd. 2(1) (2000) provides:

A person is guilty of controlled substance crime in the second degree if:
(1)the person unlawfully possesses one or more mixtures of a total weight of six grams or more containing cocaine, heroin, or methamphetamine.

For a second-degree controlled-substance possession conviction the state must prove:

First, the defendant knowingly possessed one or more mixtures of
[1] a total weight of six grams or more containing cocaine
Second, the defendant knew or believed that the substance possessed cocaine.

10A Minnesota Practice, Crim Jig 20.14 (1999).

Therefore, the elements of a crime of possession are: (1) knowledge; (2) possession of the requisite weight and substance; and (3) the act took place at the time and place set forth in the complaint. All three elements must be proven beyond a reasonable doubt for a defendant to be found guilty.

We conclude that possession of a controlled substance and knowledge of the nature of the substance are essential elements, but that the state does not have to prove, in addition to all other elements, that appellant knew the precise weight or quantity of the controlled-substance.

To satisfy the knowledge element, the state must prove that appellant “had actual knowledge of the nature of the substance.” State v. Florine, 303 Minn. 103, 104, 226 N.W.2d 609, 610 (1975). The Minnesota courts have rejected the contention that the state must prove that appellant knew the quantity of the amount of controlled substance. This court, in State v. Aviles-Alvarez, stated, “[wjhile the amount is an essential element of the crime, the defendant’s knowledge of the amount is not an essential element.” State v. Aviles-Alvarez, 561 N.W.2d 523, 526 (Minn.App.1997). For a second-degree controlled-substance conviction, the state must prove, beyond a reasonable doubt, that appellant possessed cocaine of more than six grams in weight, but not that appellant knew the actual weight of the contraband. To support the fifth-degree controlled-substance conviction, the state must prove that appellant possessed hashish and steroids. As to the hashish and steroid fifth-degree controlled-substance counts, possession, but not weight was the issue.

There was sufficient evidence that appellant was aware that he possessed cocaine, hashish, and steroids and that he possessed the statutory amount. First, appellant admitted possessing the cocaine and told Bolluyt that the drugs in the garage were his. Second, Detective Bol-luyt testified that appellant admitted that there was cocaine in the garage and that the cocaine was his. Third, Rebecca J. Carlson, a chemist at the Minneapolis Public Health Laboratory testified that she performed a GC mass spectrometer analysis on the white powdery substance and evidence and determined that it was approximately 11.58 grams of cocaine. Carlson identified the brown chunk-like substance as hashish, and also identified six different types of steroids. Appellant’s statement to the police that the cocaine and drugs in his garage were his, coupled with the chemical tests and Carlson’s testimony was sufficient to establish that appellant knew that the substances he possessed were cocaine, hashish, and steroids. Carlson’s testimony as to the weight and quantity of the contraband is sufficient to prove that appellant possessed the statutorily required amount of drugs. Viewing the evidence in the light most favorable to the verdict, as we must, we conclude the facts support the guilty verdicts.

II. Was there a substantial basis for concluding that the search warrant application established probable cause?

Appellant argues that the search warrant was not supported by probable cause, claiming that the search warrant application relied on information provided by a confidential informant whose credibility was not established and who did not meet the standards established in State v. Albrecht, 465 N.W.2d 107, 108 (Minn.App.1991). The state argues that under the totality of the circumstances, there was sufficient information in the application for an issuing magistrate to conclude there was a reasonable probability that contraband would be found in appellant’s residence.

The United States and Minnesota constitutions protect a person from unreasonable searches and seizures. U.S. Const, amend. IV; Minn. Const, art. I, § 10. Generally, a search is valid, with a few exceptions, only if conducted pursuant to a valid warrant. Albrecht, 465 N.W.2d at 108. A search warrant must be supported by probable cause and be issued by a neutral and detached magistrate. Minn.Stat. § 626.08 (2000); State v. Harris, 589 N.W.2d 782, 787 (Minn.1999). In making a determination whether a warrant is supported by probable cause, a reviewing court does not engage in a de novo review, but instead gives deference to the issuing judge’s finding of probable cause. A reviewing court is limited to ensuring that the issuing judge had a substantial basis for concluding that probable cause existed. Harris, 589 N.W.2d at 787-88.

Substantial basis means that there is a fair probability that under the totality-of-the-circumstances test, that evidence or contraband will be found in a particular place. State v. Zanter, 535 N.W.2d 624, 633 (Minn.1995). “Elements bearing on this probability include information linking the crime to the place to be searched and the freshness of the information.” State v. Souto, 578 N.W.2d 744, 747 (Minn.1998). Marginal or doubtful cases should be resolved by the preference for warrants. State v. McCloskey, 453 N.W.2d 700, 704 (Minn.1990).

Under the totality-of-the-circumstances test, the issuing magistrate makes

a practical, common-sense decision whether, given all the circumstances set forth in the affidavit before him, including the “veracity” and “basis of knowledge” of persons supplying hearsay information, there is a fair probability that contraband or evidence of a crime will be found in a particular place.

Illinois v. Gates, 462 U.S. 213, 238, 103 S.Ct. 2317, 2332, 76 L.Ed.2d 527 (1983).

We conclude there was a substantial basis for the district court to determine that probable cause existed to search appellant’s residence. In this case, the supporting affidavit contained the following information: (1) a large amount of short-term traffic was observed at appellant’s residence; (2) there was previous police contact with appellant and the last contact was in January 1999; (3) appellant was previously arrested at the residence; and (4) a garbage search uncovered cocaine residue and drug paraphernalia.

In Albrecht, this court concluded that an anonymous tip that described the inside of Albrecht’s home and stated that Albrecht drove a red-and-white pickup truck was insufficient to support a finding of probable cause for a search warrant. 465 N.W.2d at 109. The officer, however, did not independently corroborate the informant’s credibility. Id. at 107-08. In this case, unlike Albrecht, the informant was not anonymous. The informant left his name and phone number, and Bolluyt verified the informant’s name by returning the phone call. Informant reliability and credibility can be established by police corroboration. McCloskey, 453 N.W.2d at 703-04.

Additionally, the trash can search provided an independent and substantial basis for the district court’s probable cause determination. The search of the trash produced a spoon with burn marks on the bottom and pieces of plastic bags with white powder residue, which later tested positive for cocaine. Thus, the cocaine residue independently confirms Bolluyt’s suspicion that contraband might be found in appellant’s residence. We conclude the district court had a substantial basis for concluding that probable cause existed to issue a search warrant for appellant’s residence. See Id. at 704 (stating that in the totality of the circumstances the independent corroboration of an informer is relevant).

III. Did the district court abuse its discretion in refusing to consider appellant’s motion to reconsider?

Appellant argues that the district court abused its discretion in refusing appellant’s motion to reconsider its omnibus ruling. The state notes that there is no rule of criminal procedure that allows a motion to reconsider an omnibus order and argues that whether to entertain such a motion is entirely discretionary with the district court.

The district court, by letter, notified appellant that it would not reconsider its omnibus order because the court was unaware of any rule permitting a party to file a motion to reconsider an omnibus order. The court also stated that it would refuse to reconsider the motion based on its previous omnibus memorandum, which concluded that there is no legal requirement that the state prove that a defendant knew the actual weight of the controlled substance.

We conclude that refusing appellant’s motion to reconsider the omnibus order was within a district court’s discretion. Although the rules of criminal procedure do not specifically authorize motions for reconsideration of omnibus rulings, the district court has the inherent authority to consider such a motion. The supreme court recognized motions to reconsider in State v. Montjoy, 366 N.W.2d 103, 107-08 (Minn.1985) (holding that prosecutor properly moved for clarification and reconsideration of omnibus order). At times, a motion for reconsideration may be the most efficient and preferable course of action, and it can spare parties the time, trouble, and expense of an appeal. Id. In addition to recognizing motions for reconsideration or clarification, the supreme court has concluded that the omnibus court itself is “free to entertain and grant a motion to reopen made by the state * * * [.]” Id. at 107; see also State v. Needham, 488 N.W.2d 294 (Minn.1992) (remanded for reopened omnibus hearing).

Thus, given the district court’s discretion in whether to grant or deny motions to reconsider an omnibus ruling, it was not error to deny appellant’s motion to reconsider.

IV. Was appellant properly convicted on seven counts of fifth-degree controlled-substance offense?

Under Minnesota law there is a distinction between sentencing on multiple convictions that arose from a single behavioral incident and convictions of more than one offense arising from the same act.

Appellant argues that the second-degree and fifth-degree controlled-substance convictions arose from the same criminal act. The state asserts that the second-degree and fifth-degree controlled-substance convictions arose from a “single behavioral incident,” which is governed by a different statute than a “single criminal act,” and thus appellant could be convicted on the different offenses, as long as the district court did not impose multiple sentences.

Minn.Stat. § 609.035 allows multiple convictions for different incidents (counts) arising out of a “single behavioral incident,” but prohibits multiple sentences for conduct that is part of a single behavioral incident. We agree with the state that appellant’s conduct was “single behavior” rather than “single act.”

‘Whether multiple offenses arose from a single behavioral incident depends on the facts and circumstances of a particular case.” State v. Bookwalter, 541 N.W.2d 290, 294 (Minn.1995) (citations omitted). The focus is on whether the conduct occurred at the same time and place and whether there was a single criminal objective. Id. Possession of two controlled substances at the same time and place, for personal use, is a single behavioral incident. State v. Reese, 446 N.W.2d 173, 180 (Minn.App.1989), review denied (Minn. Nov. 15, 1989), see also State v. Zimmerman, 352 N.W.2d 452, 454-55 (Minn.App.1984) (noting that possession of two different controlled substances at the same time constitutes a single behavioral incident). The district court rejected appellant’s contention that his convictions were a Minn.Stat. § 609.04 “single criminal act” and thus rejected appellant’s argument that not only could he not be sentenced separately but also that he could not have separate convictions. We affirm the district court’s analysis that appellant’s criminal actions were not part of a single criminal act, but rather were parts of a single behavioral incident.

The district court followed the proper sentencing procedure outlined in Minn. Stat. § 609.035. We conclude that appellant’s conviction arose not from a single act, but from a single behavioral incident, which allows multiple convictions but not multiple sentences. Appellant’s second-degree controlled-substanee possession conviction was for possessing the cocaine. The seven fifth-degree controlled-substance convictions were for possessing hashish and each of six different steroids. None of the convictions resulted from lesser-included offenses.

We agree with appellant that he cannot receive multiple sentences, but we agree with the district court and the state that a “single behavioral incident” does not prohibit multiple convictions.

We conclude that appellant’s second-degree and fifth-degree controlled-substanee convictions were proper because the district court convicted appellant of all counts, but sentenced appellant only on the second-degree controlled-substanee conviction.

DECISION

Appellant’s statements acknowledged that the controlled substances that police found in his garage were his. That concession, coupled with independent testimony that the cocaine was more than six grams in weight, was sufficient to support the conviction for a second-degree controlled-substance crime. The state does not have to prove that appellant knew the exact weight of the controlled substance (cocaine) possessed. The state did prove the essential elements: (1) knowledge that appellant possessed illegal contraband; (2) possession of the requisite weight and substance; and (3) the act took place at the time and place set forth in the complaint.

The record contains sufficient evidence to support appellant’s fifth-degree eon-trolled-substance convictions for hashish and steroids.

Informant’s statement of short-term traffic at appellant’s residence and cocaine residue found in appellant’s garbage provided a substantial basis for the district court to conclude there was probable cause to search appellant’s residence for drugs.

Although the rales of criminal procedure do not specifically authorize reconsideration of omnibus orders, it was within the district court’s discretion to hear or refuse to hear appellant’s motion to reconsider.

On the facts, appellant’s possession of different controlled substances at the same time and place was not a single criminal act. The record supports appellant’s second-degree and fifth-degree controlled-substanee convictions.

Affirmed.

      . The weight portion of the statute works for or against defendants equally. If the expert testimony as to weight established less than six grams, then appellant would have been guilty only of a lesser crime, even if he had assumed that he bought six grams.

      . [I]f a person’s conduct constitutes more than one offense under the laws of this state, the person may be punished for only one of the offenses and a conviction or acquittal of any one of them is a bar to prosecution for any other of them. All the offenses, if prosecuted, shall be included in one prosecution which shall be stated in separate counts. Minn.Stat. § 609.035, subd. 1 (2000).

      . Upon prosecution for a crime, the actor may be convicted of either the crime charged or an included offense, but not both. An included offense may be any of the following: (1) A lesser degree of the same crime; or (2) An attempt to commit the crime charged; or (3) An attempt to commit a lesser degree of the same crime; or (4) A crime necessarily proved if the crime charged were proved; or (5) A petty misdemeanor necessarily proved if the misdemeanor charge were proved. Subd. 2. A conviction or acquittal of a crime is a bar to further prosecution of any included offense, or other degree of the same crime. Minn. Stat § 609.04, subds. 1, 2 (2000).


author: GORS, Acting Justice.

text:
    2002 SD 40
    Barry BAYER and Sylvia Bayer, Plaintiffs and Appellees, v. PAL NEWCOMB PARTNERS, a Partnership, Defendant, and PAL, Inc. a South Dakota Partnership, Defendant and Appellant, and Gale E. Fisher and Pamela J. Fisher, Plaintiffs, v. PAL Newcomb Partners, a Defendant, Partnership, and Three B., Inc., Defendant and Appellee.
    Nos. 21815, 21816.
    Supreme Court of South Dakota.
    Argued Oct. 2, 2001.
    Decided March 27, 2002.

      Arlie Brende, Sioux Falls, South Dakota, for plaintiffs and appellees.
    David L. Nadolski of Lynn, Jackson, Shultz & Lebrun, Sioux Falls, South Dakota, for defendant and appellant.
   GORS, Acting Justice.

[¶ 1.] PAL, Inc., (PAL) appeals a money judgment in favor of Barry and Sylvia Bayer and Three B, Inc. based on negligent misrepresentation. We reverse.

FACTS

[¶ 2.] River Run was a Planned Development District in Sioux Falls, South Dakota, located next to Westward Ho Country Club. West 12th Street ran along the northern boundary. Gage Brothers Concrete was located next to Interstate 29 on the west. Wooded land owned by the City of Sioux Falls bordered the Sioux River to the east.

[¶ 3.] River Run was originally farmland owned by the Newcomb family. Development efforts in the 1980⅛ left the project on the brink of foreclosure by 1992. The project needed an infusion of money. A1 Lewis and his brother , Paul had money and a history of successful development and a reputation for business acumen. They owned Lewis Square and Lewis Square II on South Minnesota Avenue in Sioux Falls. PAL was incorporated and stood for the initials of Paul and A1 Lewis, the sole stockholders. PAL reportedly infused more than $2,000,000 in River Run.

[¶ 4.] On May 28, 1993, Barry Bayer signed a purchase agreement for nine lots at River Run. On September 28, 1993, title to the lots was taken by Three B, Inc. (Three B), which Bayer had incorporated by his lawyer, Gale Fisher, to develop his investment at River Run. Bayer sold one lot to his mother, Sylvia Bayer, who built a twin home on her lot. Bayer built a twin home on his lot and sold one half of the twin home to his lawyer, Gale Fisher.

[¶ 5.] River Run did not perform as well as Bayer expected so he, his mother and his lawyer sued PAL for negligence, negligent and fraudulent misrepresentation, constructive fraud, deceit and breach of fiduciary duty. The trial court found for Bayer, his mother and lawyer on negligent misrepresentation and against them on all other claims.

[¶ 6.] Bayer claimed that PAL made the following misrepresentations:

1. that Gage Brothers was looking for another location;
2. that statements made in the Argus Leader misrepresented River Run;
3. that a strip mall would be developed on the property;
4. that River Run was going to be the next Prairie Tree (implying that an upscale development was planned);
5. that apartments similar to Dakota Dunes would be built at River Run (implying that an upscale development was planned);
6. that a twin home worth $150,000 to $175,000 would be built across the street from Bayer;
7. that A1 Lewis was planning to build a mansion at River Run;
8. that most of the trees in the development would remain;
9. that the listing prices in the original literature were higher than the actual selling prices;
10. that this was “another” PAL development, when this was the first PAL development; and
11. that PAL faded to reveal that there had been no interest in River Run when Bayer bought his lots.

Gage Brothers did not move. Subsidized housing was built instead of upscale housing. Lewis did not build a mansion. Trees were cut down. The strip mall did not materialize. Instead, three used car lots, a service and repair shop, a fast-food restaurant and three apartment projects were located at River Run.

[¶ 7.] PAL lost $500,000 at River Run. Bayer, his mother and lawyer had homes which they could not sell for what they had spent to build them and Three B had seven undeveloped lots which it could not sell for a profit. The trial court set the loss to Bayer’s house at $115,000, the loss to Sylvia Bayer’s house at $285,000 and the loss in value of Three B’s seven undeveloped lots at $42,000.

PAL appeals raising the following two issues:
1. Whether the trial court erred in finding that PAL made negligent misrepresentations.
2. Whether Barry Bayer or Three B is liable for any negligent misrepresentations to the Fishers and therefore liable under PAL’s cross claim.

STANDARD OF REVIEW

[¶ 8.] Our standard of review is well settled. Based on a review of the entire record, a trial court’s findings of fact will not be overturned unless they are clearly erroneous. Hendriks v. Anderson, 522 N.W.2d 499, 503 (S.D.1994). We review conclusions of law under a de novo standard, with no deference to the trial court’s conclusions of law. Mid-Century Ins. Co. v. Lyon, 1997 SD 50, ¶ 4, 562 N.W.2d 888, 890; Shedd v. Lamb, 1996 SD 117, ¶ 17, 553 N.W.2d 241, 244. When the issue involves a mixed question of law and fact requiring the application of a legal standard, this Court will treat the issue as a question of law subject to de novo review. Permann v. South Dakota Dep’t of Labor, Unemployment Ins. Div., 411 N.W.2d 113, 119 (S.D.1987).

ANALYSIS AND DECISION

[¶ 9.] WHETHER THE TRIAL COURT ERRED IN FINDING THAT PAL MADE NEGLIGENT MISREPRESENTATIONS.

[¶ 10.] Everyone agreed that River Run did not live up to their expectations. This is not a contract action because there was no contract between Bayer and PAL upon which a suit could be based. In the absence of a contract, Bayer’s only hope was a tort action. He tried to fit his claim into negligence, negligent and fraudulent misrepresentation, constructive fraud, deceit and breach of fiduciary duty. After considering the evidence, the trial court decided that “the facts in this case exactly fits the recovery by [Bayers] in the lawsuit; that [Bayers] ... reasonably relied upon the representations made by [PAL] to their detriment....”

[¶ 11.] The tort of negligent misrepresentation occurs when “in the course of business or any other transaction in which an individual has a pecuniary interest, he or she supplies false information for the guidance of others in their business transactions, without exercising reasonable care in obtaining or communicating the information.” Meyer v. Santema, 1997 SD 21, ¶ 9, 559 N.W.2d 251, 254 (citing Restatement (Second) of Torts § 552 (1997)). In Rumpza v. Larsen, this Court stated that a party seeking relief for the tort of negligent misrepresentation must prove:

knowledge, or its equivalent, that the information is desired for a serious purpose; that he to whom it is given intends to rely and act upon it; that, if false or erroneous, he will ... be injured in person or property. Finally, the relationship of the parties, arising out of contract or otherwise, must be such that in morals and good conscience the one has the right to rely upon the other for information and the other giving the information owes a duty to give it with care.

1996 SD 87, ¶ 19, 551 N.W.2d 810, 814 (quoting Swanson v. Sioux Valley Empire Electric Ass’n, Inc., 535 N.W.2d 755, 757 (S.D.1995)) (additional citations omitted). “Generally, representations as to future events are not actionable and false representations must be of past or existing facts.” Meyer, 1997 SD 21 at ¶11, 559 N.W.2d at 255 (citing Aschoff v. Mobil Oil Corp., 261 N.W.2d 120, 124 (S.D.1977)). This standard applies whether the action is for fraudulent misrepresentation or negligent misrepresentation. Meyer, 1997 SD 21 at ¶ 11, 559 N.W.2d at 255 n. 5.

[¶ 12.] To establish negligent misrepresentation, Bayer had to prove:

1.PAL supplied false information to Bayer;
2. PAL supplied the information in the course of a transaction in which PAL had a financial interest;
3. PAL was negligent in obtaining or communicating the information;
4. PAL supplied the information intending or knowing that Bayer would rely on the information; and
5. Bayer acted reasonably in relying on the information, to his detriment.

Meyer, 1997 SD 21 at ¶ 9-11, 559 N.W.2d at 254-55; Rumpza, 1996 SD 87 at ¶ 19, 551 N.W.2d at 814.

[¶ 13.] The trial court did not find that any of the representations were false when they were made, only that they did not become true in the future. For example, Finding of Fact 11 includes the following:

Neither the article or the conversations [with PAL’s agent Jay Zea] were in the nature of future expectations, but rather were present statements of what Pal [sic] expected its plan for the development to be....

Our review of the record discloses that the trial court’s finding is not supported by the record and therefore is clearly erroneous and that the trial court erred as a matter of law. The trial court held in Conclusion of Law 5 that:

In this case, Defendant Pal [sic] made present statements of a future fact. Simply because these things were going to be completed in the future does not make them future events. That would necessarily mean that a person can never recover for something that was said at the present time.

ARE NEGLIGENT MISREPRESENTATIONS AS TO FUTURE EVENTS ACTIONABLE?

[¶ 14.] The trial court’s ruling that present representations as to future events are actionable is the crux of this appeal. Generally, representations as to future events are not actionable and negligent misrepresentations as well as fraudulent misrepresentations must be of past or existing facts. Meyer, 1997 SD 21 at ¶ 11, 559 N.W.2d at 255 (citing Aschoff, 261 N.W.2d at 124). “A party cannot justifiably rely upon conjecture about future events.” Gatz v. Frank M. Langenfeld & Sons Constr. Inc., 356 N.W.2d 716, 718 (Minn.Ct.App.1984) cited with approval in Meyer, 1997 SD 21 at ¶ 11, 559 N.W.2d at 255 n. 5.

[¶ 15.] The trial court concluded that PAL made “present statements of a future fact” (emphasis added) and that the plaintiffs could recover for negligent misrepresentation for “something that was said at the present time.” The trial court’s conclusion of law is contrary to our holding in Meyer. The trial court did not find that PAL made any misrepresentations about past or existing facts. Rather, the trial court found PAL’s representations concerned future events regarding the development of River Run. Representations about the future development of River Run are not actionable under the general rule set out in Meyer.

[¶ 16.] The general rule that representations as to future events are not actionable has one exception. In Reitz v. Ampro Royalty Trust, 75 S.D. 167, 171-72, 61 N.W.2d 201, 208 (1953) this Court stated, “[a] misrepresentation as to a future event may be actionable where the parties to the transaction are not on equal footing but where one has or is in a position where he should have superior knowledge concerning the matters to which the misrepresentations relate.” Id. at 203. See also Aschoff, 261 N.W.2d at 124.

[¶ 17.] The exception does not apply in this case. Bayer knew this was a failed development that was being resurrected. The Newcombs were his neighbors and he knew that they had been unsuccessful in their efforts to develop River Run in the 1980’s. Bayer was the first to buy land at River Run. In addition to his homesite, Bayer bought seven other lots at River Run and had his lawyer, Fisher, create Three B for the purposes of developing these lots for sale. He also sold Fisher one half of his homesite and arranged construction of Fisher’s side of the twin home on the lot.

[¶ 18.] Bayer was not a novice to risk. He had built and managed real estate. Bayer understood the risk involved in developing River Run as well as PAL. Bayer was on equal footing with PAL. Therefore, the exception does not apply and PAL is not liable for representations concerning future events.

EXAMINING THE REPRESENTATIONS

[¶ 19.] Examination of the alleged misrepresentations reveals that they were only made about future events, not past or present facts. In addition, some of the representations could not have been relied on because they were made after Bayer purchased his lots.

Gage Brothers

[¶20.] Bayer claims PAL represented that Gage Brothers was looking for another location. Gage Brothers is a concrete contractor located between River Run and Interstate 29. Despite the benefits of business and industry, a concrete plant is dusty, noisy and unsightly in a residential community. A1 Lewis testified that Gage Brothers’ continued presence next to River Run probably hurt the development. The appraisers who testified for both sides also agreed that the continued presence of the Gage Brothers’ plant had a negative effect on the value of property at River Run.

[¶ 21.] The Gage Brothers situation presents a perfect contrast between representations as to past or present facts and future events. For example, “Gage Brothers moved last year” would be a representation of a past fact. It would be either tine or false. Gage Brothers would either have moved or not moved. By further example, “Gage Brothers is moving today” would be a representation of a present fact. It would either be true or false. Gage Brothers would either be moving today or not. By final example, Bayer’s direct testimony that Zea “told me A1 Gage had been looking for either another location or that they had been offered a fairly substantial amount of money for their present location” would be a representation that implies that Gage Brothers might move sometime in the future. Not even Gage Brothers knew whether they would actually move or not. Whether Gage Brothers would move in the future was not within PAL’s knowledge or control. Even if Gage Brothers was planning to move, circumstances might change. Negligent or misrepresentations about future events cannot be actionable because the future cannot be foreseen or guaranteed.

[¶ 22.] However, the trial court did not find any negligent representations concerning the possibility that Gage Brothers might move. Bayer apparently failed to convince the trial court on this issue. Therefore, our decision is not based on the alleged misrepresentation that Gage Brothers might move.

The Argus Leader Article

[¶ 23.] At the heart of this case is an article which the Sioux Falls Argus Leader ran under the headline “River Run resurrected” on June 13, 1993. The article reported that the developers “hope” to nestle upscale homes near the river creating a neighborhood centered on recreation and beauty. PAL’s real estate agent, Jay Zea, said he “hoped” the need for residential lots, the park-like setting and aggressive sales would “make River Run succeed this time around.” Zea also “envisioned” offices tucked in the trees. The article quotes Zea as follows:

“I think it’s going to bring it upscale.” (emphasis added).

The article closes with the following:

“Zea sees the project as a neighborhood improvement, a chance to help other business on West 12th and a way to take traffic off 41st Street ....” (emphasis added).

The article makes it clear that River Run had failed before and the new effort was a rebirth. Reference is made to a two million dollar development with apartments, a strip mall, other stores, offices, a convenience store, hotel and recreation area. Zea also said that most trees would stay in the development. The trial court found that a reasonable reading of the article would be that “hope” meant the development would be successful and would include the items listed in the article.

[¶ 24.] It is interesting to note that Bayer made the most strident claims for success contained in the article. Speaking for Three B, Bayer said he planned to build homes from 1,900 to 2,500 square feet valued at $220,000 to $260,000. He was quoted as saying:

“I know they’re going to put in a first-class development and to our way of thinking it made sense to start building homes.” (emphasis added).

Bayer indicated he would build a house at River Run and hoped Westward Ho Country Club would let residents drive their carts over to the course for golf or to the clubhouse for dinner. Bayer went on to say:

<cWe’re looking to that upper-end clientele and people who enjoy golf and enjoy living in a golf course setting.”

Bayer’s quote was repeated twice, once in the article and once in a separate, large, bold block quote. Note the contrast between Zea’s “hopes,” “envisions”, “sees,” “a chance” and “thinks” with Bayer’s definite “I know,” “will build” and “we’re looking.”

[¶ 25.] The trial court did not find that these statements were false when they were made. In fact, the trial court specifically found “Jay Zea, who was the real estate agent for PAL, testified that there was nothing contained in the article that was an error.” The trial court went on to find that Bayer reasonably relied on the article, including his own statements that he would build $200,000 to $260,000 twin homes.

[¶26.] Bayer could not have relied on the statements made in the Argus Leader article. Bayer bought his lots on May 28,1993, by signing a purchase agreement. The article appeared on June 13, 1993. Although Bayer now claims he did not actually buy the lots until after the Argus article ran (perhaps when Three B received a warranty deed on September 28, 1993), he clearly thought he owned the lots when the article was published on June 13. The article stated, “Three B. Inc. bought seven residential lots that border Westward Ho’s eighth hole.” The article went on to say that “[t]he company plans to build twin homes that ... range in price from $200,000 to $260,000, said Barry Bayer .... Construction will begin July 15 on the first twin homes .... ” (emphasis added). Bayer would not propose to build $200,000 to $260,000 twin homes on lots he had not purchased. The simple fact is that Bayer bought the lots in May and received the deed later in September. The trial court was clearly erroneous when it found that Bayer relied on the Argus Leader article which appeared after he bought his lots.

Other Misrepresentations About Future Events

[¶ 27.] Bayer also claimed that PAL misrepresented the following: that a strip mall would be developed on the property; that River Run was going to be the next Prairie Tree; that apartments similar to Dakota Dunes would be built at River Run; that a twin home worth $150,000 to $175,000 would be built across the street from Bayer; that A1 Lewis was planning to build a mansion at River Run; that most of the trees in the development would remain; and that the listing prices in the original literature were higher than the actual selling prices. The trial court also made extensive findings that covenants filed by PAL were not enforced or applied to all of the property in River Run. However, none of the covenants were filed before Bayer bought his lots and thus could not have been relied on by Bayer.

[¶ 28.] Ml of the foregoing alleged misrepresentations had to do with the neighborhood being “upscale” with expensive houses or desirable businesses that would enhance the value of Bayer’s home and lots. Instead, lower class businesses, dwellings and apartments left Bayer with lots he could not develop and sell and a house that was overpriced for the neighborhood. All of the representations about upscale development were about future events which did not come to fruition. Bayer is not the only one who took the risk. Paul and M Lewis risked their money and had lost at least $500,000 at the time of trial because River Run did not meet expectations. Developers take risks. Bayer wanted to be a developer, too. He wanted to develop seven lots along the golf course and make money. However, when he lost money, he did not want to accept the risk. Bayer wanted PAL to not only envision the future but to guarantee it.

[¶ 29.] A similar situation occurred in Fields v. Melrose Limited Partnership, 312 S.C. 102, 439 S.E.2d 283 (App.1993). In Fields, the buyers of a membership in a resort club sued Melrose for negligent misrepresentation. As part of a marketing campaign, Melrose made representations that an ocean pier, cottages with 200 bedrooms, a chapel and nice roads would be built in the development. Melrose also represented that the price of an individual interest in Melrose Club would increase to $100,000 at the end of the year.

[¶ 30.] The planned improvements never came to fruition, and the membership prices never reached $100,000. At the time of the hearing, memberships were selling for less than $35,000. The buyers contended that they relied on Melrose’s representations and sued for negligent misrepresentation. The South Carolina Supreme Court disagreed and found that all of Melrose’s statements related to future events, not existing facts. Id. at 285. Moreover, the court pointed out, the statements were not false when made. Id.

[¶ 31.] Hydro Investors, Inc. v. Trafalgar Power, Inc., 227 F.3d 8 (2d Cir.2000) also addressed a similar situation. In Hydro Investors a power company, Trafalgar, sued the engineering firm of hydroelectric power plants, claiming that it made negligent misrepresentations. Specifically, Trafalgar argued that the firm was negligent in its estimate of projected energy outputs from proposed hydroelectric plants. The Second Circuit disagreed, stating that Trafalgar’s claim “fails because the energy output predictions were mere promises of future output as opposed to present representations of existing fact. The alleged misrepresentations are ... just the sort of representations about future events that cannot support a claim for negligent misrepresentation.” Id. at 21. Additionally, the Hydro Investors Court noted that even if the engineering firm made representations sufficient to make such a claim, Trafalgar had adequate knowledge that the project’s financial success was doubtful. Id. . Particularly, the key player in Trafalgar was already active in the real estate business. Id.

Another PAL Development

[¶ 32.] Bayer also claims River Run was represented as “another” PAL development, when this was PAL’s first development. The trial court did not find any negligent representation concerning whether this was “another” PAL development. Therefore, the judgment is not based on the alleged misrepresentation because Bayer failed to convince the trial court.

No Interest in River Run

[¶ 33.] Bayer also claimed that PAL failed to reveal that there had been no interest in River Run when Bayer bought his lots. As noted earlier, Bayer knew this was a faded development that was being resurrected. The Newcombs were his neighbors and he knew that they had been unsuccessful in their efforts to develop River Run in the 1980’s. Bayer was the first to buy land at River Run. The trial court did not find that PAL failed to reveal that there was no one interested in River Run. Therefore, the judgment is not based on the alleged misrepresentation because Bayer failed to convince the trial court.

CONCLUSION

[¶ 34.] The trial court erred as a matter of law when it concluded that present representations as to future events could be the basis for finding negligent misrepresentation. The trial court was also clearly erroneous when it found that Bayer relied on the representations made in the Argus Leader article which was published after Bayer bought his lots. Therefore, we reverse the judgment in favor of Barry Bayer, Sylvia Bayer, and Three B.

[¶ 35.] GILBERTSON, Chief Justice, and SABERS, AMUNDSON, and KONENKAMP, Justices, concur.

       The claims of Sylvia Bayer and Three B were derivative of representations made to Barry Bayer, since Barry Bayer was the original purchaser from PAL.


author: GILBERTSON, Chief Justice.

text:
    2002 SD 41
    ASSOCIATED SCHOOL BOARDS OF SOUTH DAKOTA, INC., Petitioner and Appellant, v. HUGHES COUNTY, South Dakota, Respondent and Appellee.
    No. 21985.
    Supreme Court of South Dakota.
    Considered on Briefs Feb. 11, 2002.
    Decided April 3, 2002.

      Charles P. Schroyer of Schmidt, Schroyer & Moreno Pierre, South Dakota, Attorneys for petitioner and appellant.
    Mark Smith, Hughes County State’s Attorney, Pierre, South Dakota, Attorney for respondent and appellee.
   GILBERTSON, Chief Justice.

[¶ 1.] The Associated School Boards of South Dakota, Inc., (ASBSD) appeals the tax assessed by Hughes County (County) on ASBSD’s new building at 306 East Capitol Avenue, Pierre, South Dakota. ASBSD claims that it is entitled to exempt status for more than 42.5 percent of the value of its property because the entities renting ASBSD’s property are, themselves, benevolent organizations using the property for benevolent purposes. The circuit court upheld the tax for 57.5 percent of the property. We reverse and remand.

FACTS AND PROCEDURE

[¶ 2.] ASBSD is an educational organization that provides assistance for 176 member school boards across South Dakota. As a not-for-profit, § 501(c)(3) corporation, ASBSD is exempt from federal income tax. The organization has also been exempt from real property tax since 1987, when it acquired the original building at 306 East Capitol Avenue in Pierre.

[¶ 3.] In 1998, ASBSD obtained additional adjoining land, removed the old buildings, and constructed a larger building at the same location. ASBSD executed a condominium agreement whereby it retained and now owns those portions of the basement and the first two floors (designated Unit. B) that are not “common elements,” plus 72.96 percent of the “common elements” located throughout the entire building. “TDK & E, Inc.,” (a private corporation not party to this action), purchased and currently owns the third floor of the building (designated Unit A) and the remaining associated “common elements.” This dispute is over the taxability of the portions owned, but not occupied by ASBSD.

[¶ 4.] ASBSD occupies 47.7 percent of Unit B, or 6,786 square feet. The value of this portion, as well as the value of the “common elements” attributable to ASBSD, is $569,375. The value of ASBSD’s portion of the lot upon which the building rests, also 47.7 percent, is $103,418. Accordingly, the total value of the building attributable to ASBSD is $672,793, or 42.5 percent of the total value of the property owned by ASBSD.

[¶ 5.] ASBSD leased out its remaining property to either governmental entities or entities that would, on their own, normally qualify for the benevolent exemption from real estate tax found in SDCL 10-4-9.2. These entities include: (1) the School Administrators of South Dakota (SASD), renting 1,097 square feet under a 15-year lease; (2) the South Dakota Board of Regents (Regents), renting 5,243 square feet under a 5-year lease; and (3) the South Dakota Association of County Commissioners and the South Dakota Association of County Officials (Associations), renting 1,086 square feet under a 10-year lease. All of these entities are essentially nonprofit, tax exempt organizations.

[¶ 6.] Following ASBSD’s application for exemption and a subsequent investigation, County’s Board of Equalization gave a preliminary determination that the property would be 64 percent taxable, leaving only 36 percent exempt. Following notice and a hearing, the Board determined that the property was actually 66.5 percent taxable. ASBSD appealed this decision to the circuit court pursuant to SDCL 10-4-18 and 10-11-44.

[¶ 7.] The circuit court reviewed the Board’s decision and found that only 57.5 percent of Unit B, that property owned but not occupied by ASBSD, was taxable. The court held that ASBSD was exempt from real estate tax for the remaining 42.5 percent of the property. ASBSD now appeals to this Court, contending that it is entitled to an exemption greater than 42.5 percent because the property is owned by a benevolent organization, occupied by benevolent organizations, and used exclusively for benevolent purposes. Thus, ASBSD raises the following issue:

Whether ASBSD qualifies for a real estate tax exemption greater than 42.5 percent.

STANDARD OF REVIEW

[¶ 8.] On an appeal from an administrative agency decision, this Court reviews the agency findings in the same manner required of the circuit court. See Alpha Gamma Zeta House Ass’n v. Clay County Bd. of Equalization, 1998 SD 101, ¶ 7, 583 N.W.2d 167, 168. This standard is set forth in SDCL 1-26-36:

The court shall give great weight to the findings made and inferences drawn by an agency on questions of fact. The court may affirm the decision of the agency or remand the case for further proceedings. The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:
(1) In violation of constitutional or statutory provisions;
(2) In excess of the statutory authority of the agency;
(3) Made upon unlawful procedure;
(4) Affected by other error of law;
(5) Clearly erroneous in light of the entire evidence in the record; or
(6) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.
A court shall enter its own findings of fact and conclusions of law or may affirm the findings and conclusions entered by the agency as part of its judgment. The circuit court may award costs in the amount and manner specified in chapter 15-17.

For reversal on questions of fact, the administrative agency must be determined to have been clearly erroneous. Butte County v. Vallery, 1999 SD 142, ¶ 8, 602 N.W.2d 284, 286-87 (citations omitted). When, however, the issue is a question of law, we review the decisions of both the administrative agency and the circuit court de novo. Id.

[¶ 9.] This case also involves statutory interpretation, which is reviewed de novo. Steinberg v. S.D. Dep’t of Military and Veterans Affairs, 2000 SD 36, ¶ 6, 607 N.W.2d 596, 599; Zoss v. Schaefers, 1999 SD 105, ¶ 6, 598 N.W.2d 550, 552. Our rules of statutory construction are as follows: .

The purpose of statutory construction is to discover the true intention of the law, which is to be ascertained primarily from the language expressed in the statute. The intent of a statute is determined from what the Legislature said, rather than what the courts think it should have said, and the court must confine itself to the language used. Words and phrases in a statute must be given their plain meaning and effect. When the language in a statute is clear, certain and unambiguous, there is no reason for construction, and [this] Court’s only function is to declare the meaning of the statute as clearly expressed.

Martinmaas v. Engelmann, 2000 SD 85, ¶ 49, 612 N.W.2d 600, 611 (citations omitted).

[¶ 10.] In this case, the statutes to be interpreted involve property taxation and exemption. While statutes imposing a tax are construed liberally in favor of the taxpayer, “[statutes exempting property from taxation should be construed in favor of the taxing power.” Alpha Gamma Zeta, 1998 SD 101 at ¶ 7, 583 N.W.2d at 168; Appeal of Real Estate Tax Exemption for Black Hills Legal Services, Inc., 1997 SD 64, ¶ 7, 563 N.W.2d 429, 430. “The words should be given a reasonable, natural, and practical meaning to effectuate the purpose of the exemption.” Id. (additional citations omitted). The burden lies on the taxpayer to show its entitlement to the exemption. Alpha Gamma Zeta, 1998 SD 101 at ¶ 7, 583 N.W.2d at 168-69 (citations omitted).

ANALYSIS AND DECISION

[¶ 11.] Whether ASBSD qualifies for a real estate tax exemption greater than 42.5 percent.

[¶ 12.] There is no question that ASBSD is entitled to a real estate tax exemption for the property it owns and occupies under SDCL 10-4-9.2. This provision states:

Property owned by a benevolent organization and used exclusively for benevolent purposes is exempt from taxation. A benevolent organization is any lodge, patriotic organization, memorial association, educational association, cemetery association or similar association. A benevolent organization must be nonprofit and recognized as an exempt organization under section! ] 501(c)(3) ... as amended, and in effect on January 1, 1992. However, if any such property consists of improved or unimproved property located within a municipality not occupied or directly used in carrying out the primary objective of the benevolent organization owning the same, such property shall be taxed the same as other property of the same class is taxed. * * * For the purposes of this section, an educational association is a group of accredited elementary, secondary or postsecondary schools. * * * For purposes of this section, benevolent purpose means an activity that serves the poor, distressed or underprivileged, promotes the physical or mental welfare of youths or disadvantaged individuals, or relieves a government burden.

SDCL 10-4-9.2 (emphasis added). The circuit court held, and County does not disagree, that ASBSD owns and occupies Unit B as a benevolent organization, using this property exclusively for benevolent purposes. ASBSD is an educational association using its property to reheve a government burden. The question, however, arises in the property not occupied by ASBSD.

[¶ 13.] SDCL 10-4-28 ahows property being leased on a long-term basis to be treated as if it were owned by the lessee instead of the lessor.

Property held under a lease for a term of three or more years, ... belonging to the state or to any religious, scientific, or benevolent society or institution ... whose property is not taxed in the same manner as other property, shall be considered for all purposes of taxation as the property of the person so holding the same.

SDCL 10-4-23. In this case, all three entities are leasing their space in Unit B for a period of more than three years. According to the plain language of the statute, the property being leased by them should be subject to tax treatment as if they owned the property.

[¶ 14.] The circuit court found that Regents, SASD and Associations were all “entities which would qualify for the benevolent exemption from real estate tax found in SDCL 10-4-9.2” if they owned the property. They are benevolent organizations using the property exclusively for benevolent purposes, as supported by evidence in the record. County claims that because they do not own the property, their benevolent use must be identical to that of ASBSD. However, SDCL 10-4-23 allows this property to be treated as if the benevolent organizations do own the property. Therefore, the limitation in SDCL 10-4-9.2 yields to SDCL 10-4-23.

[¶ 15.] In certain instances, the Legislature may have intended SDCL 10-4-23 to remove property from exemption, but its overall effect is less sweeping. See Black Hills Legal Services, 1997 SD 64 at ¶ 10, 563 N.W.2d at 432 (holding non-exempt entity leasing to exempt entity not eligible for exemption). By enacting SDCL 10-4-23, the Legislature sought to ensure, as does any taxing power, that the system of tax exemptions for worthwhile purposes would not be abused. SDCL 10-4-23 is aimed only at preventing those entities that are not exempt from being unfairly sheltered under another entity’s benevolent organization exemption. Unlike in Black Hills Legal. Services, there is no danger in this case of an organization escaping property tax that it would otherwise be required to pay; all of the organizations are benevolent organizations using the property exclusively for benevolent purposes. Nor is there a need to penalize leases between such entities. The Legislature has determined it is to the state’s and the taxpayer’s advantage to encourage such arrangements.

[¶ 16.] Furthermore, acceptance of County’s assertion would run afoul of another provision within the same chapter. The tax assessed to ASBSD would presumably be determined by the formula set out in SDCL 10-4-12. There is no other provision for calculating partial exemptions and the “shall” language makes the use of this statute mandatory. See Loyal Order of Moose Lodge No. 1137 v. Pennington County, 1997 SD 80, ¶ 11, 566 N.W.2d 132, 135 (citations omitted). The code states:

If property owned by any health care organization or charitable, benevolent or religious society described in §§ 10-4-9 to 10-4-9.3, inclusive, other than agricultural land, is used partly by such health care organization or charitable, benevolent or religious society for health care, charitable, benevolent or religious purposes, and the remaining part is occupied, rented or used for other than health care, charitable, benevolent or religious purposes, such portion of property as is so occupied, rented or used for other than health care, charitable, benevolent or religious purposes, shall be taxed as other property of the same class is taxed. For the purpose of determining the value of the taxable portion of the property, the appraised value of the entire property shall be multiplied by the percentage of the entire property used for other than health care, charitable, benevolent or religious purposes. The resulting value shall be multiplied by the percentage of time such property is used for other than health care, charitable, benevolent or religious purposes. The resulting value shall be the assessed value for taxation purposes.

SDCL 10-4-12 (emphasis added). Clearly, this would present a problem. According to SDCL 10-4-12, only that portion of the benevolent organization’s property being used for “other than benevolent purposes” is subject to the real estate tax. To affirm either County’s decision, or that of the circuit court, would render SDCL 10-4-12 meaningless because there is no such property here.

[¶ 17.] Giving all three of these statutes their “reasonable, natural and practical meaning,” we conclude that County’s application of law to the facts in this case is clearly in error. Because we are firmly convinced that a mistake has been made, we reverse the decision of the circuit court and remand for further proceedings consistent with this opinion.

[¶ 18.] SABERS, AMUNDSON, and KONENKAMP, Justices, and GORS, Acting Justice, concur.

[¶ 19.] ZINTER, Justice, not having been a member of the Court at the time this action was submitted to the Court, did not participate.

      . ASBSD also donated 160 square feet to Kids Voting South Dakota, a South Dakota nonprofit corporation.

      . The total value of the lot is $297,000, or $12.00 per square foot.

      . The total value of the property owned by ASBSD is $1,285,595. The basement was valued at $48.97 per square foot and the other floors were valued at $79.63 per square foot.

      . The leases provide, however, that in the event that any portion of the unit is not tax exempt, the resulting real estate assessments may be added on as additional rent.

      . SDCL 10-4-13 also provides a property tax exemption to Regents for any property it owns.

      . We recognize this Court has previously held the purpose of SDCL 10-4-23 was to remove property from exempt categories and place it back on the tax rolls. But Black Hills Legal Services is distinguishable from the case at bar for one very important reason: there are no non-exempt entities here. Black Hills Legal Services involved a non-exempt entity using a creative lease arrangement with an exempt entity to avoid property tax. 1997 SD 64 at ¶ 4, 563 N.W.2d at 430. Similarly, the case we referred to in an example involved an exempt entity leasing to a non-exempt entity. Id. at ¶ 11 (citing Northern Pac. Ry. Co. v. Morton County, 32 N.D. 627, 156 N.W. 226 (N.D.1915)). We have not, until now, considered the effect that these statutes would have for exempt entities leasing their property to other exempt entities using the property exclusively for benevolent purposes.