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Date: 12-30-2017

Case Style:


United States Court of Appeals for the Tenth Circuit

Case Number: 16-7090

Judge: Harris L Hartz


Plaintiff's Attorney: Michelle Windmueller, United States Postal Service Law Department, Washington, D.C. (Douglas A. Horn, Acting United States Attorney, and Robert Gay Guthrie, Assistant United States Attorney, Muskogee, Oklahoma, and Stephan J. Boardman, United States Postal Service Law Department

Defendant's Attorney: Ron Wright
Mark D. Spencer
Reid E. Robison

Description: In 1964 the government entered into a 20-year lease with Turley for property in
Henryetta, Oklahoma (the Property) to be used as a post office. The lease provided
options to renew for six additional five-year terms and included an option to purchase at
the end of each renewal term. Written notice of renewal was due 90 days before the new

1 For convenience, we do not distinguish between Turley and his predecessors in interest with respect to the lease or between the Postal Service and its predecessor.

term began. Notice of the option to purchase was due a year before expiration of the
lease term.
Because the last five-year lease term was set to begin on November 15, 2009,
notice was due by August 15, 2009. In February 2008 the Postal Service sent its renewal
notice by certified mail to Turley at a New York City post office box. The certified mail
was returned with a stamped notification stating, “RETURN TO
Although in district court Turley had suggested that the notice had not been sent to the
correct address, Postal Service records showed that Turley had cashed lease payments
sent to that address both before and after the date of the certified mail. Unsurprisingly,
Turley does not dispute on appeal that the certified mail was sent to the correct address.
His argument is that the notice was not effective because he did not personally receive it.
For the same reason, he says that he was not bound by a notice purportedly sent by the
Postal Service by regular mail the following month. His response to a request for
admission said that he did not remember receiving a renewal notice.
In any event, the Postal Service continued to occupy the building and pay rent,
and Turley continued to provide services required by the lease. Turley claims that he
allowed the Postal Service to stay only as a holdover tenant.
During 2013 the Postal Service was considering negotiating a new lease with
Turley upon the end of the last renewal term in November 2014, but its internal emails
suggest it was also considering the purchase option. The deadline to exercise the option
(assuming that the lease had been renewed in 2009) was November 15, 2013. In October

2013, CBRE, a company retained by the Postal Service to negotiate leases on its
properties, sent Turley a proposal for a new lease to begin after November 15, 2014. On
November 7, 2013, however, the Postal Service sent a letter exercising its option to
purchase the Property, and Turley acknowledges that he received it on November 8. This
did not stop CBRE from continuing to contact Turley about leasing the property. The
parties disagree about whether CBRE was authorized to continue this negotiation.
Claiming the Postal Service could not and did not properly exercise the purchase option,
Turley refused to participate in two closings to sell the property to the Postal Service,
causing the Postal Service to file this suit in the United States District Court for the
Eastern District of Oklahoma.
After the parties filed cross motions for summary judgment, the district court
granted summary judgment in favor of the Postal Service for specific performance.
Turley appealed. We have jurisdiction under 28 U.S.C. § 1291 and affirm the summary
A. Standard of Review
We review summary judgments de novo, applying the same standards that the
district court should apply. See Camuglia v. City of Albuquerque, 448 F.3d 1214, 1218
(10th Cir. 2006). “When reviewing a grant of summary judgment, this court must
examine the record to determine whether any genuine issue of material fact pertinent to
the ruling remains and, if not, whether the substantive law was correctly applied.” APC

Operating P’ship v. Mackey, 841 F.2d 1031, 1033 (10th Cir. 1988); see Fed. R. Civ. P.
B. Applicable Law
“[O]bligations to and rights of the United States under its contracts are governed
exclusively by federal law.” Boyle v. United Techs. Corp., 487 U.S. 500, 504 (1988).
But federal law may adopt state-law rules. See O’Melveny & Myers v. F.D.I.C., 512 U.S.
79, 85 (1994). Thus, “knowing whether federal law governs . . . does not much advance
the ball.” Id. (internal quotation marks omitted). Indeed, there is a “presumption that
state law should be incorporated into federal common law.” Kamen v. Kemper Fin.
Servs., Inc., 500 U.S. 90, 98 (1991). “Displacement [of state law] will occur only where
. . . a significant conflict exists between an identifiable federal policy or interest and the
operation of state law or the application of state law would frustrate specific objectives of
federal legislation.” Boyle, 487 U.S. at 507 (citations, brackets, and internal quotation
marks omitted). We agree with the Ninth Circuit that state law should apply in the
present circumstances because “[l]ease contracts for the postal service do not inherently
implicate clear and substantial interests of the National Government, which cannot be
served consistently with respect for state interests.” U.S. Postal Serv. v. Ester, 836 F.3d
1189, 1195 (9th Cir. 2016) (ellipsis and internal quotation marks omitted); cf. Powers v.
U.S. Postal Serv., 671 F.2d 1041, 1045 (7th Cir. 1982) (setting forth reasons to apply
state law to decide Postal Service’s rights under a lease).
Because Oklahoma is the state where the Property is located, we conclude that
Oklahoma law should govern this dispute. See Denney v. Teel, 688 P.2d 803, 806 (Okla.

1984) (“Disputes concerning interests in real property are properly governed by the law
of the state where the land is located.”). We determine what that law is in the same
manner that we resolve questions of state law under our diversity jurisdiction. See
generally Bryan A. Garner et al., The Law of Judicial Precedent 598–616 (2016). We
must follow the latest holdings of the state’s highest court. See Wankier v. Crown Equip.
Corp., 353 F.3d 862, 866 (10th Cir. 2003). In the absence of a definitive resolution of the
legal issue by the highest court, our task is to predict how that court would rule. See
United States v. DeGasso, 369 F.3d 1139, 1145 (10th Cir. 2004). There are various tools
at our disposal for making that prediction, including decisions by lower courts of the
state. See id. We are bound, however, by precedents of this court construing state law,
absent an intervening decision by the state’s highest court or a legislative change. See
Wankier, 353 F.3d at 866.
C. 2009 Lease Renewal Option
Turley’s chief argument against the judgment below is that the Postal Service
never renewed its lease for the term beginning November 15, 2009, and therefore the
purchase option was no longer valid when the Postal Service attempted to exercise it in
2013. He contends that the 2009 lease-renewal option could be effective only if he
received notice of exercise of the option, but he never received the certified mail
containing the renewal notice. We are not persuaded.
We have a controlling precedent. In APC Operating Partnership, 841 F.2d at
1032–33, a lessee of mineral rights, in exercising its option to renew a lease by tendering
the designated sum, mailed the required checks by registered mail, postage paid and

return receipt requested, to the lessors at their addresses. See id. at 1033. But the lessors
failed to claim the mail and it was returned. See id. Applying Oklahoma law, we held
that the exercise of the option was effective. See id. at 1035. “There was no error or fault
on the part of the lessee, and payment would have been made but for the failure of the
[lessors] to collect their mail, an intervening factor beyond the control of the lessee.” Id.
at 1036. Although there was no evidence that the lessors intended to avoid receipt of
payment, that was “immaterial.” Id.; see id. at 1034 (refusing to “effectively give the
lessor the power to revoke the option—a power inconsistent with the very nature of an
option contract”). We see no principled way to distinguish our precedent from this case.
The Postal Service did all it could do to exercise the option by sending a timely notice by
certified mail to the proper address. Notice would have been received “but for [Turley’s]
failure . . . to collect [his] mail, an intervening factor beyond the control of [the Postal
Service].” Id. at 1036. Because the notice by certified mail was effective, we need not
address the Postal Service’s alternative arguments in favor of determining that the lease
had been renewed.2

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

Turley contends that the Postal Service expressly waived its reliance on APC
Operating when it noted in its brief that “the Postal Service has never argued in this case
that the notice became effective with the date of mailing.” Aplee. Br. at 18 n.2. But this
concession related only to the timing of the exercise of the renewal option, not whether
notice was adequate. The same distinction was made in our opinion in APC Operating.
We noted that the Oklahoma Court of Appeals had “chosen to extend the ‘mailbox’ rule
to option contracts,” holding “that an option was properly exercised where the acceptance
was mailed, even though it was never received.” 841 F.2d at 1035 (citing Worms v.
Burgess, 620 P.2d 455, 458–59 (Okla. Civ. App. 1980)). But we said that it was
unnecessary for us to go that far to resolve the case before us. We wrote:
In any event, this provision is not strictly necessary to determine the outcome here, because the payments were mailed in sufficient time to be delivered to the [lessors] before the primary term of the lease expired. In either case, whether acceptance is effective at mailing or delivery, it is effective on these facts and the lease was properly renewed.
Id. Likewise, here, notice from the Postal Service was timely whether it was effective at
the time of mailing or the time of delivery to the post office. The real question is whether
the notice was adequate despite Turley’s failure to retrieve the certified letter. And APC
Operating provides the answer.
D. Effect of Continuing Lease Negotiations
We can quickly resolve Turley’s remaining contentions. They are all based on
evidence that even after it sent its notice to exercise the option to purchase, the Postal
Service continued to try to negotiate terms of the lease for the Property. Turley argues
that the lease negotiations created uncertainty about the Postal Service’s intentions,

undermining the purpose of requiring that notice be given a year before expiration of the
lease term. But there was no uncertainty that the Postal Service was bound to purchase
the Property once it had given notice that it was exercising its option. See Davenport v.
Doyle Petroleum Corp., 126 P.2d 57, 61 (Okla. 1942) (“An option so long as it remains
unaccepted, is a unilateral writing lacking the mutual elements of a contract, but when it
is accepted by the optionee an executory contract arises, mutually binding upon the
parties” (internal quotation marks omitted)). Turley knew, or at least should have known,
that if he did nothing, he would be required to transfer the Property to the Postal Service
for a sum certain. The Postal Service was merely giving him the opportunity to reach an
alternative agreement—leasing the Property on terms agreeable to Turley. If those terms
were good enough, the Postal Service would not enforce its rights under the option, just
as Turley would not exercise his right to require the Postal Service to pay the designated
amount and obtain the Property. See Richardson v. Lawler, 231 P.2d 671, 674 (Okla.
1951) (“Parties competent to contract may as validly agree to rescind a contract as to
enter into the original agreement.”).
Nor was there anything inequitable in the Postal Service’s negotiating lease terms
after exercising the option. To be sure, its bargaining position in those negotiations was
enhanced by its having the enforceable right to acquire the Property at the option price.
But the owner of property typically has the bargaining chip of being free to keep the
property. Turley points to no evidence of any misrepresentations, unclean hands,
improper motives, or bad-faith actions that would present an equitable ground for
denying the Postal Service specific performance of its option contract.

We also see no factual support for Turley’s claim of waiver or equitable estoppel.
As stated by the Oklahoma Supreme Court:
A waiver occurs when one in possession of any right, whether conferred by law or by contract, and with full information of the material facts, does or forbears the doing of some things inconsistent with the existence of the right or his intention to rely upon it; thereupon he is said to have waived it, and he is precluded from claiming anything by reason of it afterward.

Whitmire v. Zolbe, 403 P.2d 445, 448 (Okla. 1965) (internal quotation marks omitted).
But there was nothing inconsistent about the Postal Service’s conduct. One who owns or
expects to own property (as did the Postal Service, armed with its exercised option to
purchase) can reasonably and fairly pursue other possibilities for the property. For the
same reason, equitable estoppel cannot prevent specific performance in this case. As
Turley acknowledges in his brief, “‘Equitable estoppel allows one party to prevent
another from taking a legal position inconsistent with an earlier statement or action that
places his adversary at a disadvantage.’” Aplt. Br. at 49–50 (quoting Kowalczyk v. I.N.S.,
245 F.3d 1143, 1149 (10th Cir. 2001) (further internal quotation marks omitted)). But,
again, there was nothing inconsistent in the Postal Service’s continuing to negotiate,
given that the two parties could have mutually agreed to forgo the purchase option in
favor of a new lease. See Richardson, 231 P.2d at 674.
Finally, contrary to Turley’s contention the Postal Service did not slumber on its
rights to the purchase option by continuing to negotiate for a lease. Turley contends that
the Postal Service “was not ‘willing’ or ‘eager’ to perform that contract at all times” and
thus was not entitled to specific performance. Aplt. Br. at 44. But he presents no

evidence that the Postal Service indicated that it would refuse to perform its obligations
under the exercised option absent an alternative agreement with Turley.

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

Plaintiff's Experts:

Defendant's Experts:


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