                                    ___________

                                    No. 96-1042
                                    ___________

Carmen Heppler; K.D. Heppler,       *
                                    *
      Plaintiffs - Appellants,      *
                                    *
      v.                            * Appeal from the United States
                                    * District Court for the
Thomson Newspapers, Inc.;           * District of South Dakota.
Thomson Newspapers Holdings,        *
Inc.,                               *
                                    *
      Defendants - Appellees,       *
                               ___________

                       Submitted:   November 19, 1996

                           Filed:   January 29, 1997
                                    ___________

Before BEAM, FRIEDMAN,* and LOKEN, Circuit Judges.
                               ___________


LOKEN, Circuit Judge.


     Carmen Heppler, a Shopko Stores employee, was injured when she fell
into a hole in the floor of warehouse space Shopko leased from Thomson
Newspapers, Inc.       Heppler sued Thomson and its successor for negligence.
                   1
The district court granted summary judgment in Thomson's favor, concluding
that it did not control the leased premises and therefore did not breach
a duty to Shopko or Heppler.        Heppler appeals.    Reviewing the grant of
summary judgment de novo, we affirm.




         *
       The HONORABLE DANIEL M. FRIEDMAN, United States Circuit
     Judge for the Federal Circuit, sitting by designation.
     1
     The HONORABLE JOHN B. JONES, United States District Judge for
the District of South Dakota.
                                     I.


     In March 1987, Shopko leased from Thomson the second and third floors
of an old three-story building in Mitchell, South Dakota.    Shopko used the
leased premises to store goods for a nearby store.      A newspaper owned by
Thomson occupied the first floor and one storage room on the second floor.
Before Shopko took possession, representatives of Shopko and Thomson toured
the leased premises.   They noticed a twenty-eight inch square hole in the
third floor, created when a ventilation fan for the second floor was
removed in the late 1960s.   The hole was covered by a plywood board mounted
on a metal bar that allowed the board to swivel.      A Shopko employee who
took this tour testified that he recalled a discussion of the hole but
could not recall what was said.    The summary judgment record contains no
testimony by the former employee who took this tour on behalf of Thomson.


     After the lease began, Shopko usually placed pallets of stored
products or empty pallets over the hole, eliminating the risk that an
employee would fall through the hole.       At one time, a Shopko employee
noticed that the plywood cover sagged under the weight of pallets and
placed a second board over the hole to reinforce its cover.      Many Shopko
employees were aware of the hole, including the general manager and the
employee responsible for work safety.     Thomson did nothing about the hole
before or after Shopko took possession.    Shopko did not complain to Thomson
or request that the hole be repaired during the five years prior to
Heppler's fall.


     On December 9, 1992, Heppler and her supervisor came to the third
floor to load supplies.      Neither knew of the hole in the floor.      The
supervisor asked Heppler to move the boards covering the hole because they
were in his way.   Heppler picked up the boards, was surprised to discover
the large hole, and fell into it.         She caught herself before falling
sixteen feet to the floor below but was seriously injured in the process.
This lawsuit followed.




                                    -2-
The district court granted summary judgment for Thomson because it did not
control the leased premises and had no contractual duty to remedy this
known, potentially dangerous condition.


                                    II.


     South Dakota law governs this diversity case.     South Dakota follows
the general rule that "a landlord, having parted with full possession of
the premises to the tenant is not liable for injury to third persons caused
by the tenant's negligence."     Clauson v. Kempffer, 477 N.W.2d 257, 259
(S.D. 1991).   In the case of a partially leased building, the landlord must
exercise reasonable care to discover and remedy dangerous conditions in
common   areas that remain under the landlord's control, such as the
stairways and freight elevator in the building in question, but has a
lesser duty as to areas under the tenant's control.   See Boe v. Healey, 168
N.W.2d 710, 712-13 (S.D. 1969); John Moodie Dry Goods Co. v. Gilruth, 153
N.W. 383, 384 (S.D. 1915).


     Clauson concerned a dangerous condition created by the tenant after
the lease commenced.   The Supreme Court of South Dakota cited approvingly
§ 355 of the Restatement (Second) of Torts, which provides that a landlord
generally is not liable for a "dangerous condition which comes into
existence after the lessee has taken possession."     The court in Clauson
went on to discuss favorably exceptions to § 355's general rule found in
§§ 357, 358, 361, and 362 of that Restatement.    In this case, Heppler was
injured by a dangerous condition existing when the Shopko lease began.   The
general rule for that kind of hazard is found in § 356 of the Restatement:


     Except as stated in §§ 357-362, a lessor of land is not liable
     to his lessee or to others on the land for physical harm caused
     by any dangerous condition, whether natural or artificial,
     which existed when the lessee took possession.




                                    -3-
The parties assume, and we agree, that the Supreme Court of South Dakota
would follow § 356, appearing as it does in the midst of a series of
Restatement principles discussed favorably in Clauson.        Thus, to avoid
summary judgment, Heppler must come forward with evidence that creates a
jury issue on whether her claim falls within an exception to the general
rule in § 356.


        A. Heppler first argues that her claim comes within the exception in
§ 357 of the Restatement because Thomson "contracted by a covenant in the
lease or otherwise to keep the land in repair" and negligently failed to
remedy "a condition of disrepair existing before" Shopko took possession.
The critical question on this appeal is whether Thomson contracted to
repair the leased premises.    Heppler finds such a covenant in Paragraph 3
of the lease:


        Prior to said Lessee occupancy, Lessor shall prepare the
        premises in a broom-clean condition, and in case of an existing
        building, Lessor shall repair all locks, doors, windows,
        lights, electrical and mechanical systems and repair and
        replace all other defects in the demised premises and its
        appurtenances.    Lessor shall repair latent defects in the
        premises or its appurtenances.


As the district court recognized, the problem with Heppler's contention is
that Paragraph 3 is a covenant to repair defects "prior to [Shopko's]
occupancy," not a covenant to keep the premises in repair during the lease
term.    It is undisputed that the leased premises were closed to the public,
and Thomson could not enter without Shopko's permission.        Paragraph 22
provided that, at the end of the lease, Shopko must surrender the premises
"broom-clean, in good order and repair."         Thomson's maintenance man
testified, without contradiction, that Shopko was responsible for cleaning
and maintenance of the leased premises.


        There is simply no evidence that Thomson contracted to keep the
leased premises in repair during the lease term.         Heppler notes that
Thomson repaired a collapsed ceiling during the lease term and




                                     -4-
points to Paragraph 17 of the lease, which gave Thomson the right to enter
the premises "to make such repairs or alterations therein as may be
necessary    for   the   safety   and    preservation     thereof,    without    unduly
disturbing   the   operations     of    the   Lessee."     However,    comment    b   to
Restatement § 357 states that this exception to the general rule "has no
application where the lessor does not contract to repair, but merely
reserves the privilege to enter and make repairs if he sees fit to do so."
See Henze v. Texaco, Inc., 508 A.2d 1200, 1202-03 (Pa. Super. Ct. 1986).



     There is also no probative evidence that Thompson breached a specific
pre-occupancy covenant to repair the hole.               The hole was not a latent
defect because Shopko knew of it no later than its pre-occupancy tour of
the premises.      The hole was not the sort of condition covered by the
general pre-occupancy covenant to "repair and replace all other defects,"
because the proper remedy for this kind of condition turns on the lessee's
intended use of the property.      For example, if Shopko planned to cover the
hole with permanent shelving, no remedy would be needed.                On the other
hand, if Shopko intended to cover the hole at all times with moveable
plywood and pallets, instructions and warnings to warehouse employees --
a remedy most effectively implemented by Shopko -- would render the
condition reasonably safe in a non-public warehouse environment.            In these
circumstances, the lack of a specific contractual undertaking by Thomson,
either in the written contract or during the pre-occupancy tour, supported
by the lack of evidence that Shopko ever complained of Thomson's failure
to repair the hole, make summary judgment appropriate on Heppler's claim
that Thomson negligently breached a contractual duty to repair.


     B. Alternatively, Heppler argues that her claim falls under another
exception to § 356, namely, that a landlord is liable if its negligent
repairs have "made the land more dangerous for use or given it a deceptive
appearance of safety."     Restatement § 362.       Prior to Heppler's injury, in
repairing the building's exterior




                                          -5-
walls, Thomson covered the third floor windows.           Heppler argues that this
diminished the third floor lighting, making the hole a more dangerous
condition for third floor users.      However, the exception in § 362 applies
only if the lessee "neither knows nor should know" that the leased premises
have been made more dangerous for use.           Here, Shopko was aware of the
reduced lighting, provided temporary lighting and flashlights for employees
using the third floor, and had discussed upgrading the lighting with
Thomson prior to the accident.     The exception in § 362 does not apply.       See
Parrish v. Witt, 555 P.2d 741, 743 (Mont. 1976).


     To summarize, because the hole in the floor was not a latent defect;
because   Thomson    did   not   control   the   leased    premises   and   neither
specifically agreed to remedy the hole, nor generally agreed to keep the
leased premises in good repair; and because Shopko was aware of and took
action to remedy the reduced third floor lighting, we conclude that
Heppler's accident must be attributed to tenant negligence as a matter of
South Dakota law.      Therefore, the district court's grant of summary
judgment in favor of Thomson is affirmed.


     A true copy.


           Attest:


               CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.




                                       -6-
