Eagle Shores Hospitality, Inc., d/b/a Signature Café, Respondent, vs. Peter Karkos, Appellant.

Eagle Shores Hospitality, Inc., d/b/a Signature Café, Respondent, vs. Peter Karkos, Appellant. A04-2352, Court of Appeals Unpublished, September 13, 2005.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-2352

 

 

Eagle Shores Hospitality, Inc.,

d/b/a Signature Café,

Respondent,

 

vs.

 

 

Peter Karkos,

Appellant.

 

 

Filed September 13, 2005 Affirmed in part, reversed in part, and remanded Toussaint, Chief Judge

 

 

Hennepin County District Court

File No. CT 03-16258

 

David A. Harbeck, Lapp, Libra, Thomson, Stoebner & Pusch, Chartered, One Financial Plaza, Suite 2500, 120 South Sixth Street, Minneapolis, MN 55402 (for respondent)

 

Thomas P. Malone, Karen K. Kurth, Barna, Guzy & Steffen, Ltd., 200 Coon Rapids Boulevard, 400 Northtown Financial Plaza, Minneapolis, MN 55433 (for appellant)

 

            Considered and decided by Toussaint, Chief Judge; Willis, Judge; and Forsberg, Judge.*

 

U N P U B L I S H E D  O P I N I O N

TOUSSAINT, Chief Judge

            Appellant Peter Karkos appeals the district court's grant of summary judgment in favor of respondent Eagle Shores in this lease dispute.  Karkos argues that material fact issues exist regarding whether Eagle Shores breached the lease and whether the alleged breach is curable.  Karkos also argues that the award of attorney fees to Eagle Shores was excessive.  Finally, Eagle Shores cross-appeals the district court's failure to award costs and disbursements to them as the prevailing party.  Because there are no material facts in dispute and because Karkos has failed to establish that Eagle Shores breached the lease, we affirm in part, reverse in part, and remand for the determination of costs and disbursements.

D E C I S I O N

I.

            In reviewing a summary judgment, this court must determine whether there are any genuine issues of material fact and whether the district court erred as a matter of law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  The reviewing court is required to view the evidence in the light most favorable to the nonmoving party.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). 

            Karkos argues that the district court erred in granting summary judgment in favor of Eagle Shores in the form of injunctive relief preventing Karkos from further violations of the lease.  But Karkos admits to violating specific provisions of the lease.    Karkos admits that he stored maintenance items and a "few minor personal items" in the basement of the property, despite the clear language of the lease that afforded Eagle Shores "exclusive use" of the basement.  Karkos further concedes that he entered the property without the permission of Eagle Shores and removed items from the premises.   The district court found that Karkos's actions violated the express terms of the lease, which stated that the "[l]essee shall permit [l]essor or [l]essor's agents to enter upon the premises at reasonable times and upon reasonable notice, for the purpose of inspecting the same. . . ."  (Emphasis added.)

            Karkos argues that the materiality of a breach presents a jury question precluding summary judgment.  See Cloverdale Foods of Minn., Inc. v. Pioneer Snacks, 580 N.W.2d 46, 49 (Minn. App. 1998) (holding that evidence was sufficient to raise factual issue on materiality of breach).  But Karkos concedes that he engaged in conduct that directly violated express terms of the lease and because Eagle Shores was not seeking to terminate the lease, the district court was not required to address the materiality of any alleged breach in addressing Eagle Shores' claim.  Therefore, the record supports the district court grant of summary judgment in favor of Eagle Shores.

II.

            Karkos argues that the district court erred in dismissing his counterclaim for breach of the lease and refusing to allow him to terminate the lease.  He argues that Eagle Shores materially breached the lease by:  (1) allowing a non-electrician to work on the electrical wiring of the property; (2) installing outdoor lighting to the patio area of the property without permission; and (3) violating a city of Minneapolis ordinance by allowing the consumption of alcohol on the premises prior to having obtained a liquor license.

Minnesota courts have held that "forfeitures are disfavored."  Id. In Cloverdale, this court stated the general rule that termination or rescission of a lease is only justified by a material breach or a substantial failure in performance.  Id.  If a material breach has occurred, rescission is appropriate "[w]here the injury is . . . irreparable, or where the damages would be inadequate or difficult or impossible to determine."  Johnny's, Inc. v. Njaka, 450 N.W.2d 166, 168 (Minn. App. 1990).  A material breach "goes to the root or essence of the contract."  15 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 44:55 (4th ed. 2000).  Minnesota appellate courts have concluded that a breach is material when "one of the primary purposes" of the contract was violated.  See, e.g., Steller v. Thomas, 232 Minn. 275, 282, 45 N.W.2d 537, 542 (1950) (providing that logger committed material breach when he did not burn brush piles when logging because primary purpose of contract was to clear land for farming).  Generally, however, the materiality of a breach is a fact question.  See Cloverdale, 580 N.W.2d at 49. 

            Karkos presented no evidentiary support for his claims that Eagle Shores materially breached the lease by allowing a non-electrician to work on the wiring of the property and by installing outdoor lighting to a patio area.  The only evidence presented regarding the electrical work was Karkos's testimony that Eagle Shores "did some electrical unauthorized, I believe, electrical work on the premises, so that's all I know, that I'm going by, their own admission."  When asked what specifically Eagle Shores did with respect to the electrical wiring, Karkos responded "[t]hey have done something, I don't know if it is work or not."  The "outside lighting" at issue consisted of a rope-style of Christmas lights plugged into an existing outlet.  This is insufficient to raise a fact question, and the district court properly dismissed this claim.

Karkos argues that Eagle Shores materially breached the lease by allowing the consumption of alcohol to occur on the premises prior to having obtained a liquor license from the city of Minneapolis.  The lease states that the "[l]essee shall comply with all statutes, ordinances and requirements of all municipal, state and federal authorities. . . ."  The district court assumed that Eagle Shores allowed the consumption of alcohol before being issued a liquor license but determined that Eagle Shores cured any breach of the lease by later obtaining the appropriate license.  The district court determined that Karkos could only terminate the lease after giving notice to Eagle Shores and providing them with the opportunity to cure any breach.  The record supports the district court's conclusion that if Eagle Shores breach the lease term, this breach was cured by their obtaining the appropriate liquor license.

III.

Karkos argues that the district court abused its discretion by awarding Eagle Shores attorney fees when Eagle Shores voluntarily dismissed its claims seeking monetary damages.  On appeal, this court will not reverse the district court's determination on attorney fees absent an abuse of discretion.  Becker v. Alloy Hardfacing & Eng'g Co., 401 N.W.2d 655, 661 (Minn. 1987).  The reasonable value of counsel's work is a question of fact and must be upheld unless that fact is clearly erroneous.  Amerman v. Lakeland Dev. Corp., 295 Minn. 536, 537, 203 N.W.2d 400, 400-01 (1973).  The factors to be considered in determining the reasonableness of attorney fees include:  (1) time and labor required; (2) the nature and difficulty of the responsibility assumed; (3) the amount involved and (to avoid quote) results obtained; (4) fees customarily charged for similar legal services; (5) the experience, reputation, and ability of counsel; and (6) whether the fee arrangement existing between counsel and the client is fixed or contingent.  City of Minnetonka v. Carlson, 298 N.W.2d 763, 765 (Minn. 1980).

Karkos argues that the district court abused its discretion by awarding attorney fees for the entire matter rather than only for those claims that were actually litigated.  However, the United States Supreme Court has rejected a "mathematical approach comparing the total number of issues in the case with those actually prevailed upon."  Hensley v. Eckerhart, 461 U.S. 424, 435, 103 S. Ct. 1933, 1940 n.11 (1983).  The Court specifically stated that "a plaintiff who failed to recover damages but obtained injunctive relief, or vice versa, may recover a fee award based on all hours reasonably expended if the relief obtained justified that expenditure of attorney time."  Id. at 436, 103 S. Ct. 1941 n.11.

Karkos emphasizes the fact that Eagle Shores voluntarily dismissed those claims that would have allowed for monetary damages.  However, Eagle Shores prevailed on the ultimate legal issue and chose only to pursue injunctive relief.  The district court determined that Eagle Shores had obtained a "complete victory" in a "complex case" that had been litigated for more than a year.  The district court retains the discretion to determine who is the prevailing party.  Scott v. Forest Lake Chrysler-Plymouth-Dodge, 668 N.W.2d 45, 50 (Minn. 2003).   After reviewing the relevant factors, the district court did not abuse its discretion in determining that $29,215 in attorney fees is reasonable. 

IV.

Eagle Shores appeals the district court's failure to award any costs or disbursements incurred in connection with the litigation.  The district court determined that all of Eagle Shores' claimed costs, $3,835.42, were unreasonable because they included costs for copying and certain legal research. 

The district court "shall" allow reasonable costs to a prevailing party in a district court action.  Minn. Stat. § 549.02 (2004); Benigni v. County of St. Louis, 585 N.W.2d 51, 54 (Minn. 1998).  The district court does not have discretion to deny costs and disbursements to the prevailing party.  Crince v. Kulzer, 498 N.W.2d 55, 58 (Minn. App. 1993) (citing Jostens, Inc. v. Nat'l Computer Sys., 318 N.W.2d 691, 704 (Minn. 1982)).  Minn. Stat. § 549.02 (2004) allows the defendant costs in the amount of $200 "[u]pon discontinuance or dismissal or when judgment is rendered in the defendant's favor on the merits. . . ."  And Minn. Stat. § 549.04 (2004) allows the prevailing party to recover disbursements "paid or incurred, including fees and mileage paid for service of process by the sheriff or by a private person." 

Because the district court failed to award Eagle Shores, as the prevailing party, any costs and disbursements, we remand for a determination of which requested costs and disbursements are reasonable.

Affirmed in part, reversed in part, and remanded.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Cost. Art. VI, § 10.