Tri-Buu Cat Thiem, et al., Respondents, vs. Polka Dot Dairy, Appellant.

Tri-Buu Cat Thiem, et al., Respondents, vs. Polka Dot Dairy, Appellant. A06-2125, Court of Appeals Unpublished Decision, November 27, 2007.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-2125

 

Tri-Buu Cat Thiem, et al.,
Respondents,
 
vs.
 
Polka Dot Dairy,
Appellant.

 

 

Filed November 27, 2007

Affirmed

Hudson, Judge

 

McLeod County District Court

File No. C6-06-140

 

Donald H. Walser, Kraft, Walser, Hettig, Honsey & Kleiman, PLLP, 131 South Main Street, P.O. Box 129, Hutchinson, Minnesota 55350 (for respondents)
 
Joseph M. Sokolowski, Laurie J. Miller, Brian S. McCool, Fredrikson & Byron, P.A., 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota 55402-1425 (for appellant)

 

            Considered and decided by Randall, Presiding Judge; Kalitowski, Judge; and Hudson, Judge.

 

 

U N P U B L I S H E D   O P I N I O N

HUDSON, Judge

            On appeal from summary judgment, appellant argues that the district court erred in granting summary judgment because there was a genuine issue of material fact as to whether respondent terminated the lease by implication.  Because there are no genuine issues of material fact and the district court did not err in applying the law, we affirm.

FACTS

            In 1978, appellant Polka Dot Dairy signed a 15-year lease to operate a convenience store in Hutchinson, Minnesota, with respondents' predecessor in interest.  The lease required appellant to pay monthly rent, maintenance for certain portions of the property, and all utilities and property taxes.  In 1994, the parties agreed to extend the lease term through June 2009.  In 2002, respondents Tri-Buu Cat Thiem purchased the property and appellant paid respondents monthly rent pursuant to the lease agreement.  In February 2004, appellant vacated the premises and ceased paying rent. 

            The lease provides the following with respect to a default by the tenant:

[I]f Tenant shall abandon said premises, . . . then Landlord, besides other rights or remedies it may have, shall have the immediate right of re-entry and may remove all persons and property from the Leased Premises and such property may be removed and stored in a public warehouse or elsewhere at the cost of, and for the account of, Tenant, all without service of notice or resort to legal process and without being deemed guilty of trespass, or becoming liable for any loss or damage . . . .

            Should Landlord elect to re-enter, as herein provided, or should it take possession pursuant to legal proceedings or pursuant to any notice provided for by law, it may either terminate this Lease or it may, from time to time, without terminating this Lease, make such alterations and repairs as may be necessary in order to relet the premises, and relet said premises or any part thereof for such term or terms (which may be for a term extending beyond the term of this Lease) . . . .  No such re-entry or taking possession of said premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction.  Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach.

 

The lease also provides that if respondents do not terminate the lease and find a new tenant, appellant remains liable for any rent and other expenses, including expenses incurred in finding the replacement tenant, the new rental arrangement does not cover.  Respondents did not notify appellant in writing that they terminated the lease. 

            In February 2005, respondents filed a breach-of-contract claim, and the district court awarded respondents rent for the period of February 2004 to April 2005, and taxes, maintenance, and utilities through December 2004.  Thereafter, respondents changed the locks on the property and retained a real-estate broker to find a tenant for the vacant property but have been unable to find a new tenant.  In early 2006, appellant also hired a real-estate broker to assist in finding a replacement tenant.  In January 2006, respondents filed another breach-of-contract claim against appellant to recover unpaid rent from May 2005, real estate taxes, utilities, and maintenance.  Respondents moved for summary judgment, and the district court awarded summary judgment in favor of respondents.  The district court concluded that because respondents' "actions [were] consistent with the terms of the lease," there was no genuine issue of material fact as to whether respondents impliedly terminated the lease.   This appeal follows.

D E C I S I O N

            Appellant challenges the district court's grant of summary judgment in favor of respondents, arguing that there was a genuine issue of material fact as to whether respondents terminated the lease by implication.  This court reviews a grant of summary judgment de novo to determine whether there is a genuine issue of material fact and whether the district court erred in its application of the law.  Zip Sort, Inc. v. Comm'r of Revenue, 567 N.W.2d 34, 37 (Minn. 1997).  On appeal from summary judgment, "the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted."  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).  Summary judgment is proper when the record as a whole does not present a genuine issue of material fact and the moving party is entitled to judgment as a matter of law; but to show summary judgment is improper, "the party resisting summary judgment must do more than rest on mere averments."  DLH, Inc. v. Russ, 566 N.W.2d 60, 69, 71 (Minn. 1997).   

            Appellant argues that when respondents re-entered the premises, changed the locks, hired a broker, and showed the property to prospective tenants, they exercised general dominion and control over the property.  Appellant contends that respondents' exercise of dominion and control over the property raises a genuine question of material fact as to whether respondents terminated the lease by implication.  We disagree. 

            Parties to a lease may terminate it expressly or by implication.  Provident Mut. Life Ins. Co. v. Tachtronic Instruments, Inc., 394 N.W.2d 161, 164 (Minn. App. 1986).  To terminate a lease by implication, the parties must intend to terminate the lease, meaning that the landlord "assumes a position incompatible with the existence" of the landlord-tenant relationship.  Benasutti v. Coast-to-Coast (Cent. Org.), Inc., 392 N.W.2d 695, 697 (Minn. App. 1986) (quotation omitted).  But when the lease contains language permitting the landlord to re-enter the premises, "there must be unequivocal proof that the landlord intended to forgive the tenant's further obligations under the lease and accepted the tenant's surrender of the premises."  Provident Mut., 394 N.W.2d at 164 (holding that the parties intended to terminate a lease because evidence showed a consensual arrangement to vacate the premises, the landlord took back keys, the landlord did not continue to charge tenant for rent, and the landlord re-let the space for more rent and a longer term); see also Book v. Asseltine, 295 Minn. 531, 532, 203 N.W.2d 387, 38788 (1972) (holding that for the two and one-half months it took landlord to ready the property after tenant abandoned it, landlord did not accept tenant's surrender of the property, even though after the property was ready to re-let landlord rented it to one of its wholly owned subsidiaries).

            Here, appellant concedes that the lease provides respondents the right to enter the premises, change the locks, and try to find a replacement tenant upon the default of appellant.  But appellant contends that in so acting, respondents impliedly terminated the lease.  Appellant, however, does not point to any evidence indicating that respondents forgave appellant its future rental obligation.  In fact, respondents sued appellant for past-due rent and other expenses in 2005 and requests the same relief in this action.  Further, the lease holds appellant responsible for the remainder of the lease term for any deficiencies in rent and other expenses even after respondents re-let the property.  In sum, appellant has not demonstrated that respondents assumed a position incompatible with the existence of the landlord-tenant relationship as defined in the lease.  On this record, appellant has not shown that there is a genuine issue of material fact regarding whether respondents' actions terminated the lease by implication.

            Appellant contends, however, that the optional remedies afforded to respondents upon a default by appellant create a question of fact as to whether respondents' actions may be characterized as continuing the lease or terminating it by implication because (1) the lease allows respondents to choose whether to terminate the lease when a breach occurs; and (2) the lease provides that a court can determine that the parties terminated the lease.  Appellant relies on Rhee v. Golden Home Builders, Inc., 617 N.W.2d 618, 622 (Minn. App. 2000), for the proposition that summary judgment is inappropriate when parties dispute the characterization of facts.  In Rhee, this court held that because the parties disputed whether the work constituted a repair or an improvement and the district court had to make a factual finding to determine that issue, summary judgment was inappropriate.

            But Rhee is distinguishable because here, the parties' lease explicitly stated that respondents' re-entry and repossession of the property did not terminate the lease.  Thus, the district court did not have to make a factual finding to determine whether respondents terminated the lease by implication.  Furthermore, it is undisputed that respondents did not notify appellant in writing that they terminated the lease.  In fact, appellant hired its own agent to find a new tenant for the property, indicating that even appellant did not characterize respondents' re-entry as terminating the lease. 

            Moreover, adopting appellant's position would render meaningless the lease provision that respondents' re-entry and possession shall not be construed as an election to terminate the lease.  See Chergosky v. Crosstown Bell, Inc., 463 N.W.2d 522, 526 (Minn. 1990) (stating that because the court presumes parties intend contractual language to have effect, "we will attempt to avoid an interpretation of the contract that would render a provision meaningless").  Because respondents acted in accordance with the lease and did not otherwise terminate the lease, appellant has not shown that a genuine issue of material fact exists as to whether respondents' actions may be characterized as terminating the lease by implication.  As a result, the district court did not err in granting respondents' motion for summary judgment. 

            In addition, appellant contends that summary judgment was inappropriate because the parties were unable to complete discovery, which would have revealed additional facts showing that respondents terminated the lease by implication.  Appellant, however, does not explain what additional evidence it could have procured during the discovery process to show that respondents terminated the lease.

            Finally, appellant argues that a landlord must mitigate his damages after the termination of a lease, and the issue as to mitigation cannot be resolved by summary judgment.  But a landlord only has a duty to use reasonable efforts to mitigate his damages when the landlord accepts the tenant's abandonment of the property or terminates the lease.  Gruman v. Investors Diversified Servs., Inc., 247 Minn. 502, 509, 78 N.W.2d 377, 381 (1956).  Because we affirm the district court's grant of summary judgment, we do not address appellant's arguments regarding a duty to mitigate damages.

            Affirmed.