Andrew Kaeding v. Karl Auleciems, Susanne Auleciems
2016 Minn. App. LEXIS 73
| Minn. Ct. App. | 2016Background
- Tenants (Kaeding) leased a house with a $2,500 security deposit and a $1,000 pet deposit; lease forbade pets on the basement and second floor. Dogs accessed those areas several times but caused no damage.
- Landlords (Auleciems) retained the full $3,500 after tenancy and asserted a lease clause that forfeited the entire deposit if pets were found on upper or lower floors.
- Tenants sued in conciliation court; conciliator held the forfeiture clause unenforceable, awarded landlords $800 for damages, and returned $2,700 to tenants.
- Landlords removed the case to district court; the district court granted summary judgment that the forfeiture clause violated Minn. Stat. § 504B.178 and awarded tenants return of most deposits, $1,000 punitive damages, attorney fees, costs, and disbursements; landlords recovered $640 in damages after trial.
- On appeal, the Court of Appeals affirmed: forfeiture clauses seeking to convert non-monetary lease breaches into automatic forfeiture of deposits violate § 504B.178; bad-faith retention presumption and fee/cost awards upheld.
Issues
| Issue | Plaintiff's Argument (Kaeding) | Defendant's Argument (Auleciems) | Held |
|---|---|---|---|
| 1. Enforceability of forfeiture clause (security deposit) | Forfeiture clause is void under Minn. Stat. § 504B.178; deposit may be withheld only for unpaid funds or damage beyond wear and tear. | Forfeiture clause valid; deposit secures performance of any lease term, so forfeiture for pet breaches is permitted. | Forfeiture clause void and unenforceable; withholding must be for unpaid funds or damage beyond ordinary wear and tear. |
| 2. Punitive damages for bad-faith retention | Landlords failed to comply with § 504B.178 notice/return requirements; retention presumed bad faith; punitive damages appropriate. | Retention was based on a reasonable claim; not bad faith. | Presumption of bad faith applies because landlords failed to return deposit within two weeks after suit; $1,000 punitive damages (up to $500 per deposit) affirmed. |
| 3. Attorney fees under lease provision | Lease authorizes fees to prevailing party in lawsuits “about the tenancy”; this dispute is about tenancy and fees are recoverable at market rates. | “About the tenancy” means eviction/possession disputes only; parties did not wholly prevail so no prevailing party for fee award. | Lease unambiguously covers this suit; tenants were prevailing party; fee award at prevailing market rate affirmed. |
| 4. Costs and disbursements after removal from conciliation court | Tenant seeks full disbursements plus $50 additional cost under § 491A.02. | Removing-party rule limits costs to $50 when removing party does not prevail. | § 491A.02 requires an additional $50 but does not limit disbursements; tenants may recover reasonable disbursements under § 549.04 plus the $50. |
Key Cases Cited
- Mattson Ridge, LLC v. Clear Rock Title, LLP, 824 N.W.2d 622 (Minn. 2012) (standard for reviewing summary judgment)
- Binkley v. Allina Health Sys., 877 N.W.2d 547 (Minn. 2016) (statutory interpretation: plain-meaning approach)
- Borchert v. Maloney, 581 N.W.2d 838 (Minn. 1998) (determining the prevailing party by overall result)
- Reome v. Gottliev, 361 N.W.2d 75 (Minn. App. 1985) (fee awards measured by prevailing market rates regardless of nonprofit representation)
- Duluth Herald & News Tribune v. Plymouth Optical Co., 176 N.W.2d 552 (Minn. 1970) (appellant bears burden when trial transcript is omitted)