952 N.W.2d 64
N.D.2020Background
- Lease executed in 2010 between Dresser Oil Tools (Three Aces successor) and RSC Equipment Rental (United Rentals successor); United Rentals exercised an extension option and vacated the premises in Sept. 2013.
- Three Aces contracted to redevelop and leased the site to Kum & Go in Nov. 2013.
- Three Aces sued United Rentals (2017) for breach of lease (unpaid rent, failure to maintain/repair parking area and premises) and waste; United Rentals counterclaimed for breach/constructive eviction.
- District court on summary judgment found United Rentals breached by failing to pay rent for the final six months and by failing to surrender the parking area in a similar condition, but awarded damages only for unpaid rent ($56,097.18); it denied damages for repair because (a) cost to repair (~$2.7M) far exceeded any diminution in value and (b) redevelopment to Kum & Go mitigated harm.
- Both parties moved to amend judgment; motions denied. Parties appealed and cross-appealed; Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper measure of damages for tenant’s failure to repair parking area | Three Aces: entitled to damages (cost to repair or other recovery) for breach | United Rentals: diminution in value (and mitigation by redevelopment) controls; cost would be windfall | Court: lesser of repair cost or diminution applies; here diminution = $0 and repair cost (~$2.7M) would be a windfall, so no damages for repair |
| Whether United Rentals breached maintenance covenant for parking area | Three Aces: United Rentals destroyed asphalt and used unauthorized scoria, breaching maintenance/surrender obligations | United Rentals: claimed Three Aces’ failure to comply with City directives caused occupancy issue | Court: United Rentals had duty to maintain/surrender parking in similar condition and breached that duty as a matter of law (but no recoverable damages under diminution measure) |
| Constructive eviction and termination of rent obligation | Three Aces: United Rentals remained obligated to pay rent despite vacating | United Rentals: Three Aces’ failure to comply with City made occupancy unlawful, terminating lease and rent obligation (constructive eviction) | Court: No constructive eviction; City enforcement resulted from United Rentals’ own failure to maintain, so lease did not terminate and rent remained owing |
| Appropriateness of summary judgment on damages and denial of trial | Three Aces: district court should have tried damages issues | United Rentals: undisputed facts entitled it to judgment as a matter of law | Court: Summary judgment proper because undisputed appraisal and redevelopment evidence established diminution = $0 and repair cost was impractical; denial of motions to amend affirmed |
Key Cases Cited
- Feltman v. Gaustad, 942 N.W.2d 844 (2020 N.D.) (summary judgment standard).
- Swenson v. Mahlum, 927 N.W.2d 850 (2019 N.D.) (elements and interpretation of contract/lease).
- Peterbilt of Fargo, Inc. v. Red River Trucking, LLC, 864 N.W.2d 276 (2015 N.D.) (amount of damages is a factual determination).
- Swain v. Harvest States Coops., 469 N.W.2d 571 (N.D. 1991) (cost-to-repair vs. diminution-in-value framework).
- Biteler’s Tower Serv., Inc. v. Guderian, 466 N.W.2d 141 (N.D. 1991) (repair cost generally measure unless impractical).
- McLane v. Wal-Mart Stores, Inc., 10 S.W.3d 602 (Mo. Ct. App. 2000) (avoid windfalls; limit recovery to diminution where restoration would overcompensate).
- Sykeston Township v. Wells County, 356 N.W.2d 136 (N.D. 1984) (definition/meaning of “maintain” as keep in repair).
- Kittleson v. Grynberg Petroleum Co., 876 N.W.2d 443 (2016 N.D.) (specific contract provisions qualify general provisions).