Opinion
No. A04-2034.
Filed August 2, 2005.
Appeal from the District Court, Ramsey County, File No. CX-03-12283.
Robert A. Manson, Robert A. Manson, P.A., (for appellant)
Michael D. O'Neill, O'Neill, Grills O'Neill, P.L.L.P., (for respondent)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Appellant argues that the district court erred in granting summary judgment to respondent when the evidence clearly contradicts the district court's finding that the original landlord installed the cabinetry and plumbing fixtures at issue here. The parties acknowledge that there are no disputed facts and that the district court applied the law correctly. Because the evidence supports the conclusion that the original tenant, not the landlord, installed the cabinetry and plumbing fixtures at issue, we reverse the district court's decision and order summary judgment be granted in favor of appellant landlord. We further remand to the district court to determine the amount of damages to be awarded to appellant.
FACTS
On April 17, 1979, Roseville Professional Center, a limited partnership, entered into a lease with Earle Thompson, D.D.S. (Thompson) for space in its building. By its terms, the lease expired on May 31, 1981. The lease contained the following provisions:
The landlord/tenant relationship between Roseville Professional Center, a limited partnership, and Thompson started around 1970.
XX. Surrender of Premises in Good Order. At the termination of this Lease by lapse of time or otherwise, the Tenant shall peaceably surrender the Leased Premises and all equipment and fixtures of Landlord in as good condition as when Tenant originally took possession, ordinary wear and alternations made with Landlord's written consent excepted, failing which Landlord may restore the Leased Premises to such condition and Tenant shall pay the cost thereof. Any property left in the Leased Premises after the expiration or termination of the Lease Term shall be deemed to have been abandoned by the Tenant and title shall thereto pass to Landlord under this Lease as a bill of sale. If the Leased Premises be not surrendered at the termination of this Lease by lapse of time or otherwise, Tenant shall indemnify Landlord against any loss or liability resulting from delay by Tenant in so surrendering the premises, including, but without limitation, claims made by any succeeding tenant founded on such delay.
XXI. Removal of Additions. All installations, additions, hardware, nontrade fixtures, and improvements, temporary or permanent, except movable furniture and equipment belonging to Tenant, in or upon the Premises, whether placed there by Tenant or Landlord shall be Landlord's property and shall remain upon the Premises, all without compensation, allowance or credit to Tenant; provided, however, if prior to termination of this Lease or within ten (10) days thereafter Landlord so directs by notice, Tenant shall promptly remove the installations, additions, hardware, nontrade fixtures and improvements, placed in the Premises by Tenant and designated in the notice, failing which Landlord may remove the same and Tenant shall pay the cost thereof. Any damage to the Leased Premises or Building resulting from the removal of trade fixtures, movable furniture, and equipment, or those items directed to be removed by Landlord shall be promptly repaired by Tenant at its expense. Said repairs shall be done by the employees of Landlord at the expense of Tenant.
On March 16, 1981, Terry Evanson, the successor landlord to Roseville Professional Center, entered into a new lease with Thompson for the same space. The new lease contained the same provisions regarding the termination or expiration of the lease and surrender of the lease property as the first. By its terms, the lease was to expire on May 31, 1983; however, it was amended June 1, 1983, to expire on May 31, 1985.
On April 23, 1984, Thompson sold his dental practice to respondent Mark Olson, D.D.S., which sale included an assignment of the existing lease. Evanson consented to the assignment of the lease the following day. In March 1985, Evanson informed respondent that a new lease was required. A new lease was executed on April 2, 1985, and was to expire on February 28, 1987; however, the lease was amended to extend the expiration date of the lease to February 28, 1990. The lease contained the same provisions regarding surrender of the leased premises and removal of additions as the previous leases. During 1989, ownership of the building changed hands. Evanson assigned the lease with respondent to Horizon Development Company, which in turn reassigned the lease to appellant RPC Properties, Inc.
Appellant and respondent entered into new leases for the time periods: February 1990 to February 1993; February 1993 to February 1996; and February 1999 to February 2002. The record contains no evidence of a lease between the parties between February 1996 and February 1999; however, the parties acknowledge that there was a continuous leasing arrangement from 1979 to 2002. Finally, on January 22, 2002, appellant and respondent entered into the final lease, which commenced on March 1, 2002, and terminated six months thereafter or upon 90 days' notice. Each lease contained the same provisions regarding surrender of the leased premises and removal of additions as the previous leases.
On January 1, 2003, respondent notified appellant that he intended to vacate the property on March 1, 2003. On February 13, 2003, the operations manager for appellant, Nathan Buss, sent a letter to respondent stating, "[a]s a reminder, upon vacating the office suite, all cabinets and plumbing fixtures need to be removed." Appellant did not anticipate a dentist moving into the space after respondent moved out. When respondent vacated the property on February 28, 2003, he did not remove the items requested by appellant. Respondent also did not repair damage caused by the items he did remove.
On July 1, 2003, appellant brought an action against respondent in Ramsey County Conciliation Court to recover the cost of removing the cabinetry and electrical and plumbing fixtures, the cost of repairing the premises, as well as two months of rental costs and the costs associated with the lawsuit. On October 10, 2003, the conciliation court referee ruled in favor of appellant. Respondent then appealed to Ramsey County District Court. Both parties filed motions for summary judgment on May 3, 2004.
In support of its motion for summary judgment, appellant filed affidavits by Nathan Buss, operations manager for appellant, and Karl Keller, a developer for the Roseville Professional Center building. According to the affidavits, the building was constructed with the intention of recruiting doctors and dentists as tenants. Because the landlord would not know how the tenants would want their offices set up, the owner did not install plumbing and electrical connections into the office suites. This allowed each tenant to set up the suite as he or she wished after moving in. Both affidavits state that connections for water, sewer, electrical, dental vacuum, and dental compressed air were run to the central hallway of three floors in the building. Any extensions from these central connections to the office suites were at the expense of, and were the responsibility of, the tenant.
In support of his motion for summary judgment, respondent filed an affidavit from Thompson regarding the initial installation of the cabinetry and plumbing fixtures. Thompson's affidavit states that the landlord furnished all of the plumbing set connections, compressed-air connections, high-volume oral-evacuation connections, and electrical connections for him and other professionals in the building. It further states, "[t]he dental supply company that I used furnished the cabinetry and sinks that I used in my practice, and the cabinetry and sinks were installed prior to my moving into the office space."
A hearing on the summary-judgment motions was held on May 26, 2004. On August 12, 2004, the district court judge issued an order granting respondent's motion for summary judgment with a detailed analysis of the court's decision in an attached memorandum. The court specifically stated that:
There is no factual question that the original landlord placed the connections and cabinetry at issue in the premises for use by the professionals in the building. By its plain language, the notice and removal provision applies to the improvements placed by the tenant, and therefore does not apply to the items at issue.
The court further stated that respondent gave sufficient notice under the lease that he was vacating the suite, that appellant did not have a basis to assert a claim for conversion or replevin, and denied appellant's request for attorney fees associated with the suit, as allowed in the lease.
DECISION
Summary Judgment
Appellant argues that the district court erred in granting summary judgment to respondent because the facts and evidence provided by both parties directly contradict the district court's statement that the original landlord installed the cabinetry and plumbing fixtures. On appeal from summary judgment, this court asks (1) whether there are any genuine issues of material fact and (2) whether the district court erred in its application of law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). This court reviews de novo whether a genuine issue of material fact exists and whether the district court erred in its application of the law. STAR Ctrs., Inc. v. Faegre Benson, L.L.P., 644 N.W.2d 72, 77 (Minn. 2002). On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment is granted. Id. at 76-77 (citation omitted). For purposes of this case, therefore, we must accept as true the factual allegations made by appellant.
The parties' submissions to both the district court and this court claim that there are no disputed issues of fact in this case. While it is undisputed that the cabinetry and plumbing fixtures were installed prior to Thompson moving into the suite, the parties appear to disagree as to who installed the items. Appellant argues that the cabinetry and plumbing fixtures were installed by Thompson. Respondent argues that Thompson did not install the cabinetry and plumbing fixtures, the dental supply company did. This argument, while technically correct, does not clarify the relationship between Thompson and the dental supply company. The affidavit submitted by Thompson states, "The dental supply company that I used furnished the cabinetry and sinks that I used in my practice, and the cabinetry and sinks was [sic] installed prior to my moving into the office space." (Emphasis added.) Based on the affidavits submitted by the parties, it is clear that Thompson hired the dental supply company to install the cabinetry and plumbing fixtures, not the landlord. Nowhere in the record does it state that the landlord installed the items or had the items installed for Thompson.
Further, respondent's argument includes a lax use of the word "connections." The affidavits submitted by Buss and Keller in support of appellant's motion for summary judgment clearly state that the building provided central lines for plumbing, sewer, electrical, dental vacuum, and compressed air to the main hallway of three floors. When a tenant moved into the building, he or she was responsible for installing extensions of these connections to their office suite at their expense. Respondent acknowledges that "[i]t is undisputed that the plumbing and electrical connections were installed . . ." before Thompson moved into the suite and that "the landlord furnished all plumbing and electrical connections." By failing to point out the difference between the connections installed by the landlord in the central hallway and the extensions from those connections to the suite that were installed by the tenant, respondent's shoddy phraseology could potentially lead to the conclusion that the connections are all one and the same. Based on the evidence, there is no genuine issue of fact as to who installed the cabinetry and plumbing fixtures; the record, however, supports the conclusion that it was Thompson who installed the items, not the original landlord.
Respondent further argues that even if the cabinets and plumbing fixtures were installed by Thompson in 1970, at the expiration of the 1979 lease they became the property of the landlord because Thompson did not remove the items. This argument is absurd. Ordinarily, a tenant must remove trade fixtures before the lease expires. Erickson v. Jones, 37 Minn. 459,460,35 N.W. 267, 267-68 (1887). The Minnesota Supreme Court, however, has noted the absurdity in a rule of law that would in effect say to a tenant who is about to obtain a renewal, "If you will be at the expense and trouble, and incur the loss, of removing your erections during the term, and of afterwards bringing them back again, they shall be yours; otherwise you will be deemed to abandon them to your landlord." Sassen v. Haegle, 125 Minn. 441, 446, 147 N.W. 445, 447(Minn. 1914). The cabinetry and plumbing fixtures did not become the property of the landlord at the expiration of the 1979 lease. The items remained the property of Thompson until the dental practice was sold and the existing lease was assigned to respondent, at which time they became respondent's property.
Further, the argument that the cabinetry and plumbing fixtures became the property of the landlord at the expiration of the 1984 lease — the lease Thompson assigned to respondent — because Thompson failed to remove the items also fails. Ordinarily, a tenant must remove trade fixtures before the lease expires. Erickson v. Jones, 37 Minn. 459, 460, 35 N.W. 267, 267-68 (1887).The supreme court has created an exception in cases where a tenant conditionally sells trade fixtures to a subsequent tenant who plans to carry on the same business. Central Chrysler Plymouth, Inc. v. Holt, 266 N.W.2d 177, 180 (Minn. 1978). In such cases, when the landlord knows of the arrangement, the fixtures are not deemed abandoned. Id. In this case, Thompson sold his dental practice (which included the cabinetry and plumbing fixtures) to respondent so that respondent could carry on the dental practice. The landlord consented to the assignment of the lease and did not require Thompson to remove the additions in consideration of the fact that respondent was planning to continue using the items in his dental practice.
Finally, respondent argues that the final lease between the parties required respondent to restore the office suite to the condition it was in when he moved in; the cabinetry and plumbing fixtures were already there when respondent moved into the suite. Further, the lease does not specifically require respondent to remove any additions that had been installed by Thompson. Appellant argues that the assignment of the lease from Thompson to respondent obligated respondent to assume all of the terms and conditions of the lease. This court agrees with appellant. The law in Minnesota, like most jurisdictions, holds that an assignment of a contract does not impose on the assignee the duties or liabilities imposed by the contract on the assignor in the absence of the assignee's specific assumption of such liabilities. Meyers v. Postal Fin. Co., 287 N.W.2d 614, 617 (Minn. 1979); see also Carstedt v. Grindeland, 406 N.W.2d 39, 42 (Minn.App. 1987). The assignment from Thompson to respondent, dated April 23, 1984, clearly states, "Assignee [Olson] does hereby accept the foregoing assignment as of the date of the execution of this Agreement and thereby assumes and agrees to perform all the terms, conditions, covenants, and agreements of said lease, on the part of the assignor [Thompson] to be performed." Respondent specifically assumed any and all terms and obligations required under the lease just as if he were Thompson fulfilling the lease. Respondent, therefore, specifically assumed the provisions requiring the tenant to surrender the premises in good order and to remove any additions installed by the tenant.
Appellant argues that the district court did not address respondent's failure to repair damage caused by the removal of the items he took when he vacated the suite as required under the lease. It is well-established law in Minnesota that a landlord can recover the expenditures necessary to restore the premises to the original condition on the lessee's failure to do so in accordance with the lease. Storr v. Keljik, 178 Minn. 391, 392-93, 227 N.W. 211, 211-12 (1929). Every lease here contained language obligating the tenant to repair any damage caused by the removal of improvements or additions by the tenant at the tenant's expense. Further, if the tenant failed to repair the damage, the landlord would complete the repairs at the tenant's expense. Respondent failed to repair the damage caused by the removal of items from the suite and is responsible for the cost of the repairs incurred by appellant to restore the office suite to its original condition. We remand this issue to the district court to determine the amount of damages incurred by appellant to repair the damage caused by respondent and to enter a judgment in favor of appellant for that amount.
Based on the evidence submitted in support of the parties' motions for summary judgment, there are no genuine issues of material fact, and the district court correctly applied the law. The record, however, does not support the district court's assumption that the original landlord installed the cabinetry and plumbing fixtures. The district court erred in granting summary judgment to respondent.
Inadequate Notice by Tenant
Appellant argues that the district court erred in finding that respondent gave sufficient notice of termination under the lease by modifying the holding-over provisions of the lease. This court must construe the challenged lease provision by applying principles of contract construction. See Amoco Oil Co. v. Jones, 467 N.W.2d 357, 360 (Minn.App. 1991) ("A lease is a contract which should be construed according to ordinary rules of interpretation."). In addition, we must give the language of the lease its plain meaning and interpret it "in the context of the entire agreement." Hydra-Mac, Inc. v. Onan Corp., 450 N.W.2d 913, 916 (Minn. 1990). Unless ambiguity exists, generally the construction and effect of contract language is a question of law. Westphal v. Anderson, 347 N.W.2d 85, 87 (Minn.App. 1984). Questions of law are subject to a de novo standard of review. Jadwin v. Minneapolis Star Tribune Co., 367 N.W.2d 476, 483 (Minn. 1985). Minn. Stat. § 504B.135(a) (2004) provides that a tenancy at will may be terminated by either party by giving written notice. The time of the notice must be at least as long as the interval between the time rent is due or three months, whichever is less.
The district court found that the March 2002 lease expired by its terms on September 1, 2002; however, the terms of the lease carried over into the holdover period. Further, the court found that while respondent was required to give 90 days' notice, paragraph 23 of the lease negated the 90-day requirement. Paragraph 23 of the lease provides:
Tenant will, at the expiration of this Lease Agreement, whether by lapse of time or termination, give up immediate possession to Landlord. If Tenant fails to give up possession, the Landlord may, at its option, serve written notice upon Tenant that such holdover constitutes any one of the following: (i) renewal of this Lease Agreement for one year, and from year to year thereafter; (ii) creation of a month-to-month tenancy at will; or (iii) creation of a tenancy at sufferance. If Landlord does not give said notice, tenant's holdover shall create a tenancy at sufferance. In any such event the tenancy shall be upon the terms and conditions of this Lease Agreement, except that the Base Rental shall be prorated on the basis of a 365 day year for each day Tenant remains in possession. . . .
The district court stated that it "must determine which of the three categories applies, since the [respondent] clearly held over beyond the expiration of the lease; and no express agreement was made by the parties to qualify the situation as any of these three categories." The district court held that it would be unconscionable to uphold the default creation of tenancy at sufferance because the landlord chose to accept the monthly rent payment as he had done under the lease. Further, it found that the acceptance of the rent checks by the landlord implied permission, thus making the holdover tenancy a month-to-month tenancy at will. Finally, the district court stated that considering that a tenancy at will was created, under Minn. Stat. § 504B.141 (2004), either party may terminate the tenancy at will with one rental payment period notice (here, one month notice).
The terms of the 2002 lease are not ambiguous. The plain language of the lease states that if there is a holdover, a tenancy at sufferance is created, and the resulting tenancy shall be based upon the terms and conditions of the lease. The "Lease Term" provided that the lease shall expire six months after March 1, 2002, or 90 days' written notice. Because appellant did not notify respondent in writing of the status of their relationship after September 1, 2002, the relationship between appellant and respondent became a tenancy at sufferance by default under the plain language of the lease. The tenancy, also pursuant to the plain language of the lease, was based on the terms and conditions of the lease, which includes the 90-day-written-notice provision. There is nothing in the lease to support the court's statement that acceptance of the rent checks implied a tenancy at will. The district court erred in holding that respondent gave sufficient notice under the lease. We remand this issue to the district court to determine the amount of damages incurred by appellant for respondent's failure to provide adequate notice under the lease and to enter a judgment in favor of appellant in that amount.
Claims for Conversion and Replevin
The district court found that there was no basis for appellant to amend its complaint to assert claims for conversion or replevin. Appellant argues that if the court agreed with respondent's argument that the original landlord installed the cabinetry and plumbing fixtures, then appellant is entitled to payment for the items respondent removed from the property when he vacated the suite.
Minn. R. Civ. P. 15.01 provides, in pertinent part, that "a party may amend a pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." The district court has broad discretion to grant or deny leave to amend a complaint, and its ruling will not be reversed absent a clear abuse of discretion. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). Whether the district court has abused its discretion in ruling on a motion to amend may turn on whether it was correct in an underlying legal ruling. Id. at 762.
There is no dispute that respondent removed some of the items installed by Thompson (and later owned by respondent) from the office suite when he vacated it and failed to remove other items installed by Thompson that appellant specifically requested that respondent remove. The record supports a continuous ownership of the cabinetry and plumbing fixtures, first by Thompson, and then by respondent after he purchased them from Thompson. The district court's finding that appellant does not have a basis to assert conversion or replevin was not an abuse of discretion because appellant does not have a claim for conversion or replevin; the property was owned by respondent.
Attorney Fees
The district court denied appellant's claim for attorney fees because it found that respondent had not violated the terms of the lease, and, therefore, respondent was not responsible for appellant's attorney fees, costs, and disbursements. Appellant argues that this was an abuse of discretion. The Minnesota Supreme Court has long held that attorney fees are not recoverable in litigation unless there is a specific contract permitting or a statute authorizing such recovery. Barr/Nelson, Inc. v. Tonto's, Inc., 336 N.W.2d 46, 53 (Minn. 1983). Here, paragraph 28 of the lease provides that the tenant will be responsible for reasonable attorney fees, costs, and disbursements incurred in an action instituted by the landlord to enforce the lease. The lease does not provide that attorney fees will be awarded to the party who prevails or that the tenant is not responsible for attorney fees if the court finds that he or she has complied with the lease. Further, even if the district court's analysis was correct, the record does not support the district court's conclusion that respondent did not violate the terms of the lease. The district court's denial of appellant's request for attorney fees was an abuse of discretion and we direct the district court to determine the attorney fees, costs, and disbursements due to appellant.