Goodman Inv., Inc. v. Swanston Equipment Co., 9810

• Decision Date: 21 November 1980
• Docket Number: No. 9810,9810
• Citation: 299 N.W.2d 786
• Parties: GOODMAN INVESTMENT, INC., Plaintiff and Appellant, v. SWANSTON EQUIPMENT CO., Defendant and Appellee. Civ.
• Court: North Dakota Supreme Court

Page 786

299 N.W.2d 786

GOODMAN INVESTMENT, INC., Plaintiff and Appellant, v. SWANSTON EQUIPMENT CO., Defendant and Appellee.

Civ. No. 9810.

Supreme Court of North Dakota.

Nov. 21, 1980.

Paul F. Richard, of Tenneson, Serkland, Lundberg, Erickson & Marcil, Fargo, for plaintiff and appellant.

J. Gerald Nilles, of Nilles, Hansen, Selbo, Magill & Davies, Fargo, for defendant and appellee.

VANDE WALLE, Justice.

Goodman Investment, Inc. ("Goodman") appeals from a judgment entered on April 16, 1980, in Cass County Court, in favor of the defendant, Swanston Equipment Co. ("Swanston"). We affirm.

The facts involved in this appeal are not in dispute. In 1948 Goodman's predecessors in interest, Irving Goodman and Stanley Goodman, entered into a lease agreement with Swanston by the terms of which Swanston leased certain property in Cass County from the Goodmans. The lease contained a renewal provision, which was exercised by Swanston, whereby in 1958 the lease was renewed for a period of 89 years and called for Swanston to pay a rental of $100 per month. Swanston failed to pay the rent agreed upon during the months of June, July, and August 1979. ¹

The lease is silent with respect to any forfeiture provision because of nonpayment of rent.

On August 15, 1979, Goodman served Swanston with a notice to quit the premises. On August 17, 1979, Swanston tendered Goodman the unpaid rent plus interest at six percent. The tender of the rent and interest was rejected by Goodman as was the tender of the September rent, but by agreement between the parties the tender was delivered to Goodman's attorney and proper tender was acknowledged by Goodman. Swanston refused to give up possession of the premises and Goodman commenced an action in forcible detainer on August 20, 1979, by service of a summons and a complaint upon Swanston. Swanston answered, moving for dismissal of Goodman's complaint for failure to state a claim upon which relief could be granted.

A trial on the merits was held before Michael McGuire, Judge of the Cass County Court, on August 29, 1979. Both parties were afforded the opportunity to present testimony and evidence. Following the trial the court took the matter, including Swanston's motion to dismiss the action, under advisement. Subsequent to the trial and prior to April 10, 1980, Judge McGuire was appointed to and accepted the position of District Judge of the East Central Judicial District. On April 10, 1980, Judge McGuire issued his memorandum opinion dismissing Goodman's complaint. Judge McGuire concluded that the good-faith tender of the past-due rent and the proper interest within three days after the service of the notice to quit upon Swanston prevented a forfeiture of the lease and is a complete defense to an action for forcible detainer. Pursuant to the order for judgment, the Clerk of Cass County Court issued judgment on April 16, 1980.

The issues raised by Goodman on appeal are legal in nature. The first issue is whether or not, under our forcible-detainer statutes, a lessor must make a demand for rent and be refused payment prior to the maintenance of an action in forcible detainer. If we answer the first issue in the negative, a second issue is whether or not equity may relieve a lessee from a statutory forfeiture. The third issue is whether or not Judge McGuire had the jurisdiction to render a decision in the county court case after he was appointed to the district court.

I

Insofar as the first issue is concerned, the parties have stipulated that Goodman did not make a demand on Swanston for the rent due for the months of June, July, and August 1979. Swanston's position is that Goodman must serve a notice to quit, which is the equivalent of a demand for rent, and that a tender of the rent due within three days after service of the notice to quit would abate the forcible-detainer action. Goodman, on the other hand, asserts that failure to pay rent due under a lease is a termination of the lease and that there is no statutory requirement of a demand for rent before the forcible-detainer action can be maintained.

Both parties concede that at common law a demand for payment must be made to entitle the lessor to enforce a forfeiture for nonpayment of rent. 49 Am.Jur.2d 1002, Landlord and Tenant, Sec. 1034. North Dakota has, however, enacted forcible-detainer statutes which are found in Chapter 33-06, N.D.C.C., and it is the meaning of these statutes which control our decision in this case.

Section 33-06-01, N.D.C.C., provides, in part, that an action of forcible detainer to recover possession of real estate is maintainable in the proper county justice court when:

"4. A lessee, in person or by subtenant, holds over after the termination of his lease or expiration of his term, or fails to pay his rent for three days after the same shall be due."

Section 33-06-02, N.D.C.C., requires that in all cases arising under subsection 4, among certain of the other subsections of Section 33-06-01, "three days' written notice to quit must be given to the lessee, ... before proceedings can be instituted."

Goodman argues that the notice-to-quit requirement in Section 33-06-02, in the case of failure of the tenant to pay rent, is not a demand for payment of the rent; that its purpose is simply to notify the lessee that he has three days to vacate the premises or he will be evicted by legal action and that the tender by the lessee of the rent due within the three-day time period of the notice to quit does not abate the eviction action. Swanston, of course, argues that the notice-to-quit provision is our Legislature's substitution for the demand-for-payment requirement of the common law and, because a tender of payment at common law abated the eviction action, the tender of the rent within the three-day time period of the notice to quit should have the same effect under our statutory scheme. Both parties have cited numerous cases from other jurisdictions, some of which are distinguishable on their facts or on the basis of the statutes involved therein.

In Murry v. Burris, 6 Dak. 170, 42 N.W. 25 (1889), the Territorial Court determined that the statute now codified as subsection 4 of Section 33-06-01, N.D.C.C., was taken directly from the State of Iowa, and that the statute now codified as Section 33-06-02 was also taken from the State of Iowa. Other parts of the Act were taken from the State of California and still other parts of the Act were unique to Dakota Territory in 1889. In Cole v. Johnson, 120 Iowa 667, 94 N.W. 1113, 1114 (1903), the Supreme Court of Iowa addressed the question of whether or not a demand of rent is an essential condition to the maintenance of forcible entry and detainer, stating:

"The rule was very strict at common law, and is still observed in most states where no statutory modification has been made, that, to forfeit a lease for nonpayment of rent, demand must be made on the leased premises at or near sundown on the day when such payment falls due.... Without attempting now to determine just how far this rule may be abrogated by our statute, we are of the opinion that a demand should be made, and some reasonable opportunity to make payment afforded the tenant, before employing a summary remedy for his ejection. It is a familiar principle that forfeitures are not favored in law, and their effect will be limited by strict construction of statutes and contracts. There is no hardship in this requirement, and there may be great hardship in enforcing a technical forfeiture which a simple demand might have rendered unnecessary. The rule is salutary and humane, and accords with the general policy of the law." (Emphasis supplied.)

Although the statutes of Iowa contained no requirement for a demand for payment, they did contain a requirement of a notice to quit. Sec. 4210, Iowa Code 1897.

In Dakota Hot Springs Co. v. Young, 9 S.D. 577, 70 N.W. 842, 843 (1897), the South Dakota Supreme Court considered statutes almost identical to those of North Dakota and, relying on construction of similar statutes in other jurisdictions, held that the South Dakota forcible-entry and detainer law abrogated the common-law rule which required a demand for the rent to be made upon the premises on the date it became due and substituted for such demand the notice to quit specified in the statute, stating:

"The notice to quit being a substitute for the common-law demand, it would seem to logically follow that a tender of payment within the three days specified in the notice to quit would prevent the forfeiture, ... The object of these provisions making the failure to pay rent a ground of forfeiture evidently was to secure and enforce the payment of rent without a resort to the old technical proceedings at common law, and hence proof of payment made by the tenant within three days after the notice to quit is served constitutes a good bar to an action to enforce the forfeiture."

The South Dakota Court went on to point out that the three-day period within which the rent was required to be paid was much shorter than in most other jurisdictions, stating:

"But in Illinois and in Massachusetts, prior to 1880, and in Nebraska, the notice is a simple notice to quit, yet the courts in those states, in construing the statute, have held that the notice to quit is equivalent to a demand, and payment made or tendered within the time specified in the notice saves the forfeiture. (Citations omitted.) No court, as far as our researches have extended, has held that without a demand of rent from the tenant in some form, a forfeiture could be predicated upon a failure to pay the same. Such a law would be so manifestly unjust, and would lead to such serious consequences, that we cannot give to our statute such a construction, unless required to do so by language clearer and more pointed than that used in the law we are now considering.... A construction, however, that makes the service of a notice to quit a demand, thereby...