Gruman v. Investors Diversified Services

• Decision Date: 22 June 1956
• Docket Number: No. 36798,36798
• Citation: 247 Minn. 502,78 N.W.2d 377
• Parties: Mary P. GRUMAN et al., Respondents, v. INVESTORS DIVERSIFIED SERVICES, Inc., Appellant.
• Court: Minnesota Supreme Court

Page 377

78 N.W.2d 377

247 Minn. 502

Mary P. GRUMAN et al., Respondents, v. INVESTORS DIVERSIFIED SERVICES, Inc., Appellant.

No. 36798.

Supreme Court of Minnesota.

June 22, 1956.

Syllabus by the Court.

1. Majority rule is that lease containing clause to effect that lessee may not assign or sublet leased premises without written consent of lessor imposes no obligation upon lessor to accept suitable tenant submitted by lessee, or to otherwise mitigate damages in event of lessee's abandonment of leased premises.

2. Reasons supporting majority rule expressed.

3. This court has expressed itself as in accord with principles of majority rule, although on facts dissimilar to those here involved.

4. Where by some act or statement lessor has indicated his acceptance of lessee's abandonment of leased premises and thus in effect terminated lease, his remedy is for damages resulting from breach with attendant obligation to use reasonable effort to mitigate them subsequent to breach.

5. A number of writers have advanced theory that more just viewpoint than that expressed in majority rule would require that same principles that are applied in other breach of contract cases be applied in cases involving abandonment of leased premises by a lessee.

6. This court adopts viewpoint in accordance with majority rule. Applied in instant case, it must follow that plaintiffs here were not under obligation to accept a subtenant proposed by defendant or to otherwise mitigate damages after defendant abandoned the leased premises.

Nichols, Mullin, Farnand & Lee, and George C. Mastor, Minneapolis, for appellant.

Kaplan, Edelman & Kaplan, Minneapolis, Hyman Edelman, Sidney J. Kaplan, Sheldon Kaplan, Minneapolis, of counsel, for respondents.

THOMAS GALLAGHER, Justice.

Action to recover rent alleged to be due on a written lease. Upon motion for summary judgment, the court ordered judgment for plaintiffs in the sum of $20,656.63. This is an appeal from the judgment entered pursuant thereto. It is conceded that the amount found due on the lease is correct if plaintiffs were not under obligation to accept defendant's proposed subtenant who was ready, able, and willing to rent the premises for a part of the unexpired portion of the lease. The latter is the issue for determination here.

The facts are as follows: On June 8, 1948, plaintiffs' predecessor in title entered into the lease with defendant. Thereunder, for a term of seven years and one month from September 1, 1948, or until September 30, 1955, defendant rented a portion of the ground floor and basement of the premises known as the WCCO Building at 629 Second Avenue South, Minneapolis, at a total rental of $176,375, payable $2,075 monthly on or before the tenth day of each month. Contained in the lease was a covenant that the lessee agreed not to '* * * assign this lease nor underlet said premises, or any part thereof, without the consent of Lessor in writing.' Also contained therein was the customary reentry clause providing that, in case the lessee defaulted in completing any of the terms or conditions of the lease, the lessors might reenter the leased premises and at their option annul and cancel the lease; and that in case of any such termination, the lessee would indemnify the lessors against all loss of rents which might be incurred during the residue of the term of the lease.

Defendant took possession of the premises September 1, 1948, and thereafter all rentals required under the lease up to and including the rental for the month of July 1954 were paid by it. On or about July 1, 1954, it advised plaintiffs in writing that it would vacate the leased premises prior to August 1, 1954; that it would immediately commence looking for a desirable subtenant therefor; and that plaintiffs should likewise look for such a subtenant. On July 7, 1954, defendant submitted a proposed lease whereunder the premises would be rented to the postmaster general of the United States for use as a regional operations office for a period of 11 months from August 1, 1954, at a monthly rental of $1,795.50. For the purposes of the motion for summary judgment, it was agreed that the subtenant thus proposed was ready, able, and willing to assume the obligations of the lease to the extent described and was otherwise a suitable subtenant therefor.

On July 12, 1954, plaintiffs advised defendant that they would not consent to the proposed sublease and would not permit the premises to be subleased by anyone for any part of the unexpired portion of the lease but would require that defendant pay the full rental due each month thereon. As an alternative they proposed that defendant pay them $20,000 for a release covering all its obligations under the lease. This was rejected by defendant. Thereafter, in July 1954, defendant vacated the premises and subsequently each month until the lease expired tendered to plaintiffs as rental a sum equal to the difference in the amount due under the lease and the amount the postmaster general would have paid had the sublease been accepted by plaintiffs. Such tenders were rejected by plaintiffs.

Subsequently, this action was instituted. In its answer defendant claimed an offset in the amount claimed due for the unexpired term of the lease equal to the rental that would have been paid under the sublease by the postmaster general. Plaintiffs thereupon moved for summary judgment. As indicated above, it was then stipulated that the postmaster general of the United States was in all respects a highly satisfactory, desirable, and suitable subtenant, plaintiffs' sole contention being that, under the provision of the lease above quoted, they were not obligated to accept Any subtenant Suitable or otherwise and might arbitrarily refuse to sublease to anyone proposed by the lessee. It was also agreed for the purpose of this motion that plaintiffs had at no time consented to defendant's removal from, or surrender of, the premises and that they had at no time consented to any assignment of sublease thereof or accepted defendant's forfeiture thereof so as to terminate its liability thereon.

In computing the amount due for the unexpired portion of the lease, defendant was credited with an amount subsequently paid by a subtenant, the Reynolds Company, under a sublease with plaintiffs, it being stipulated that such sublease would in no way affect the rights of the parties in the instant litigation except by way of a reduction in the amount claimed due for the unexpired term equal to the amount paid by such subtenant during that period.

1. The only issue presented for determination is whether under the lease clause above quoted plaintiffs could arbitrarily refuse to accept the suitable subtenant proffered by defendant. Examination of our decisions indicates that we have had no prior case involving a similar fact situation. In foreign jurisdictions, where the question has been presented, a majority of the courts have held that in a lease such as this the lessor does not have the duty of mitigating damages; may arbitrarily refuse to accept a subtenant suitable and otherwise responsible; and may recover from the lessee the full rentals due under the lease as and when they become due. Friedman v. Thomas J. Fisher & Co., Inc., D.C.Mun.App., 88 A.2d 321; Rice v. Dudley, 65 Ala. 68; Browne v. Dugan, 189 Ark. 551, 74 S.W.2d 640; Strei v. Brooks, 95 Cal.App. 589, 273 P. 145; Boardman Realty Co. v. Carlin, 82 Conn. 413, 74 A. 682; Manley v. Kellar, 8 Terry 511, 47 Del. 511, 94 A.2d 219; Williams v. Aeroland Oil Co., 155 Fla. 114, 20 So.2d 346; Hirsch v. Home Appliances, Inc., 242 Ill.App. 418; Patterson v. Emerich, 21 Ind.App. 614, 52 N.E. 1012; Jordon v. Nickell, Ky., 253 S.W.2d 237; Lirette v. Sharp, La.App., 44 So.2d 221; Enoch C. Richards Co. v. Libby, 136 Me. 376, 10 A.2d 609, 126 A.L.R. 1215; Fifty Associates v. Berger Dry Goods Co., Inc., 275 Mass. 509, 176 N.E. 643; Jennings v. First Nat. Bank, 225 Mo.App. 232, 30 S.W.2d 1049; Merrill v. Willis, 51 Neb. 162, 70 N.W. 914; Heckel v. Griese, 171 A. 148, 12 N.J.Misc. 211; Zucker v. Dehm, 128 N.J.L. 435, 26 A.2d 564; Sancourt Realty Corp. v. Dowling, 220 App.Div. 660, 222 N.Y.S. 288; Underhill v. Collins, 132 N.Y. 268, 30 N.E. 576; White v. Smith, 8 Ohio App. 368; Rucker v. Mason, 61 Okl. 270, 161 P. 195; Higgins v. Street, 19 Okl. 45, 92 P. 153, 13 L.R.A.,N.S., 398; Meagher v. Eilers Music House, 84 Or. 33, 164 P. 373; Milling v. Becker, 96 Pa. 182; Silbert v. Keton, Tex.Civ.App., 29 S.W.2d 824; 1 Tiffany, Landlord and Tenant, § 182, p. 1170; 1 American Law of Property, § 3.99, p. 392; 2 Underhill, Landlord and Tenant, § 713, p. 1214.

2. The reasons expressed in support of this rule are that, since the lessor has exercised a personal choice in the selection of a tenant for a definite term and has expressly provided that no substitute shall be acceptable without his written consent, no obligation rests upon him to look to anyone but the lessee for his rent, Stern v. Thayer, 56 Minn. 93, 57 N.W. 329; White v. Huber Drug Co., 190 Mich. 212, 157 N.W. 60; that a lease is a conveyance of an interest in real property and, when a lessor has delivered the premises to his lessee, the latter is bound to him by privity of estate as well as by privity of contract, Davidson v. Minnesota Loan & Trust Co., 158 Minn. 411, 197 N.W. 833, 32 A.L.R. 1418; Cf. W. C. Hines Co. v. Angell, 188 Minn. 387, 247 N.W. 387; that a lessor's right to reenter the premises upon lessee's default or abandonment thereof is at the lessor's option and not the lessee's, Kulawitz v. Pacific Woodenware & Paper Co., 25 Cal.2d 664, 155 P.2d 24; Rau v. Baker, 118 Ill.App. 150;...