Three Aces Props. LLC v. United Rentals (N. Am.), Inc.

• Decision Date: 17 December 2020
• Docket Number: No. 20200032,20200032
• Parties: THREE ACES PROPERTIES LLC, successor in interest to Dresser Oil Tool, Inc., Plaintiff, Appellant, and Cross-Appellee v. UNITED RENTALS (NORTH AMERICA), INC., successor in interest to RSC Equipment Rental, Inc., Defendant, Appellee, and Cross-Appellant
• Court: North Dakota Supreme Court

952 N.W.2d 64

THREE ACES PROPERTIES LLC, successor in interest to Dresser Oil Tool, Inc., Plaintiff, Appellant, and Cross-Appellee

v.UNITED RENTALS (NORTH AMERICA), INC., successor in interest to RSC Equipment Rental, Inc., Defendant, Appellee, and Cross-Appellant

No. 20200032

Supreme Court of North Dakota.

FILED DECEMBER 17, 2020

Lisa M. Six (argued) and Garth H. Sjue (appeared), Williston, ND, for plaintiff, appellant and cross-appellee.

Jeffrey M. Markowitz (argued), Corey S. Bronczyk (appeared), Stephen M. Warner and Jonathon M. Zenter (on brief), Minneapolis, MN, for defendant, appellee and cross-appellant.

Crothers, Justice.

[¶1] Three Aces Properties LLC appeals and United Rentals (North America), Inc., cross-appeals from a judgment and orders denying their motions to amend the judgment. Three Aces argues the district court erred by failing to award it damages for its breach of contract claims. United Rentals argues the court erred in dismissing its breach of contract and constructive eviction claim. We affirm.

I

[¶2] On March 3, 2010, Dresser Oil Tools, Inc. and RSC Equipment Rental, Inc. entered into a lease for commercial real property in Williston, North Dakota. Three Aces is Dresser Oil Tools’ successor in interest, and United Rentals is RSC Equipment Rental's successor in interest. In 2013, United Rentals exercised an option to extend the lease until March 31, 2014. In September 2013, United Rentals vacated the property. In November 2013, Three Aces executed an agreement to lease the property to Kum & Go.

[¶3] In 2017, Three Aces sued United Rentals for breach of contract and waste. Three Aces claimed United Rentals breached the lease by failing to pay rent after it vacated the property, failing to maintain and repair the parking area, and failing to maintain and repair the premises. Three Aces alleged United Rentals’ use of the premises resulted in destruction of the asphalt parking area and damages to the building and other areas of the property. Three Aces claimed United Rentals attempted to repair the parking area by replacing the asphalt paving with scoria, the City of Williston notified the parties that replacement of the asphalt with scoria violated zoning ordinances, and the parties disagreed about which party had an obligation to repair the parking area.

[¶4] United Rentals answered and counterclaimed for breach of contract. United Rentals alleged Three Aces had an obligation under the lease to ensure United Rentals could legally occupy the property, Three Aces refused to repair the parking area as the City directed, and United Rentals was forced to vacate the premises as a result of Three Aces’ refusal to comply with the City's directive to repair the parking area.

[¶5] Both parties moved for summary judgment. United Rentals argued there were no genuine issues of material fact, it was entitled to judgment as a matter of law on all of Three Aces’ claims, and there was no evidence of any damages to Three Aces for its breach of contract claims. United Rentals also argued it lawfully terminated the lease and vacated the property when it learned it could not legally occupy the property, and it was entitled to summary judgment on its breach of contract claim because Three Aces constructively evicted it from the property by failing to repair the parking area to comply with the City's demands. Three Aces argued United Rentals was obligated to maintain the parking area under the lease, United Rentals breached the lease by destroying the asphalt on the parking area and failing to repair the area, and United Rentals breached the lease by damaging and failing to repair the premises before surrendering it. Three Aces also asserted United Rentals failed to pay monthly rent of $6,898 for the last six months of the term of the lease, and United Rentals’ claim failed as a matter of law because Three Aces did not breach any contractual duty.

[¶6] The district court concluded there were no genuine issues of material fact and decided all claims on summary judgment. The court determined United Rentals breached the lease by failing to pay rent for the final six months. The court also concluded United Rentals breached the lease by failing to leave the parking area in the same or similar condition as when the lease began. The court denied United Rentals’ motion for summary judgment as to its breach of contract and constructive eviction claim, but granted summary judgment on its damages argument. The court determined Three Aces was not entitled to damages related to the parking area because there was no diminution of value in the property as a result of the breach and any damages were mitigated by redevelopment of the property. The court concluded Three Aces was only entitled to damages for its breach of contract claim related to the unpaid rent. Judgment was entered in favor of Three Aces for $56,097.18.

[¶7] Both parties moved to amend the judgment under N.D.R.Civ.P. 52(b) and 59(j). The district court denied both motions.

II

[¶8] The standard for reviewing a district court's decision on a motion for summary judgment is well established:

"Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was appropriately granted, we must view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences which can reasonably be drawn from the record. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record."

Feltman v. Gaustad , 2020 ND 89, ¶ 7, 942 N.W.2d 844 (quoting Pennington v. Cont'l Res., Inc. , 2019 ND 228, ¶ 6, 932 N.W.2d 897 ).

III

[¶9] Three Aces argues the district court erred by granting summary judgment and failing to allow a trial on damages related to United Rentals’ failure to repair the premises. Three Aces contends the court erred in determining as a matter of law that the appropriate measure of damages was the diminution in value of the property and that any damages Three Aces incurred were mitigated by redevelopment of the property.

[¶10] The elements for a breach of contract claim are: (1) the existence of a contract; (2) breach of the contract; and (3) damages which flow from the breach. Swenson v. Mahlum , 2019 ND 144, ¶ 19, 927 N.W.2d 850. The party asserting a breach of contract must prove all of the elements. Id. The nonperformance of a contractual duty when it is due is a breach of the contract. Id. The interpretation of a contract to determine its legal effect is a question of law, which is fully reviewable. Id. at ¶ 20. General rules of contract interpretation apply to leases. Id. The determination of the amount of damages caused by a breach of contract is a finding of fact. Peterbilt of Fargo, Inc. v. Red River Trucking, LLC , 2015 ND 140, ¶ 16, 864 N.W.2d 276.

[¶11] The lease included a maintenance and repair provision, stating:

"Licensee shall maintain and repair the Premises, including without limitation, maintaining and repairing (i) all interior walls, storefronts, floors, ceilings, interior and exterior doors, interior and exterior windows, and fixtures as well as damage caused by Licensee, its agents, employees or invitees, and (ii) the exposed electrical, plumbing, and sewage system. In addition, Licensee shall maintain the heating, ventilating, and air conditioning system and other related equipment which is affixed to the Premises, including the cost of routine service calls on such equipment. Licensee shall maintain the parking area and fence, such parking area and fence shall be surrendered in a condition similar to that existing at the time Licensee took occupancy, subject to wear and tear caused by the ordinary operation of Licensee's business on the Premises. Regular, periodic maintenance of the lawns, landscaping and shrubbery shall be the responsibility of Licensee."

[¶12] The district court determined the undisputed facts established United Rentals had a duty to maintain the parking area and to surrender the parking area in a condition similar to that which existed when the lease began. The court concluded Three Aces was not obligated to pave the parking area with a hard surface after the commencement of the lease, United Rentals attempted to maintain the parking area by covering it with scoria which was not "similar" to an asphalt paved parking area, and United Rentals failed to leave the parking area in a condition similar to the condition that existed when the lease began. The court concluded United Rentals breached the lease by failing to repair the parking area.

[¶13] Although the district court concluded United Rentals breached the lease by failing to repair the parking area, it also concluded Three Aces was not entitled to recover damages for the breach. The court stated Three Aces had a duty to minimize its damages and either the cost to repair or the diminution of value of the property would be an appropriate measure of damages. The court determined the undisputed evidence established Three Aces did not lease the property during the remaining term after United Rentals vacated the property, but Three Aces entered into negotiations with Kum & Go to redevelop the property as a convenience store, and it leased the property to Kum & Go in an agreement dated November 12, 2013. The court concluded...