VND, LLC v. Leevers Foods, Inc., 20030091.

Citation672 N.W.2d 445,2003 ND 198
Decision Date19 December 2003
Docket NumberNo. 20030091.,20030091.
PartiesVND, LLC, a North, Dakota Limited Liability Company, Plaintiff and Appellant, v. LEEVERS FOODS, INC. d/b/a Leevers County Market, a North Dakota Business Corporation, Defendant and Appellee.
CourtUnited States State Supreme Court of North Dakota

Mark G. Schneider, Schneider, Schneider & Phillips, Fargo, for plaintiff and appellant.

Daniel M. Traynor (argued) and Thomas E. Rutten (appeared), Traynor, Rutten & Traynor, P.C., Devils Lake, for defendant and appellee.

SANDSTROM, Justice.

[¶ 1] VND is appealing a Southeast Judicial District Court judgment denying summary eviction of Leevers Foods, Inc., under N.D.C.C. ch. 33-06. After a hearing on the motion for eviction, the district court found there had been no material breach of the written lease by Leevers, as required by N.D.C.C. § 33-06-01(8), found Leevers was entitled to equitable relief from the termination of the lease because of its substantial investment in the leased premises, and denied summary eviction. VND argues the district court erred in allowing Leevers to present counterclaims and affirmative defenses to its summary eviction claim. VND also argues that Leevers admitted it breached the lease and that these breaches were sufficient for summary eviction in that they were material. Finally, VND argues that Leevers' substantial investment in the leased property does not entitle it to equitable relief from the termination of the lease. Because this case is not suitable for summary eviction, we affirm.

I

[¶ 2] Leevers is a North Dakota corporation that operates a supermarket in Jamestown known as Leevers County Market. VND is a limited liability company and owns a shopping mall in Jamestown known as Park Plaza Mall. Leevers entered into a lease on November 27, 1981, with the former owner of the Park Plaza Mall, Paul J. Bjornson. On October 21, 1997, VND purchased the Park Plaza Mall and assumed the lease.

[¶ 3] The lease provides for monthly rental payments of $10,417.00. Leevers leases approximately 57.22 percent of the space available for tenants in Park Plaza Mall and pays 57.22 percent of the common area maintenance charges for the Park Plaza Mall in addition to its monthly rent. Leevers claims it has paid approximately one million dollars in monthly rent and maintenance charges since October 21, 1997. Leevers also contends it made long-term capital investments estimated at 3.9 million dollars. These investments include fixtures and other leasehold improvements of 1.8 million dollars, including $142,000 paid for improvements to the Park Plaza Mall parking lot. VND claims that maintenance charges of over $20,000 are unpaid, owing, and continuing to accrue.

[¶ 4] Leevers claims it has not paid its maintenance charges because of past overcharges. Leevers investigated and found it was likely that the common area meters supplied utilities for other tenants in the Park Plaza Mall. On January 16, 2001, Leevers notified VND of this problem and gave VND an opportunity to cure. On January 29, 2001, VND asked Leevers to give proof of its allegations. On March 25, 2002, Leevers provided proof of $20,597.00 in overpaid utilities and stated it would deduct overpayments from future bills for the maintenance charges. On March 29, 2002, Leevers claims VND gave it an accounting, providing credit to Leevers for the overpayment of maintenance utilities from October of 1997 forward; Leevers claims VND acknowledged a $17,580.19 credit. VND denies acknowledging a credit. VND informed Leevers that any deductions of maintenance overpayments by Leevers would be treated as a separate default of the lease. Leevers began applying the alleged credit to its monthly maintenance statements. Leevers did not send a notice of default to VND with regard to the maintenance charges.

[¶ 5] Leevers claims it has paid for a pro-rata share of all-risks insurance on the building in addition to maintaining its own liability insurance under the lease. Leevers notified VND that it was no longer going to pay for 57.22 percent of VND's cost of purchasing liability insurance, claiming the language of the lease did not require this payment. Prior to the hearing, Leevers agreed to resume paying for this insurance and to reimburse VND for the pro-rata cost for those months when the insurance was not paid.

[¶ 6] On August 9, 2002, VND gave Leevers written notice of default, alleging Leevers was in default for failing to pay common area maintenance charges, for unilateral setoff of rents due, and for failing to pay its pro-rata share of liability insurance. On September 5, 2002, Leevers responded to the notice of default, stating it was applying an acknowledged credit due in maintenance charges and denying it owed a pro-rata share of VND's liability insurance under the lease. On September 10, 2002, notice of intention to evict was served upon Leevers; no demand for damages or for rents and profits was made with the notice. Leevers did not vacate the premises. VND brought a suit against Leevers for summary eviction. A hearing on the motion for eviction was held on October 24, 2002.

[¶ 7] The trial court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27-05-06. The appeal was timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, §§ 2 and 6, and N.D.C.C. §§ 28-27-01 and 28-27-02.

II

[¶ 8] VND argues Leevers was precluded from asserting any counterclaims or affirmative defenses in this summary eviction action because it demonstrated Leevers failed to pay rent and otherwise materially breached the lease.

[¶ 9] "`The interpretation of a statute is fully reviewable on appeal.'" State v. Norman, 2003 ND 66, ¶ 14, 660 N.W.2d 549 (quoting Overboe v. Farm Credit Servs., 2001 ND 58, ¶ 9, 623 N.W.2d 372 (citation omitted)). "`Although courts may resort to extrinsic aids to interpret a statute if it is ambiguous, we look first to the statutory language, and if the language is clear and unambiguous, the legislative intent is presumed clear from the face of the statute.'" Id.

[¶ 10] Section 33-06-04, N.D.C.C., provides:

An action of eviction cannot be brought in a district court in connection with any other action, except for rents and profits accrued or for damages arising by reason of the defendant's possession. No counterclaim can be interposed in such action, except as a setoff to a demand made for damages or for rents and profits.

[¶ 11] "The purpose of the no-counterclaim provision in the eviction statutes `was to get a speedy determination of possession without bringing in any extraneous matters.'" Anderson v. Heinze, 2002 ND 60, ¶ 11, 643 N.W.2d 24 (quoting Nomland Motor Co. v. Alger, 77 N.D. 29, 31, 39 N.W.2d 899, 900 (1949)). See also South Forks Shopping Center v. Dastmalchi, 446 N.W.2d 440, 443 (N.D.1989)

.

[¶ 12] "In an eviction action, the defendant may show the character of the possessory rights claimed by the parties." Anderson, 2002 ND 60, ¶ 11, 643 N.W.2d 24 (citation omitted). However, "`the right to the possession of the real estate is the only fact that can be rightfully litigated unless damages or rent is claimed.'" Id. (quoting Vidger v. Nolin, 10 N.D. 353, 354, 87 N.W. 593, 593 Syllabus ¶ 3 (1901)).

[¶ 13] The right to possession in this case depends on whether or not Leevers failed to pay rent and whether or not there were any material breaches. The evidence regarding the strained relationship is important in determining whether a material breach has occurred. See generally Restatement (Second) of Contracts § 241 (1977). Further, because whether rent is paid goes to Leevers' right of possession, affirmative defenses and counterclaims regarding the payment of rents must be allowed. We conclude the district court did not misapply the law in this case by allowing evidence of the strained relations between Leevers and VND and by allowing Leevers to present evidence on whether rent was paid.

III

[¶ 14] VND argues the trial court erred in failing to summarily evict, because Leevers admitted it failed to pay $20,000 in past due "additional rents" and over $10,000 in past due pro-rata portions of the landlord's liability insurance.

A

[¶ 15] Whether failure to pay $20,000 in past due "additional rents" is sufficient to compel summary eviction depends on whether the "additional rents" are considered rents for the purposes of N.D.C.C. § 33-06-01(4).

[¶ 16] Section 33-06-01, N.D.C.C., provides the grounds for maintaining a summary eviction action. Section 33-06-01(4) provides that an action of eviction to recover the possession of real estate is maintainable in the proper district court when a lessee fails to pay rent for three days after the rent becomes due.

[¶ 17] Section three, additional rent, of the lease agreement provides:

Lessee agrees to pay its pro-rata share of mall maintenance and cleaning, mall lighting, mall landscaping, mall heat and air conditioning, and parking lot repair and maintenance. Such pro-rata share shall be made on the basis of the square feet of the floor area of the building which is a part of the demised premises as related to the total [leaseable] square footage of the floor area in the Shopping Center.

[¶ 18] Whether "additional rents" are considered rents for summary eviction purposes is discussed in Rector, Church Wardens, Vestrymen v. Chung King House of Metal, Inc., 193 Misc.2d 44, 747 N.Y.S.2d 292 (N.Y.CityCiv.Ct.2002). This case deals with a summary nonpayment proceeding under New York Consolidated Law Service, Real Property Actions and Proceedings Law § 711, summary proceedings to recover possession of real property. The purpose of the New York statute is similar to the purpose of the North Dakota statute dealing with summary eviction. N.D.C.C. § 33-06-01. The purpose of each statute is to provide a landlord with an inexpensive, expeditious, and simple means to obtain possession of leased premises for nonpayment of...

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