Ramsey County District Court File No. C1-04-6883.
A landlord with eminent domain authority does not, as a matter of law, breach the quiet enjoyment provision of a lease by initiating condemnation proceedings against its tenant.
The opinion of the court was delivered by: Minge, Judge
Considered and decided by Minge, Presiding Judge; Randall, Judge; and Collins, Judge.*fn1
In this consolidated appeal, appellants challenge the district court's grant of summary judgment on their breach-of-contract and damages claims arising out of a condemnation petition. Because respondent did not breach the lease by initiating condemnation proceedings and because the lease prohibits appellants from recovering a takings award, we affirm.
Appellants Ronald and Judith Rasmussen have operated a Tires Plus store under a series of leases at the same location in St. Anthony since the early 1980s. In July 1996, the Rasmussens entered into their current lease for this business property with Ste. Marie Company (Ste. Marie) as their landlord. The lease has a term of 15 years, with two options to extend the lease for additional terms of five years each. In 1997, respondent the Housing and Redevelopment Authority (HRA) for the City of St. Anthony, Minnesota, purchased land from Ste. Marie in order to establish a municipal liquor store. Because the Rasmussens' business was located next door to the proposed liquor store and Ste. Marie was willing to sell the entire larger parcel to HRA, HRA purchased the parcel containing the Rasmussens' store as well. Because the Rasmussens had a right of first refusal, they were notified of the sale and given an opportunity to buy their store location before HRA completed its purchase.
Six years later, the site of the Apache Plaza shopping center was the subject of a redevelopment project. Incident to that project, HRA agreed to acquire certain parcels of land, including the site of the Rasmussens' tire business, to use eminent domain if needed to accomplish this, and to transfer the parcels to Apache Redevelopment, LLC. Upon learning of HRA's commitment to acquire their leasehold and to condemn it, if necessary, the Rasmussens brought a claim for breach of contract against HRA in May 2004. The Rasmussens alleged that, by telling them that they needed to vacate their premises and threatening to condemn the premises, HRA breached the quiet enjoyment provision of the lease. That provision reads as follows:
Landlord hereby warrants that it and no other person or corporation has the right to lease the Premises. So long as Tenant shall perform each and every covenant to be performed by Tenant hereunder, Tenant shall have peaceful and quiet use and possession of the Premises without hindrance on the part of Landlord, and Landlord shall warrant and defend Tenant in such peaceful and quiet use and possession.
HRA subsequently brought a petition seeking to condemn the Rasmussens' leasehold. HRA argued that due to various terms of the lease dealing with condemnation, the Rasmussens had no compensable interest in the property. The lease defines condemnation as "(a) the exercise of any governmental power, whether by legal proceedings or otherwise, by a Condemnor, or (b) a voluntary sale or transfer by Landlord to any Condemnor, either under threat of condemnation or while legal proceedings for condemnation are pending." The lease describes the consequences of a total taking: "If all of the Premises shall be taken in Condemnation, except for a taking for temporary use, this Lease shall be terminated automatically as of the Date of Taking." The lease also provides for termination by either party in the event of substantial partial taking. Furthermore, the lease states that "[t]he Award for any taking shall be the sole property of Landlord." The lease defines "award" as "all compensation, sums, or anything of value awarded, paid or received on a total or partial condemnation." (However, the lease recognized the Rasmussens' right to retain payment for moving expenses, loss of stock, personal property and trade fixtures, and unamortized costs of improvements paid for by the tenant.)
In August 2004, the district court granted HRA's petition for condemnation. The parties brought cross-motions for summary judgment on the breach-of-contract action and cross-motions for partial summary judgment on the condemnation action. The district court granted HRA's motions to dismiss the breach-of-contract action and grant the condemnation. The district court reasoned that if the condemnation was a "total taking," the lease terminated by its terms. The district court further reasoned that even if it was not a total taking, it was still "a taking through condemnation proceedings" and that the Rasmussens waived their right to compensation except what they had been paid for moving expenses, personal property, and trade fixtures.
The parties stipulated that the district court's order for summary judgment resolved all of the issues in the matter and final judgment ...