Title: O'Brien v. Black

State: vermont

Issuer: Vermont Supreme Court

Document:

OBRIEN_V_BLACK.92-073; 162 Vt. 448; 648 A.2d 1374

[Opinion Filed April 8, 1994]

[Motion for Reargument Denied August 10, 1994]

 NOTICE:  This opinion is subject to motions for reargument under V.R.A.P.
 40 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.


                                 No. 92-073


 Donohoe O'Brien, Burlington                  Supreme Court
 Square Limited Partnership,
 d/b/a Burlington Square
                                              On Appeal from
      v.                                      Chittenden Superior Court


 William R. Black, Karen L. Black             January Term, 1994
 and Pickwick & Perkins, Ltd.


 Alden T. Bryan, J.

 Dennis R. Pearson and Craig Weatherly of Gravel and Shea, Burlington, for
    plaintiffs-appellants

 Paul D. Jarvis and Richard R. Goldsborough of Jarvis & Kaplan, Burlington,
     for defendants-appellees



 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


      JOHNSON, J.   Today, in affirming the judgment of the superior court,
 we hold that a commercial landlord has a duty to make reasonable efforts to
 mitigate its damages when its tenant abandons the leased property.  This
 duty arises as soon as the landlord has notice of the tenant's abandonment,
 even if the lease has not been formally terminated.
      Landlord, Burlington Square Mall, brought this action to recover rents
 and expenses under a lease after tenant, Pickwick & Perkins, Ltd., abandoned
 the leased premises before the scheduled expiration of the lease term.  The
 lease provided that, in the event of default by tenant, "Landlord may, at

 

 its option, give to Tenant a written notice of its intention to terminate
 this lease."  It further provided that "[a]cceptance of the surrender of
 this lease shall not be effective unless made in writing and signed by
 Landlord."
      The five-year lease was to end on November 1, 1991, but tenant
 abandoned its space in the Burlington Square Mall and ceased paying rent at
 the end of January 1990.  Shortly thereafter, landlord began searching for a
 replacement tenant.  Landlord also sent a notice of default, warning tenant
 that if tenant did not cure the default, landlord could exercise its option
 to terminate the lease.  Although tenant did not cure its default, landlord
 did not formally terminate the lease or otherwise seek to dispossess tenant
 from the premises until August 10, 1990, when it rented the space to a new
 tenant.  Landlord then brought this action seeking to charge Pickwick &
 Perkins rent for the intervening months between abandonment and reletting.
      Tenant defended the action by arguing that landlord's failure to make
 reasonable efforts to mitigate damages relieved tenant of any obligation to
 pay rent.  The dispute over mitigation centers around landlord's response to
 a prospective tenant, Vivien Ginsberg, in February 1990.  The trial court
 found that Ms. Ginsberg, another tenant in the Mall, had approached landlord
 about the possibility of expanding her business and relocating into the
 space vacated by tenant.  Landlord refused to discuss the possibility of
 renting this space with Ms. Ginsberg, telling her that the space had already
 been relet to another tenant.  This was not in fact the case.  Ultimately,
 landlord was successful in leasing to a new tenant that was part of a
 national chain at a substantial increase in rent.

 

      After a bench trial, the court entered judgment in favor of tenant.
 The court held that landlord had a duty to make reasonable efforts to miti-
 gate its damages upon abandonment by tenant, even though the lease had not
 been formally terminated.  The court then found that tenant had presented
 sufficient evidence to sustain its burden of proving that landlord failed to
 mitigate damages, reasoning that landlord's "blatant failure to even discuss
 with Ms. Ginsberg the possibility of renting the premises and [to] listen to
 her proposed terms was unreasonable."  The court concluded that, having
 failed to mitigate its damages when it had the opportunity to do so and
 choosing instead to hold out for a higher paying tenant, landlord "cannot
 recover rent for the waiting period" from tenant.
      Landlord makes two arguments on appeal: (1) that a commercial landlord
 does not have a duty to mitigate damages after the tenant abandons the
 leased premises but prior to the formal termination of the lease, and (2)
 assuming such a duty exists, the trial court's finding that landlord failed
 to mitigate its damages was clearly erroneous.
                                      I.
      Landlord's first argues that, when a lessee abandons the leased
 premises, a commercial lessor does not have an affirmative duty to mitigate
 damages until the lease is formally terminated.  Absent formal termination,
 which is within its control, landlord argues it can allow its damages to
 accrue until the end of the lease period.  This is a question of first

 

 impression in Vermont,(FN1) though many other jurisdictions have addressed this
 issue and are divided over it.
      Those jurisdictions that follow the traditional rule that a landlord
 has no duty to mitigate damages upon a tenant's abandonment "proceed[] from
 the theory that a lease creates an estate in land and the lessee thus
 becomes the owner of the premises for the term of the lease.  Gruman [v.
 Investors Diversified Servs., 78 N.W.2d 377, 381 (Minn. 1956)].  Under this
 theory the lessor need not concern himself with the lessee's abandonment of
 the lessee's own property."  Mar-Son, Inc. v. Terwaho Enters., Inc.,