NO. 94-388

IN THE SUPREME COURT OF THE STATE OF MONTANA

1995

JEFFREY KREGER and

LEA ANN KREGER,

Plaintiffs and Respondents,

-vDANIEL FRANCIS and

CHRISTINA L. FRANCIS,

Defendants and Appellants.

APPEAL FROM: District Court of the Eighth Judicial District,

In and for the County of Cascade,

The Honorable Joel Roth, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

Robert M. Kampfer, Great Falls, Montana

For Respondents:

Joan E. Cook, Miller & Cook, Great Falls, Montana

Filed:

Submitted on Briefs: March 23, 1995

Decided: June 15, 1995
Justice Fred J. Weber delivered the Opinion of the Court

This is an appeal from a decision of the Eighth Judicial

District Court, Cascade County granting judgment in favor of

Jeffrey Kreger and Lea Ann Kreger for reasonable attorney's fees

and costs incurred. We reverse.

We restate the issue on appeal:

Did the District Court err when it ruled Jeffrey and Lea Ann

Kreger did not waive their rights to terminate a lease for Daniel

and Christina Francis' breach of the terms of the lease when

Jeffrey and Lea Ann Kreger accepted full payment of rent?

On August 1, 1993, appellants, Daniel Francis and Christina

Francis (Renters) entered into a written rental agreement with

respondents, Jeffrey Kreger and Lea Ann Kreger (Landlords). The

lease was for a term of six months and included the following

provision:

9 . We agree to obtain renters insurance for all property

leased to us before moving into premises.

Renters applied for and obtained a policy of renters insurance

on their belongings at the rented address. The policy of renters

insurance was subsequently cancelled by the insurance company,

effective October 1, 1993, because the Renters had a bad credit

rating. Renters were unable to obtain further coverage.

On October 1, 1993, Landlords sent to Renters a 30 day Notice

to Quit and Notice Terminating Rental Agreement which referenced

the fact Renters were unable to obtain renters insurance as

required by Section 9 of the Lease Agreement. The Landlords sent

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another notice to Renters on October 16, 1993, in the event the

prior notice was premature given that Renters had until the end of

the day, October 1, 1993, before their coverage terminated.

Renters refused to vacate the premises at the end of the 30 day

period. So, Landlords filed a cause of action for possession in

the Justice Court.

Landlords accepted $600.00 on or about the first day of each

month the Renters remained in possession -- October, November and

December of 1993. Renters vacated the premises at the end of

December 1993, after the first trial in Justice Court.

The Justice Court ruled in favor of the Landlords and awarded

costs and attorney's fees in the amount of $452.50 to the

Landlords. Renters appealed to District Court and a de nova bench

trial was conducted on June 14, 1994. On June 28, 1994, the

District Court entered judgment for Landlords and against Renters

concluding acceptance of the monthly rent from Renters by Landlords

did not waive Landlords' right to terminate the Rental Agreement

for the Renters' failure to obtain renters insurance. The District

Court awarded costs and attorney's fees to Landlords.

From the District Court's June 28, 1994 decision, Renters

appeal.

Did the District Court err when it ruled Jeffrey and Lea Ann

Kreger did not waive their rights to terminate a lease for Daniel

and Christina Francis' breach of the terms of the lease when

Jeffrey and Lea Ann Kreger accepted full payment of rent?

The District Court found that the rent was paid current as of

3
the date the Renters vacated the premises. The court concluded the

following as a matter of law:

3. Acceptance of the monthly rent from Tenants [Renters]

by the Landlord did not waive their right to terminate

the Rental Agreement for the Tenants' [Renters'] failure

to obtain Renters Insurance. Acceptance of the payment

of rent is a waiver of a claimed breach of a Rental

Agreement, only if that claimed breach is the nonpayment

of rent. Section 70-24-423, MCA.

The court's interpretation of § 70-24-423, MCA, is at issue.

Section 70-24-423, MCA states the following:

Waiver of landlord's right to terminate for breach.

Acceptance by the landlord of full payment of rent due

with knowledge of a tenant's default or acceptance by the

landlord of a tenant's performance that varies from the

terms of the rental agreement constitutes a waiver of the

landlord's right to terminate the rental agreement for

that breach unless otherwise agreed after the breach has

occurred. The acceptance of partial payment of rent due

does not constitute a waiver of any right.

Renters point out Landlords accepted full, current monthly

rental payments from Renters for three months after the expiration

of the renters insurance policy. Renters allege there was never an

arrearage of rent and there was never any understanding other than

that the payments were made for the current month's rent. Renters

argue the plain language of 5 70-24-423, MCA, provides acceptance

of rent constitutes a waiver of any breach known to the landlord.

Here, Landlords knew Renters' breached Section 9 of the lease prior

to accepting rent. Therefore, Landlords waived this breach when

they accepted full payment of rent and, thus, had no basis to evict

Renters.

Renters conclude the District Court erred in awarding costs

and fees to Landlords because Landlords had no grounds to bring an

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eviction suit against Renters. Renters request this Court reverse

the District Court's judgment and award costs and fees to Renters.

Landlords argue they did not waive any breach by accepting the

rent due and the District Court came to the correct conclusion of

law. At no time did they agree the provision of renters insurance

was waived. Landlords contend all of their conduct indicates they

did not accept the varied performance of the Renters and that they

intended to treat the varied performance as a default.

Landlords argue, according to Renters' analysis, all landlords

must refuse payment of rent or else they forgo remedies for a

breach. Additionally, Landlords contend that a proffered payment

of rent must be accepted by the landlord under the landlord's duty

to mitigate damages.

Our standard of review of the District Court's conclusion of

law is to determine if the District Court's interpretation of the

law is correct. Steer, Inc. v. Department of Revenue (1990), 245

Mont. 470, 474-475, 803 P.Zd 601, 603-604.

We have held, "where the language of the statute is plain,

unambiguous, direct, and certain, the statute speaks for itself."

State ex rel. Palmer v. Hart (1982), 201 Mont. 526, 530, 655 P.2d

965, 967. The language of § 70-24-423, MCA, is clear --

"[alcceptance by the landlord of full payment of rent due with

knowledge of a tenant's default . . . constitutes a waiver of the

landlord's right to terminate the rental agreement for that breach.

. 'I (Emphasis added.) We cannot insert limiting language where

none exists. Section l-2-101, MCA; Palmer, 655 P.2d at 969.

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Landlords accepted the rent on the first day of the month to

which it would be applied. We hold that, for each month where

Landlords accepted full rent, Landlords waived their right to

terminate the lease for failure to obtain renters insurance.

The District Court's interpretation of 5 70-24-423, MCA, was

incorrect. We conclude the District Court erred when it ruled

Landlords did not waive their rights to terminate a lease for

Renters' breach of its terms when Landlords accepted full payment

of rent.

Renters have requested costs and attorney's fees be awarded to

them. Attorney's fees are awarded by statute or by contract.

Joseph Russell Realty Co. v. Kenneally (19801, 185 Mont. 496, 505,

605 P.Zd 1107, 1112. Neither the Lease/Rental Agreement nor

relevant statute grants an award of attorney's fees to Renters.

Therefore, none will be awarded here.

The judgment awarding attorney's fees and costs to Landlords

is reversed.

We Concur:

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Justice Terry N. Trieweiler dissenting.

I dissent from the majority opinion. I would affirm the

District Court's conclusion that:

Acceptance of the payment of rent is a waiver of a

claimed breach of a Rental Agreement, only if that

claimed breach is the nonpayment of rent. Section

70-24-423, MCA.

To conclude, as the majority has, that acceptance of rent

waives some breach other than nonpayment of rent, will lead to

absurd results, is contrary to other provisions in the Landlord and

Tenant Act, and is obviously contrary to the intention of the

Legislature.

The majority opinion refers to 5 l-Z-101, MCA, selectively.

That section also provides that several provisions of a legislative

act are to be construed so as to give effect to all. Furthermore,

§ l-Z-102, MCA, provides in part that "[iln the construction of a

statute, the intention of the legislature is to be pursued if

possible." The majority opinion satisfies neither of these

statutory directives.

In construing § 70-24-423, MCA, we must look at all of its

terms and not isolate any particular phrase. Only by doing so can

the obvious purpose of the statute be accomplished and absurd

results avoided.

When § 70-24-423, MCA, is examined in its entirety, and in the

context of the entire Landlord and Tenant Act, it is apparent that

the Legislature intended that a landlord's acceptance of

performance by a tenant in some manner that deviated from the

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literal requirements of the rental agreement would constitute a

waiver of the literal requirements. For example, if late payments

are accepted, then late payments cannot provide the basis for

termination of the contract. However, precluding a landlord from

accepting rental payments as a condition to enforcing unrelated

terms of the contract, ignores that statutory requirement found at

5 70-24-401(l), MCA, that a landlord has "a duty to mitigate

damages." It has the effect of punishing a landlord twice where a

tenant breaches a rental agreement in some manner other than by

nonpayment of rent.

For example, where rental property is repeatedly damaged by a

tenant, contrary to a contractual provision that it be maintained

in good condition, a landlord would have to forego future rental

payments during the potentially lengthy time it may take to evict

the tenant for property damage. Not only does the landlord in that

situation sustain property damage, but also the income which may be

necessary to satisfy the landlord's own financial obligations with

regard to the property. Surely, this was never the Legislature's

intention. Obviously this result is contrary to the statutory

requirement that a landlord mitigate his or her damage. For these

reasons, I would affirm the District Court's conclusion that

acceptance by the landlord of payment of rent waives a tenant's

default only when that default is based on failure to pay rent.

stice

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Chief Justice J. A. Turnage and Justice William E. Hunt, Sr., join

in the foregoing dissenting opinion.

Justice

10
Jmie 1.5, 1995

CERTIFICATE OF SERVICE

I hereby certify that the following certified order was sent by United States ma

to the following named:

Robert M. Kampfer

Attorney at Law

P.O. Box 1946

Great Falls, MT 59403-1946

Joan E. Cook, Esq.

Miller & Cook

600 Central Plaza, Ste. 300

Great Falls, MT 59401

ED SMITH

CLERK OF THE SUF’REME

STATE OF MONTANA

il, prepaid,

COURT