Opinion ID: 1407850
Heading Depth: 3
Heading Rank: 3

Heading: Landlords May Sue for Damages Under Breach of Contract Theory.

Text: In the alternative, Tenants claim that Landlords cannot have full possession of the premises, collect future rent, and simultaneously preclude Tenants from occupying the premises for the remainder of the lease term. Landlords, however, seek contract damages, not rent as such. Under the common law, if a tenant breaches a lease, a landlord may: (1) terminate the tenancy and sue for damages under breach of contract theory; (2) elect to continue the tenancy, and sue periodically for rent as it accrues; or (3) terminate the lease, retake possession, and absolve tenant from all liability. See, e.g., Quintero-Chadid Corp. v. Gersten, 582 So.2d 685, 688 (Fla.App. 1991); [12] Rokalor Inc. v. Conn. Eating Ent., Inc., 18 Conn.App. 384, 558 A.2d 265, 268 (1989); Maida v. Main Bldg. of Houston, 473 S.W.2d 648, 651 (Tex.App.1971). Under the first option, the landlord must mitigate damages. Rokalor, 558 A.2d at 268. Termination of the tenancy releases the tenant from lease obligations, including the payment of rent. Id. A landlord, however, still may recover damages for breach of contract. Id.; see also Hart v. Vermont Inv. Ltd. Partnership, 667 A.2d 578, 587 (D.C.App.1995) (breach of a lease creates a right to damages); Holly Farm Foods, Inc. v. Kuykendall, 114 N.C.App. 412, 442 S.E.2d 94, 96 (1994) (breaching tenant is liable not for rent but for damages flowing from breach of contract); Schneiker, 732 P.2d at 608 (landlord can maintain an action for contract damages caused by tenant's breach); Benderson v. Poss, 142 A.D.2d 937, 530 N.Y.S.2d 362, 363 (N.Y.App.Div.1988) (what survives after the termination of a lease is not liability for rents, but liability for damages). Furthermore, a basic precept of contract law is that a party who sustains a loss by the breach of another is entitled to compensation that will actually or as precisely as possible compensate the injured party. Amfac v. Waikiki Beachcomber Inv. Co., 74 Haw. 85, 128, 839 P.2d 10, 32, reconsideration denied, 74 Haw. 650, 843 P.2d 144 (1992) (citing Ferreira v. Honolulu Star-Bulletin, Ltd., 44 Haw. 567, 573-74, 356 P.2d 651, 655, reh'g denied, 44 Haw. 581, 357 P.2d 112 (1960)). Despite this rule, Tenants argue that damages should not be awarded in this case because they are speculative and uncertain. We disagree. Under the lease, future unpaid rent less mitigation is the measure of damages to be used in the event of a breach by Tenants. Other jurisdictions agree with this formula. [13] For example, Rokalor held that [u]npaid [future] rent, while not recoverable as such, may be used by the court in computing the losses suffered by the plaintiff by reason of the defendant's breach of contract of lease. The plaintiff would be entitled to recover the damages which would naturally follow from such a breach.... We conclude that ... in an action for breach of a lease, the amount of rent agreed to by the parties is a proper measure of damages.... Rokalor, 558 A.2d at 268-9. This `court cannot rewrite the contract of the parties,' Fortune v. Wong, 68 Haw. 1, 11, 702 P.2d 299, 306 (1985) (citations omitted); see also Sentinel Ins. Co., Ltd. v. First Ins. Co. of Hawai`i, Ltd., 76 Hawai`i 277, 300, 875 P.2d 894, 917 (1994); First Ins. Co. of Hawai`i, Ltd. v. Lawrence, 77 Hawai`i 2, 16, 881 P.2d 489, 503, reconsideration denied, 77 Hawai`i 373, 884 P.2d 1149 (1994), but must construe and enforce [it,] not make or alter [it]. Strouss v. Simmons, 66 Haw. 32, 40, 657 P.2d 1004, 1010 (1982). Pursuant to section 18.3 of the lease, both HBS and Aloha Futons could have reasonably foreseen that they would be liable for rental of the premises for the entire term of the lease, subject to the proceeds of any subsequent reletting. Both HBS and Aloha Futons were aware, or should have been aware, that (1) the length of the lease term was ten years; (2) failure to pay the rent would constitute a default that would allow Landlords to terminate the lease; and (3) termination of the lease before expiration of the ten-year term would result in their liability for rent payments for the remainder of the lease term, as provided in section 18.3 of the lease. Had either Aloha Futons or HBS continued to pay the rent agreed under the lease, Landlord would have collected the rental value of the premises for the entire lease term. In doing so, Landlords would have realized the benefit of the bargain. [14] Accordingly, we reject Tenants's contention that damages based upon future unaccrued rent were speculative, unforeseeable, or penalties. This result protects Landlords's expectancy interest and places them in the same position they would have been in had the contract been fully performed by Tenants. [15]