Court Opinion

ID: 9527899
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:35:27.849499+00
Date Added: 2024-06-11T13:26:16.797033
License: Public Domain

TORSI, Judge,
dissenting.
I respectfully dissent from that part of the majority opinion which holds that a landlord may avoid the consequences of mitigating damages through the device of charging an entry premium.
The distinction between the charge for entry premium and the charge for periodic rental is one of form and not substance. Carried to a logical conclusion, the majority rule would allow a landlord to allocate the entire consideration for leasing of premises to an “entry premium” and thereby not only avoid the duty to mitigate damages but also to effectuate a double recovery.
The issue in this case is not whether a landlord may charge an entry premium, but, having availed himself of the opportunity to relet the premises, whether the money received must be applied in mitigation of damages. See Schneiker v. Gordon, 732 P.2d 603 (Colo.1987).
In Schneiker, our supreme court stated: “A party injured by a breach of contract has a duty to make a reasonable effort to reduce the damage sustained.... The measure of damages is the amount it takes to place the landlord in the position he would have occupied had the breach not occurred, taking into account the landlord’s duty to mitigate.”
The majority contends the entry premium is consideration for the contract for a lease and belonged exclusively to the plaintiff because the defaulted lease gave the plaintiff a right to possession of the premises upon breach. However, the lease here gave the plaintiff the right and option to terminate the lease and take possession. The plaintiff did not exercise this option. The court and both counsel agreed the defendants were entitled to a setoff for increased rent received by the plaintiff.
When a landlord relets premises he must account to the tenant for an amount in excess of the original lease when he acts for the tenant’s account. Restatement (Second) of Property § 12.1 comment i (1977). Reletting on the tenant’s account is deemed a sublease by the original tenant, and his leasehold continues. Restatement (Second) of Property, supra. In such a case, the landlord takes possession only to the extent necessary to protect the property from vandalism and to relet, and does not have a right to full possession. Restatement (Second) of Property, supra.
Here, the right of lawful possession to enter and use the premises belonged to the defendants until the premises were relet. In fact, the principal owner of Ja Jal, Inc. first approached the intervenors regarding rental of the premises and the intervenors referred him to the plaintiff. Furthermore, it is inconsistent to find on one hand the defendants were entitled to the setoff for increased rent and on the other hand determine they have an insufficient possessory interest to entitle them to a setoff for the premium.
In Schneiker, our supreme court adopted the reasoning of Professor Dobbs, D. Dobbs, Remedies (1973), concerning the concept of avoidable consequences and states the reason for the avoidable consequences rule is that damages should be minimized so that economic waste will be avoided. He reasons that application of this concept would have the effect of barring recovery of damages that should have been avoided, thus eliminating any recovery that is economically wasteful. I would apply this principle here and would find that the landlord has suffered no injury.
Therefore, I would find the trial court committed reversible error in denying the defendants a setoff for the premium.