IN COURT OF APPEALS
Ronald Rasmussen, et al.,
The Housing and Redevelopment Authority for the City of St. Anthony, Minnesota,
The Housing and Redevelopment Authority for the City of St. Anthony, Minnesota, petitioner,
Ronald Rasmussen, et al.,
Ramsey County District Court
File No. C1-04-6883
David D. Meyer, Steven J. Quam, Fredrikson & Byron, P.A., 200 South Sixth Street, Suite 4000, Minneapolis, MN 55402-1425 (for appellants)
David Y. Trevor, Heather C. Toft, Dorsey & Whitney, LLP, 50 South Sixth Street, Suite 1500, Minneapolis, MN 55402-1498; and
and decided by Minge,
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.
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.
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
years later, the site of the
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 was entered. The Rasmussens appeal.
1. Did HRA
breach the quiet enjoyment provision of the lease in acquiring the
2. Do the lease provisions limiting the lessees’ right to condemnation damages apply to this condemnation by HRA?
reviewing summary judgment, an appellate court asks whether there are any
genuine issues of material fact and whether the district court erred in its
application of the law. State by Cooper v. French, 460 N.W.2d 2,
first issue is whether HRA breached the quiet enjoyment provision of its lease
with the Rasmussens by bringing a condemnation petition.
Minnesota Supreme Court recently considered the position of a utility with condemning
authority who was also a lessee in Lundell
v. Coop. Power Ass’n and it upheld the district court’s grant of the utility’s
condemnation petition against its own lessor.
707 N.W.2d 376, 381-83 (
property owners appealed, arguing that there was no public purpose or necessity
for the taking and that the utility had acted in bad faith in failing to
complete negotiations for amendments to the lease.
supreme court also concluded that the utility did not act in bad faith: “The
mere fact that [the utility] chose to exercise its power of eminent domain
rather than continue negotiations with the landowner does not make this taking
an abuse of [the utility]’s condemnation power.”
B. Other States
parties cite cases from other jurisdictions on the issue of whether an entity
with eminent domain authority breaches a quiet enjoyment provision in a
contract by initiating a condemnation proceeding against its own tenant. In City
of Glendale v. Superior Ct., the city-lessor agreed to a 20-year lease and
reserved the right to terminate the lease after 10 years, but then prior to the
expiration of the 10-year period, filed a complaint to condemn the
in Goodyear Shoe Machinery Co. v. Boston
Terminal Co., the court held that a covenant of quiet enjoyment was not
breached when a landlord exercised its power of eminent domain over its tenant:
“But the sovereign power to take by eminent domain is not an incumbrance, and
the exercise of the power is not a breach of any of the ordinary
covenants.” 57 N.E. 214, 215
(1900). The court further noted that “it
cannot matter that the person who sets the delegated sovereign power in motion
is the landlord. The exercise of that
power has not been covenanted against.”
Rasmussens attempt to distinguish
The Rasmussens attempt to distinguish Goodyear Shoe on the basis that it involved an implied covenant, rather than an express provision in a lease. See 57 N.E. at 215. But this distinction is not compelling because the implied covenant of quiet enjoyment is fundamental to the lessor’s obligation to the tenant and a sovereign’s ability to impair its eminent domain powers by contract should not be any different for an implied covenant than for an express contract.
In support of their
position, the Rasmussens cite Farmers’
Elec. Coop., Inc. v. Missouri Dep’t of Corr., 977 S.W.2d 266 (
C. Sovereign Acts Doctrine
Rasmussens argue that HRA’s breach of the contract was not the protected act of
a sovereign under the principles of the “sovereign acts doctrine,” an
affirmative defense to a breach-of-contract claim. See
Allegre Villa v.
second issue is whether the terms of the lease limit the Rasmussens’ recovery
following a condemnation. As the
Minnesota Supreme Court recognized in Housing
and Redevelopment Auth. of City of St. Paul v. Lambrecht, a lease may
contain a provision limiting the rights of a tenant upon condemnation of the
property. 663 N.W.2d 541, 546 (
Rasmussens first argue that the provision terminating the lease or providing an
option to terminate the lease does not apply because this was not a total or
partial taking, as only their leasehold interest was taken, not the rest of the
fee interest already held by HRA. In Bradley Facilities, Inc. v. Burns, the
court interpreted similar language, “the entire Demised Premises, or so much
thereof that the remainder is not useful to Tenant,” as it applied to the
condemnation of a leasehold by the lessor who itself held the fee interest. 551 A.2d 746, 749 (
Here, the lease contrasts “total” and “partial” takings with each other; “total” is not contrasted with some interest less than the entire fee simple. Because HRA took the Rasmussens’ entire leasehold, which in combination with the interest HRA already owned in the property constituted full fee-simple ownership, it was a total taking. As a consequence, the lease terminated upon the taking, and the Rasmussens no longer had any interest in the condemned property. See Lambrecht, 663 N.W.2d at 547.
The Rasmussens also argue that the provision in the lease assigning the condemnation award to HRA is not applicable. However, this argument is based on the claim that the taking is fractional. Based on our foregoing conclusion that this taking is functionally of the entire interest in the parcel, this argument fails.
The Rasmussens finally argue that the condemnation provisions of the lease did not contemplate a condemnation petition brought by the lessor itself, citing one of the lease’s definitions of condemnation as “a voluntary sale or transfer by Landlord to any Condemnor, either under threat of condemnation or while legal proceedings for condemnation are pending.” Although this definition may imply that the lease contemplated application to condemnations not initiated by the landlord, the first definition of condemnation in the lease provides no such limitation: “‘Condemnation’ means (a) the exercise of any governmental power, whether by legal proceedings or otherwise, by a Condemnor . . . (4) ‘Condemnor’ means any public or quasi-public authority, or private corporation or individual, having the power of condemnation.” As discussed earlier, the Lundell decision recognizes that condemning authorities have dual roles when they are lessees and may properly act in either capacity. See Lundell, 707 N.W.2d at 382.
lease prohibits the Rasmussens from recovering a takings award following a
condemnation. We note that the
D E C I S I O N
The district court did not err in determining that the quiet enjoyment provision of the lease does not preclude HRA from acquiring the Rasmussens’ interest by condemnation even though HRA was also the lessor. The district court also did not err in determining that the lease provisions limiting damages in condemnation were applicable to HRA’s acquisition of the Rasmussens’ interest in this proceeding.
* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.
 Because we conclude that HRA did not breach its contract, we need not reach the Rasmussens’ argument that HRA cannot enforce provisions of the contract prohibiting the Rasmussens from recovering a takings award if HRA breached other provisions of the contract. We also do not reach the issue of whether HRA’s actions served a public purpose because the Rasmussens do not challenge that finding on appeal.
The Rasmussens claim HRA reaps a windfall benefit here because as the present
landlord, it is able to keep whatever compensation it would have been obliged
to pay Ste. Marie if HRA had initiated condemnation proceedings while Ste.
Marie owned the property. To the extent
there were any such savings, Ste. Marie would have been able to negotiate for
that premium when it sold to HRA.