This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
STATE OF MINNESOTA
IN COURT OF APPEALS
Shores Hospitality, Inc.,
September 13, 2005
Affirmed in part, reversed in part, and remanded
Toussaint, Chief Judge
File No. CT 03-16258
David A. Harbeck, Lapp, Libra,
Thomson, Stoebner & Pusch, Chartered, One Financial Plaza, Suite 2500, 120
South Sixth Street, Minneapolis, MN 55402 (for respondent)
Thomas P. Malone, Karen K. Kurth, Barna, Guzy & Steffen, Ltd., 200 Coon Rapids Boulevard,
400 Northtown Financial Plaza, Minneapolis,
MN 55433 (for appellant)
Considered and decided by Toussaint, Chief Judge; Willis, Judge; and Forsberg, Judge.
U N P U B L I S H E D O P I N I
TOUSSAINT, Chief Judge
Appellant Peter Karkos appeals the
district court’s grant of summary judgment in favor of respondent Eagle Shores
in this lease dispute. Karkos argues that
material fact issues exist regarding whether Eagle Shores
breached the lease and whether the alleged breach is curable. Karkos also argues that the award of attorney
fees to Eagle Shores was excessive. Finally, Eagle Shores
cross-appeals the district court’s failure to award costs and disbursements to
them as the prevailing party. Because
there are no material facts in dispute and because Karkos has failed to
establish that Eagle
Shores breached the
lease, we affirm in part, reverse in part, and remand for the determination of
costs and disbursements.
D E C I S I O N
In reviewing a summary judgment, this court must
determine whether there are any genuine issues of material fact and whether the
district court erred as a matter of law.
State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).
The reviewing court is required to view the evidence in the light most
favorable to the nonmoving party. Fabio
v. Bellomo, 504 N.W.2d 758, 761 (Minn.
Karkos argues that the district court erred in granting
summary judgment in favor of Eagle
Shores in the form of
injunctive relief preventing Karkos from further violations of the lease. But Karkos admits to violating specific provisions
of the lease. Karkos admits that he
stored maintenance items and a “few minor personal items” in the basement of
the property, despite the clear language of the lease that afforded Eagle
Shores “exclusive use” of the basement.
Karkos further concedes that he entered the property without the
permission of Eagle
Shores and removed items
from the premises. The district court
found that Karkos’s actions violated the express terms of the lease, which
stated that the “[l]essee shall permit [l]essor or [l]essor’s agents to enter
upon the premises at reasonable times and upon reasonable notice, for the purpose of inspecting the same. . .
.” (Emphasis added.)
Karkos argues that the materiality of a breach presents a
jury question precluding summary judgment.
See Cloverdale Foods of Minn., Inc. v. Pioneer Snacks, 580 N.W.2d 46, 49 (Minn. App. 1998) (holding that evidence was sufficient to
raise factual issue on materiality of breach).
But Karkos concedes that he engaged in conduct that directly violated
express terms of the lease and because Eagle
Shores was not seeking to terminate
the lease, the district court was not required to address the materiality of any
alleged breach in addressing Eagle
Shores’ claim. Therefore, the record supports the district
court grant of summary judgment in favor of Eagle Shores.
Karkos argues that the district court erred in
dismissing his counterclaim for breach of the lease and refusing to allow him
to terminate the lease. He argues that Eagle Shores
materially breached the lease by: (1)
allowing a non-electrician to work on the electrical wiring of the property;
(2) installing outdoor lighting to the patio area of the property without
permission; and (3) violating a city of Minneapolis
ordinance by allowing the consumption of alcohol on the premises prior to
having obtained a liquor license.
Minnesota courts have held that
“forfeitures are disfavored.” Id. In
Cloverdale, this court stated the
general rule that termination or rescission of a lease is only justified by a
material breach or a substantial failure in performance. Id. If a material breach has occurred, rescission
is appropriate “[w]here the injury is . . . irreparable, or where the damages
would be inadequate or difficult or impossible to determine.” Johnny’s,
Inc. v. Njaka, 450 N.W.2d 166, 168 (Minn. App. 1990). A material breach “goes to the root or
essence of the contract.” 15 Samuel
Williston & Richard A. Lord, A Treatise on the Law of Contracts § 44:55
(4th ed. 2000). Minnesota
appellate courts have concluded that a breach is material when “one of the
primary purposes” of the contract was violated.
See, e.g., Steller v. Thomas,
232 Minn. 275, 282, 45 N.W.2d 537, 542 (1950)
(providing that logger committed material breach when he did not burn brush
piles when logging because primary purpose of contract was to clear land for
farming). Generally, however, the
materiality of a breach is a fact question.
See Cloverdale, 580 N.W.2d at
Karkos presented no evidentiary support for his claims
that Eagle Shores materially breached the lease by
allowing a non-electrician to work on the wiring of the property and by
installing outdoor lighting to a patio area.
The only evidence presented regarding the electrical work was Karkos’s
testimony that Eagle
Shores “did some
electrical – unauthorized, I believe, electrical work on the premises, so
that’s all I know, that I’m going by, their own admission.” When asked what specifically Eagle Shores
did with respect to the electrical wiring, Karkos responded “[t]hey have done
something, I don’t know if it is work or not.”
The “outside lighting” at issue consisted of a rope-style of Christmas
lights plugged into an existing outlet.
This is insufficient to raise a fact question, and the district court
properly dismissed this claim.
argues that Eagle Shores materially breached the lease by allowing the
consumption of alcohol to occur on the premises prior to having obtained a
liquor license from the city of Minneapolis. The lease states that the “[l]essee shall
comply with all statutes, ordinances and requirements of all municipal, state
and federal authorities. . . .” The
district court assumed that Eagle Shores allowed the consumption of alcohol before
being issued a liquor license but determined that Eagle Shores
cured any breach of the lease by later obtaining the appropriate license. The district court determined that Karkos
could only terminate the lease after giving notice to Eagle Shores
and providing them with the opportunity to cure any breach. The record supports the district court’s
conclusion that if Eagle
Shores breach the lease
term, this breach was cured by their obtaining the appropriate liquor license.
Karkos argues that the
district court abused its discretion by awarding Eagle
Shores attorney fees when Eagle Shores
voluntarily dismissed its claims seeking monetary damages. On appeal, this court will not reverse the
district court’s determination on attorney fees absent an abuse of
discretion. Becker v. Alloy
Hardfacing & Eng’g Co., 401 N.W.2d 655, 661 (Minn. 1987).
The reasonable value of counsel’s work is a question of fact and must be
upheld unless that fact is clearly erroneous.
Amerman v. Lakeland Dev. Corp., 295 Minn. 536, 537, 203 N.W.2d 400, 400-01
(1973). The factors to be considered in
determining the reasonableness of attorney fees include: (1) time and labor required; (2) the nature
and difficulty of the responsibility assumed; (3) the amount involved and (to
avoid quote) results obtained; (4) fees customarily charged for similar legal
services; (5) the experience, reputation, and ability of counsel; and (6)
whether the fee arrangement existing between counsel and the client is fixed or
contingent. City of Minnetonka v. Carlson, 298
N.W.2d 763, 765 (Minn.
Karkos argues that the
district court abused its discretion by awarding attorney fees for the entire
matter rather than only for those claims that were actually litigated. However, the United States Supreme Court has
rejected a “mathematical approach comparing the total number of issues in the
case with those actually prevailed upon.”
Hensley v. Eckerhart, 461 U.S.
424, 435, 103 S.Ct. 1933, 1940 n.11 (1983).
The Court specifically stated that “a plaintiff who failed to recover
damages but obtained injunctive relief, or vice versa, may recover a fee award
based on all hours reasonably expended if the relief obtained justified that
expenditure of attorney time.” Id. at 436, 103
S. Ct. 1941 n.11.
Karkos emphasizes the fact
that Eagle Shores voluntarily dismissed those
claims that would have allowed for monetary damages. However, Eagle Shores
prevailed on the ultimate legal issue and chose only to pursue injunctive
relief. The district court determined
that Eagle Shores had obtained a “complete victory”
in a “complex case” that had been litigated for more than a year. The district court retains the discretion to
determine who is the prevailing party. Scott v. Forest Lake Chrysler-Plymouth-Dodge,
668 N.W.2d 45, 50 (Minn.
2003). After reviewing the relevant
factors, the district court did not abuse its discretion in determining that
$29,215 in attorney fees is reasonable.
Eagle Shores appeals the district
court’s failure to award any costs or disbursements incurred in connection with
the litigation. The district court
determined that all of Eagle
Shores’ claimed costs,
$3,835.42, were unreasonable because they included costs for copying and certain
The district court “shall”
allow reasonable costs to a prevailing party in a district court action. Minn. Stat.
§ 549.02 (2004); Benigni v. County of St. Louis,
585 N.W.2d 51, 54 (Minn.
1998). The district court does not have
discretion to deny costs and disbursements to the prevailing party. Crince
v. Kulzer, 498 N.W.2d 55, 58 (Minn. App. 1993) (citing Jostens, Inc. v. Nat’l Computer Sys., 318 N.W.2d 691, 704 (Minn. 1982)). Minn. Stat. § 549.02 (2004) allows the
defendant costs in the amount of $200 “[u]pon discontinuance or dismissal or
when judgment is rendered in the defendant’s favor on the merits. . . .” And Minn. Stat. § 549.04 (2004) allows
the prevailing party to recover disbursements “paid or incurred, including fees
and mileage paid for service of process by the sheriff or by a private
Because the district court
failed to award Eagle
Shores, as the prevailing
party, any costs and disbursements, we remand for a determination of which
requested costs and disbursements are reasonable.
Affirmed in part, reversed in part, and remanded.