may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Farmers Insurance Exchange,
d/b/a Hopkins Tire and Auto Service, et al.,
Filed February 24, 1998
Toussaint, Chief Judge
Hennepin County District Court
File No. 9512830
Dale M. Wagner, Christopher R. Morris, Bassford, Lockhart, Truesdell & Briggs, P.A., 3550 Multifoods Tower, 33 South Sixth Street, Minneapolis, MN 55402-3787 (for appellants)
Considered and decided by Randall, Presiding Judge, Toussaint, Chief Judge, and, Holtan, Judge.**
Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI § 10.
TOUSSIANT, Chief Judge
Gary Ouellette, d/b/a Hopkins Tire and Auto Service, appeals the entry of judgment in favor of respondent Farmers Insurance Exchange (Farmers Insurance) wherein the district court found: (1) the waiver provision of the written lease agreement initially entered into between Ouellette's grantor, Scott Arnold, and Farmers Insurance's, insurer for Abrax Systems, Inc. (Abrax) did not bar Farmers Insurance's subrogation claim against Ouellette; and (2) that Farmers Insurance was entitled to $67,213. Because both Ouellette and Abrax failed to obtain special endorsements from their respective insurers as required by the written lease agreement, we affirm.
On February 1, 1992, Abrax entered into a lease agreement with Scott Arnold d/b/a Hopkins Tire & Auto Service (Arnold) for the lease of some commercial office. Under the lease agreement, Abrax agreed to lease the property for one year ending on January 31, 1993. The lease contains a waiver of subrogation clause, which provides:
So long as their respective insurers so permit, Tenant and Landlord hereby mutually waive their respective rights of recovery against each other for any loss insured by fire, extended coverage or all risk insurance now or hereafter existing for the benefit of the respective party. Each party shall obtain any special endorsement required by their insurer to evidence compliance with the aforementioned waiver.
Farmers Insurance Exchange insured Abrax. Neither Abrax nor Arnold obtained endorsement from their insurance companies.
At the end of the lease term, Abrax and Arnold agreed to renew the lease on a month-to-month basis commencing February 1, 1993. On or about February 28, 1993, Arnold sold Hopkins Tire & Auto Services to Gary Ouellette. Abrax and Ouellette did not enter into a written lease but leased the property on a month-to-month basis under the terms and conditions of the written lease between Abrax and Arnold. In that lease, there is a provision on sale by landlord, which states:
Except as set forth in this Article, this Lease shall not be affected by any such sale, and Tenant agrees to attorn to the purchaser or assignee.
The lease further provides that
Subject to the provisions of Article 10, the terms, covenants and conditions contained herein shall be binding upon and inure to the benefit of the heirs, successors, executors, administrators, marital communities, if any, and assigns of the parties hereto.
There was a fire in Ouellette's leased property, causing damage to the adjoining leased property and personal property of Abrax. Pursuant to the insurance policy, Farmers Insurance paid Abrax $67,213 for the fire damage. Ouellette brought a motion for summary judgment after Farmers Insurance filed its subrogation claim, arguing that the waiver provision of the lease barred the subrogation claim. The district court held that the lease provisions were inapplicable to Farmers Insurance's claim against Ouellette because the lease expired on January 31, 1993, and there was no written lease between Ouellette and Abrax at the time of the fire.
Ouellette argues that (1) the district court erred in concluding that there was not a written lease agreement between him and Abrax at the time of the fire; (2) the parties agreed to extending the terms of the lease on a month-to-month basis, which constituted a renewal of the lease; or (3) alternatively, the absence of an express renewal of the lease, Abrax must be considered a "hold over" tenant bound by the terms of the lease.
Under the circumstances Ouellette was not a "hold over" tenant nor was there a renewal of the written lease agreement. We conclude that there was a modified lease agreement in effect between Ouellette and Abrax at the time of the fire. At the end of the lease term, Arnold and Abrax orally agreed to continue the lease on a month-to-month basis under the same terms and conditions as the written lease. This oral agreement modified the written lease agreement effective February 1, 1993. The terms of the modified lease agreement, except for the duration of the lease, are the same as those of the original lease agreement. Twenty-eight days later Arnold sold the leased premises to Ouellette. After the sale, Ouellette continued to lease the property to Abrax on a monthly basis for the same amount of rent as provided in the written lease agreement. The parties did not discuss a new written lease until Abrax leased two more office spaces from Ouellette.
We conclude that Ouellette assumed the terms of the modified lease because (1) the written lease agreement, provides that the lease is not affected by a transfer of ownership and Abrax "agrees to attorn to the purchases;" and (2) subject to the provisions of article 10, the terms and covenants are binding upon and inure to the benefit of the successors and assignees of the landlord.
Minnesota caselaw provides:
A conveyance of the revision brings the grantee in privity with the leasee, puts him in the place of the original lessor, subjects him to the burdens of such covenants of the leasor as run with the land, and entitles him to the benefits of the covenants of the leasee. * * * The rights and liabilities existing between the grantee and the leasee are the same as those that originally existed between the grantor and the lessee. In short he becomes the landlord and the original lessor ceases to be such. The tenant hold of the new landlord upon the same terms as he held of the old.
Glidden v. Second Ave. Inv. Co., 125 Minn. 471, 473-74, 147 N.W. 658, 659 (1914) (citations omitted). Therefore, we conclude the district court erred in deciding that there was not a written lease agreement between Ouellette and Abrax at the time of the fire.
Ouellette next argues the district court erred in concluding that the waiver provision of the lease agreement barred a subrogation claim by Farmers Insurance. The lease agreement provided "[s]o long as their respective insurers so permit," tenant and landlord hereby mutually waive their respective rights of recovery against each other for any loss insured by fire insurance. It further provided that each party shall obtain any special endorsement "required by their insurer" to evidence compliance with the waiver provision.
Here, both Ouellette and Abrax failed to obtain the special endorsement from their respective insurers. This failure on the part of both parties renders the waiver provision inoperative. Consequently, we conclude that Farmer's subrogation claim is not barred by the written lease agreement.