This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).




606 Vandalia Partnership,



JLT Mobil Building Limited Partnership, et al.,


Filed October 20, 1998

Reversed and remanded

Crippen, Judge

Ramsey County District Court

File No. C99613002

Kay Nord Hunt, Phillip A. Cole, Lommen, Nelson, Cole & Stageberg, P.A., 1800 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for appellant)

Steven K. Champlin, Richard W. Murphy, Dorsey & Whitney, LLP, Pillsbury Center South, 220 South Sixth Street, Suite 1300, Minneapolis, MN 55402-1498 (for respondents)

Considered and decided by Crippen, Presiding Judge, Klaphake, Judge, and Willis, Judge.



The trial court dismissed appellant 606 Vandalia's claim for rent on the theory that the rental obligation of respondent JLT Mobil Building was offset by Vandalia's money obligations to JLT. Finding merit in appellant's position on the offset issues, we reverse and remand for a determination of the amount of appellant's claim under the lease agreement.


In April 1989, appellant 606 Vandalia Partnership leased part of its property to respondent JLT. In March 1991, respondent stopped making rental payments but continued to occupy the property for the additional year remaining on the lease term. Appellant sued to recover the unpaid rent of over $100,000.

JLT, the tenant and prior owner of the property, claims an offset under its contract for sale of the property to appellant Vandalia, JLT having entered into the lease to provide one of the sources of revenue for Vandalia as the new owner. The contract provided that JLT could offset any contract default by Vandalia against rent owed under the lease. The contract further provided that in the event of Vandalia's default, JLT had the right to receive the rental payments due under its prior lease of part of the property to Nor-Lakes Services Midwest, the lease having been conditionally assigned to Vandalia as part of the sale transaction.

In February and March 1991, a number of obligations were not paid. Gerald Trooien, the President of JLT, defaulted on a $1,950,000 note to Resolution Trust Corporation that was secured by a mortgage on the 606 Vandalia property. Vandalia then failed to make its contract payment. JLT then stopped paying rent.

The trial court concluded that JLT's rent obligations were immediately satisfied by offsets resulting from Vandalia's default under the purchase contract. Because the lease did not contain any procedure for exercising offset rights, the court concluded that they were exercised by JLT's refusal to pay. Alternatively, the court concluded that JLT offset its rent obligations against its right to receive the benefit of Nor-Lakes' rents. Thus, the trial court avoided appellant's contention that the offsets could no longer be asserted in the present lawsuit because they were extinguished by JLT's election to cancel the purchase contract in 1994.

Appellant contends that the trial court's analysis was fundamentally in error in viewing Vandalia's failure to make a contract payment as the first pertinent occurrence in 1991. The record indicates that default first occurred on the obligation for payments on a mortgage note of the JLT president. The purchase contract required JLT to pay "all amounts due" on mortgages on the property.


Neither the trial court nor respondent disputes appellant's claim on the effect of JLT's choice to cancel its contract, that cancellation effectively extinguishes alternative claims under the contract. Rudnitski v. Seely, 452 N.W.2d 664, 666 (Minn. 1990).[1] If we view an offset as a claim, as opposed to an immediate credit, the occurrence of the claim is precluded by the choice to cancel the contract. JLT chose cancellation as its exclusive remedy; as appellant observes, its recitation of the buyer's default included all sums payable under the contract, including portions it now considers as offsets to its rental obligation. Recognizing the effects of the cancellation, the trial court concluded and respondent asserts that the offsets occurred simultaneously when Vandalia defaulted and JLT elected not to pay rent.

We conclude that the trial court's `immediate credit' analysis is in error as a matter of law due to the fact that JLT was a party in the breach of the contract before it claimed offsets or credits under the contract; thus, at the time its rent payments were due, JLT was not entitled to demand performance of any of the contract terms. Associated Cinemas of America v. World Amusement Co., 201 Minn. 94, 99, 276 N.W. 7, 10 (1937) (breaching party cannot demand performance by the other party). The contract explicitly required JLT's payments on a mortgage that represented an interest superior to the buyer's interest.

Respondent claims that it is "far too late in the day" for Vandalia to invoke rights under JLT's breach of contract. But respondent has rested its case on the simultaneous occurrence of its exercise of offset rights and its failure to pay rent, long before the contract was cancelled. Having engaged in analysis of the parties' rights at that time, our examination would be incomplete without recognizing the circumstances of JLT's breach of its contract obligations.

Appellant also contends that JLT's offset rights under the purchase contract are defeated because the lease agreement, executed at the same time, provided that there were no offset rights. Because the offset claim is otherwise flawed, examination of this issue is unnecessary.

Independent of offset rights, respondent contends that appellant lost its right to assert a claim for rent after the contract was cancelled. This argument confuses appellant's entitlement to rents, which expired when the contract was cancelled, with its right to assert a claim for prior rents. Respondent cites no authority and we find none to support the notion that a contract vendee is precluded, after a cancellation, from asserting a claim for entitlements that arose before the cancellation occurred. In this case, it is evident that appellant was entitled, commensurate with its right of possession, to rental rights accruing before the cancellation of its contract rights. See Stiernagle v. County of Waseca, 511 N.W.2d 4, 5 (Minn. 1994) (stating that vendee is entitled to full possession of the property so long as vendee complies with contract terms). Respondent asserts that the mortgagee of the property was entitled to rents upon the occasion of default on mortgage payments, but it is undisputed that in federal court litigation in this case it was determined that the mortgagee had no rights to entitlements of the purchaser in 1991 and 1992.

Because JLT chose the exclusive remedy of canceling Vandalia's purchase contract, its other claims against Vandalia no longer exist, and Vandalia is entitled to recover the amounts due under the lease. We remand for a determination of the amount of Vandalia's claim under the lease. Because the issue has not been previously considered by the trial court, we do not decide the dispute of the parties on late-payment fees due under the lease agreement; this issue is to be determined by the trial court as part of its calculation on remand of the amount due under the lease.

Reversed and remanded.

[1] This conclusion coincides with an earlier federal court decision in litigation related to the present proceedings. In dismissing JLT's unjust enrichment claim, premised especially on Vandalia's continuing stream of rental receipts until the contract was cancelled, a federal district court judge observed that cancellation was JLT's exclusive remedy under the purchase contract.