This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1998).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C4-99-1908

 

 

Paul M. Eickhof,

Respondent,

 

vs.

 

Health Dimensions Rehabilitation, Inc.,

Appellant.

 

Filed May 9, 2000

Affirmed as modified
Foley, Judge^*

 

Polk County District Court

File No. C2-98-1664

 

 

Carol E. Johnson, Vaaler, Zimney, Foster & Johnson (Chartered), Bremer Financial Center, Suite 200, 3100 South Columbia Road, P.O. Box 13417, Grand Forks, ND  58208-3417 (for respondent)

 

Mark P. Essling, 1994 Rum River Drive SE, Cambridge, MN  55008 (for appellant)

 

Considered and decided by Toussaint, Chief Judge, Klaphake, Judge, and Foley, Judge.

U N P U B L I S H E D   O P I N I O N

FOLEY, Judge

            Appellant Health Dimensions Rehabilitation seeks review of the district court’s judgment for respondent Paul M. Eickhof in his claim for breach of a commercial lease. Because the district court did not err in concluding that respondent reasonably refused to sublease to a prospective tenant who would compete directly with another tenant in the same building, but erred in granting respondent judgment for future rents before rents actually accrued, we affirm as modified.

FACTS

            The parties entered into a lease for commercial space in respondent’s building, which contained five commercial spaces.  The term of the lease was from December 1, 1996 through November 30, 1999, with an agreed rent of $655 per month.  Appellant abandoned the premises in late 1997, made all monthly payments through August 1998, and then ceased making payments on the lease.

            After appellant abandoned the premises, respondent placed a "For Rent" sign on the building.  Appellant, however, does not allege that, by doing so, respondent accepted appellant’s surrender of the premises.  In March 1998, Dennis Kotch, a financial planner, inquired about the commercial space. A current tenant, who was also engaged in the investment and brokerage business and who had been leasing space from respondent for 15 years, objected to the proposed tenancy of Kotch.  Based on the existing tenant’s concerns, respondent informed Kotch and appellant of the decision not to lease the space to Kotch. 

            On December 18, 1998, respondent filed suit against appellant to recover unpaid rent in the amount of $9,825 for September 1998 through the end of the lease term in November 1999.  Before trial in August 1999, neither party had secured a tenant to sublease the space.  In September 1999, the district court ruled for respondent, finding that his refusal to lease the space to a prospective tenant who would be in direct competition with an existing tenant was reasonable.  Respondent was awarded $7,860 in unpaid rent, plus the additional sum of $1,965, subject to abatement should the premises be subleased prior to November 30, 1999. 

D E C I S I O N

I.

            Appellant argues that the district court erred in deciding that respondent reasonably refused to sublease to a prospective tenant who would compete directly with a current tenant.  When a contract is unambiguous, its interpretation is a question of law.  City of Virginia v. Northland Office Properties Ltd. Partnership, 465 N.W.2d 424, 427 (Minn. App. 1991), review denied (Minn. Apr. 18, 1991).  This court need not be bound nor give deference to a district court’s decision on a question of law.  Frost‑Benco Elec. Ass’n v. Minnesota Pub. Utils. Comm’n, 358 N.W.2d 639, 642 (Minn. 1984).

            The parties agree that respondent refused to lease to Kotch because of respondent’s concern that Kotch would compete with a long-term tenant.  The parties dispute whether the court correctly concluded that respondent’s refusal to lease to Kotch was reasonable, as required by Section 10 of the lease, which provides:

Assignment and Subletting.  Tenant shall not assign this Lease or any part thereof, or sublet any portion of the leased premises, without the written consent of Landlord, which consent shall not be unreasonably withheld.

            In a similar case, a hospital agreed to lease property for a nominal rent, for the primary purpose of obtaining office space for hospital staff.  Medinvest Co. v. Methodist Hosp., 359 N.W.2d 714, 715 (Minn. App. 1984), review denied (Minn.  Mar. 21, 1985). The lease contained a provision stating that all tenants would be subject to approval by the hospital, but approval would not be unreasonably withheld.  The hospital refused to agree to a proposed tenant who would directly compete with it in providing laboratory services, and the parties disputed whether such a refusal was reasonable.  Id.  This court concluded that "[w]here the purpose of the lease is endangered by the proposed sublessee, consent may be reasonably withheld[,]" and agreed that the purpose of the lease, providing office space for hospital staff, would be adversely affected by leasing to a competing business.  Id. at 717.  In reviewing precedents from other jurisdictions, this court concluded that "when a proposed subtenancy would defeat a specific and primary purpose for a lease, albeit economic, the landlord may withhold consent. " Id. (citations omitted).

            Appellant argues that in Medinvest this court agreed with an Illinois decision that held that a lessor cannot reasonably refuse to lease to a competitor if the “purpose” of the lease is rent.  See Edelman v. F. W. Woolworth Co., 252 Ill. App. 142, 143 (1929).  In fact, while we distinguished the facts in Medinvest from those in Edelman, we did not indicate agreement with Edelman.  Medinvest, 359 N.W.2d at 716‑17.

            The opinion in Medinvest did cast doubt on an earlier Minnesota case that contained language describing the purpose of an anti-assignment clause as “the protection of the landlord in his ownership and operation of his property—not for his general economic protection.”  Torgerson-Forstrom H.I. Willmar, Inc. v. Olmsted Fed. Sav. & Loan Ass’n, 339 N.W.2d 901, 903 (Minn. 1983).  In Medinvest, we held that this rule is inapplicable when the purpose of a lease is undone by subleasing to a competitor.  Medinvest, 359 N.W.2d at 717.

            Appellant argues that the lease allows any legal use of the leased space, including occupations that would compete with the landlord or another tenant.  However, the lease restricts appellant in its use by stating:

The premises hereby leased shall be used by Tenant for the normal course of business of HEALTH DIMENSIONS REHABILITATION, INC., and all related operations in connection therewith.

 

By these terms, appellant made a contractual promise to use the leased space as a health provider.  Any attempt to change the nature of the business would conflict with the terms of the lease.  Appellant is not free to engage in other business that would compete with the landlord or another tenant.

            Here, although the purpose of the lease was to obtain rent, respondent’s concern over the potential loss of a long-term tenant is a valid and reasonable business concern. Installing a competitor could adversely affect the rent respondent receives for this building. Respondent’s refusal to consent to the sublease to Kotch is related to the purpose of the lease and was reasonable.

II.

            Appellant also argues that the district court erred in awarding future rents to respondent.  A reviewing court need not defer to the district court’s application of the law when the material facts are not in dispute.  Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989).

            The parties agree that if respondent reasonably withheld consent for the sublease to Kotch, then respondent was entitled to accrued rent of $7,860.  They dispute whether the district court should have granted respondent $1,965, subject to abatement should the space be subleased, for the three month’s future rent remaining on the lease when judgment was entered.   

            “Rent to be paid in the future is not a debt or liability for the recovery of which a present action will lie.”  Ambrozich v. City of Eveleth, 200 Minn. 473, 483, 274 N.W. 635, 640 (1937).  Until the rent accrues, payment by the lessee is not required.  Id.  The lease did not contain an acceleration clause requiring appellant to pay all future rent upon breach of the contract.  The district court erred in awarding future rents to respondent and we modify the judgment by deducting $1,965.

            Affirmed as modified.