Smith v. Temple Corp.

1

David M. Smith, et al., Respondents, v. Temple Corp., Inc., et al., Appellants.

No. A22-1038

Court of Appeals of Minnesota

August 7, 2023

This opinion is nonprecedential except as provided by Minn. R Civ. App. P. 136.01, subd. 1(c).

St Louis County District Court File No. 69DU-CV-20-1845

Jude Schmit, Legal Aid of Northeastern Minnesota, Duluth Minnesota (for respondents)

William D. Paul, Miles J. Ringsred, Duluth, Minnesota (for appellants)

Considered and decided by Smith, Tracy M., Presiding Judge; Jesson, Judge; and Bryan, Judge.

OPINION

BRYAN, JUDGE

In this appeal from judgment in consolidated emergency tenant remedies action (ETRA) petitions, appellant-landlords challenge the denial of their pretrial motion to dismiss and the district court's posttrial factual findings concerning damages. We affirm.

FACTS

On October 23, 2020, David M. Smith, respondent and residential tenant at an apartment in Duluth, Minnesota ("St. Regis"), brought an ETRA pursuant to Minnesota Statutes section 504B.381 (2022),^[1] alleging that the building had no heat after the St. Regis boiler system failed. Other residential tenants filed additional ETRA petitions, and the district court issued an ex parte order for emergency relief, ordering appellant Temple Corporation, Inc., et al. (landlords) to immediately restore heat. Following a hearing on November 2, the district court consolidated the various ETRA petitions and ordered landlords to continue taking steps to repair the boiler system. In a separate order on November 17, the district court required landlords to locate and pay for temporary housing for affected residents of St. Regis.

Landlords filed an answer and a subsequent motion to dismiss, asserting the following four legal defenses: (1) tenants' nonpayment of rent meant that they no longer met the statutory definition of "residential tenants" and, therefore, they lacked standing to bring the ETRAs; (2) pursuant to general contract principles, tenants' nonpayment of rent constituted a material breach of the lease, justifying landlords' breach of their statutory covenants of habitability; (3) pursuant to the language in Fritz v. Warthen, 213 N.W.2d 339, 343 (1973) (holding that tenants may assert a breach of the covenants of habitability as a defense to an eviction action), landlords can assert that tenants failed to pay rent as a legal defense to the ETRAs; and (4) pursuant to the provisions governing rent-escrow actions, Minn. Stat. § 504B.385 (2022), landlords are entitled to dismissal of the ETRAs and possession of the premises because tenants failed to pay rent in escrow.

The district court denied the motion to dismiss, concluding that landlords' second, third, and fourth arguments had no valid basis in the law. The district court, however, also construed portions of the motion-including the first argument-as a summary judgment motion. The district court received additional written submissions regarding the existence of a genuine fact dispute on these portions of the motion. The district court then denied the motion, specifically noting that factual disputes remained regarding whether tenants satisfied the definition of "residential tenants," whether tenants' conduct caused the emergency underlying the ETRA petitions, and damages:

[Tenants'] claims . . . create genuine issues of material fact on . . . whether [tenants] are all in fact 'residential tenants' within the meaning of Minn. Stat. § 504B.001, subd. 12 [(2022)], whether the emergency can in any way be found to be the result of 'the deliberate or negligent act or omission of a residential tenant . . .' Minn. Stat. § 504B.381, subd. 6, and what relief is appropriate under Minn. Stat. § 504B.425 subds. (b) through (g) [(2022)].

On February 26, 2021, the district court presided over an evidentiary hearing concerning whether tenants satisfied the definition of "residential tenants." In an order on March 3, 2021, the district court concluded that tenants were "residential tenants" as statutorily defined, and they had standing. The district court then presided over an evidentiary hearing on April 27 concerning whether and how rent abatement and consequential damages should be awarded to individual tenants. Tenants testified regarding the expenses they incurred while having to move to and stay in temporary housing as a result of the heat emergency. The district court ultimately concluded that tenants' nonpayment of rent had not caused the emergency underlying the ETRA petitions and awarded over $27,000 in "rent credits/abatement" to tenants.^[2] This appeal follows.

DECISION

Landlords challenge the district court's denial of their motion to dismiss and the district court's factual findings underlying its award of damages. We conclude that landlords have not established that the asserted defenses are available in an ETRA and because landlords did not provide this court with a transcript, we affirm the district court's factual findings regarding damages.

I. The District Court's Decision Denying Landlords' Motion to Dismiss

Residential landlords and tenants have various claims and defenses available to them pursuant to statute: "The legislature included several different remedies in chapter 504B-equitable, criminal, and civil-that tenants can pursue in the event their landlord (either directly or indirectly) removes them from a residential premises." Reimringer v. Anderson, 960 N.W.2d 684, 689 (Minn. 2021). An ETRA is one of these distinct statutory remedies, Minn. Stat. § 504B.381, as is a rent-escrow action, Minn. Stat. § 504B.385 (2022). The legislature also provided landlords with a statutory cause of action in the event that a tenant fails to pay rent: eviction. Minn. Stat. § 504B.291 (2022). The legislature included in this statutory framework certain basic guarantees for tenants, establishing that covenants of habitability are implied in every residential lease. Minn. Stat. § 504B.161 (2022). As a defense to an eviction action, a tenant may argue that its nonpayment was justified by the landlord's violation of the statutory covenants of habitability. Fritz, 213 N.W.2d at 341 ("[T]he tenant may now assert breach of the statutory covenants in excuse, justification, or avoidance of the landlord's [eviction] action.") (quotation omitted).

With that framework in mind, we construe landlords' arguments as a challenge to the district court's rejection of the following three legal defenses asserted by landlords in their motion to dismiss:^[3] (1) based on general contract principles, landlords' violation of the covenants of habitability was justified by tenants' material breach of the lease (nonpayment of rent); (2) based on language from Fritz, landlords may asset a common law defense in response to an ETRA that tenants breached their covenant to pay rent; and (3) pursuant to the provisions governing rent-escrow actions, Minn. Stat. § 504B.385, landlords are entitled to possession of the premises because tenants failed to pay rent in escrow during the pendency of the ETRAs. "When the material facts are not in dispute, we review the lower court's application of the law de novo." In re Collier, 726 N.W.2d 799, 803 (Minn. 2007).^[4] Tenants argue that landlords' arguments misconstrue the law. We agree with tenants and the district court that landlords' arguments lack merit.

A. Applicability of a General Breach-of-Contract Defense

Landlords are correct that when responding to a claim for breach-of-contract, a defendant can avoid liability if the plaintiff materially breached the contract first. See Carlson Real Est. Co. v. Soltan, 549 N.W.2d 376, 380 (Minn.App. 1996) ("The first breach serves as a defense against the subsequent breach."), rev. denied (Minn. Aug. 20, 1996). Landlords extrapolate from that principle a legal defense to an ETRA based on tenants' nonpayment of rent.^[5] We are not convinced for the following three reasons.

First, tenants have not raised a breach-of-contract claim, and landlords cite to no authority that permits a party to raise a general contract defense in response to an ETRA. We are careful to differentiate between distinct causes of action, and we have previously limited the available counterclaims in an eviction action under chapter 504B because of the unique summary nature of those proceedings. See Minn. Stat. § 504B.001, subd. 4 (2022) (defining eviction proceedings as summary proceedings to efficiently adjudicate only a single issue: the present right to possess real property); SVAP III Riverdale Commons LLC v. Coon Rapids Gyms, LLC, 967 N.W.2d 81, 86 (Minn.App. 2021) (declining to "recognize for the first time common-law affirmative defenses of impossibility or frustration of purpose in an eviction action alleging non-payment of rent"); Amresco Residential Mortg. Corp. v. Stange, 631 N.W.2d 444, 445-446 (Minn.App. 2001) (holding that a tenant could not raise equitable counterclaims in response to an eviction complaint). Absent a citation to some legal authority, we decline to reverse the district court's decision that general defenses to a breach-of-contract claim are not applicable in a specific statutory proceeding under chapter 504B. See Waters v. Fiebelkorn, 13 N.W.2d 461, 464-65 (Minn. 1974) ("[O]n appeal error . . . must be made to appear affirmatively before there can be reversal . . . [and] the burden of showing error rests upon the one who relies upon it."); Schoepke v. Alexander Smith &Sons Carpet Co., 187 N.W.2d 133, 135 (Minn. 1971) ("An assignment of error based on mere assertion and not supported by any argument or authorities in appellant's brief is waived and will not be considered on appeal unless prejudicial error is obvious on mere inspection.").

Second we observe that the legislature...