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Law School Case Brief

Ruud v. Larson - 392 N.W.2d 62 (N.D. 1986)

Rule:

A landlord generally has a duty to mitigate the damages that arise out of his tenant's default. Once the tenant defaults, the landlord has a duty to make a good faith effort, expending reasonable effort and diligence, to relet the property. The burden is upon the tenant to establish a lack of good faith by the landlord; in the absence of such a showing, it will be presumed that the landlord acted in good faith. The determination whether the landlord has made a good faith effort to mitigate damages is a finding of fact that will be set aside on appeal only if it is clearly erroneous. A finding of fact is clearly erroneous when, although there may be some evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been made.

Facts:

Plaintiff lessors, Arthur and Ruby Ruud, and Defendant lessees, Raymond L. and Yvonne J. Larson, executed a 10-year lease that was later extended for another 10-year term. The Larsons constructed and operated a car wash and gasoline sales outlet on the property. When the Larsons failed to make timely rental payments and also failed to pay property taxes as required by the terms of the lease, the Ruuds, commenced an action for breach of the lease. The District Court of Cass County (North Dakota) awarded damages to plaintiff lessors after finding that defendant lessees had breached the lease by failing to pay taxes, rent, and by failing to provide liability insurance and to keep the property in good repair. Defendant lessees, the Larsons, sought appellate review.

Issue:

Did the trial court err in finding that plaintiff lessor made a good faith effort to mitigate damages?

Answer:

No

Conclusion:

The court held that the trial court's finding that the lessors, the Ruuds, had made diligent efforts to sublease the property and thereby mitigate damages was not clearly erroneous. When the sublease could not be arranged, the Larsons made other attempts to sublease the property through a realtor. Because the Ruuds had been threatened by a creditor's bankruptcy counsel with a contempt citation if the lessors, the Ruuds, interfered with the property, the Ruud smade no attempt to sublease the property until the bankruptcy court ruled that the creditor had no interest in the property. Immediately after the bankruptcy court's ruling, the Ruuds took possession of the property and completed necessary repairs and cleaning. The court noted that, as part of their due diligence to sublease the property, the lessors, the Ruuds, had made over 140 contacts with approximately 50 prospective tenants but had received no written offers to lease the property. 

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