Negassi H. Ghebrehiwet v. Khaled Ghneim ( 2016 )

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).
STATE OF MINNESOTA
IN COURT OF APPEALS
A15-0397
Negassi H. Ghebrehiwet,
Appellant,
vs.
Khaled Ghneim, et al.,
Respondents.
Filed January 11, 2016
Affirmed in part, reversed in part, and remanded
Larkin, Judge
Ramsey County District Court
File No. 62-CV-13-5919
Mikael Merissa, Merissa Law Firm, Minneapolis, Minnesota (for appellant)
James D. Capra, St. Paul, Minnesota (for respondents)
Considered and decided by Bjorkman, Presiding Judge; Worke, Judge; and Larkin,
Judge.
UNPUBLISHED OPINION
LARKIN, Judge
Appellant landlord challenges the district court’s award of damages and penalties to
respondent tenants for landlord’s breach of the statutory covenants of habitability and the
tenants’ statutory right to privacy. Because respondent tenants failed to prove reasonably
exact, nonspeculative damages stemming from appellant’s breach of the covenants of
habitability, we reverse in part. But because the district court did not abuse its discretion
in awarding a penalty for landlord’s multiple breaches of tenants’ statutory right to privacy,
we affirm in part and remand for entry of an amended judgment consistent with this
opinion.
FACTS
On July 1, 2012, respondents Khaled and Asam Ghneim (the Ghneims) leased a
residential property from appellant Negassi Ghebrehiwet. The written lease agreement
established a rental period of July 1, 2012 to June 30, 2013, and a rental rate of $1,100 per
month. The Ghneims did not move into the rental unit until on or about July 7, because
the unit was not ready for occupation.
On May 17, 2013, Ghebrehiwet commenced an action in conciliation court,
claiming that the Ghneims failed to pay their May rent and associated late fees, as well as
late fees associated with their April rent. The conciliation court held a hearing on June 24
and ruled that Ghebrehiwet violated the Ghneims’ right to privacy under Minn. Stat.
§ 504B.211, subd. 2 (2014) and that the Ghneims were therefore “entitled to a rent
reduction.” In July 2013, the Ghneims vacated the rental unit.
On August 14, Ghebrehiwet removed the case to district court for a trial de novo.
In his district court complaint, Ghebrehiwet claimed that the Ghneims breached the lease
by failing to pay rent in May, June, and July and by remaining in possession of the rental
unit after the rental period expired on June 30, 2013. He also alleged that the Ghneims had
“willfully and maliciously” damaged the rental unit. The Ghneims counterclaimed that the
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condition of the rental unit during the tenancy breached the covenants of habitability under
Minn. Stat. § 504B.161 (2014) and that Ghebrehiwet’s actions during the tenancy breached
their statutory right to privacy under Minn. Stat. § 504B.211 (2014).
On September 9, 2014, the district court held a bench trial. By the agreement of the
parties, a consensual special magistrate presided over the trial and drafted findings of fact,
conclusions of law, and an order for judgment, which were subsequently approved and
adopted by the district court. The district court concluded that the Ghneims are liable to
Ghebrehiwet for $1,952 in unpaid rent for June and July 2013, which included a set off of
$248 for the first week of July 2012. The district court rejected Ghebrehiwet’s other
claims. The district court ruled in favor of the Ghneims on their counterclaims, awarding
them damages of $3,300 (the equivalent of three months’ rent) for Ghebrehiwet’s breach
of the covenants of habitability, and penalties totaling $3,300 for Ghebrehiwet’s numerous
privacy violations.
Ghebrehiwet appeals the district court’s award of damages and penalties. The
Ghneims have not filed a responsive brief.
DECISION
I.
Ghebrehiwet contends that the district court erred by abating, as damages, “the
entire amount of rent due for the three months [in which it] found . . . violations of the
warranty of habitability.” He argues that because the Ghneims “remained in possession of
the property during that time,” the Ghneims “should only be compensated for the
diminution in the value of the property they bargained for.” Ghebrehiwet does not
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challenge the district court’s finding that he violated the covenants of habitability; he
argues that the district court erred by failing to calculate damages based on diminution of
value. “The application of law to established facts is a question of law, which this court
reviews de novo.” Longbehn v. Schoenrock, 727 N.W.2d 153, 158 (Minn. App. 2007).
Minn. Stat. § 504B.161, subd. 1(a), establishes a number of covenants, which are
an implied part of every lease of residential premises and which are known as the covenants
of habitability. See Fritz v. Warthen, 298 Minn. 54, 56-57, 213 N.W.2d 339, 340-41 (1973)
(referring to the “statutory covenants of habitability” in a prior version of the statute). For
example, the statute provides that the landlord covenants:
(1) that the premises and all common areas are fit for the use
intended by the parties;
(2) to keep the premises in reasonable repair during the term of
the lease or license, except when the disrepair has been caused
by the willful, malicious, or irresponsible conduct of the tenant
or licensee or a person under the direction or control of the
tenant or licensee;
....
(4) to maintain the premises in compliance with the applicable
health and safety laws of the state, and of the local units of
government where the premises are located during the term of
the lease or license, except when violation of the health and
safety laws has been caused by the willful, malicious, or
irresponsible conduct of the tenant or licensee or a person
under the direction or control of the tenant or licensee.
Minn. Stat. § 504B.161, subd. 1(a).
The district court determined that the Ghneims “amply established that
[Ghebrehiwet] breached the statutory [covenants] of habitability in many ways throughout
much, if not all, of the tenancy.” But the district court also found that the Ghneims’
testimony regarding their resulting damages “lacked specificity and documentation.” The
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district court noted that the Ghneims did not provide photographs or a contemporaneous
record showing the precise nature of each problem at the rental unit, when each problem
began, when and how the Ghneims complained to Ghebrehiwet about each problem, or
when, if at all, Ghebrehiwet fixed each problem. Because the Ghneims failed to present
specific proof of their damages, the district court “determined that a percentage rebate
would not be appropriate.” Instead, the district court focused on the three months “in which
the evidence showed the most severe problems.” In September 2012, there was a
“pervasive smell of sewage” in the rental unit, and in January and February 2013, there
was flooding in the rental unit from a leaking roof and “no heat.” The district court
concluded that the Ghneims were “entitled to a rebate of the monthly rent” for those three
months.
Minn. Stat. § 504B.161, subd. 1, does not mandate a particular remedy for breach
of the covenants of habitability. Instead, potential remedies are found in other sections of
chapter 504B that govern landlord-tenant relationships. Minn. Stat. §§ 504B.001-.471
(2014). For example, section 504B.395 generally authorizes a residential tenant of a
residential building to bring an action in district court if the tenant alleges that the building
contains a violation of any of the covenants set forth in section 504B.161, subdivision 1(1)-
(2).1 Minn. Stat. §§ 504B.395, subd. 1(1), .001, subd. 14(2); see generally Minn. Stat. §§
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Similarly, section 504B.385 authorizes a tenant to bring a rent-escrow action to remedy
a violation of the covenants of habitability. Minn. Stat. § 504B.385, subd. 1. If the district
court finds that a violation exists in a rent-escrow action, the court has discretion to “order
relief as provided in section 504B.425, including retroactive rent abatement.” Minn. Stat.
§ 504B.385, subd. 9(a)(1).
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504B.395-.471 (governing tenant-remedies actions). If the tenant prevails in such an
action, the district court may, among other remedies,
find the extent to which any uncorrected violations impair the
residential tenants’ use and enjoyment of the property
contracted for and order the rent abated accordingly. If the
court enters judgment under this paragraph, the parties shall be
informed and the court shall determine the amount by which
the rent is to be abated.
Minn. Stat. § 504B.425(a), (e) (emphasis added).
The emphasized portions of section 504B.425 indicate that the district court must
use a proportionate approach when it retroactively abates rent as a remedy for an
established violation of the covenants of habitability. Thus, Ghebrehiwet’s argument that
the district court erred by failing to calculate damages based on diminution of value is
persuasive. We are not aware of any precedential authority indicating that a tenant is
automatically entitled to retroactive abatement of an entire month’s rent for any month in
which a violation of the covenants of habitability occurred.
As to proof of diminution in value, the statutory covenants of habitability are “made
a part of the lease” by “statutory mandate” rather than by agreement of the parties. Fritz,
298 Minn. at 57-58, 213 N.W.2d at 341. “A lease is a contract. . . .” Amoco Oil Co. v.
Jones, 467 N.W.2d 357, 360 (Minn. App. 1991). A tenant’s claim for damages based on
a breach of the statutory covenants of habitability therefore sounds in contract law. A party
seeking damages for breach of contract must prove the party’s damages by a preponderance
of the evidence. See Wick v. Widdell, 276 Minn. 51, 53-54, 149 N.W.2d 20, 22 (1967) (“In
an ordinary civil action the plaintiff has the burden of proving every essential element of
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his case, including damages by a fair preponderance of the evidence.”). “Generally,
damages need not be proved with absolute certainty nor with mathematical precision.
Sufficient proof must be given, however, to avoid speculative awards.” Bethesda Lutheran
Church v. Twin City Constr. Co., 356 N.W.2d 344, 348 (Minn. App. 1984), review denied
(Minn. Feb. 5, 1985). “While the law most certainly does not require that damages be
calculable with absolute precision, damages must nevertheless be ascertainable with
reasonable exactness and may not be the product of benevolent speculation.” Faust v.
Parrott, 270 N.W.2d 117, 120 (Minn. 1978).
As the district court noted, it is impossible to determine the extent to which
Ghebrehiwet’s violations of the covenants of habitability impaired the Ghneims’ use and
enjoyment of the property because the Ghneims’ testimony “lacked specificity and
documentation.” Because the Ghneims did not meet their burden to prove reasonably
exact, nonspeculative damages, the district court should not have awarded damages. See,
e.g., Kohn v. City of Minneapolis Fire Dep’t, 583 N.W.2d 7, 15 (Minn. App. 1998)
(reversing damages award for harm to reputation because plaintiff’s evidence was too
speculative), review denied (Minn. Oct. 20, 1998). Instead, the district court awarded
$3,300 in damages, which is the entire amount of the rent for the three months in which
the most severe violations occurred. Essentially, the damage award reflects a
determination that the Ghneims did not receive any use and enjoyment from the rental unit
during those months. The record simply does not support such a determination.
Given the record in this case, the only possible justification for the damage award
is reliance on tort law. The district court noted that “[a]t least one court” outside of
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Minnesota “has dealt with the dearth of specific, documentary evidence with an analogy to
tort law.” The district court relied on Tower W. Assocs. v. Derevnuk, in which the court
allowed and determined damages for breach of a covenant of habitability “under a theory
similar to an allowance of damages for ‘pain and suffering’ or mental distress.” 450
N.Y.S.2d 947, 953 (Civ. Ct. 1982). But Minnesota has not endorsed that approach. In fact,
Minnesota law clearly provides that a tort recovery is not allowed on a breach of contract
claim. “[A] party is not responsible for damages in tort if the duty breached was merely
imposed by contract.” Glorvigen v. Cirrus Design Corp., 816 N.W.2d 572, 584 (Minn.
2012) (quotations omitted).
In sum, because the Ghneims failed to meet their burden to prove reasonably exact,
nonspeculative damages resulting from Ghebrehiwet’s breach of the covenants of
habitability, the district court erred by abating three full months of rent as damages. We
therefore reverse the award.
II.
Ghebrehiwet also contends that the district court erred in ordering penalties for his
violations of section 504B.211, which is entitled “residential tenant’s right to privacy” and
provides that “a landlord may enter the premises rented by a residential tenant only for a
reasonable business purpose and after making a good faith effort to give the residential
tenant reasonable notice under the circumstances of the intent to enter.” Minn. Stat. §
504B.211, subd. 2. “If a landlord substantially violates subdivision 2, the residential tenant
is entitled to a penalty which may include a rent reduction up to full rescission of the lease,
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recovery of any damage deposit less any amount retained under section 504B.178, and up
to a $100 civil penalty for each violation.” Minn. Stat. § 504B.211, subd. 6.
This court reviews a district court’s imposition of a civil penalty for an abuse of
discretion. See, e.g., State v. Alpine Air Prods., Inc., 490 N.W.2d 888, 897 (Minn. App.
1992) (concluding that the district court acted within its discretion in ordering statutorily
authorized civil penalty), aff’d on other grounds, 500 N.W.2d 788 (Minn. 1993). The
district court must adequately explain the reasons for its award of a penalty. See, e.g.,
Geske v. Marcolina, 624 N.W.2d 813, 819 (Minn. App. 2001) (remanding conduct-based
attorney fees because district court failed to identify the conduct that justified the award
and whether it occurred during litigation). “A district court abuses its discretion when it
bases its conclusions on an erroneous view of the law.” Miller v. Lankow, 801 N.W.2d
120, 127 (Minn. 2011).
Ghebrehiwet argues that the appropriate penalty for the multiple privacy violations
in this case is $100 because the district court did not “enumerate the separate instances of
the [privacy] violation but merely award[ed] a lump sum.” Ghebrehiwet also argues that
the district court “commit[ted] reversible error when it [made] lump sum awards of twenty
three times the statutory limit for one instance of a violation of a residential tenant’s right
to privacy.”
The district court awarded the Ghneims a total of $3,300 in penalties for
Ghebrehiwet’s violations of their statutory right to privacy. The district court explained
that $1,000 of the award is based on “[Ghebrehiwet’s] multiple violations of subdivision 2
that occurred before [the Ghneims] complained.” This penalty is authorized so long as the
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record sustains a finding that Ghebrehiwet “substantially violated” section 504B.211,
subdivision 2, ten times. See Minn. Stat. § 504B.211, subd. 6 (authorizing a “$100 civil
penalty for each violation”).
The district court did not support its imposition of the $1,000 penalty with factual
findings describing ten individual violations. However, the district court determined that
“[Ghebrehiwet] repeatedly violated Minnesota Statutes section 504B.211, subdivision 2,”
noting that “[t]he testimony of Mr. Ghneim and especially Ms. Ghneim were quite
persuasive [regarding] this issue.” Mr. Ghneim testified that Ghebrehiwet “[came] every
day, every single day” to the rental unit and estimated that Ghebrehiwet was there “over a
hundred time[s].” Ms. Ghneim testified that Ghebrehiwet “came almost every day, or
almost every other day.”
Based on this testimony, the district court concluded that “[the Ghneims] proved
substantially more than 10 substantial violations” of their right to privacy under Minn. Stat.
§ 504B.211, subd. 2. (Emphasis added.) However, the district court limited the penalty
for the violations to $1,000, reasoning that Ghebrehiwet’s “[compliance] with the notice
requirement once [the Ghneims] demanded that he follow the law in that respect” is a
mitigating circumstance. Because the district court found that the Ghneims proved at least
ten substantial violations of their right to privacy under Minn. Stat. § 504B.211, subd. 2,
and the record supports that finding, the district court did not abuse its discretion by
awarding an aggregate civil penalty of $1,000.
The district court awarded the Ghneims an additional $2,300 penalty based on a
“Bedroom Incident.” During that incident, Ghebrehiwet entered the master bedroom of
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the rental unit without permission, caused Ms. Ghneim to wake up and “suffer the shock
of finding [Ghebrehiwet] and another male within feet of her.” Ghebrehiwet ignored
Ms. Ghneim’s demand that he and his companion leave immediately. Instead, they
remained in the bedroom even after Ms. Ghneim’s son entered the room and ordered them
to leave. Based on those facts, the district court concluded that this event was an “egregious
violation” of Ms. Ghneim’s privacy. The district court reasoned that “[i]t is hard to imagine
any more egregious violation of a woman tenant’s privacy rights without contemplating a
physical assault.” We agree.
The $2,300 award for the “Bedroom Incident” is comprised of (1) a $1,100 rent
reduction for the month in which the “Bedroom Incident” occurred, (2) recovery of the
Ghneims’ $1,100 damage deposit, and (3) the maximum statutory civil penalty of $100.
Section 504B.211 specifically authorizes those amounts. See Minn. Stat. § 504B.211,
subd. 6 (“If a landlord substantially violates subdivision 2, the residential tenant is entitled
to a penalty which may include a rent reduction up to full rescission of the lease, recovery
of any damage deposit less any amount retained under section 504B.178, and up to a $100
civil penalty for each violation.”). Because Minn. Stat. § 504B.211, subd. 6, allowed the
district court to award a full rent reduction, recovery of the damage deposit, and a civil
penalty of $100, and because the district court adequately explained why those remedies
are appropriate, the district court did not abuse its discretion in awarding the Ghneims a
penalty of $2,300 for the “Bedroom Incident.”
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In sum, the district court’s award of $3,300 in penalties for Ghebrehiwet’s violations
of the Ghneims’ right to privacy under Minn. Stat. § 504B.211, subd. 2, is not an abuse of
discretion.
Conclusion
Because the Ghneims did not meet their burden to prove reasonably exact,
nonspeculative damages stemming from Ghebrehiwet’s violation of the covenants of
habitability, we reverse the district court’s award of damages for the Ghneims in the
amount of $3,300. But because the district court’s $3,300 penalty for Ghebrehiwet’s
violation of the Ghneims’ privacy rights is not an abuse of discretion, we affirm the penalty.
We remand for entry of an amended judgment consistent with this opinion.
Affirmed in part, reversed in part, and remanded.
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