Michael A. Knight v. Sean K. McGinity

STATE OF MINNESOTA
IN COURT OF APPEALS
A14-1667
Michael A. Knight,
Appellant,
vs.
Sean K. McGinity,
Respondent.
Filed August 10, 2015
Affirmed in part, reversed in part, and remanded
Schellhas, Judge
Hennepin County District Court
File No. 27-CV-13-7064
Jared M. Goerlitz, PFB Law, PA, St. Paul, Minnesota (for appellant)
Sean K. McGinity, Rahway, New Jersey (pro se respondent)
Considered and decided by Larkin, Presiding Judge; Schellhas, Judge; and Reyes,
Judge.
SYLLABUS
In a month-to-month residential lease with no definite term and a right of both
parties to terminate the lease with 45 days’ written notice, a clause prohibiting the parties
from giving notice that would result in a lease termination during specified months each
year does not constitute an automatic renewal clause subject to Minn. Stat. § 504B.145
(2014).
OPINION
SCHELLHAS, Judge
In this landlord-tenant dispute, appellant challenges the judgment, arguing that the
district court erred by concluding that the parties’ written lease did not govern their rental
arrangement. Appellant also challenges the court’s denial of his motion for sanctions
under Minn. R. Civ. P. 37.03(b). We affirm in part, reverse in part, and remand.
FACTS
On December 13, 2001, respondent Sean McGinity signed a written lease for an
apartment in a rental property owned by Bill Frothinger. The lease was “month to month”
with no expiration date; required a $525 security/damage deposit, a monthly rent
payment of $525, and 45 days’ notice of termination; and contained the following
handwritten clause: “No notice to move out between Nov. 1 & Feb. 28 or 29” (no-move-
out clause). In January 2004, appellant Michael Knight purchased the rental property, and
Frothinger assigned the lease and the deposit to Knight.
In the summer of 2005, Knight presented McGinity with a new lease that would
have increased the monthly rent to $540. McGinity did not sign the new lease but
increased his monthly rent payments to $535. On or about December 15, 2005, McGinity
notified Knight of his intent to vacate the apartment by January 31, 2006, but instead
remained in the apartment and continued to pay rent. In late November or early
December of 2006, McGinity notified Knight that he was vacating the apartment and
vacated it. McGinity paid rent for November 2006, but he did not pay rent for December
2006, January 2007, or February 2007. Knight discovered that McGinity had damaged a
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wall in the apartment, that the apartment needed cleaning, and that McGinity’s
abandoned personal property required removal. Knight did not re-lease the apartment
until after February 2007, and he sued McGinity in conciliation court in February 2013,
seeking rent for December 2006, January 2007, and February 2007; late fees; and
damages for repair, cleaning, and removal costs. Following the conciliation court’s ruling
against him, Knight removed the case to district court.
Knight conducted discovery in district court, including a request under Minn. R.
Civ. P. 36.01 that McGinity admit that he did not pay rent for December 2006, January
2007, and February 2007. McGinity responded, “To the best of my recollection I paid
rent for December 2006. I was not obligated to pay rent for January and February 2007.”
But at the subsequent bench trial, McGinity admitted that he did not pay rent for
December 2006.
The district court concluded that the parties’ rental arrangement “was a month-to-
month rental not governed by any valid written lease”; that Knight was entitled to rent for
December 2006, which Knight recovered by retaining McGinity’s security deposit; that
McGinity was not liable for January or February 2007 rent; and that Knight failed to
prove that he was owed late fees at $5 per day. The court acknowledged that the written
lease provided that Knight was entitled to “attorney’s fees and other costs of a legal
action,” but awarded Knight neither. Knight moved for amended findings and for
sanctions under Minn. R. Civ. P. 37.03(b), due to McGinity’s failure to admit, among
other things, that he did not pay rent for December 2006. The court amended its findings
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and ruled that Knight was entitled to rent for January 2007 but denied Knight’s motion
for sanctions under rule 37.03(b).
This appeal follows.
ISSUES
I. Did the district court err by concluding that the written lease was invalid and did
not govern the parties’ rental arrangement?
II. Did the district court abuse its discretion by denying Knight’s motion for sanctions
under Minn. R. Civ. P. 37.03(b)?
ANALYSIS
I. The district court erred by concluding that the written lease was invalid and
did not govern the parties’ rental arrangement.
The district court denied Knight rent for February 2007, concluding that the no-
move-out clause was tantamount to an automatic renewal clause subject to a notice
requirement under Minn. Stat. § 504B.145 (2014).1 Because Knight did not provide that
notice, the court concluded that the parties’ rental arrangement “resort[ed] to a standard
month-to-month lease with a 30 day notice.” Knight argues that the no-move-out clause
was not an automatic renewal clause subject to Minn. Stat. § 504B.145. We agree.
“[Appellate courts] review the interpretation of a statute de novo.” Seagate Tech.,
LLC v. W. Digital Corp., 854 N.W.2d 750, 757 (Minn. 2014). “The goal of statutory
interpretation is to effectuate the intent of the Legislature.” Staab v. Diocese of St. Cloud,
853 N.W.2d 713, 716 (Minn. 2014). “If the Legislature’s intent is clear from the
1
We apply the most recent version of the statute in this opinion because it has not been
amended in relevant part. See Interstate Power Co. v. Nobles Cnty. Bd. of Comm’rs, 617
N.W.2d 566, 575 (Minn.2000) (stating that, generally, “appellate courts apply the law as
it exists at the time they rule on a case”).
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unambiguous language of the statute, [appellate courts] apply the statute according to its
plain meaning.” Id. at 716–17.
“[L]eases are contracts to which [appellate courts] apply general principles of
contract construction.” RAM Mut. Ins. Co. v. Rohde, 820 N.W.2d 1, 14 (Minn. 2012).
“Contract interpretation is . . . a question of law that [appellate courts] review de novo.”
City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, 843 N.W.2d 577, 581
(Minn. 2014). “[L]eases should be construed so as to give effect to the intention of the
parties.” Snyder’s Drug Stores, Inc. v. Sheehy Props., Inc., 266 N.W.2d 882, 884 (Minn.
1978). “Great weight should be given to the intention of the parties regarding the purpose
of the lease.” Orme v. Atlas Gas & Oil Co., 217 Minn. 27, 30, 13 N.W.2d 757, 760
(1944).
Section 504B.145 provides:
Notwithstanding the provisions of any residential
lease, in order to enforce any automatic renewal clause of a
lease of an original term of two months or more which states,
in effect, that the term shall be deemed renewed for a
specified additional period of time of two months or more
unless the tenant gives notice to the landlord of an intention to
quit the premises at the expiration of the term due to expire,
the landlord must give notice to the tenant as provided in this
section. The notice must be in writing and direct the tenant’s
attention to the automatic renewal provision of the lease. The
notice must be served personally or mailed by certified mail
at least 15 days, but not more than 30 days prior to the time
that the tenant is required to furnish notice of an intention to
quit.
Here, the written lease was not for an original term of two months or more; the lease
plainly stated that it was month-to-month. And nothing in the no-move-out clause
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provided that the lease would renew for a specified period of two months or more unless
McGinity gave notice to Knight of his intent “to quit the premises at the expiration of the
term due to expire.” Rather, the no-move-out clause specified winter months during
which neither party could give notice to terminate the lease. Frothinger testified that he
typically included the no-move-out clause in leases because of his difficulty in finding
tenants to move in during the winter months due to the cold weather and holidays. He
also explained that tenants had difficulty finding parking spots for moving vans in the
winter months. Nothing in the record suggests that the no-move-out clause was intended
to automatically renew the lease upon McGinity’s failure to give notice of his intent to
quit the premises. We conclude that the no-move-out clause in the written lease did not
constitute an automatic renewal clause subject to section 504B.145 and that the district
court therefore erred by denying Knight rent for February 2007.
The district court also denied Knight late fees, attorney fees, and costs, concluding
that “[b]y increasing the rent and thus changing the terms of the Original Lease, the
Original lease is no longer valid and the terms of the agreement . . . are those of the
standard month-to-month lease.” Knight argues that the unchanged terms of the written
lease remained in effect. We agree.
“[A] written contract may be modified after its execution by the acts and conduct
of the parties . . . .” Wormsbecker v. Donovan Constr. Co., 247 Minn. 32, 41, 76 N.W.2d
643, 649 (1956). The supreme court has stated that “when a contract is modified by
consent of the parties it consists thereafter of the new terms and of all of the old ones
which were not changed, and . . . a subordinate and separable part of a contract may
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always be modified by the parties without a cancellation or avoidance of the whole
contract.” First Nat’l Bank v. St. Anthony & Dakota Elevator Co., 171 Minn. 461, 465,
214 N.W. 288, 289 (1927) (emphasis added); cf. Merickel v. Erickson Stores Corp., 255
Minn. 12, 16, 95 N.W.2d 303, 306 (1959) (“A rescission—or so-called abandonment—
by mutual agreement of a single provision of a contract is a modification or an
amendment without a cancellation or a voidance of the contract as a whole.” (emphasis
omitted)).
Here, Knight and McGinity agreed to an increase in rent around the summer of
2005. McGinity paid, and Knight accepted, increased rent from that time until November
2006, reflecting the parties’ agreement to modify the monthly rent payment. No evidence
in the record suggests that the parties cancelled the written lease. The unchanged terms of
the written lease therefore governed the parties’ rental arrangement.
The written lease provided that Knight was entitled to $5 per day “if [McGinity]
does not pay the full rent by the fifth day of the month in which it is due.” Because we
have concluded that the written lease governed the parties’ rental arrangement, Knight is
entitled to recover late fees from McGinity. The district court noted that any late fees
owed to Knight would be limited to 8% of the rent amount under Minn. Stat. § 504B.177.
But Minn. Stat. § 504B.177 became effective January 1, 2011, and applies to “leases
entered into or renewed on or after that date.” 2010 Minn. Laws ch. 315, § 5, at 852.
Here, the parties neither entered into nor renewed the written lease on or after January 1,
2011. Consequently, section 504B.177 is inapplicable to the written lease and does not
limit the late fees that Knight may recover.
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The written lease allowed Knight to recover “actual attorney’s fees and other
costs” if and when he “initiate[d] any legal action against [McGinity].” Because we have
concluded that the written lease governed the parties’ rental arrangement, Knight is
entitled to recover his attorney fees and costs incurred in the proceeding.
We reverse the district court’s order denying Knight rent for February 2007, late
fees, attorney fees, and costs. On remand, the district court must determine the late fees,
attorney fees, and costs to which Knight is entitled.
II. The district court did not abuse its discretion by denying Knight’s motion for
sanctions under Minn. R. Civ. P. 37.03(b).
The district court denied Knight’s motion for sanctions under rule 37.03(b),
reasoning that “[McGinity] had reasonable ground to believe that he might prevail on the
issue of whether he paid rent in December 2006” in light of “the significant passage of
time and the reality that memories fade.”
We review a district court’s award or denial of sanctions under rule 37.03(b) for
an abuse of discretion. See Indep. Sch. Dist. No. 404 v. Castor, 670 N.W.2d 758, 765
(Minn. App. 2003) (applying abuse-of-discretion standard of review to denial of
sanctions under rule 37.03); Zurich Reinsurance (UK) Ltd. v. Canadian Pac. Ltd., 613
N.W.2d 760, 765–66 (Minn. App. 2000) (applying abuse-of-discretion standard of review
to award of sanctions under rule 37.03), review denied (Minn. Sept. 26, 2000).
Rule 37.03(b) provides:
If a party fails to admit . . . the truth of any matter as
requested pursuant to Rule 36, and if the party requesting the
admissions thereafter proves . . . the truth of any such matter,
the requesting party may apply to the court for an order
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requiring the other party to pay the reasonable expenses
incurred in making that proof, including reasonable attorney
fees. The court shall make the order unless it finds that . . . the
party failing to admit had reasonable ground to believe that
the party might prevail on the matter . . . .
Knight argues that McGinity did not have a reasonable ground to believe he might
prevail because he did not make a reasonable inquiry into the information known to or
readily obtainable by him, as required by rule 36.01. McGinity admitted that he did not
investigate the matter before answering the request for admission and that he had no
evidence that he paid rent for December 2006. And on cross-examination, McGinity
testified:
I am clearly openly admitting after going back through things
and looking through emails from family—I finally looked at
emails from family. I was out of there at the end of
November. And my feeling and my recollection to the best,
you know, is that I paid my last month’s rent and he kept my
security deposit.
Knight proved that McGinity did not pay rent for December 2006. But Knight’s argument
fails because he points to nothing in the record that suggests McGinity’s failure to admit
he did not pay rent for December 2006 was vexatious or in bad faith. See Davies &
Davies Agency, Inc. v. Davies, 298 N.W.2d 127, 132 (Minn. 1980) (agreeing with district
court that no evidence in record showed that refusal to make admissions was
unreasonable or in bad faith); cf. Gilchrist v. Perl, 387 N.W.2d 412, 418–19 (Minn. 1986)
(concluding that sanctions against defendants were warranted where their “answer was
vexatious, and defendants ha[d] offered no good reason for their failure to admit”).
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Although we may have decided Knight’s motion for sanctions differently, we defer to the
district court’s discretion in denying Knight sanctions against McGinity.
DECISION
The district court erroneously concluded that the written lease was invalid and did
not govern the parties’ rental arrangement and therefore erred by denying Knight rent for
February 2007, late fees, attorney fees, and costs. The district court did not abuse its
discretion by denying Knight’s motion for sanctions under rule 37.03(b).
Affirmed in part, reversed in part, and remanded.
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