Reid v. Mutual of Omaha Insurance Company and United Benefit Life Insurance Company, Supreme Court of Utah---776 P.2d 896
Facts
Mutual of Omaha Insurance Company (defendant) rented a premise from Reid (plaintiff). The problem started to arise when a company called Intermountain Marketing moved into the premise next to the defendant. Intermountain constantly made excessive noises which made the defendant unable to focus on their business. The defendant requested the plaintiff some action to cease the noise, but no action was taken. The defendant moved out of the place before the lease expired, and the plaintiff sued the defendant for breach of contract.
Issue
In an action of breach of lease contract, is a landlord required to exercise reasonable effort to relet the premise in the remaining of lease term?
Rules
Schneiker v. Gordon (mitigation trend rule)
The economies of both the state and the nation benefit from a rule that encourages the reletting of premises, which returns them to productive use, rather than permitting a landlord to let them sit idle while it seeks rents from the breaching tenant.
Application
First, the court concluded that the defendant’s act of vacating the premises does not establish constructive eviction because certain necessary steps were not taken. As a following argument in decreasing damages the defendant will be entitled to, they claimed that the plaintiff has an active duty to mitigate damages by releasing the premises to a third party. The court agreed with imposing such a duty. In Schneiker v. Gordon, or mitigation trend rule, even if the premise was vacated at the fault of the tenant by obligating the landlord to relet the place it would economically benefit both the state and the nation. Here, the plaintiff indeed mitigated their damages by reletting the premise. Thus, the rents received from reletting should be deducted from the total damages that the defendant will be obligated to pay.
Holding
Yes, the landlord has a duty to mitigate the damages by reletting the premise.
Conclusion
Affirmed of liability for breach of the lease, reversed in part on the determination of damages.
Feedback and notes
The traditional rule does not require a mitigation duty to the landlord. In some sense, this reasoning is understandable because the landlord is the injured party- it might seem harsh to impose such a duty to reduce its future damages. However, the court recognized the necessity of imposing mitigation duty because by obligating the landlord, the state and the nation, even the landlord himself would economically benefit from the transaction. But this does not mean the breaching party would go scot-free. The expenses accrued during the reletting process, such as remodeling, would be included to the total damages calculation.