NO. 94-388
IN THE SUPREME COURT OF THE STATE OF MONTANA
1995
JEFFREY KREGER and
LEA ANN KREGER,
Plaintiffs and Respondents,
-v-
DANIEL FRANCIS and
CHRISTINA L. FRANCIS,
Defendants and Appellants.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable Joel Roth, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Robert M. Kampfer, Great Falls, Montana
For Respondents:
Joan E. Cook, Miller & Cook, Great Falls, Montana
Submitted on Briefs: March 23, 1995
Decided: June 15, 1995
Filed:
Justice Fred J. Weber delivered the Opinion of the Court
This is an appeal from a decision of the Eighth Judicial
District Court, Cascade County granting judgment in favor of
Jeffrey Kreger and Lea Ann Kreger for reasonable attorney's fees
and costs incurred. We reverse.
We restate the issue on appeal:
Did the District Court err when it ruled Jeffrey and Lea Ann
Kreger did not waive their rights to terminate a lease for Daniel
and Christina Francis' breach of the terms of the lease when
Jeffrey and Lea Ann Kreger accepted full payment of rent?
On August 1, 1993, appellants, Daniel Francis and Christina
Francis (Renters) entered into a written rental agreement with
respondents, Jeffrey Kreger and Lea Ann Kreger (Landlords). The
lease was for a term of six months and included the following
provision:
9. We agree to obtain renters insurance for all property
leased to us before moving into premises.
Renters applied for and obtained a policy of renters insurance
on their belongings at the rented address. The policy of renters
insurance was subsequently cancelled by the insurance company,
effective October 1, 1993, because the Renters had a bad credit
rating. Renters were unable to obtain further coverage.
On October 1, 1993, Landlords sent to Renters a 30 day Notice
to Quit and Notice Terminating Rental Agreement which referenced
the fact Renters were unable to obtain renters insurance as
required by Section 9 of the Lease Agreement. The Landlords sent
2
another notice to Renters on October 16, 1993, in the event the
prior notice was premature given that Renters had until the end of
the day, October 1, 1993, before their coverage terminated.
Renters refused to vacate the premises at the end of the 30 day
period. So, Landlords filed a cause of action for possession in
the Justice Court.
Landlords accepted $600.00 on or about the first day of each
month the Renters remained in possession -- October, November and
December of 1993. Renters vacated the premises at the end of
December 1993, after the first trial in Justice Court.
The Justice Court ruled in favor of the Landlords and awarded
costs and attorney's fees in the amount of $452.50 to the
Landlords. Renters appealed to District Court and a de nova bench
trial was conducted on June 14, 1994. On June 28, 1994, the
District Court entered judgment for Landlords and against Renters
concluding acceptance of the monthly rent from Renters by Landlords
did not waive Landlords' right to terminate the Rental Agreement
for the Renters' failure to obtain renters insurance. The District
Court awarded costs and attorney's fees to Landlords.
From the District Court's June 28, 1994 decision, Renters
appeal.
Did the District Court err when it ruled Jeffrey and Lea Ann
Kreger did not waive their rights to terminate a lease for Daniel
and Christina Francis' breach of the terms of the lease when
Jeffrey and Lea Ann Kreger accepted full payment of rent?
The District Court found that the rent was paid current as of
3
the date the Renters vacated the premises. The court concluded the
following as a matter of law:
3. Acceptance of the monthly rent from Tenants [Renters]
by the Landlord did not waive their right to terminate
the Rental Agreement for the Tenants' [Renters'] failure
to obtain Renters Insurance. Acceptance of the payment
of rent is a waiver of a claimed breach of a Rental
Agreement, only if that claimed breach is the nonpayment
of rent. Section 70-24-423, MCA.
The court's interpretation of § 70-24-423, MCA, is at issue.
Section 70-24-423, MCA states the following:
Waiver of landlord's right to terminate for breach.
Acceptance by the landlord of full payment of rent due
with knowledge of a tenant's default or acceptance by the
landlord of a tenant's performance that varies from the
terms of the rental agreement constitutes a waiver of the
landlord's right to terminate the rental agreement for
that breach unless otherwise agreed after the breach has
occurred. The acceptance of partial payment of rent due
does not constitute a waiver of any right.
Renters point out Landlords accepted full, current monthly
rental payments from Renters for three months after the expiration
of the renters insurance policy. Renters allege there was never an
arrearage of rent and there was never any understanding other than
that the payments were made for the current month's rent. Renters
argue the plain language of 5 70-24-423, MCA, provides acceptance
of rent constitutes a waiver of any breach known to the landlord.
Here, Landlords knew Renters' breached Section 9 of the lease prior
to accepting rent. Therefore, Landlords waived this breach when
they accepted full payment of rent and, thus, had no basis to evict
Renters.
Renters conclude the District Court erred in awarding costs
and fees to Landlords because Landlords had no grounds to bring an
4
eviction suit against Renters. Renters request this Court reverse
the District Court's judgment and award costs and fees to Renters.
Landlords argue they did not waive any breach by accepting the
rent due and the District Court came to the correct conclusion of
law. At no time did they agree the provision of renters insurance
was waived. Landlords contend all of their conduct indicates they
did not accept the varied performance of the Renters and that they
intended to treat the varied performance as a default.
Landlords argue, according to Renters' analysis, all landlords
must refuse payment of rent or else they forgo remedies for a
breach. Additionally, Landlords contend that a proffered payment
of rent must be accepted by the landlord under the landlord's duty
to mitigate damages.
Our standard of review of the District Court's conclusion of
law is to determine if the District Court's interpretation of the
law is correct. Steer, Inc. v. Department of Revenue (1990), 245
Mont. 470, 474-475, 803 P.Zd 601, 603-604.
We have held, "where the language of the statute is plain,
unambiguous, direct, and certain, the statute speaks for itself."
State ex rel. Palmer v. Hart (1982), 201 Mont. 526, 530, 655 P.2d
965, 967. The language of § 70-24-423, MCA, is clear --
"[alcceptance by the landlord of full payment of rent due with
knowledge of a tenant's default . . . constitutes a waiver of the
landlord's right to terminate the rental agreement for that breach.
. 'I (Emphasis added.) We cannot insert limiting language where
none exists. Section l-2-101, MCA; Palmer, 655 P.2d at 969.
5
Landlords accepted the rent on the first day of the month to
which it would be applied. We hold that, for each month where
Landlords accepted full rent, Landlords waived their right to
terminate the lease for failure to obtain renters insurance.
The District Court's interpretation of 5 70-24-423, MCA, was
incorrect. We conclude the District Court erred when it ruled
Landlords did not waive their rights to terminate a lease for
Renters' breach of its terms when Landlords accepted full payment
of rent.
Renters have requested costs and attorney's fees be awarded to
them. Attorney's fees are awarded by statute or by contract.
Joseph Russell Realty Co. v. Kenneally (19801, 185 Mont. 496, 505,
605 P.Zd 1107, 1112. Neither the Lease/Rental Agreement nor
relevant statute grants an award of attorney's fees to Renters.
Therefore, none will be awarded here.
The judgment awarding attorney's fees and costs to Landlords
is reversed.
We Concur:
6
Justice Terry N. Trieweiler dissenting.
I dissent from the majority opinion. I would affirm the
District Court's conclusion that:
Acceptance of the payment of rent is a waiver of a
claimed breach of a Rental Agreement, only if that
claimed breach is the nonpayment of rent. Section
70-24-423, MCA.
To conclude, as the majority has, that acceptance of rent
waives some breach other than nonpayment of rent, will lead to
absurd results, is contrary to other provisions in the Landlord and
Tenant Act, and is obviously contrary to the intention of the
Legislature.
The majority opinion refers to 5 l-Z-101, MCA, selectively.
That section also provides that several provisions of a legislative
act are to be construed so as to give effect to all. Furthermore,
§ l-Z-102, MCA, provides in part that "[iln the construction of a
statute, the intention of the legislature is to be pursued if
possible." The majority opinion satisfies neither of these
statutory directives.
In construing § 70-24-423, MCA, we must look at all of its
terms and not isolate any particular phrase. Only by doing so can
the obvious purpose of the statute be accomplished and absurd
results avoided.
When § 70-24-423, MCA, is examined in its entirety, and in the
context of the entire Landlord and Tenant Act, it is apparent that
the Legislature intended that a landlord's acceptance of
performance by a tenant in some manner that deviated from the
8
literal requirements of the rental agreement would constitute a
waiver of the literal requirements. For example, if late payments
are accepted, then late payments cannot provide the basis for
termination of the contract. However, precluding a landlord from
accepting rental payments as a condition to enforcing unrelated
terms of the contract, ignores that statutory requirement found at
5 70-24-401(l), MCA, that a landlord has "a duty to mitigate
damages." It has the effect of punishing a landlord twice where a
tenant breaches a rental agreement in some manner other than by
nonpayment of rent.
For example, where rental property is repeatedly damaged by a
tenant, contrary to a contractual provision that it be maintained
in good condition, a landlord would have to forego future rental
payments during the potentially lengthy time it may take to evict
the tenant for property damage. Not only does the landlord in that
situation sustain property damage, but also the income which may be
necessary to satisfy the landlord's own financial obligations with
regard to the property. Surely, this was never the Legislature's
intention. Obviously this result is contrary to the statutory
requirement that a landlord mitigate his or her damage. For these
reasons, I would affirm the District Court's conclusion that
acceptance by the landlord of payment of rent waives a tenant's
default only when that default is based on failure to pay rent.
stice
9
Chief Justice J. A. Turnage and Justice William E. Hunt, Sr., join
in the foregoing dissenting opinion.
Justice
10
Jmie 1.5, 1995
CERTIFICATE OF SERVICE
I hereby certify that the following certified order was sent by United States ma il, prepaid,
to the following named:
Robert M. Kampfer
Attorney at Law
P.O. Box 1946
Great Falls, MT 59403-1946
Joan E. Cook, Esq.
Miller & Cook
600 Central Plaza, Ste. 300
Great Falls, MT 59401
ED SMITH
CLERK OF THE SUF’REME COURT
STATE OF MONTANA