Property II, Pages 494–497

Frenchtown Square Partnership v. Lenstone, Inc.

Supreme Court of Ohio, July 23, 2003

Facts:

Plaintiff owns a mall and leased store space to defendant for a period of ten years. Plaintiff then leased other mall space to Alpha Gifts, a business that sold items similar or identical to products sold by defendant. This competition reduced defendant's profitability to the point where it could no longer pay its rent. About six months before its lease expired, defendant abandoned the leased store. Defendant did not pay plaintiff for the remaining balance, and plaintiff did not relet the property. Plaintiff sued for for rent due, incidental fees, and taxes.

Defendant's Argument:

Plaintiff failed to mitigate its damages.

Procedural History:

  • Trial court granted summary judgment in plaintiff's favor.

  • The appeals court affirmed in part, but held that plaintiff, as a commercial lessor, had a duty to mitigate damages.

Issue:

LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 255 (not in casebook)

[W]hether a landlord has a duty to mitigate damages caused by a tenant who breaches a commercial lease and abandons the leasehold.

Plaintiff's Argument:

Imposing a duty to mitigate on commercial leases would encourage tenants to abandon property.

Reasoning:

Under common law, a lessor did not have an obligation to mitigate because leases were viewed as transfers of property interests. Under contract law, a lessor does have a duty to mitigate. Modern leases are more than simply property-interest transfers. They often include many other duties. Therefore, a duty to mitigate damages applies to all leases unless provided otherwise. No valid reason to exempt commercial leases is given.

Rule/Holding:

Landlords owe a duty to mitigate damages applies to all leases unless provided otherwise.

Judgment:

Affirmed and remanded on the question of mitigation and damages.

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