Amoco Oil Co. v. Jones
1991 Minn. App. LEXIS 263, 467 N.W.2d 357, 1991 WL 34648 (1991)
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Rule of Law:
A general covenant in a lease requiring a lessee to keep property in good repair and surrender it in as good condition as received does not obligate the lessee to rebuild a structure destroyed or substantially damaged by fire without the lessee's fault. The lease must be interpreted as a contract to ascertain the parties' intent, and any ambiguity is construed against the drafter.
Facts:
- Llewellan K. Jones had leased and operated a gas station from Amoco Oil Company since 1968.
- On October 26, 1984, the parties entered a standard form lease provided by Amoco with minimal negotiation.
- The lease required Jones to keep the premises in 'good repair' and surrender them in 'substantially as good condition as when received, ordinary wear and tear excepted.'
- The lease also contained a clause allowing Amoco to terminate the lease upon 'Destruction of all or a substantial part of the Premises.'
- On December 24, 1985, a fire broke out, causing substantial damage and destruction to the station.
- Neither Jones nor Amoco was negligent or otherwise at fault in causing the fire.
- Following the fire, Amoco terminated the lease due to the property's destruction.
- After terminating the lease, Amoco leveled the remaining structure.
Procedural Posture:
- Amoco Oil Company sued Llewellan K. Jones in the trial court for breach of the lease.
- The case proceeded to a jury trial.
- At the close of Amoco's evidence, Jones moved for a directed verdict.
- The trial court granted the motion for a directed verdict in favor of Jones, finding he did not breach the lease.
- The trial court entered a final judgment for Jones.
- Amoco, as the appellant, appealed the trial court's judgment to the intermediate appellate court.
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Issue:
Does a general repair and delivery covenant obligate a lessee to rebuild property destroyed or substantially damaged by fire, where the lessee is not at fault?
Opinions:
Majority - Judge Edward D. Mulally
No. A general repair and delivery covenant does not obligate a lessee to rebuild property substantially destroyed without the lessee's fault. The court rejected the common law rule that imposed such an obligation, viewing it as 'arbitrary and outdated.' Instead, the court held that a lease should be interpreted as a contract according to its plain language to determine the parties' intent. Here, the lease was a standard form drafted by Amoco and must be construed against it. The language requiring 'upkeep and maintenance' does not equate to an obligation to rebuild. Furthermore, the clause allowing Amoco to terminate the lease upon the property's destruction and then granting Jones a right of first refusal if Amoco chose to rebuild suggests the parties contemplated that Amoco, not Jones, would bear the risk of rebuilding. Amoco presented no evidence that the parties intended for Jones to assume the risk of loss by fire.
Analysis:
This decision marks a significant departure from the old common law rule, aligning the jurisdiction with the modern trend of treating leases as contracts rather than as conveyances of land. It establishes that the extraordinary burden of rebuilding after a casualty loss will not be imposed on a tenant based on a general repair clause alone. For such a duty to exist, it must be explicitly and unambiguously stated in the lease. This places the onus on landlords who draft standard form leases to be very clear if they intend to shift the risk of destruction to the tenant, offering greater protection to commercial lessees from unforeseen liabilities.
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