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Reid v.

Mutual of Omaha Insurance Company

• Mutual (D) appeals from judgement in nonjury trial finding it liable to Reids (P)
• D contents trCt erred in rejecting its claim that Ps had constructively evicted Mutual and that it
also erred in calculating damages due the Reids.
• Mutual, as tenant, and Reids , a landlord, entered a 5 year lease agreement for office space at a
monthly rate of $1,100.
• Lease was to end Oct. of 1985
• Mutual took possession of property and used it for insurance sales business.
• Soon after, another tenant moved into the next door property
• The other tenant, Intermountain marketing, operated doore to door cookware sales business and
• Made lots of noise, took up all of Mutual's parking spaces, interfered with Mutual's business
• Mutual reported this to the Reids, but felt the Reids did not respond adequately
• Mutual vacated and Reids filed suit.
• Reids want value of lease for three and a half year term remaining in the lease.
• Mutual claims CONSTRUCTIVE EVICTION, b/c Reids failure to control activities of
neighbor.
• IM took up the space for a rent comparable to what Mutual would have paid. However, in
1982, IM vacated and declared bankrupcy.
• TRCT awarded Reids total unpaid rents, included those during litigation, less rents received by
IM, plus cost of attorneys fees.
• Mutual contends it only owes damages from start of lease until the time that IM rented.

HOLDING: affirmed liability for breach but reverse in part determination of damages.
ISSUE:
• Whether Reids gave constructive eviction
• Whether Utah law imposes a duty upon landlords to mitigate damages by reletting
premises after a tenant has wrongfully vacated and defaulted on the covenant to pay
rent.

RULE:
1. “surrender and acceptance”: Under this doctrine, hen a tenant surrenders the premises to
a landlord bf lease expires, and landlord accepts surrender, tenant is no longer has no
obligation for any rents accruing after the date of acceptance.
2. NEW RULE: landlord who seeks to hold a breaching tenant liable for unpaid rents has
an obligation to take commercially reasonable steps to mitigate its losses. Usually
means landlord must relet premises.

REASONING:
1. At CL, Reid's acts were not conclusive evidence of a surrender.
2. Court looks to
1. Traditional rule: landlord not required
2. Trend rule: landlord has some obligation to relet.
Justification for Trad Rule (1)
• can be easily obviated
• Trend has some concern that breaching party should not be able to force its landlord to seek
other tenants on pain of losing bargained for rents.
• Unfairness eliminated.
• Stems from ancient property law concepts
◦ However, these are no longer consonat with most modern landlord tenant relationships
Court adopts TREND RULE
• Policy reasons.