## Facts

- Landlords Arthur and Ruby Ruud leased Fargo, North Dakota commercial property to Raymond and Yvonne Larson, who operated a car wash and gasoline outlet on the premises.
- The parties entered a renewed ten-year lease in 1976 requiring Larson to pay rent and real estate taxes, maintain liability insurance, and keep the premises in good repair.
- Larson defaulted, including late or unpaid rent beginning in early 1982 and nonpayment of real estate taxes required under the lease.
- After trial, the district court found multiple breaches, including unpaid taxes for 1981–1984 and part of 1985, unpaid rent totaling $24,500, failure to maintain liability insurance, and failure to keep the premises in good repair.
- Larson sought a sublessee and later entered an arrangement with a third party purchaser of business assets (after the tenant’s business entered bankruptcy) in which Larson agreed to pay tax arrearages.
- After Larson vacated, Ruud repaired the property and marketed it for reletting, including advertising that generated approximately 140 contacts and 50 prospective tenants.
- The lease contained an attorney’s-fees clause for enforcement litigation; the trial court awarded attorney’s fees to Ruud.

## Issues

1. Whether the district court clearly erred in finding that Ruud made a good faith, reasonably diligent effort to mitigate damages by attempting to relet the premises after Larson’s default.

## Decision

- The North Dakota Supreme Court affirmed the judgment.
- The court held the finding that Ruud made diligent, good faith mitigation efforts was not clearly erroneous.
- Because Larson did not prove lack of good faith mitigation, the damages and attorney’s-fees award to Ruud were upheld.

## Legal Principles

- After a tenant’s default, a landlord has a duty to mitigate damages by making a good faith effort, with reasonable effort and diligence, to relet the property.
- The tenant bears the burden to prove the landlord failed to act in good faith; absent such proof, good faith is presumed.
- Whether the landlord acted in good faith to mitigate is a question of fact reviewed on appeal under the clearly erroneous standard.
- A landlord’s attempt to relet at a higher rent, or to protect legitimate interests regarding arrearages, does not by itself establish bad faith if the overall reletting efforts are reasonable and diligent.

## Conclusion

The court affirmed liability and damages for lease breach, concluding that extensive repair and marketing efforts supported the trial court’s finding that the landlord acted in good faith to mitigate, and the tenant failed to meet the burden to show otherwise.


Ruud v. Larson, 392 N.W.2d 62 (N.D. 1986)