Peoria 44 v. Edwards ( 2015 )


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  •                           NOTICE: NOT FOR PUBLICATION.
    UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE
    LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.
    IN THE
    ARIZONA COURT OF APPEALS
    DIVISION ONE
    PEORIA 44 L.L.C., an Arizona limited liability company, Plaintiff/Appellee,
    v.
    MARIA G. EDWARDS, individually and as Trustee of the LEROY M.
    EDWARDS AND MARIA G. EDWARDS REVOCABLE LIVING TRUST;
    BALJIT S. RAI and GULNAR B. RAI, husband and wife,
    Defendants/Appellants.
    No. 1 CA-CV 13-0567
    FILED 8-25-2015
    Appeal from the Superior Court in Maricopa County
    No. CV2011-006641
    The Honorable Arthur T. Anderson, Judge
    REVERSED IN PART, AFFIRMED IN PART, AND REMANDED
    COUNSEL
    Copeland Law Offices, Glendale
    By Kirsten Copeland
    Counsel for Defendants/Appellants
    Gilbert Bird Law Firm, PC, Scottsdale
    By Ryan J. Bird
    Counsel for Plaintiff/Appellee
    PEORIA 44 v. EDWARDS et al
    Decision of the Court
    MEMORANDUM DECISION
    Judge John C. Gemmill delivered the decision of the Court, in which
    Presiding Judge Patricia K. Norris and Judge Lawrence F. Winthrop joined.
    G E M M I L L, Judge:
    ¶1             Defendants Maria G. Edwards, individually and as Trustee of
    the LeRoy M. Edwards and Maria G. Edwards Revocable Living Trust, and
    Baljit S. and Gulnar B. Rai (collectively “defendants”) appeal the trial
    court’s decision granting summary judgment to plaintiff/appellee Peoria
    44, L.L.C. The trial court granted summary judgment on Peoria 44’s breach
    of contract claim for unpaid rent after a successor sublessee of defendants
    defaulted on a lease. Because this court finds that Peoria 44 failed to meet
    its initial burden of production in its motion for summary judgment, we
    reverse and remand for further proceedings. We, however, conclude that
    partial summary judgment was appropriate regarding the mitigation and
    duress defenses, and we therefore affirm partial summary judgment in
    favor of Peoria 44 on those two issues.
    FACTS AND PROCEDURAL HISTORY
    ¶2            On July 10, 1998, defendants’ predecessor in interest, Small
    Wonders Preschool and Daycare Inc. (“Small Wonders”), entered into a
    commercial lease agreement with Peoria 44’s predecessor in interest for
    certain premises in Glendale, Arizona. Over the next ten years, seven
    addendums to the lease were executed, one of which extended the lease
    term to August 2011 and five of which involved transferring the tenancy to
    successive subtenants. Annette and Kenneth Schlenz were Subtenant 1,
    Baljit and Gulnar Rai were Subtenant 2, Maria Edwards, individually and
    as Trustee of the LeRoy M. Edwards and Maria G. Edwards Revocable
    Living Trust was Subtenant 3, Iris and Lonnie Sullivan were Subtenant 4,
    and William and Michelle Mahoney were Subtenant 5. In the addendums
    transferring subtenancy, each subtenant agreed “to assume and be bound
    by all the terms of the Lease” and each prior subtenant “acknowledge[d]
    that they shall remain liable under the Lease in the event of a default under
    the lease.” The addendums further stated that “[a]ll other terms and
    conditions of the Lease shall remain intact.”
    2
    PEORIA 44 v. EDWARDS et al
    Decision of the Court
    ¶3            The lease provided in relevant part:
    12.3 SUCCESSORS AND ASSIGNS.
    All rights, obligations and liabilities herein, given to, or
    imposed upon, the respective parties hereto shall extend to
    and bind the several and respective heirs . . . successors,
    sublessees, and assigns of said parties . . . .
    Paragraph 11.1 of the lease identified “Events of Default” as including:
    (2)    Failure of Tenant to pay when due any installment of
    rent hereunder or any other sum herein required to be paid
    by Tenant, and the continuance of such nonpayment for five
    (5) days after written notice from Landlord.
    (3)   Abandonment or misuse of the leased premises by
    Tenant.
    (4)    Tenant’s failure to perform any other covenant or
    condition of this lease within twenty (20) days after written
    notice and demand.
    Among the remedies afforded the landlord upon an event of default under
    the lease was the right to re-enter and to take possession of the premises.
    ¶4             Peoria 44 sent a letter dated January 19, 2011, to Subtenants 2
    through 5, claiming the Subtenants had abandoned the premises on or
    1
    about November 22, 2010 and notifying them that it had terminated the
    lease and re-taken possession of the premises in accordance with the lease
    and Arizona Revised Statutes (“A.R.S.”) § 33-361(A). Peoria 44 noted that
    under paragraph 11.2(5) of the lease, the remaining rental balance was
    accelerated and it had seized the personal property on the premises subject
    to sale. Peoria 44 demanded payment of $67,400.40, reserving the right to
    take legal action should the amount not be paid.
    ¶5            In a March 11, 2011 letter, Peoria 44 notified the subtenants
    that it would sell the seized personal property at public auction on March
    1 The letter was not addressed to and did not mention Subtenant 1 or the
    original tenant.
    3
    PEORIA 44 v. EDWARDS et al
    Decision of the Court
    24, 2011, if the amount due was not paid. The personal property was sold
    on that date.
    ¶6            A few days before Peoria 44 notified the subtenants it would
    sell the seized property at public auction, it entered into a lease of the
    premises with Brightside Academy (“Brightside”). Under the lease, the
    new tenant’s lease term and its obligation to pay rent began on the earliest
    of the following events: receipt of its license to operate at the premises;
    when it opened for business; or on June 1, 2011. Mark Rein, a member of
    Peoria 44, avowed that the obligation to pay rent began on August 1.
    ¶7             Peoria 44 sued all of the subtenants and Small Wonders
    (collectively, “subtenants”) in May 2011. Peoria 44 alleged the subtenants
    failed to pay the rent owed and sought the outstanding rent due plus other
    charges for occupancy of the premises, interest, and attorney fees.
    ¶8           In answering the complaint, the Rais alleged twenty-seven
    affirmative defenses in addition to those set forth in Rules 8(c) and 12,
    Arizona Rules of Civil Procedure. The defenses listed included failure to
    mitigate damages, accord and satisfaction, failure to join all persons
    needed, abatement, novation, and conditions precedent.
    ¶9             Edwards alleged eight affirmative defenses, including lack of
    capacity to contract and the affirmative defenses of Rule 8(c). Edwards
    argued that, due to a recent eye surgery, she was physically unable to read
    or comprehend the lease addendum. Edwards also argued that she was
    pressured into signing the addendum when she was informed that failure
    to do so would result in her continued liability on the lease and in
    preventing any further payments to her in connection with the sale of Small
    Wonders. She also asserted that Peoria 44’s claims were barred for failure
    to perform a condition precedent, specifically alleging that she had retained
    the right of re-entry under the lease and therefore had the right to mitigate
    damages through re-leasing the leasehold interest. She further alleged that
    Peoria 44 deprived her of those rights by failing to provide prompt notice
    of default and failing to allow her to repossess and re-lease the premises.
    ¶10           Peoria 44 moved for summary judgment. It asserted the
    subtenants defaulted on their obligations in August 2010 and that they
    breached the lease by failing to pay the past rent owed to Peoria 44. It
    further asserted that it marketed the premises after taking possession on
    January 19, 2011, and re-let the premises in March 2011, with the first rent
    payment due August 2011. The motion was supported by a declaration of
    4
    PEORIA 44 v. EDWARDS et al
    Decision of the Court
    Mark Rein, copies of the original lease and addendums, the January 19, 2011
    and March 11, 2011 letters, the new tenant’s lease, an invoice for repairs to
    the premises, and a balance sheet showing rent payments on the premises.
    Peoria 44 also listed specific damages owed for the principal balance,
    interest, and attorney fees.
    ¶11            Edwards responded that Peoria 44 had not produced any
    documentary evidence regarding the nature of the default on the lease, the
    efforts made to re-lease the premises, or the circumstances surrounding the
    re-lease of the premises to Brightside. Edwards also argued that Peoria 44
    was required in its motion for summary judgment to address the defenses
    she asserted and had failed to do so. Among the defenses Edwards
    contended Peoria 44 failed to address were the lack of capacity defense, the
    failure to mitigate defense, the right of re-entry defense, and breach of the
    implied covenant of good faith and fair dealing. Edwards supported her
    arguments with copies of her October 3 and 31, 2012 disclosure statements
    articulating these defenses, copies of her medical records, and a copy of
    findings from a May 4, 2011 inspection of “Brightsky Academy” at the
    premises address. She also supplied a declaration by Annette Schlenz in
    support of these assertions. Schlenz attested that on March 15, 2011, she
    had offered to take over the lease, but that Mark Rein refused her offer and
    told her he already had a new tenant.
    ¶12             The Rais similarly asserted that Peoria 44 failed to address the
    affirmative defenses as required, and as a result, it was not entitled to
    summary judgment. They also argued that summary judgment was
    inappropriate because Peoria 44 failed to give notice of default, failed to
    mitigate its damages by not accepting the proffered cure of default by either
    the Rais or Schlenzes, and had not complied with the statutory procedure
    for sale of the property seized under its landlord’s lien. The Rais supported
    their arguments with their own declarations as well as the Schlenz
    declaration.
    ¶13           In replying to the Rais, Edwards, and the Schlenzes (who had
    joined in their co-subtenants’ responses), Peoria 44 argued that the
    subtenants failed to produce evidence contradicting the summary
    judgment motion and demonstrating the existence of a triable issue. Peoria
    44 asserted that when it learned the last subtenant abandoned the premises
    in January 2011, it had the right to repossess the premises with no notice
    required. It further argued that the subtenants had not met their burden to
    show a failure to mitigate and asserted that it had no obligation to allow the
    subtenants to re-access the premises. It also contended that Edwards had
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    PEORIA 44 v. EDWARDS et al
    Decision of the Court
    not submitted any sworn testimony to support the claim of lack of capacity.
    Peoria 44 denied that Edwards signed the pertinent documents under
    duress and submitted a supplemental affidavit from Mark Rein avowing
    that he had no specific knowledge of any health issues affecting Edwards
    and that the business broker Edwards spoke with did not work on behalf
    of Peoria 44. He further stated that he had contacted the Rais, Schlenzes,
    and Edwards by telephone to ask if they wanted to take over the business,
    but they refused to cure the past due amounts.
    ¶14           The trial court found that no disputed issues of material fact
    existed and granted Peoria 44’s motion. The court entered judgment
    against Small Wonders, Maria Edwards individually and as Trustee of the
    Leroy M. Edwards and Maria G. Edwards Revocable Living Trust, the Rais,
    and the Schlenzes2 for $66,238.77, prejudgment interest of $19,566.75, costs
    of $1,761.51, and attorneys’ fees of $19,472. Edwards and the Rais timely
    appealed. This court has jurisdiction pursuant to A.R.S. § 12-2101(A)(1).
    DISCUSSION
    ¶15           Appellants, the Rais and Edwards, argue that Peoria 44 was
    not entitled to summary judgment because it failed to demonstrate in its
    motion that the subtenants had no evidence to support their affirmative
    defenses. We agree, except with regard to the defenses of failure to mitigate
    and duress.
    ¶16            Summary judgment may be granted when “there is no
    genuine dispute as to any material fact and the moving party is entitled to
    judgment as a matter of law.” Ariz. R. Civ. P. 56(a). This court determines
    de novo whether any genuine issues of material fact exist and whether the
    trial court properly applied the law. Eller Media Co. v. City of Tucson, 
    198 Ariz. 127
    , 130, ¶ 4, 
    7 P.3d 136
    , 139 (App. 2000). We view the facts and the
    inferences to be drawn from those facts in the light most favorable to the
    party against whom judgment was entered. Scalia v. Green, 
    229 Ariz. 100
    ,
    102, ¶ 6, 
    271 P.3d 479
    , 481 (App. 2011).
    ¶17           To obtain summary judgment, the moving party must come
    forward with evidence demonstrating the absence of any genuine issue of
    material fact and that it is entitled to judgment. Nat’l Bank of Arizona v.
    Thruston, 
    218 Ariz. 112
    , 115, ¶ 14, 
    180 P.3d 977
    , 980 (App. 2008). The moving
    2 Iris Sullivan was never served, Lonnie Sullivan had been dismissed from
    the action, and the Mahoneys were discharged in bankruptcy.
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    PEORIA 44 v. EDWARDS et al
    Decision of the Court
    party has the burden of “demonstrating the absence of a genuine issue of
    material fact as to each element of its claim and each defense.” Vig v. Nix
    Project II P’ship, 
    221 Ariz. 393
    , 396, ¶ 11, 
    212 P.3d 85
    , 88 (App. 2009). When
    the non-moving party would have the burden of proof on a claim or defense
    at trial, the moving party must “point out by specific reference to the
    relevant discovery” that evidence does not exist to support that claim or
    defense. Thruston, 218 Ariz. at 117, ¶ 22, 
    180 P.3d at 982
    . The moving party
    need not disprove the non-moving party’s claim or defense, but must do
    more than make unsupported assertions that the nonmoving party cannot
    meet its burden of proof at trial; conclusory statements are insufficient. 
    Id.
    at 117–18, ¶¶ 22–23; 
    180 P.3d at
    982–83.
    ¶18            Demonstrating that the non-moving party lacks evidence to
    meet its burden of proof at trial is part of the moving party’s burden of
    establishing entitlement to judgment. Id. at 119, ¶ 26, 
    180 P.3d at 984
    . Until
    the moving party establishes it is entitled to judgment, the non-moving
    party has no duty to come forward with evidence to show the existence of
    disputed issues of material fact. Id. at 119, ¶ 28, 
    180 P.3d at 984
    ; Flynn v.
    Lindenfield, 
    6 Ariz. App. 459
    , 461, 
    433 P.2d 639
    , 641 (1967). The moving
    party, however, bears the burden of persuading the court that it is entitled
    to summary judgment, and that burden never shifts to the non-moving
    party. Wells Fargo Bank, N.A. v. Allen, 
    231 Ariz. 209
    , 213, ¶ 17, 
    292 P.3d 195
    ,
    199 (App. 2012); Thruston, 218 Ariz. at 115, ¶ 15, 
    180 P.3d at 980
    .
    I.     Failure to Mitigate
    ¶19             Defendants argued as a defense that Peoria 44 failed to
    mitigate damages. In its motion for summary judgment, however, Peoria
    44 argued that it undertook meaningful efforts to mitigate its damages.
    Peoria 44 stated that it immediately began marketing the premises upon
    taking possession. In support of this statement, Peoria 44 provided the
    affidavit of Mark Rein, in which he avowed that “[a]fter taking possession
    of the Premises, the Plaintiff immediately began marketing the Premises for
    re-letting.” Rein further stated that the premises were re-let and the new
    lessor’s rental obligation began in August 2011. Therefore, Peoria 44 met
    its initial burden of production, and the defendants were required to “come
    forward with any evidence” to show the existence of disputed issues of
    material fact related to the mitigation defense. Thruston, 218 Ariz. at 119, ¶
    28, 
    180 P.3d at 984
    . Because the defendants offered no evidence that Peoria
    44’s efforts to mitigate were inadequate or insufficient, they did not meet
    their burden of establishing a triable issue of fact. We therefore conclude
    7
    PEORIA 44 v. EDWARDS et al
    Decision of the Court
    the trial court ruled correctly regarding the defendants’ mitigation
    defenses.
    II.    Duress
    ¶20            We also agree with the trial court’s ruling regarding Edwards’
    duress defense. Edwards’ grounds for asserting duress were that she was
    told she would not receive payments and that she would continue to be
    liable for the lease if she did not sign the addendum. Peoria 44 argued in
    its reply to the trial court that notifying a previous subtenant that she will
    remain obligated under these assignment agreements is not a wrongful act
    constituting duress. Peoria 44 further asserted that, under the facts
    presented and pursuant to Dunbar v. Dunbar, Edwards cannot prevail on
    the duress defense because it did not act wrongfully when Edwards ratified
    the lease addendums and the assignments. 
    102 Ariz. 352
    , 355–56, 
    429 P.2d 949
    , 952–53 (1967) (noting that the “test of what act or threat constitutes
    duress is determined by considering whether the threat placed the party
    entering into the transaction in such fear as to preclude the exercise by him
    of free will and judgment”).
    ¶21            We conclude Edwards cannot prevail on the substantive legal
    principles of duress. As noted in Thruston, it is possible for a movant to
    prevail on a motion for summary judgment by accepting the facts alleged
    by the non-moving party and showing they are insufficient to support the
    non-moving party’s defense. 218 Ariz. at 118, n.8, ¶ 24, 
    180 P.3 at 983, n.8
    .
    Accepting as true the facts alleged by Edwards, we agree with the trial court
    that the duress defense fails as a matter of law. Edwards did not establish
    that Peoria 44 acted wrongfully to induce her to sign the lease addendums
    and assignments. See Dunbar, 
    102 Ariz. at 356
    , 
    429 P.2d at 953
     (“By
    definition, an act or threat to constitute duress must be ‘wrongful.’”). Peoria
    44 adequately met its burden of persuasion on this issue by asserting that,
    even assuming the facts asserted by Edwards, such facts do not, as a matter
    of law, constitute the required wrongful conduct. See Thruston, 218 Ariz. at
    117–18, ¶¶ 22–23; 
    180 P.3d at
    982–83.
    III.   Remaining Defenses
    ¶22          Peoria 44 did not, however, meet its burden of production on
    the defendants’ remaining affirmative defenses. In its reply supporting the
    motion, Peoria 44 did not substantively address the defenses raised by the
    Rais and Edwards in their responses, but instead asserted that the
    defendants’ arguments lacked merit and the Rais and Edwards failed to
    8
    PEORIA 44 v. EDWARDS et al
    Decision of the Court
    meet their burden to produce evidence demonstrating the existence of a
    material fact.3 However, until Peoria 44 met its initial burden of production,
    the Rais and Edwards were not required to come forward with evidence
    showing the existence of a disputed issue of material fact. Thruston, 218
    Ariz. at 119, ¶ 28, 
    180 P.3d at 984
    . Because Peoria 44 did not assert that the
    defendants lacked evidence to support their defenses and did not address
    in its motion any other issues raised by defendants as affirmative defenses,
    Peoria 44 did not meet its burden of production. See id. at 117, ¶ 22, 
    180 P.3d at 982
    .
    ¶23           On appeal, despite citing Thruston, Peoria 44 continues to
    assert that the Rais and Edwards bore the burden of proof on their
    affirmative defenses when answering the motion. Thruston itself, however,
    explains a moving party’s obligation to “point out by specific reference” the
    absence of evidence supporting the non-moving party’s affirmative
    defenses. See id. at 117, ¶ 22, 
    180 P.3d at 982
    . The burden in this case never
    shifted to the defendants because Peoria 44 never met its initial burden of
    production, except regarding the defenses of mitigation and duress. Peoria
    44 was not entitled to summary judgment because it ignored a majority of
    the defendants’ affirmative defenses and, as a result, did not meet its initial
    burden to establish entitlement to judgment. See id. at 119, ¶ 29, 
    180 P.3d at 984
    .
    ¶24          This court must therefore reverse the trial court’s ruling,
    except in regard to the mitigation and duress defenses, and remand for
    further proceedings.
    IV.    Attorney Fees and Costs
    ¶25           The parties seek attorney fees and costs on appeal pursuant
    to A.R.S. §§ 12-341 and § 12-341.01. Defendants also seek fees under the
    lease. As the successful parties on appeal, the Rais and Edwards are
    awarded their costs on appeal. A.R.S. § 12-341. Section 12-341.01, A.R.S.,
    permits a discretionary award of attorney fees to the successful party in a
    contested action arising out of contract. Paragraph 12.5 of the lease
    3 Attached to Peoria 44’s reply was an affidavit by Mark Rein, who made
    certain avowals in support of Peoria 44’s argument against the affirmative
    defenses. Presenting new arguments and new evidence in the reply in an
    attempt to remedy a failure in the motion is ineffective. Allen, 231 Ariz. at
    214, n.3, ¶ 20, 292 P.3d at 200, n.3. This reply was not, therefore, adequate
    to satisfy Edwards’ burden of production.
    9
    PEORIA 44 v. EDWARDS et al
    Decision of the Court
    provides for an award of reasonable attorney fees to the prevailing party.
    Because we reverse in part the trial court’s judgment and remand for
    further proceedings, it is premature to decide which party or parties are
    “successful” or “prevailing” in this action. We therefore decline the
    requests for attorney fees. But we authorize the trial court, at the conclusion
    of the trial court proceedings, to exercise its discretion to consider whether
    to award attorney fees for this appeal to the ultimately successful or
    prevailing party or parties.
    CONCLUSION
    ¶26          Peoria 44 failed to meet its initial burden of production in its
    motion for summary judgment because it failed to address most of the Rais
    and Edwards affirmative defenses. We therefore reverse the summary
    judgment and remand for further proceedings, with the exception that we
    affirm partial summary judgment in favor of Peoria 44 regarding the
    defenses of mitigation of damages and duress.
    :ama
    10
    

Document Info

Docket Number: 1 CA-CV 13-0567

Filed Date: 8/25/2015

Precedential Status: Non-Precedential

Modified Date: 8/25/2015