Opinion
No. 2 CA-CV 2017-0162
08-28-2018
TARGET CORPORATION, Plaintiff/Appellant, v. SPRINT SPECTRUM, L.P., Defendant/Appellee.
COUNSEL Mesch, Clark & Rothschild P.C., Tucson By Paul A. Loucks Counsel for Plaintiff/Appellant Polsinelli PC, Phoenix By Jennifer J. Axel and Michelle Buckley Counsel for Defendant/Appellee
THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES.
NOT FOR PUBLICATION
See Ariz. R. Sup. Ct. 111(c)(1); Ariz. R. Civ. App. P. 28(a)(1), (f). Appeal from the Superior Court in Pima County
No. C20162902
The Honorable Richard E. Gordon, Judge
REVERSED AND REMANDED
COUNSEL Mesch, Clark & Rothschild P.C., Tucson
By Paul A. Loucks
Counsel for Plaintiff/Appellant Polsinelli PC, Phoenix
By Jennifer J. Axel and Michelle Buckley
Counsel for Defendant/Appellee
MEMORANDUM DECISION
Judge Brearcliffe authored the decision of the Court, in which Chief Judge Eckerstrom and Judge Eppich concurred. BREARCLIFFE, Judge:
¶1 In this forcible entry and detainer (FED) action appellant Target Corporation (Target) appeals from the trial court's dismissal of the action and award of attorney fees and costs to appellee Sprint Spectrum Limited Partnership (Sprint). We reverse the court's dismissal of the FED action and award of attorney fees and costs and remand the matter to the trial court.
Issues
¶2 Target contends that the trial court erred by dismissing the FED action on the basis of Sprint's offer to surrender physical possession of the subject premises alone, and then in awarding Sprint attorney fees and costs under the FED statute. Sprint contends that the court correctly determined that its surrender of physical possession mooted the case and that the award of fees and costs was correct. The issue is whether the court erred as a matter of law in dismissing the case because of Sprint's tender of physical possession and by granting Sprint fees and costs. We find that it did err in dismissing the FED action, and, because it did, it also erred in awarding Sprint its fees and costs.
Factual and Procedural History
¶3 This matter was resolved on a motion to dismiss, but because matters outside of the pleadings were necessarily considered by the court, it will be treated as an appeal from a motion for summary judgment. See Rule 12(b)(6), Ariz. R. Civ. P.; see also Colonial Tri-City Ltd. P'ship v. Ben Franklin Stores, Inc., 179 Ariz. 428, 431 (App. 1993). "We review a summary judgment de novo, viewing the facts in the light most favorable to the party against whom judgment was entered." First Am. Title Ins. Co. v. Johnson Bank, 239 Ariz. 348, ¶ 8 (2016). In October 1993, the Tandy Corporation entered into a commercial, retail-space lease agreement with landlords Charles and Helga Schonfeld for the subject premises. In pertinent part, the 1993 lease at paragraphs 32 and then 40 provided:
QUIET ENJOYMENT: . . . Landlord further warrants that tenant, on payment of the rent and performance of the covenants herein contained, shall peaceably and quietly have, hold and enjoy the Demised Premises, for the uses and purposes herein set forth, during this Lease term and any extension or renewal thereof, free from hindrance by Landlord or any party claiming by, through or under landlord, subject, however, to the terms and condition of this Lease.And
MINIMUM GROSS SALES: If in any Fiscal Year during the Lease Term, Gross Sales are less than . . . $500,000.00 Tenant shall have the option of: (a) terminating this Lease by giving Landlord sixty (60) days prior notice thereof, and all rights and obligations of both parties shall cease upon the expiration of the aforesaid sixty (60) day period; or (b) paying three percent (3%) of Tenant's annual Gross Sales monthly.Target later succeeded the Schonfelds as landlord under the lease.
¶4 In February 2014, Target and tenant RadioShack Corporation (formerly known as Tandy Corporation) ("Radio Shack") amended the lease, extending the lease term to January 31, 2019, and requiring Radio Shack to pay a monthly, fixed minimum rent of $6,108.75. The next year, in February 2015, Radio Shack filed for Chapter 11 Bankruptcy in the United States Bankruptcy Court, District of Delaware. In April 2015, that court authorized Radio Shack to assign its obligations under the lease to Sprint.
¶5 In February 2016, Sprint gave notice to Target that it was electing to pay three percent of its annual gross sales monthly in lieu of the monthly, fixed minimum rent because its sales fell below $500,000 for the 2015 calendar year. In June 2016, Target filed an FED action against Sprint asserting a breach by Sprint by its failing to pay rent due based on all of its gross sales. Target prayed for a writ of restitution allowing it to retake possession of the subject premises, and an award of damages, attorney fees, costs and prejudgment interest. Within a week, Target filed its first amended complaint, making the same allegations and seeking the same relief. Before answering the complaint, in July 2016, Sprint served notice of its removal of the case to the United States Bankruptcy Court, District of Arizona, from which it would seek, among other things, transfer of the case to the Delaware Bankruptcy Court. On Target's motion, the bankruptcy court remanded the case to the superior court at the end of March 2017.
¶6 In April 2017, Sprint sent Target written notice that it was terminating the lease "effective June 30, 2017" because the annual gross sales for that location fell below $500,000 for 2016. On May 3, 2017, Sprint filed a motion to dismiss Target's FED action, asserting that "Sprint has offered to turn over possession of the premises to Target by May 31, 2017, if Target agrees to waive the sixty (60) day notice." Sprint argued that, because it had terminated the lease and was willing to vacate the property and turn over possession to Target by May 31, 2017, "[p]ossession is therefore not an issue in this matter and the purpose of an FED action is negated." Sprint contended "there is no need for the Court to determine whether the subject Lease should be terminated because it has already in fact been terminated." Sprint further stated "there is no need for the Court to determine whether Target should be awarded possession of the property because Sprint has already relinquished its right to possession." (Emphasis added.) Sprint concluded that, because it no longer claimed possession of the property and had "indeed offered to vacate the premises, an FED action is procedurally inappropriate and Target's First Amended Complaint should be dismissed." Target opposed the motion to dismiss and requested a trial on the merits of its FED action. At a May 8, 2017, status conference, the trial court set both the FED bench trial and the hearing on Sprint's motion to dismiss for May 25, 2017.
In its answering brief, Sprint states both that it "vacated the Demised Premises on or about May 1, 2017," and that "Target re-keyed the Demised Premises in late Spring 2017," but does not support those claims with citation to the record. This court will therefore not consider those assertions. ARCAP 13; see Ness v. W. Sec. Life Ins. Co., 174 Ariz. 497, 500 (App. 1992) ("We cannot consider any evidence not contained in the record.").
¶7 On May 25, 2017, the trial court granted Sprint's motion to dismiss, stating that it was finding "in favor of the Defendant and against the Plaintiff as to the FED action because possession is not at issue" and dismissing the FED action without prejudice. The court granted Target leave to file an amended complaint to proceed with a breach of contract claim. Target thereafter filed its second amended complaint adding a claim for breach of contract.
¶8 On June 5, 2017, Sprint filed an application for attorney fees and costs pursuant to A.R.S. § 12-1178 claiming entitlement as successful party in the FED action. Target opposed the application arguing principally that any award of fees should await the resolution of the breach of contract claim. In its September 18, 2017 amended and superseding judgment, the court granted Sprint's request for attorney fees and costs with regard to the FED action in the amount of $20,012.89, and dismissed the FED action with prejudice. Target filed this appeal. We have jurisdiction pursuant to A.R.S. §§ 12-120.21 and 12-2101(A)(1).
Analysis
¶9 We review de novo issues of statutory interpretation. BMO Harris Bank, N.A. v. Wildwood Creek Ranch, LLC, 236 Ariz. 363, ¶ 7 (2015). "When a tenant neglects or refuses to pay rent when due and in arrears for five days, or when a tenant violates any provision of the lease, the landlord . . . may reenter and take possession or, without formal demand or reentry, commence an action for recovery of possession of the premises." A.R.S. § 33-361(A). Such an action by a landlord to retake possession of a leased premises is to be "commenced, conducted and governed as provided for actions for forcible entry and detainer" and must be tried no "more than thirty days after its commencement." A.R.S. § 33-361(B).
¶10 An action for forcible entry and detainer under A.R.S. §§ 12-1171 to 12-1183, "is a statutory proceeding, the object of which is to provide a summary, speedy and adequate means for obtaining possession of premises by one entitled to actual possession." DVM Co. v. Stag Tobacconist, Ltd., 137 Ariz. 466, 467 (1983); see also Olds Bros. Lumber Co. v. Rushing, 64 Ariz. 199, 206-07 (1946). FED actions are possessory in character and are maintained against a party who is in possession at the time the action is commenced. See Byrd v. Peterson, 66 Ariz. 253, 257 (1947) (action may not be maintained against one who is not in possession at the time the suit is instituted). Similarly, "section 33-361(A) is a summary proceeding available to a landlord who has an existing lease with a tenant. The statute is designed to determine whether the existing landlord and tenant relationship should be terminated for failure to pay rent or for breach of lease." Colonial Tri-City Ltd. P'ship, 179 Ariz. at 432.
¶11 In a forcible entry and detainer action arising from § 33-361(B), "[i]n addition to determining the right to actual possession, the court may assess damages, attorney fees and costs pursuant to § 12-1178." Under § 12-1178, in an FED action brought by a landlord, if a tenant is found to have wrongfully retained possession of the premises under § 12-1173(A), the court grants a writ of restitution of the premises and judgment "for all charges stated in the rental agreement and for damages, attorney fees, court and other costs and, at the plaintiff's option, all rent found to be due and unpaid through the periodic rental period . . . provided for in the rental agreement." § 12-1178(A). But if the tenant is found not to have wrongfully retained possession of the premises, "judgment shall be given for the defendant against the plaintiff for damages, attorney fees and court and other costs, and if it appears that the plaintiff has acquired possession of the premises since commencement of the action, a writ of restitution shall issue in favor of the defendant." § 12-1178(B).
¶12 Other than concluding after a trial with a judgment of "guilty" for the landlord or of "not guilty" for the tenant, an FED action may end in dismissal if the court finds that the parties do not have a landlord-tenant relationship. Colonial Tri-City Ltd. P'ship, 179 Ariz. at 432. As stated in Colonial Tri-City, "a landlord and tenant relationship must exist between a plaintiff and a defendant at the time the complaint is filed" in order to "proceed summarily under section 33-361(A)." Id. at 432. Where a "defendant establish[es] that plaintiff and defendant [do] not have an existing landlord and tenant relationship" when the FED action is filed, the court must dismiss the action, id. at 430, and may do so even if the parties do not raise the issue, id. at 434.
¶13 Here, the trial court did not dismiss the FED complaint because Target did not prove the landlord-tenant relationship; indeed, that relationship is undisputed. Instead, on the date set for the FED bench trial, the court dismissed the FED action because it found "possession is not at issue." Though the court did not provide the precise grounds as to why it found possession no longer at issue, presumably it was for the reasons stated in Sprint's motion to dismiss. In its motion to dismiss, Sprint stated "there is no need for the Court to determine whether Target should be awarded possession of the property because Sprint has already relinquished its right to possession" and that it was "willing to vacate the property and turn over possession to Target by May 31, 2017." Whatever the basis for the ruling, the court erred in dismissing the FED action.
¶14 Target alleged in its complaint that Sprint's then-current possession was wrongful due to its breach of lease. Under the terms of the lease, absent a qualifying breach, Sprint maintained a tenant's right to possession of the premises—quiet enjoyment—to the exclusion of Target. A covenant of quiet enjoyment ensures that a tenant will be "free from any interference on the part of the landlord." Johansen v. Ariz. Hotel, 37 Ariz. 166, 173 (1930) (quotation marks omitted). As of the date of trial, as evidenced by Sprint's offer to vacate the premises and turn them over to Target—but not for (at least) another six days—Sprint maintained physical possession of the premises. Therefore as of the date of the dismissal, there remained matters to be tried. As stated above, it remained for the court to determine, after trial, whether Sprint was guilty of forcible entry and detainer and necessarily which of the parties had, as of the date of trial, the superior right to possession. Then, once having made that determination, to issue a judgment and, if judgment be in favor of the party without physical possession, to issue a writ of restitution to restore that party to physical possession of the premises.
¶15 By its motion to dismiss, Sprint declared that it had relinquished its "right to possession" and conceded the relief sought by Target, and that it was "offering" to surrender physical possession. As noted in Taylor v. Stanford, 100 Ariz. 346, 349 (1966), the right to possession is distinct from the right of possession although even courts use the language loosely:
there is a clear distinction between a right to possession, and a right of possession. The holder of a deed conveying the title, or a lease on real estate, which expressly or by implication gives the lessee possession, has the right to possession, and if actually in possession, he not only has the right to, but the right of possession. A party who enters and detains by force, or who enters lawfully and detains unlawfully and forcibly the possession, has the right of possession, and cannot be dispossessed by force by a party having the right to possession.Id., quoting Cahill v. Pine Creek Oil Co., 134 P. 64 (Okla. 1913). Until Sprint surrendered physical possession by vacating the premises and allowing Target physically to occupy it, it had the right of possession of the premises even though, by its relinquishment, it no longer asserted the right to possession. Nonetheless, it still remained for the trial court to enter judgment of Sprint's guilt or innocence, either after trial or based on Sprint's judicial admission relinquishing the right to possession and conceding to Target's requested relief. And then, if guilt is found, to issue a writ of restitution to restore Target to physical possession free of any of Sprint's competing leasehold interests. Because a landlord-tenant relationship existed between the parties, and because there remained matters to be tried at the time of its order granting dismissal, the court erred in granting Sprint's motion to dismiss.
Sprint's statements may be tantamount to judicial admissions or confessory pleadings. A voluntary admission, conceding the truth of a fact, made in open court is a judicial admission and resolves the matter in the case. See Clark Equip. Co. v. Ariz. Prop. & Cas. Ins. Guar. Fund, 189 Ariz. 433, 439 (App. 1997), quoting IX John H. Wigmore, Evidence § 2588 (1981) ("An express waiver made in court . . . by the party . . . conceding for the purposes of the trial the truth of some alleged fact, has the effect of a confessory pleading, in that the fact is therefore to be taken for granted; so that the one party need offer no evidence to prove it and the other is not allowed to disprove it."). --------
¶16 Because Sprint had relinquished its right to possession yet still had physical possession of the premises, had the matter been tried, it may be that the trial court would have erred had it found Sprint to have a superior right to possession and not guilty of forcible entry and detainer. It may very well be that the only legally correct judgment and result, based on the circumstances that existed on the date of trial, is a judgment for Target finding Sprint guilty of forcible entry and detainer, and the court's issuing of a writ of restitution restoring Target to physical possession of the premises. See Pac. Fire Rating Bureau v. Ins. Co. of N. Am., 83 Ariz. 369, 376 (1958) (plaintiff entitled to judgment on pleadings if complaint sets forth claim for relief and answer does not contain legally cognizable defense or does not effectively deny material allegations). Nonetheless, we leave that for the court to determine on remand.
¶17 As to the trial court's award of attorney fees to Sprint, because the FED matter remains to be tried, the award is premature and must be vacated. Additionally, even if the dismissal of the FED action had been correct, an award of attorney fees in favor of Sprint was improper. While A.R.S. § 12-1178 does authorize an award of attorney fees in FED actions, the statute provides that, "[i]f the defendant is found not guilty, judgment shall be given for the defendant against the plaintiff for damages, attorney fees and court and other costs." A.R.S. § 12-1178(B) (emphasis added). Sprint initially prevailed in the matter below by way of dismissal, however, Sprint was not found "not guilty." By dismissing the matter, there was no determination of guilt one way or the other by the court resulting from a decision on the merits of forcible entry and detainer. By the plain language of the statute, Sprint was not entitled to attorney fees.
Disposition
¶18 The court's judgment of May 25, 2017, and its amended and superseding judgment dated September 18, 2017, including its award of attorney fees and costs, are reversed. This matter is remanded to the court for a trial on Target's FED complaint, and such other and further proceedings consistent with this decision.
¶19 Each party requested an award of attorney fees on appeal pursuant to A.R.S. § 12-1178(A) and ARCAP 21(b). Because Sprint is not the successful party, we deny Sprint's request. As the successful party, Target is awarded its attorney fees and costs incurred on appeal upon compliance with ARCAP 21(b).