Camelback Land & Inv. Co. v. Phoenix Entertainment Corp.

• Decision Date: 17 November 1965
• Docket Number: CA-CIV,No. 1,1
• Citation: 2 Ariz.App. 250,407 P.2d 791
• Parties: CAMELBACK LAND AND INVESTMENT COMPANY, a corporation, Appellant, v. PHOENIX ENTERTAINMENT CORPORATION and Ralph E. Staggs and Patricia J. Staggs, Appellees. * 18.
• Court: Arizona Court of Appeals

Page 791

407 P.2d 791

2 Ariz.App. 250

CAMELBACK LAND AND INVESTMENT COMPANY, a corporation, Appellant, v. PHOENIX ENTERTAINMENT CORPORATION and Ralph E. Staggs and Patricia J. Staggs, Appellees. ^*

No. 1 CA-CIV 18.

Court of Appeals of Arizona.

Nov. 17, 1965.

Powers & Rehnquist, by James Powers, Phoenix, for appellant.

O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears, by John P. Otto, Phoenix, for appellees.

CORDOVA, Superior Court Judge.

Camelback Land and Investment Company, a corporation, hereinafter called Plaintiff, brought an action by filing a complaint against Phoenix Entertainment Corporation and Ralph E. Staggs and Patricia J. Staggs, the Defendants herein, to recover sums allegedly due the Plaintiff by the Defendants as and for rent due under and by virtue of a written lease to the subject premises, and attached a copy of the lease to the complaint. The subject premises consisted of a restaurant located in Phoenix and known as 'The Embers'. The basic term of the lease was for a period of five years, but said lease contained a provision giving the Plaintiff the right to terminate the lease before the expiration of the basic term, in the Plaintiff-Lessor's sole and uncontrolled discretion. That provision of the lease provided as follows:

'Tenant acknowledges that Landlord is the owner of substantial property adjoining the leased premises which is presently undeveloped. Landlord desires to assure itself that the advantageous development of such property will not be hindered by the existence of this Lease, believing that the proper development of such property is of greater importance to it than this Lease even though Tenant is operating a successful business on the property and paying to Landlord a good rent on its investment in the property.

'It is therefore understood and agreed that Landlord may terminate this Lease at its election as follows:

A. Landlord may terminate this Lease effective November 30, 1961, if in its sole and uncontrolled discretion Landlord should regard such termination as advisable. Such termination shall be effected by mailing a notice thereof to Tenant by registered or certified mail prior to October 31, 1961.'

The lease contained further provisions giving the Plaintiff-Lessor the right to an early termination of the lease under certain conditions set forth in the lease. The rents set forth in the lease were a minimum of $3,333.33 per month or ten percent of the gross receipts of the business, whichever was greater. The individual Defendants Ralph E. Staggs and Patricia J. Staggs were sued as guarantors of the lease by the corporation, having subjected themselves to personal liability under said personal guarantee.

The lease contained a provision respecting the remedies of the Plaintiff-Lessor in the event of the default by the tenant, which provision contained the following, set forth in Paragraph XXV thereof:

'DEFAULT BY TENANT--In the event of any default by Tenant in the performance of any of the obligations herein undertaken by them, and in the event such default is not cured within ten days after written notice thereof by Landlord, then Landlord may exercise any one or more of the following remedies:

'(a) Re-enter the premises and take possession thereof, forfeiting the balance of the term, if any, and collect from Tenant the sum of $5,000.00 as agreed upon liquidated damages plus any other actual damages as may have been done to the leased premises.

'(b) If such default arises from a failure by Tenant to pay to third persons any amounts herein required to be paid, Landlord may pay such sums for the account of Tenant, such payments thereafter to constitute a debt due from Tenant to Landlord with interest at 8% per annum together with an amount equal to 25% of the principal as liquidated damages for such breach, the aggregate of which may be collected from Tenant by any means recognized by law for the collection of debts.

'(c) Re-enter the premises and take possession thereof and relet the same for the account of Tenant for the remainder of the YEAR (DJF, RES, PJS), holding the Tenant liable for any deficiency in rent, FOR SAID YEAR ONLY (DJF, RES, PJS). In such event the rental due from Tenant shall be computed as though the gross receipts described in item F (c) of sub-paragraph B of paragraph IX above were in fact received, and Tenant shall be liable for any amount by which 10% of such sums (computed monthly) exceed the actual rent received from such reletting for the balance of said year only.'

In the original prepared lease the first sentence of Subparagraph (c) read:

'(c) Re-enter the premises and take possession thereof and relet the same for the account of Tenant for the remainder of the term, holding the Tenant liable for any deficiency in rent.'

In the final version of the lease the word 'term' was crossed out and the word 'year' was inserted by hand, and the words 'for said year only' were added at the end, also by hand, and the interlineations and the insertion by hand were then initialled by all of the parties to the lease.

The Defendant-Lessee went into possession on May 2, 1960, and remained in possession until the middle of February, 1961, at which time it ceased its operation of the business known as 'The Embers' and moved out of the premises. The Defendant-Lessee then paid the rents due for March 1, 1961, and all but $800,00 of the rent due on April 1, 1961. No further rents were paid thereafter. The first year would expire on April 30, 1961, and the second year would commence with the month of May, 1961.

Subsequently, on May 17, 1961, a complaint was filed by the Plaintiff-Lessor in the nature of a debt to collect the balance of $800.00 due on April 1, the last month of the first year, and to collect the full rental payment allegedly due on May 1, 1961, the first month of the second year.

The Defendant-Lessee on June 2, 1961, filed a Motion to Dismiss the Complaint for failure to state a claim upon which relief could be granted. The Plaintiff-Lessor on June 16, 1961, filed its written Motion for Summary Judgment. The motions were argued before the lower court and taken under advisement. On September 27, 1961, the lower court made the following order:

'This matter having heretofore been taken under advisement, and after due consideration in the premises, therefore,

'IT IS ORDERED that the Defendants' Motion to Dismiss is granted, and Order that the plaintiff's Motion for Summary Judgment is denied and plaintiff take nothing on account thereof.

'The Court has had some difficulty with the issues presented in this matter and has made the foregoing rulings after reading and analyzing the cases presented, one with the other.

'It is the opinion of the Court that a breach of a contract by a tenant is similar to a like breach by the purchaser of a contract of sale and purchase.

'It appears to the Court that the plaintiff, at the time of the execution of the lease, provided therein precisely what the remedy or remedies shoud be in the case of a purchase [the trial court undoubtedly meant a default]; and therefore, the Court feels that they are, and should be limited in their remedies by the term of the contract.'

On October 13, 1961, the final order was made in the lower court as follows:

'ORDER that the Complaint of plaintiff be dismissed with prejudice and that the plaintiff take nothing by virtue thereof in accordance with the written judgment signed this date.'

A formal written judgment dismissing the plaintiff's complaint was entered as reflected by the minute entry just quoted.

The Plaintiff-Lessor has appealed the orders and judgment of the trial court granting the Motion to Dismiss for failure to state a claim and further denying Plaintiff's Motion for Summary Judgment, setting forth as assignments of error:

'(1) The court erred in denying plaintiff's motion for summary judgment, in that the record disclosed that there was no genuine issue as to any material fact and plaintiff was entitled to such judgment as a matter of law.

'(2) The court erred in dismissing plaintiff's complaint.'

We will first consider Assignment of Error No. 2 relative to whether or not the complaint stated a claim for relief against the Defendants. The Plaintiff-Lessor takes the position that the complaint sets forth a cause of action in the nature of a debt and that the same is not necessarily controlled by the default clause of the lease. Further, that the complaint was less an action for breach of a lease than it was for recovery of a debt; that under the circumstances existing herein between the parties it is questionable whether the default provision of the lease would have any bearing on the issue. In other words, Plaintiff's position is that as each month's rent accrued it became a debt and that the Lessee was obligated to pay the same for the remainder of the term of the lease and at the option of the Lessor, and that Paragraph XXV of the lease setting forth the remedies of the Lessor are inapplicable and immaterial.

It is evidence that the Plaintiff's claim for relief is the nature of a debt and not for breach of the lease by the Defendant-Lessee. The question thus presented in respect to the Motion to Dismiss for failure to state a claim is whether or not the provisions of Paragraph XXV setting forth the rights of the parties in the event of default are exclusive, rendering the ordinary rules of construction of remedies available for a breach of a lease inapplicable.

Paragraph XXV of the lease between the parties contained a provision providing for remedies of the Lessor in the event of default by the Lessee. Subparagraph (a) provided for re-entry by the Lessor and $5,000.00 agreed liquidated damages. Subparagraph (b) provided that if there was a default by the Tenant-Lessee to pay to third persons any sums required to be paid, that the Landlord could pay the same and charge them to the Lessee as set forth in said subparagraph (b). S...