Cote v. A. J. Bayless Markets, Inc.

• Citation: 626 P.2d 602,128 Ariz. 438
• Decision Date: 15 January 1981
• Docket Number: No. 1,CA-CIV,1
• Parties: Robert T. COTE, Plaintiff-Appellant, v. A. J. BAYLESS MARKETS, INC., ABC Corporation; John Does 1-5, Defendants-Appellees. 4761. DEPARTMENT C.
• Court: Court of Appeals of Arizona

Page 602

626 P.2d 602

128 Ariz. 438

Robert T. COTE, Plaintiff-Appellant, v. A. J. BAYLESS MARKETS, INC., ABC Corporation; John Does 1-5, Defendants-Appellees.

No. 1 CA-CIV 4761.

DEPARTMENT C.

Court of Appeals of Arizona, Division 1.

Jan. 15, 1981.

Rehearing Denied March 5, 1981.

Review Denied April 7, 1981.

Jack J. Rappeport, Tucson, for plaintiff-appellant

Romley & Sherk by Roger T. Hargrove, Phoenix, for defendants-appellees.

OPINION

O'CONNOR, Judge.

This is an appeal by Robert T. Cote, the plaintiff in the trial court, from a summary judgment against him and in favor of A. J. Bayless Markets, Inc., the appellee, in an action brought by appellant as a successor-landlord against the appellee for breach of a tenant's covenants to repair and maintain the leased premises.

In reviewing a summary judgment, we must view the evidence in a light most favorable to the party opposing the motion and give that party the benefit of all reasonable favorable inferences from the evidence. Wisener v. State, 123 Ariz. 148, 598 P.2d 511 (1979). The facts here are undisputed. Bayard Realty Company was the owner of a parcel of real property and a building thereon. The property and building were leased to A. J. Bayless Markets, Inc. The lease expired January 31, 1976. On January 28, 1976, Bayard executed an agreement to sell the property and the building to Cote, the appellant, for $215,000.00. The closing date for the sale was March 1, 1976, on which date Cote acquired the legal title. The agreement of sale included the following language:

The Purchaser understands that the entire premises is currently under lease to the A. J. Bayless Company of Phoenix, Arizona according to the terms of an agreement dated June 2, 1950 executed by E. F. Sanguinetti as a lessor and A. J. Bayless, President of A. J. Bayless Markets Inc. as lessee and that the agreed expiration date of said lease is January 31, 1976. The seller hereby assigns all his right title and interest, as Landlord, as of the date of execution hereof. The purchaser and seller specifically agree that it shall be the purchasers right and responsibility to accept or reject demised premises from the lessee according to the terms of the lease. Acceptance or rejection of the premises by the purchaser shall not disturb the timely closing of this sale as indicated above.

As a condition of the agreement of sale, Bayard agreed to maintain and deliver the property at closing in substantially as good condition as on the date of the agreement. All taxes, rents and insurance were to be prorated to the closing date.

The lease contained the following provisions on which appellant relies:

3. At the expiration of this lease or at its earlier termination lessee shall have the right at its own expense to remove from the building hereby demised all shelving, furniture, fixtures, and equipment of every kind and character brought or placed thereon or therein by lessee, but lessee shall restore the said building to an undamaged condition following such removal and shall yield up to lessors the said premises and the building thereon located in as good condition, ordinary wear and tear, acts of God and damage by tornado and earthquakes excepted, as the said building and premises were at the time of commencement of this lease.

5. Lessors may enter and view the state of repairs of the premises and if found out of repair, may make demand upon the lessee to make such repairs, and lessee covenants so to do within (60) days from and after receipt of such request.

6. Lessee covenants and agrees to keep and maintain the building to be erected upon said premises, including the plumbing, electrical wiring and cess pool (sic), in a good state of repair during the full term of this lease.

An agent of Bayard had visited the property in 1974 and 1975. He noted the property needed some repair, and was aware of allegations of a leaking roof and warped structural supports. He was also aware that the canopy on the front of the building was damaged, some ornamental tiles had fallen off the front of the building, and the parking lot needed repair. At no time did Bayard demand that Bayless make repairs to the premises. Bayard listed the property for sale with a real estate agent, Joseph C. Ritchie, in August 1975. The asking price was $250,000.00.

Cote visited the property with Ritchie in January, 1976. Ritchie told Cote about the needed repairs. Cote offered to buy the property for $215,000.00, which offer was accepted. Cote testified in his deposition that he considered the necessary repairs in making his offer. On January 28, 1976, the date on which the agreement of sale was executed, Ritchie, acting as Cote's agent, notified Bayless by letter that the condition of the premises did not meet the requirements of paragraph 6 of the lease, and also made demand that the premises be put in a state of good repair so that Bayless could "be in a position to return the property to the landlord in 'as good condition,' ordinary wear and tear, acts of God and damage by tornado and earthquakes excepted, as the said building and premises were at the time of commencement of this lease." Ritchie wrote a second letter to Bayless the next day repeating the demand and stating that if Bayless preferred, Cote would make the repairs and charge Bayless its share. Bayless did not make the repairs or offer to pay for them. Cote caused the repairs to be made at a cost of approximately $30,000.00. Cote then filed suit against Bayless for breach of the tenant's covenants to repair and maintain the premises and to surrender them in as good condition as when leased, and prayed for damages in the amount of the repairs. After certain pretrial discovery was completed, Bayless filed a motion for summary judgment. This appeal is from the granting of Bayless' motion for summary judgment.

Appellant, Cote, argues that he is the real party in interest and entitled to sue for breach of the covenants to repair and surrender in good condition following the assignment of Bayard's rights in the contract of sale. Appellee concedes that a tenant's covenants to keep the premises in good repair and to surrender the premises in good condition run with the land; however, appellee contends that the new owner of the premises is not entitled to recover damages for breaches occurring prior to the transfer. As stated in 49 Am.Jur.2d, Landlord and Tenant § 107 (1970):

The general rule is that the voluntary transfer of the reversion does not carry with it the right to sue the lessee for breaches of his covenants or agreements which occurred prior to the transfer. The main foundation for this rule seems to be that the party owning the real estate at the time of the breach is ordinarily the one injured thereby. Prima facie, he is the party to bring the action even though he has parted with the real estate, since the Statute of 32 Henry VIII ch. 34 and state statutes of a similar import, conferring upon a grantee of the reversion the right to enforce covenants and conditions in leases, could not well be construed as taking away from the transferor his right of action for an injury causing loss to him personally in the depreciated value of the property, and giving it to the transferee, who has suffered no loss. (footnotes omitted)

49 Am.Jur.2d at 140.

For a case applying this principle see Foss v. Stanton, 76 Vt. 365, 57 A. 942 (1904), where the plaintiff acquired the reversionary interest in the premises from the original lessors, and then sued the tenant for breach of the covenant to keep the premises in good repair and to surrender them in good condition at the end of the term. Recovery was denied because the court determined that the breach of the covenant had occurred prior to transfer of the reversionary interest. The court stated:

(W)hen the lessor takes no advantage of the failure to keep in repair, and afterwards conveys his interest, the lessee's duty to the assignee is to be measured by the condition of the property at the time of the transfer. The covenant to repair runs with the land, and the plaintiff can sue for any breach occurring after she took the title. But the deed gave her no right to proceed for a prior breach. Neither a right of entry nor a right of action can be transferred.

76 Vt. at 368-69, 57 A. at 943. See also Bailey v. Meade, 250 Mass. 46, 144 N.E. 110, 34 A.L.R. 779 (1924); Kates v. Hotel Brooks Corporation, 118 Vt. 324, 109 A.2d 265, 20 A.L.R.2d 1331 (1954).

A breach of the covenant to keep the premises in good repair during the lease term, as required by paragraph 6 of the lease, would have occurred in this case prior to the execution of the contract of sale by Bayard to Cote. Under the general rule cited above, appellant Cote thus acquired no right of action against appellee for any breach of the covenant in paragraph 6 which preceded his acquisition of rights in the property. Accordingly, we affirm the trial court's grant of summary judgment in favor of Bayless as to the paragraph 6 covenant.

However, paragraph 3 of the lease contains language to the effect that the premises would be surrendered at the expiration of the lease term in as good condition as when originally leased, ordinary wear and tear, acts of God, and natural disasters excepted. All clauses of a lease must be considered and given effect in relation to each other. Alabam Freight Lines v. Stewart, 70 Ariz. 140, 217 P.2d 586 (1950). Although paragraph 3 also contains language dealing with removal of fixtures, furniture, and equipment by the lessee, in our opinion the requirement of surrendering the premises in good condition at the end of the lease term is not limited to merely restoration of the premises upon the removal of fixtures, but is an additional covenant to surrender the premises in as good condition as when leased, other than for damage from the excepted causes listed. "Where the lease contains a covenant to repair and a covenant to leave in...