DVM Co. v. Bricker

• Decision Date: 02 November 1983
• Docket Number: No. 16683-PR,16683-PR
• Citation: 672 P.2d 933,137 Ariz. 589
• Parties: DVM CO., a joint venture, Plaintiff-Appellant, v. John BRICKER and Kathleen Bricker, his wife, dba Basket House, Defendants-Appellees.
• Court: Arizona Supreme Court

Page 933

672 P.2d 933

137 Ariz. 589

DVM CO., a joint venture, Plaintiff-Appellant, v. John BRICKER and Kathleen Bricker, his wife, dba Basket House, Defendants-Appellees.

No. 16683-PR.

Supreme Court of Arizona In Banc.

Nov. 2, 1983.

Rehearing Denied Dec. 6, 1983.

Murphy & Posner by K. Bellamy Brown, Michael L. Murphy, Phoenix, for plaintiff-appellant

O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears by Redfield T. Baum, Phoenix, for defendants-appellees.

CAMERON, Justice.

We granted review of a memorandum decision of the Court of Appeals affirming the trial court's judgment holding that though there was a breach of a covenant of a lease, the breach was not "sufficiently material" to require a forfeiture of the lease. We have jurisdiction pursuant to Art. 6, § 5, Arizona Constitution. We reverse.

We consider the following issues:

1. While a forfeiture is pending in the courts, does acceptance of rent by the lessor from the lessee in possession of the property waive the lessor's right to claim forfeiture?

2. Did the trial court err in excluding evidence of materiality concerning the effect of the breach?

3. If there has been a breach of a material covenant in a lease, does the materiality of the breach affect the granting of a forfeiture?

The appellants, DVM Company, leased space in Metrocenter Mall to the appellees, John and Kathleen Bricker, d/b/a Basket House. The lease called for a minimum rental and a percentage of the net sales as defined in the lease. The lease set forth the items that could be sold, including "Arizona Souvenirs," and further provided:

Tenant shall not use or permit the premises to be used for any other purpose or purposes * * * without the written consent of the landlord first had and obtained.

Article 22 further provided:

Should Tenant at any time be in default hereunder * * * and should such default or breach of performance continue for more than a reasonable time (in no event to exceed thirty (30)[ ) ] days after written notice from Landlord to Tenant specifying the particulars of such default or breach of performance * * * then Landlord may treat the occurrence of any one or more of the foregoing events as a breach of this Lease, and * * * it shall be, at the option of the Landlord * * *:

(a) The right of the Landlord to declare the term hereof ended and to re-enter the premises and take possession thereof and remove all persons therefrom, and Tenant shall have no further claim thereon or thereunder; * * *.

Sometime during the period of the lease, the Brickers began to sell T-shirts with imprints of movie, TV, and cartoon personalities and with imprints of popular sayings. DVM contended that such sales violated the use restrictions of the lease and sent notice to the Brickers to cease such sales. The Brickers refused, contending that the T-shirts were "Arizona Souvenirs" as allowed by the lease. DVM then brought suit in Maricopa County Superior Court, alleging a breach of lease and seeking to terminate the lease. After trial to the court without a jury, the court held that while selling T-shirts with some identification of Arizona, Phoenix, cactus or such things did not violate the use clause, the sale of T-shirts with movie, TV or cartoon personality imprints did violate the lease. However, the court also found:

3. The breach of the lease agreement for the Basket House was not sufficiently material in nature to warrant recovery and possession of the subject premises The trial court awarded DVM attorney's fees, but refused to terminate the lease. The Court of Appeals affirmed, and we granted DVM's petition for review of the decision of the Court of Appeals.

under the provisions of A.R.S. § 33-361 or the lease agreement.

ACCEPTANCE OF THE RENTAL PAYMENTS

During the time the matter was disputed and being litigated, the Brickers continued to make the required lease payments. The Brickers claim that by accepting rental payments during the pendency of this court proceeding, DVM waived its right to claim forfeiture. We do not agree. Normally, acceptance of rental payments results in waiver of a claim of breach. Butterfield v. Duquesne Mining Co., 66 Ariz. 29, 32, 182 P.2d 102, 103 (1947). However, "[w]hen a tenant continues in possession pending a determination of an action brought by the landlord to enforce a forfeiture, the tenant is still under an obligation to pay rent and acceptance of these payments does not constitute a waiver of the breach." Fogel v. Hogan, 496 P.2d 322, 324 (Colo.App.1972). See also Wecht v. Anderson, 84 Nev. 500, 444 P.2d 501, 505 (1968). As long as a tenant is in possession of the property, the landlord should not be forced, pending determination of the matter, to refuse rental payments by a tenant in possession. We hold that under this specific fact situation, accepting rental payments during the pendency of this action does not result in a waiver of a claim to forfeiture.

EVIDENCE OF MATERIALITY

At trial DVM attempted to offer testimony concerning the materiality of the use restriction.

Q [By DVM's attorney Mr. Murphy] MR. PEDERSON, ARE YOU CONCERNED ABOUT THE SALES BEYOND THE USE CLAUSE ALLOWED BY THE LEASE AS FAR AS OTHER TENANTS ARE CONCERNED?

MR. MAXWELL: OBJECTION, YOUR HONOR, THAT'S BEYOND THE [SCOPE] OF THE PLEADING, NOT RELEVANT.

THE COURT: WHAT WOULD THE RELEVANCE BE, COUNSEL, AS TO THE WITNESSES--

MR. MURPHY: WELL, YOUR HONOR, I INTEND OR WOULD LIKE TO SHOW THAT THE SALES BY THE DEFENDANTS ARE CAUSING A PROBLEM WITH OTHER TENANTS IN THE SHOPPING CENTER...