Colonial Tri-City Ltd. Partnership v. Ben Franklin Stores, Inc.

Citations: 880 P.2d 648; 179 Ariz. 428; 154 Ariz. Adv. Rep. 18; 1993 Ariz. App. LEXIS 275Docket: 1 CA-CV 91-108, 1 CA-CV 92-006

Court: Court of Appeals of Arizona; December 16, 1993; Arizona; State Appellate Court

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In the case Colonial Tri-City Limited Partnership v. Ben Franklin Stores, Inc., the Arizona Court of Appeals addressed whether a plaintiff could utilize the summary proceeding under A.R.S. section 33-361 to determine the existence of a landlord-tenant relationship. The court concluded that the plaintiff could not use this summary procedure to assert that the defendant had exercised an option to reassume a lease previously assigned to a franchisee. The court determined that there was no existing landlord-tenant relationship when the action was filed, leading to the trial court's error in not dismissing the case. 

The relevant facts include a lease agreement dated June 19, 1989, between the plaintiff and defendant for retail space in Tri-City Mall, which included clauses for assignment and reassumption. The defendant assigned its lease rights to Dub. Sal's, which operated the store until vacating the premises in May 1990. After Dub. Sal's closed, the plaintiff notified the defendant of a default under the lease, to which the defendant responded by denying any current interest in the lease, claiming it had been fully assigned. Subsequently, the plaintiff initiated a summary proceeding under A.R.S. section 33-361 in June 1990. The appellate court's ruling effectively resolved the appeal without addressing the defendant's other arguments.

The complaint filed by the plaintiff did not claim that the defendant reinstated the June 1989 lease or resumed a landlord-tenant relationship after assigning the lease to Dub. Sal's. The plaintiff asserted that the defendant lacked possession of the premises due to non-payment of overdue rent and other charges. In seeking relief, the plaintiff requested immediate possession of the premises and all unpaid rent since June 1990. The defendant moved to dismiss the complaint under Rule 12(b)(6) of the Arizona Rules of Civil Procedure, arguing that the assignment eliminated the landlord-tenant relationship and thus precluded the plaintiff's action. The defendant also contended that the court lacked jurisdiction under the forcible entry and detainer statute and that the plaintiff failed to make a requisite written demand for possession.

Despite these arguments, the trial court denied the dismissal motion and proceeded with a jury trial. The jury concluded that the defendant reassumed the lease on May 25, 1990, failed to pay rent, and committed a forcible entry and detainer, awarding the plaintiff possession and $18,820.66 in unpaid rent. The defendant's subsequent motion for judgment notwithstanding the verdict, asserting that the court lacked jurisdiction, was denied, leading to an appeal.

The plaintiff later filed a breach of lease action, asserting that the defendant reassumed the lease and breached it by not paying rent from August to November 1990. The trial court ruled that the defendant's defenses were barred by res judicata and collateral estoppel due to the prior judgment in the summary proceeding, granting the plaintiff a summary judgment for $85,822.54 in unpaid rent. The defendant appealed, and the appeals were consolidated.

The analysis concluded that a plaintiff cannot maintain a section 33-361 action if the defendant proves there is no existing landlord-tenant relationship. It was determined that the plaintiff failed to show that the defendant reassumed the lease, leading to the conclusion that the trial court erred by not dismissing the section 33-361 action. The judgments in both proceedings were reversed, and the case was remanded for a new trial in the civil action. It was noted that if the trial court considers information beyond the complaint in a Rule 12(b)(6) motion, it should be treated as a motion for summary judgment, which was appropriately followed in this case.

The trial court had the obligation to treat the defendant's motion as one for summary judgment due to the attached assignment agreement, which indicated the absence of a landlord-tenant relationship between the parties. Under A.R.S. section 33-361(A), a landlord can take action only if a tenant has failed to pay rent or violated lease terms, necessitating an existing lease at the time of complaint filing. The defendant assigned its lease obligations to Dub. Sal's with the plaintiff’s consent, establishing that Dub. Sal's had rights to possession. The plaintiff's claims, as presented by Anthony Orlich's affidavit, did not provide evidence of a terminated tenancy or that the defendant had reassumed the lease, thus failing to demonstrate a disputed fact regarding the landlord-tenant relationship. The court concluded that the defendant was entitled to summary judgment as no material facts were in dispute, and the trial court incorrectly did not dismiss the action. Even if a factual dispute existed regarding reassumption of the lease, the trial court could not grant relief typically reserved for a general civil action within the summary proceeding framework of section 33-361, which is governed by forcible entry or detainer actions.

An action under the forcible detainer statute, A.R.S. section 12-1171(3), is permissible only when the premises are leased to the defendant, as established in Moore v. Blackstone. The purpose of forcible entry and detainer is to provide a swift and effective method for obtaining possession of property by someone entitled to it, as noted in DVM Co. v. Stag Tobacconist, Ltd. The statute is not designed to serve as a remedy for establishing the existence of a lease, but rather to determine if an existing lease should be terminated due to tenant breaches or nonpayment. Other jurisdictions with similar statutes, like Washington, have clarified that the court's jurisdiction in these cases is limited to possession and related damages, without transforming the proceedings into a general lawsuit. Specifically, the question of whether a valid lease exists must be resolved in a separate civil action, as it is not incidental to possession rights. The summary nature of forcible entry and detainer proceedings lacks the procedural safeguards typical in civil actions, such as limited discovery options for defendants. In such proceedings, only the right of possession is at issue; counterclaims or affirmative claims cannot be considered. Defendants may only present legal defenses against the claim for immediate possession.

Defendant was barred from filing a counterclaim against the plaintiff or a cross-claim against Dub. Sal's for indemnification. Arizona law establishes that matters related to damages from lease breaches and attorney's fees arising from a landlord's repossession of property are not to be adjudicated in forcible entry and detainer actions; such matters should be dealt with in general civil actions. The determination of whether a landlord-tenant relationship exists is also not suitable for summary proceedings. While the parties did not contest the necessity of this relationship for an action under A.R.S. section 33-361, the court is not bound by their stipulations regarding applicable law. Errors affecting the foundation of an action can be raised on appeal, regardless of whether they were explicitly cited. Consequently, the trial court's decision not to grant summary judgment dismissing the section 33-361 action was erroneous, leading to a reversal of the trial court’s judgment. The principles of res judicata and collateral estoppel no longer preclude the defendant's defenses in CV 90-25424. The order granting plaintiff summary judgment in that case is vacated, and the matter is remanded for a trial on the issues. Additionally, a note clarifies that Judge Michael J. O'Melia was authorized to participate in this case, and a motion by the plaintiff to dismiss the appeal for jurisdictional issues was denied. Relevant procedural rules regarding motions and forcible entry and detainer actions are also referenced.