DVM Co. v. Bricker, 672 P.2d 933 (1983)

Facts

  • DVM Co. (landlord) leased retail space in Metrocenter Mall to John and Kathleen Bricker, doing business as Basket House (tenants).
  • The lease required the tenants to pay a minimum rent plus a percentage of net sales, making tenant sales volume important to the landlord’s return.
  • The lease contained a “use” clause that listed permitted merchandise (including “Arizona Souvenirs”) and required the landlord’s written consent before the premises could be used for any other purpose.
  • Without obtaining DVM’s consent, the Brickers began selling T‑shirts printed with movie, television, and cartoon characters and with popular sayings.
  • DVM notified the Brickers that the T‑shirt sales violated the lease and demanded they stop; the Brickers refused, asserting the shirts qualified as “Arizona Souvenirs.”
  • DVM sued under Arizona’s commercial landlord statute (A.R.S. § 33‑361) seeking termination/forfeiture of the lease and possession of the premises.
  • At trial, DVM attempted to introduce evidence that the unauthorized T‑shirt sales affected other mall tenants and the shopping center’s operation; the trial court excluded that evidence.
  • The trial court found the tenants breached the use restriction but ruled the breach was not serious enough to justify forfeiture; the court of appeals affirmed.
  • The Arizona Supreme Court granted review.

Issues

  1. While a forfeiture action is pending, does the landlord’s acceptance of rent from a tenant who remains in possession waive the landlord’s right to seek forfeiture?
  2. Did the trial court err by excluding evidence offered to show the seriousness of the breach (including effects on other tenants and the center’s business)?
  3. Under A.R.S. § 33‑361(A), must the landlord prove the breach was “material” before the court may order forfeiture and possession in a commercial lease case?

Decision

  • The Arizona Supreme Court held that acceptance of rent during the pendency of a forfeiture action did not waive DVM’s forfeiture claim, because the tenants remained in possession and continued to owe rent while the dispute was being litigated.
  • The court held the trial court erred in excluding DVM’s evidence concerning the seriousness and business impact of the unauthorized sales.
  • Construing A.R.S. § 33‑361(A), the court rejected the lower courts’ requirement that the breach be “sufficiently material” as a condition to forfeiture; the statute authorizes reentry and possession when a commercial tenant violates a lease provision and fails to cure after notice, though courts may deny forfeiture in truly minor cases.
  • Because the trial court had already found a breach of the use restriction and there was no waiver, DVM was entitled to termination and possession.
  • Disposition: the court of appeals was reversed and the case was remanded with directions to enter judgment for DVM, including possession of the premises.

Legal Principles

  • In Arizona commercial leasing, A.R.S. § 33‑361(A) permits a landlord to terminate the lease and recover possession for an uncured violation of a lease covenant; a separate “materiality” requirement is not written into the statute.
  • A landlord’s acceptance of rent after filing and pursuing a forfeiture/possession action does not, by itself, waive the landlord’s forfeiture rights when the tenant remains in possession and is still obligated to pay rent.
  • Use restrictions in shopping‑center leases are enforceable as written; when a lease limits permitted goods and requires written consent for other uses, selling unapproved merchandise can constitute a breach.
  • Evidence bearing on the seriousness and practical consequences of a tenant’s breach (including effects on other tenants and the center’s operation) is relevant where the court considers whether equitable limits should prevent forfeiture for a minor violation.

Conclusion

DVM Co. v. Bricker held that a mall tenant’s unauthorized sale of pop‑culture T‑shirts breached a lease use restriction, and that under A.R.S. § 33‑361 the landlord could obtain forfeiture and possession without proving the breach was “material,” subject to limited equitable restraint for minor violations. The court also ruled that accepting rent while the forfeiture action was pending did not waive the landlord’s claim and that the trial court should not have excluded evidence offered to show the breach’s business impact; the case was remanded for entry of judgment awarding DVM possession.