Next Gen Capital, LLC v. Consumer Lending Associates LLC
234 Ariz. 9
| Ariz. Ct. App. | 2013Background
- CLA (Consumer Lending Associates), a payday-loan operator, entered a five-year Arizona commercial lease in 2007 that limited use to short-term loans/check cashing and ancillary money transfers.
- The Arizona statute authorizing deferred presentment/payday lending included a sunset provision terminating the licensing program on July 1, 2010.
- CLA vacated the leased premises when the statute expired and refused to pay rent for the remainder of the lease term, claiming the lease terminated by operation of law.
- Next Gen (successor plaintiff) sued for breach of lease; the superior court granted summary judgment for Next Gen, awarding $144,899.06 plus interest, fees, and costs.
- CLA appealed arguing (1) frustration of purpose excused performance and (2) genuine factual dispute existed over whether Next Gen reasonably mitigated damages (and arguing burden allocation on mitigation).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether frustration of purpose excuses CLA's breach | CLA: Statutory expiration destroyed the lease's principal purpose (payday lending), so performance excused | Next Gen: Expiration was foreseeable (statute had known sunset); risk could have been allocated in lease | Court: Frustration of purpose inapplicable — CLA should have foreseen statute's sunset and could have contracted around the risk |
| Whether there is a triable issue that Next Gen failed to reasonably mitigate damages | CLA: Next Gen did not show reasonable marketing before reassigning premises; factual dispute exists | Next Gen: Submitted uncontradicted affidavit showing re-leasing, mitigation amount, and re-leasing costs | Court: No genuine issue — CLA, as breaching party, failed to produce evidence that further mitigation was probable; summary judgment appropriate |
| Who bears burden to prove mitigation of damages | CLA: Argues Next Gen had burden to show mitigation efforts (or at least initial production burden) | Next Gen: Mitigation evidence submitted; precedent places burden on breaching party to prove mitigation was possible and not attempted | Court: Reaffirms precedent that breaching party bears burden of proving mitigation; declined to consider CLA's appellate-only procedural argument |
Key Cases Cited
- 7200 Scottsdale Rd. Gen. Partners v. Kuhn Farm Mach., Inc., 184 Ariz. 341, 909 P.2d 408 (App. 1995) (sets out Restatement test and four elements for frustration of purpose)
- Garner v. Ellingson, 18 Ariz.App. 181, 501 P.2d 22 (1972) (limits frustration doctrine to extreme hardship and requires foreseeability analysis)
- Mohave Cnty. v. Mohave-Kingman Estates, Inc., 120 Ariz. 417, 586 P.2d 978 (1978) (frustration inapplicable where change was foreseeable and could have been contracted against)
- Fairway Builders, Inc. v. Malouf Towers Rental Co., 124 Ariz. 242, 603 P.2d 513 (App. 1979) (places burden on breaching party to prove mitigation was reasonably possible but not attempted)
- GM Dev. Corp. v. Cmty. Am. Mortgage Corp., 165 Ariz. 1, 795 P.2d 827 (App. 1990) (uncontradicted affidavit of mitigation efforts can support summary judgment)