Westcor Santan v. Az Root Bar
1 CA-CV 21-0357
| Ariz. Ct. App. | May 24, 2022Background:
- Root Bar and Westcor entered a commercial lease (term ~3–5 years) for a hair salon with Fixed Minimum Rent ($4,756.33/month) and annual fixed/variable additional rent; lease allowed a 100% increased fixed minimum rent charge for days the tenant was closed and permitted interest at prime plus 2% and a 10% monthly service charge on overdue amounts.
- Root Bar never opened the salon and surrendered possession before the lease term ended.
- Westcor sued for unpaid rent for the remainder of the term (initially ~$337,095) and later moved for summary judgment after locating a replacement tenant, seeking $205,086.95 (excluding the increased fixed minimum rent penalty).
- The superior court granted summary judgment for Westcor in the requested amount; Root Bar appealed arguing (1) certain charges were unenforceable penalties and (2) Westcor failed to prove mitigation because it did not produce the replacement tenant’s lease.
- The broker declaration offered by Root Bar to prove mitigation was struck below; Root Bar did not dispute that ruling on appeal.
- The Court of Appeals affirmed, holding Root Bar failed to meet its burdens on both the penalty and mitigation challenges; it also awarded appellate fees to Westcor as the prevailing party.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of increased fixed rent, interest, and 10% service charges (penalty question) | Root Bar: charges (by percentage) are punitive/unenforceable penalties under Dobson Bay | Westcor: charges are contractual remedies; increased fixed rent was not sought in summary judgment; Root Bar bears burden to show a clause is an unenforceable penalty | Court: Rejected Root Bar’s penalty challenge; increased fixed rent was not awarded and Root Bar failed to prove interest/service charges are penalties under Dobson Bay test |
| Sufficiency of mitigation evidence / summary judgment despite no replacement-lease in record | Root Bar: absence of replacement lease creates genuine issue—replacement paid less rent, so damages mitigation is disputed | Westcor: breaching party bears burden to prove mitigation; Westcor credited replacement rent and Root Bar’s only mitigation evidence was struck | Court: Affirmed summary judgment; Root Bar failed to meet its burden to present admissible mitigation evidence |
| Entitlement to appellate attorneys’ fees | Both parties sought fees | Westcor: as prevailing party entitled to fees under statute and lease | Court: Only Westcor entitled to recover reasonable appellate fees and costs, subject to ARCAP 21 |
Key Cases Cited
- Dinsmoor v. City of Phoenix, 251 Ariz. 370 (discussing de novo review on summary judgment)
- Roosen v. Schaffer, 127 Ariz. 346 (landlord entitled to sue for rent and lease damages)
- Tempe Corp. Office Bldg. v. Ariz. Funding Servs., Inc., 167 Ariz. 394 (lease governs damage calculations)
- Wingate v. Gin, 148 Ariz. 289 (same—contract terms control damages)
- Dobson Bay Club II DD, LLC v. La Sonrisa de Siena, LLC, 242 Ariz. 108 (sets test for when contractual charges are unenforceable penalties)
- Gatecliff v. Great Rep. Life Ins. Co., 170 Ariz. 34 (summary judgment standard—genuine issue of material fact)
- Next Gen Cap., L.L.C. v. Consumer Lending Assocs., L.L.C., 234 Ariz. 9 (breaching party bears burden to present mitigation evidence)