Shea & 92nd v. Streets of Ny

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

SHEA & 92ND OPCO, LLC, Plaintiff/Appellee,

v.

STREETS OF NEW YORK INC, Defendant/Appellant.

No. 1 CA-CV 25-0772
FILED 06-26-2026

Appeal from the Superior Court in Maricopa County
No. CV2024-002673
The Honorable Scott Sebastian Minder, Judge

AFFIRMED

COUNSEL

Quarles & Brady LLP, Phoenix
By Coree E. Neumeyer, Anthony F. Pusateri, Kristin N. Leaptrott
Counsel for Plaintiff/Appellee

Powers Law PLLC, Scottsdale
By John M. Powers
Counsel for Defendant/Appellant
SHEA & 92ND v. STREETS OF NY
Decision of the Court

MEMORANDUM DECISION

Judge Veronika Fabian delivered the decision of the Court, in which
Presiding Judge Michael J. Brown and Judge Andrew J. Becke joined.

F A B I A N, Judge:

¶1 Appellant, Streets of New York, Inc. (“Tenant”), appeals the
superior court’s order granting summary judgment in favor of appellee,
Shea & 92nd OPCO, LLC (“Landlord”), on Landlord’s breach of contract
claim. The question raised by this appeal is whether Landlord can recover
rent through the end of the lease term when Landlord has reletted the
property but has not yet started receiving rent. Because the parties’ lease
agreement says the Landlord can, this Court affirms summary judgment.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Landlord leased a commercial restaurant space to Tenant
under a written agreement (the “Lease”). The Lease stated that if Tenant
breached the agreement, the Landlord may:

Terminate this Lease and . . . Landlord shall be entitled to
recover from Tenant all damages incurred by Landlord by
reason of Tenant’s Breach, including, but not limited to: (1)
the cost of recovering possession of the Premises; (ii) all
expenses of re-letting the Premises . . . and (vii) the worth at
the time of award of (1) unpaid Minimum Rent, Additional
Rent and any other charges required to be paid under the
Lease which had been earned at the time of termination, (2)
the amount by which the unpaid Minimum Rent, Additional
Rent and other charges called for under the Lease which
would have been earned after termination until the time of
award exceeds the amount of such Minimum Rent,
Additional Rent and other charges lost for the same period
which Tenant proves could have been reasonably avoided,
and (3) the amount by which the unpaid Minimum Rent,
Additional Rent and other charges required to be paid under
the Lease for the balance of the term after the time of such
award exceeds the amount of such rental loss for the same
period that Tenant proves could be reasonably avoided . . . .

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(Emphasis added).

¶3 Tenant breached the Lease in April 2022 when it abandoned
the space and stopped paying rent. Tenant did not respond to Landlord’s
written notice of default and demand to cure. Landlord then retook
possession of the space.

¶4 The parties do not dispute that Landlord terminated the Lease
when it relet the premises—along with an adjacent space—to a replacement
tenant on July 6, 2022 (the “New Lease”). Under the New Lease, rent was
not due until April 2023. The Landlord also agreed to reimburse the
replacement tenant up to $155,975 for additions, alterations, or
improvements to the premises. The New Lease expanded the rented
premises to include an adjacent space not included in the original Lease,
and increased the monthly rent from $9,599.54 to $16,156.

¶5 In 2024, Landlord sued Tenant for breach of contract, and
moved for summary judgment seeking $168,033.11 in damages for lost rent
and other expenses for the period from April 2022 through April 2023.

¶6 Tenant opposed the motion, arguing that its obligation to pay
rent under the Lease ended when Landlord relet the premises in July 2022.
It maintained that Landlord could not recover rent from Tenant from July
2022 through April 2023, when the replacement tenant was making
improvements to the space but not paying rent.

¶7 Landlord asserted the Lease allowed it to collect post
termination rent as a remedy for Tenant’s breach even after it relet the
premises, subject to a reduction for rent collected from the replacement
tenant. Because it did not begin receiving rent under the New Lease until
April 13, 2023, its damages calculation properly included the months from
July 2022 to April 2023.

¶8 The superior court granted summary judgment for Landlord,
concluding the Lease permitted Landlord to recover the monthly rent owed
by Tenant even after the premises were relet, subject to an offset for the rent
Landlord received during those months. The court ruled that Landlord’s
damages calculation was correct and Tenant had failed to meet its burden
to show that Landlord did not reasonably mitigate its damages.

¶9 Tenant timely appealed and this Court has jurisdiction
pursuant to Article VI, Section 9 of the Arizona Constitution and A.R.S.
§§ 12-2101(A)(1) and 120.21(A)(1).

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Decision of the Court

DISCUSSION

¶10 Tenant argues Landlord’s reletting of the premises
discharged Tenant’s obligation to pay rent and the superior court erred by
granting summary judgment for Landlord.

¶11 Summary judgment is appropriate when there is “no genuine
dispute as to any material fact and the moving party is entitled to judgment
as a matter of law.” Ariz. R. Civ. P. 56(a). This Court reviews a grant of
summary judgment de novo and views the evidence and reasonable
inferences in a light most favorable to the non-moving party. Zambrano v.
M & RC II LLC, 254 Ariz. 53, 58 ¶ 9 (2022). The interpretation of a lease is
also reviewed de novo. Premier Consulting & Mgmt. Sols., LLC v. Peace Releaf
Ctr. I, 257 Ariz. 80, 86 ¶ 21 (App. 2024).

I. The Lease Allows Landlord to Collect Future Rent.

¶12 Tenant argues the superior court erred by awarding Landlord
rent for the period from July 2022 to April 2023, because Tenant’s obligation
to pay rent ended when Landlord terminated the Lease by reletting the
space in July 2022.

¶13 Tenant relies on Roosen v. Schaffer, in which this Court held
that if a landlord accepts the surrender of a lease when a tenant abandons
the premises, the lease is terminated and the landlord can recover “only the
unpaid rent due prior to the termination of the lease.” 127 Ariz. 346, 349
(App. 1980). However, Roosen was based on the parties’ rights at common
law, which parties may contractually agree to modify. Id.; Green v.
Snodgrass, 79 Ariz. 319, 322 (1955). Landlord and Tenant did just that when
they signed the Lease, which gives Landlord the right to recover the rent
Tenant would have owed through the end of the Lease term, reduced by
any rent Landlord received from a replacement tenant. The Lease also
places the burden on the Tenant to show the amount Landlord could have
earned by reletting the property.

¶14 Tenant concedes the Lease provision quoted above governs
Landlord’s remedies at termination, but argues that because the provision
did not “specifically and unambiguously” address reletting after
termination, Arizona’s common law—in particular, Roosen—controls. But
the Lease does address reletting after termination. It expressly contemplates
that Landlord will relet the premises and allows Landlord to recover the
expenses of reletting from Tenant. It also allows Landlord to recover rent
from Tenant through the end of the Lease term, less any amount Tenant
proves Landlord earned or could have earned during that period (for

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example, by reletting to another tenant). Because the Lease specifically
provides these remedies for Tenant’s breach, Roosen does not apply.

¶15 Tenant argues that the Lease preserves common-law
remedies as cumulative with those in the Lease. This Court does not
address this argument because Tenant raised it for the first time in its reply
brief. See Ariz. Dep’t of Revenue v. Ormond Builders, Inc., 216 Ariz. 379, 385
¶ 24 n.7 (App. 2007).

¶16 This Court finds no error in the superior court’s ruling that
Tenant’s obligation to pay rent did not end when Landlord relet the space
to the replacement tenant.

II. Landlord’s Damages Do Not Result in a Windfall.

¶17 Tenant argues that allowing Landlord to recover rent from
Tenant for July 2022 through April 2023 gives Landlord an improper
windfall because Landlord already obtained consideration for those
months under the New Lease. Although Tenant does not dispute that
Landlord received no rent from the replacement tenant until April 2023,
Tenant claims Landlord nonetheless realized a $155,000 benefit during that
period from the replacement tenant’s improvements to the rental space.
Tenant therefore asserts that any rent it owed Landlord for July 2022
through April 2023 should be reduced by $155,000 to prevent Landlord
from receiving an unlawful windfall. However, Landlord was required to
reimburse the replacement tenant for those expenses. Thus, Landlord
gained no net benefit from the improvements, let alone a windfall.

¶18 Tenant also argues that Landlord improperly received a
windfall because it received more rent from the new tenant ($16,156)
because of the deferred rent. But the New Lease was for a larger space than
was rented by Tenant and the Lease places the burden on Tenant to prove
that Landlord did not act reasonably. See Next Gen Cap., L.L.C. v. Consumer
Lending Assocs., L.L.C., 234 Ariz. 9, 12 ¶ 13 (App. 2013) (stating breaching
party has “the burden of proving that mitigation was reasonably possible
but not reasonably attempted” (quoting Fairway Builders, Inc. v. Malouf
Towers Rental Co., 124 Ariz. 242, 255 (App. 1979)). Tenant offered no
evidence that Landlord did not act reasonably, that rent deferral was
improper, or that the increased rent was the result of the rent deferral.

¶19 This Court finds no error in the superior court’s ruling that
Tenant owes Landlord $168,033.11 for breach of the Lease.

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III. Attorney Fees.

¶20 Landlord requests an award of attorney fees on appeal citing
Lease § 31.6 and A.R.S. § 12-341.01. Section 31.6 provides that the
unsuccessful party in litigation between Landlord and Tenant to enforce
any provision of the Lease “shall pay the successful or prevailing party’s
reasonable attorney’s fees and taxable and non-taxable costs and expenses.”
Accordingly, this Court awards Landlord reasonable attorney fees and
costs on appeal upon compliance with Arizona Rule of Civil Appellate
Procedure 21.

¶21 Landlord’s request for an award of attorney fees and costs
incurred in the superior court is denied because the superior court already
awarded those fees and costs.

CONCLUSION

¶22 This Court affirms.

MATTHEW J. MARTIN • Clerk of the Court
FILED: JR

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