Freanel v. Fashionable

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE FREANEL & SON GILBERT, LLC, dba GILBERT TOWNE CENTER, ) ) ) Plaintiff/Appellee/ ) Cross-Appellant, ) ) v. ) ) FASHIONABLE EXPECTATIONS, LLC, an ) Arizona limited liability ) company; MICHAEL GOODMAN and ) ANGELA WILSON-GOODMAN, husband ) and wife, ) ) Defendants/Appellants/ ) Cross-Appellees. ) ) DIVISION ONE FILED: 05-20-2010 PHILIP G. URRY,CLERK BY: GH 1 CA-CV 08-0853 DEPARTMENT C MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV 2006-007382 The Honorable Bethany G. Hicks, Judge AFFIRMED IN PART; MODIFIED IN PART Tiffany & Bosco, P.A. By Christopher R. Kaup May Lu Attorneys for Plaintiff/Appellee/Cross-Appellant Phoenix Wilson-Goodman & Fong, P.C. By Terry J. Fong Attorneys for Defendants/Appellants/Cross-Appellees Gilbert B R O W N, Judge ¶1 Fashionable Angela Wilson-Goodman Expectations, LLC, Michael (collectively Tenant ) Goodman, appeal from and the trial court s judgment after a bench trial finding that Tenant unjustifiably vacated the premises it leased from Freanel & Son Gilbert, LLC ( Landlord ), and was not constructively evicted. Landlord cross-appeals from the court s damages award, asserting that the court improperly reduced its claimed damages for renovation expenses and commissions incurred for re-leasing the premises, when such costs were included in the lease. For the following reasons, we find that the trial court set an incorrect accrual date commissions, for and the the interest attorneys on fee renovation award credited Tenant with its security deposit. and costs, should lease have We otherwise affirm the judgment. BACKGROUND ¶2 Landlord is the owner and lessor of a shopping center known as Gilbert Towne Center. In June 2004, Tenant signed a three-year lease with Landlord to lease Suite 142 for use as a retail store selling maternity, infant, and children s clothing and accessories. Angela Wilson-Goodman and her husband Michael Goodman executed a personal guarantee of the lease. ¶3 By letter dated July 18, 2005, Lisa Baranowski, the managing agent of the Gilbert Towne Center, advised Tenant that 2 Tenant had violated conditioning unit. the lease by installing a new air for work She also stated: Secondly, in regards to the roof leaks, we have had our contractor out to access [sic] the roof repairs and are currently waiting for a proposal. Once we have reviewed and receive approval from the owner, we will schedule the repairs. However, please be advised, that your A/C contractor will be responsible for any penetrations or leaks as a result of the installation of the A/C unit and will be responsible for any and all such repairs as caused by such. Standard Roofing subsequently submitted performed for several rental units. the invoice stated: leak in an invoice With regard to Suite 142, [bathroom], 3-coursed split. [A/C] condensate line needs to be checked by [A/C] tech. An earlier invoice from Standard Roofing, dated February 28, 2005, stated: Not a roof leak, A/C problem. On or about October 15, 2005, Tenant vacated the premises. ¶4 The tenant adjoining Suite 142, Bed Depot, took over Suite 142 as an expansion of its existing space pursuant to a lease dated March 29, 2006. Bed Depot received three months free rent, and Landlord made $26,497.99 worth of modifications to the suite to accommodate Bed Depot s expansion. Bed Depot agreed to lease the new space for five years and then extended its existing lease to correspond to the new lease on Suite 142. The lease commenced on September 19, 2006, with the payment of prorated rent for September. 3 ¶5 for In May 2006, Landlord filed a complaint against Tenant breach of contract. The complaint alleged that Tenant vacated and abandoned the premises without Landlord s consent. Tenant denied it abandoned the premises and filed a counterclaim for the return of its $2,750 security deposit. Tenant alleged that Landlord breached the contract because Landlord failed to repair the roof after Tenant gave notice that the roof leaked during rainy weather. Tenant asserted that Landlord had knowledge of the leaking roof for at least a year prior to Tenant s vacating the premises. Tenant claimed that flooding caused by the leaking roof made the suite untenable as a place of business. ¶6 Prior to trial, the superior court granted Landlord s motion in limine and request for sanctions based on Tenant s discovery violations and failure to comply with preparing the joint pretrial statement. The court precluded Tenant from presenting any exhibits or witnesses, except for the testimony of Angela Goodman-Wilson. ¶7 The court conducted a two-day bench trial. Michael Crook, President of Nobeus Property Management, Inc. ( Nobeus ), the property management company for Landlord, testified that on October 15, 2005, during a periodic inspection of the Gilbert Towne Center, he noticed a Going Out of Business sign taped to Tenant s front windows, and instructed 4 Baranowski to contact Tenant about the sign. vacated the premises, He further testified that after Tenant Nobeus negotiated tenants for the vacated premises. with four potential He explained that his company was entitled to a commission of $10,856.60 for obtaining the replacement tenant. He testified that the necessary to secure Bed Depot s occupancy. renovations were He also testified that any leaking because of the air conditioner was Tenant s responsibility under the lease. He stated that he inspected the property the after Tenant vacated premises but before the renovations were made and saw no evidence of any water damage on the property. ¶8 Baranowski property after damage. She Goodman about testified Tenant had moved several roof leaks that out and she also saw no conversations and hired occasions to address the complaints. with visited signs Angela contractors on of the water Wilsonseveral She noted that the roofer indicated that the condensate line for the air conditioning unit needed to be checked and stated that she told Wilson-Goodman, but she did not know whether Tenant ever checked or fixed the air conditioning unit. Baranowski also explained that repairs were made to the roofs over other suites, but that those other suites were not in the same building as Suite 142 and did not share the same roof. She further testified that in January 2006, the entire roof was sealed with an elastomeric coating, 5 but that the project was not precipitated by any complaints or any leaks related to Suite 142. She could not remember receiving any letter from Tenant regarding problems with the roof or any letter in October 2005 informing her that Tenant was going to terminate the lease and vacate the premises because of flooding issues. ¶9 Angela Wilson-Goodman testified that the roof of Suite 142 leaked for the first time in July 2004, soon after Tenant took possession of the property. She notified the property management company, which was someone other than Nobeus at the time, but did not know if that company took any action because in July the following year the roof leaked again. She said that she sent a letter to Baranowski on July 23, 2005, because the roof was still leaking and nothing was being done. According to Wilson-Goodman, the letter noted that the bathroom was under water and a carpeted children s play area was drenched. She described the bathroom as having water running down the walls and bubbling paint on the ceiling and described the ceiling in the center of the store as also having a major leak. Wilson- Goodman testified that Nobeus sent someone to pull up the carpet to dry it, to vacuum up the water, and to replace a ceiling tile that had crumbled. the store flooded She stated that, after the July 23 letter, every time it rained. Wilson-Goodman testified that, on October 18, 2005, the store flooded again, 6 and she faxed and mailed a letter to Baranowski, saying that because Nobeus failed to repair the roof, she considered Landlord to be in breach of its obligations and so she was vacating the premises. She denied that she was ever told that the leak was caused by the air conditioning unit. She testified that the store did not have a going out of business sign on the window, but had a sign indicating fifty percent off and that the sign, advertising varying discounts, had been placed on the window in early 2005. ¶10 In maintains a rebuttal, log of Baranowski telephone calls testified it that receives Nobeus regarding maintenance issues and that, except for a call in June 2005 about the air Wilson-Goodman. conditioning, the log reflected no calls from She testified she received an e-mail regarding leaks some time prior to July 18, 2005, and that in response Nobeus sent Standard Roofing to check the problem. ¶11 Randy England, general manager of Standard Roofing, testified regarding two invoices from his company dated February 28, 2005, and July 29, 2005. Tenant objected to his testimony on the grounds that England had no personal knowledge of the service listed in the invoices because he had not performed the work. Overruling the objection, the trial court indicated that it would accept the evidence as an interpretation of business records. England testified that the three-course split that 7 appeared in the July invoice was a minor repair needed when a roof penetration, as with a pipe, vent, or duct, caused a small split requiring new plastic cement. He further explained that an air conditioning condensate line drains the condensation from an air conditioning unit, but that if the condensate line becomes blocked, the water builds up inside the unit, overflows, and can come through the roof, appearing to be a roof leak. also noted that an air conditioning unit produces He more condensation when it rains, resulting in overflows and leaks, giving the impression that the leak is caused by a defective roof. The Tenant s court ruled constructive in favor eviction of the defense. Landlord, The rejecting court awarded Landlord damages for unpaid rent plus interest and attorneys fees. As to Landlord s claim for damages for commissions and renovation expense, the court awarded Landlord one third of the claimed amount based on evidence presented at trial. Landlord filed a motion for new trial, arguing that it was entitled to all its lease. renovation costs and leasing commissions under the ¶12 The court denied the motion. The court ultimately entered judgment in favor of Landlord in the amounts of $36,689.71 for unpaid rent (which included rent up to September 18, 2006); $13,394.93 of interest on unpaid rent through April 9, 2008, at the rate of eighteen percent; interest at the rate 8 of eighteen percent on the principal amount of unpaid rent from April 9, 2008, until paid; $12,451.33 for renovation costs and leasing commissions, plus interest at the rate of eighteen percent from September 18, 2006 (the date that the new tenant [Bed Depot] began paying rent in the leased premises vacated by defendants), until paid ; attorneys fees in the amount of $34,730.00 plus interest at eighteen percent from the date awarded until paid; and costs in the amount of $535.80. ¶13 Tenant appealed and Landlord cross-appealed the trial court s reduction of damages with expenses and leasing commissions. to Arizona Revised Statutes respect to the renovation We have jurisdiction pursuant ( A.R.S. ) section 12-2101(B) (2003). DISCUSSION ¶14 the On appeal from a trial to the court, we are bound by trial erroneous. court s findings of fact unless they are clearly Sabino Town & Country Estates Ass n v. Carr, 186 Ariz. 146, 149, 920 P.2d 26, 29 (App. 1996). by the trial court s conclusions of law. We are not bound Id. We view the evidence in the light most favorable to supporting the trial court s decision and must affirm if any evidence supports the judgment. In re Estate of Pouser, 193 Ariz. 574, 576, 975 P.2d 704, 706 (1999). 9 A. ¶15 Constructive Eviction Tenant argues that it was constructively evicted from the property. Constructive eviction occurs through intentional conduct by the landlord which renders the lease unavailing to the tenant or deprives [the tenant] of the beneficial enjoyment of the leased premises. property, causing [the tenant] to vacate the Stewart Title & Trust of Tucson v. Pribbeno, 129 Ariz. 15, 16, 628 P.2d 52, 53 (App. 1981). ¶16 Tenant relies extensively on the testimony of Angela Wilson-Goodman. She testified that the premises suffered extensive damage on July 23, 2005, that the roof leaked almost every time numerous it calls rained, and regarding that the Nobeus leaks. failed She to respond testified that to she decided to close the business after a bad rainstorm on October 18 again resulted in flooding and appeals to Nobeus received no response. Although this testimony might support a finding of constructive eviction, it does not require such a finding in light of other evidence. ¶17 Baranowski testified that logs of telephone calls requesting maintenance did not show any calls from Tenant for roof leaks, although she acknowledged such requests could have been received by e-mail or letter. She acknowledged that she had conversations with Wilson-Goodman about leaks, but testified that Nobeus responded whenever it received a complaint from her, 10 and Wilson-Goodman s testimony confirms that Nobeus responded to Tenant s written complaint in July 2005. Landlord also submitted evidence showing that a leak in the bathroom ceiling was repaired in July 2005 and that the air conditioners condensate line needed to be checked, which under the lease was Tenant s responsibility. Although Tenant denied being informed of the need to address the air conditioning condensate line, Baranowski testified conditioner needed that to be she told Wilson-Goodman checked. Crook the testified that air on October 15, 2005, prior to the date Wilson-Goodman stated she decided to vacate the premises because of the leaks, he saw a going out of business sign in Tenant s window. Wilson-Goodman claimed the sign was for a sale, not because she was going out of business. Crook memorialized his observation, however, in an e-mail sent October 15 and introduced into evidence. directed Baranowski front windows. to Contact Fashions due to The e-mail GOB sign on Both Baranowski and Crook testified that the premises showed no sign of water damage when they inspected it after Tenant left. ¶18 were Tenant argues that other tenants in the same building having includes similar evidence of leak roof problems. repairs Although involving the other record tenants, Baranowski testified that those other tenants were not in the same building as Tenant and did not share the same roof. 11 ¶19 Tenant also argues that the testimony of England regarding the effect of humidity and rain on a condensate line should have been excluded as expert testimony. Landlord argues that Tenant waived the issue by failing to object and that, even if the evidence should have been excluded, its admission was harmless. ¶20 been The court had previously ruled that England had not properly noticed disclosed as a England s testimony as an witness. would expert The be court limited although he to factual been ruled therefore had that testimony. Tenant subsequently objected to England s testimony about the invoices from Standard Roofing on the grounds that England lacked personal knowledge since he had not repaired the roof himself. The court permitted that testimony about the invoices, saying it would treat the invoices as business records. Tenant voiced no objection, however, to England s testimony regarding how condensate lines work and the effect of rain or humidity on a condensate line. Tenant did object to England s testifying about the application of elastomeric coating on the grounds that the testimony was expert testimony, and the court sustained that objection. ¶21 testimony Although by the England court to be had previously inadmissible, ruled Tenant was expert still obligated to object when testimony in violation of that ruling 12 was offered. See Goldthorpe v. Farmers Ins. Exch., 19 Ariz. App. 366, 368, 507 P.2d 978, 980 (1973) (incumbent on plaintiff to have objected to admission of inadmissible evidence regarding refusal to take polygraph). Because Tenant failed to object, the testimony was properly before the court. ¶22 Id. In any event, even if the admission was error, this court reverses for error only when the record shows that the error was prejudicial to the substantial rights of the party. Ariz. R. Civ. P. 61; Creach v. Angulo, 189 Ariz. 212, 214-15, 941 P.2d 224, 226-27 (1997). to be the case. In Tenant has not demonstrated that addition to England s testimony, the invoices from Standard Roofing showed the cause of the leak to be the condensate line of the air conditioning unit. ¶23 The parties presented conflicting evidence as to the nature of the problem, the condition of the premises, and the responsiveness of Landlord; it is for the fact finder to weigh the evidence and resolve the conflicts. Aranda v. Cardenas, 215 Ariz. 210, 218, ¶ 30, 159 P.3d 76, 84 (App. 2007) (recognizing that the fact-finder determines credibility, weighs the evidence, and draws appropriate inferences from the evidence ). Substantial evidence supports the trial court s conclusion that Tenant was not constructively evicted. 13 B. Surrender of Premises ¶24 The trial court found that the expenses incurred by Landlord for premises were renovations and inconsistent commissions with the in re-letting obligation to the mitigate damages and were instead intended to benefit Landlord. Tenant contends that this finding requires the conclusion that Landlord accepted Tenant s surrender of the premises, thereby terminating the lease as a matter of law and limiting damages to unpaid rent prior to the date of acceptance of the surrender. ¶25 When a tenant of a commercial lease abandons the premises, the lessor can either accept or refuse to accept the surrender of the property. Roosen v. Schaffer, 127 Ariz. 346, 349, 621 P.2d 33, 36 (App. 1980). If the landlord accepts the surrender, the lease is terminated and the landlord can recover only any landlord rent due refuses prior to to the termination. accept the surrender, Id. it may If the recover possession of the property, but must make reasonable efforts to rent the property at a fair rental. 166 Ariz. unqualified 471, 477, retaking 803 of P.2d the 464, premises surrender as a matter of law. generally a question 470 by (App. the 1990). landlord The is a Riggs v. Murdock, 10 Ariz. App. 248, 251, 458 P.2d 115, 118 (1969). is Id.; Lee Dev. Co. v. Papp, of fact The intent of the landlord in light of all the circumstances, and the trier of fact must determine whether the 14 control over the property exercised by the landlord was for the landlord s own benefit, thereby evidencing acceptance of the surrender, or for the benefit of and on behalf of the tenant so as to mitigate governing damages. whether a Id. However, landlord has these principles unqualifiedly retaken possession of the property apply in absence of lease provisions dealing with the problems. ¶26 the Id. Paragraph 30 of the lease provides various options to Landlord maintaining in the the event lease and of Tenant s re-letting default, the including premises at its discretion or re-entering the premises and accepting surrender. Tenant contends that since the lease provides for surrender and the facts support it, the court s factual finding that Landlord s actions were for its own benefit requires a finding that Landlord accepted surrender and Paragraph 30, however, clearly states: terminated the lease. No such re-entry or execution of any other remedy by Landlord shall constitute a termination of this Lease unless Landlord notifies Tenant in writing of such termination. In addition, Paragraph states: No act or conduct of Landlord, including, without limitation, the acceptance of the keys to the Demised Premises, shall constitute an acceptance or the surrender of the Demised Premises by Tenant before the expiration of the term of this Lease. Only a notice from Landlord to Tenant shall 15 35(d) constitute acceptance the Demised Premises. or the surrender of The lease further provides that notices must be in writing. such writing exists, therefore no surrender or No termination occurred under the lease. C. ¶27 Calculation of Damages Tenant also challenges awarded by the trial court. the calculation of damages Tenant contends that the court s award of damages for unpaid rent was erroneous because it was inconsistent minute with entry, the its earlier trial minute court awarded 2005, to August 31, 2006, as damages. judgment, Landlord listed entry damages rent ruling. from November on the inconsistent with grounds the that minute for the entry, judgment including the September rent. its 1, In its proposed form of unpaid rent September 18, 2006 the date Bed Depot began paying rent. objected In proposed but the through Tenant judgment court was entered On appeal, Tenant argues that including the rent for September was inconsistent with the trial court s minute entry ruling and was clearly erroneous and an abuse of discretion. ¶28 We find no error. reconsider non-final rulings. Superior of Tenant s objection judges may Zimmerman v. Shakman, 204 Ariz. 231, 236, ¶ 15, 62 P.3d 976, 981 (App. 2003). benefit court but, 16 The court had the nevertheless, revised its earlier ruling Landlord. by adopting Because the the minute damages entry award ruling was proposed not a by final ruling, the court was permitted to modify or correct its earlier minute entry. amount as the Although correct Tenant amount argues for an entirely unpaid rent, it different does not explain the basis for this amount, nor does it allege that the amount awarded by the judgment is not supported by the record. Landlord submitted its calculation for unpaid rent during the trial and the evidence supports the trial court s ruling. ¶29 Tenant further argues that the court improperly applied an interest rate of eighteen percent to the late fees, the amount awarded for renovation and leasing commissions, and the attorneys fees. Tenant contends that, although the lease provides for an eighteen percent interest rate on unpaid rent, it is silent as to interest on these other damages, and therefore ten percent interest applies pursuant to A.R.S. § 441201 (2003). ¶30 Paragraph 9 of the lease provides in pertinent part: In the event Tenant is late in the payment of Minimum Guaranteed Rental or other sums of money required to be paid under this Lease, Tenant agrees to pay to Landlord a In addition to the late late charge[.] charge referred to above, any and all payments in arrears for more than fifteen (15) days shall bear interest, from the due date, payable as additional rent to Landlord at the interest rate of eighteen (18%) percent per annum. 17 The late fees, renovation costs, leasing commissions, and attorneys fees are all payments or other sums of money to which Landlord is provides that eighteen percent entitled any and under all interest. the payments We find lease. in no Paragraph arrears error 9 accrue in the at trial court s application of the eighteen percent interest rate. ¶31 Tenant also argues that the interest on the renovation costs and leasing commissions as well as attorneys fees should accrue from the date of the judgment. The judgment provides that interest on the renovation costs and leasing commissions accrues as of the date Bed Depot began paying rent, and that interest on attorneys fees accrues as of the unsigned minute entry establishing the amount of fees, which was issued several months prior to judgment. prejudgment interest on In essence, the judgment provides for the renovation costs and lease commissions as well as the attorneys fees. ¶32 A party is liquidated claim. entitled to prejudgment interest on a See Gemstar Ltd. v. Ernst & Young, 185 Ariz. 493, 508, 917 P.2d 222, 237 (1996). A claim is liquidated if there is a basis upon which the amount claimed can be precisely calculated. then Id. calculated (citation from the omitted). date (citation omitted). 18 the Prejudgment claim interest becomes due. is Id. ¶33 Here, neither the renovation costs nor the leasing commissions claimed by the Landlord were liquidated until the court determined the final amount due. Landlord presented evidence about the renovation costs and leasing commissions in the form of testimony and exhibits. For the reasons explained, infra within ¶¶ awarding 37-42, Landlord the court only a acted portion of its renovation costs and leasing commissions. its discretion claimed damages in for The award, therefore, was not liquidated until the court determined the amount owing; thus, interest accrues from the date of the judgment. ¶34 Similarly, the award of attorneys fees was not liquidated until the court determined the amount of award for the fees. reasonable Because the attorneys lease fees, the provides amount for of subject to the discretion of the trial court. an the award award of was See Woliansky v. Miller, 146 Ariz. 170, 172, 704 P.2d 811, 813 (App. 1985) (where contract provides for award of reasonable attorneys fees, the determination of the reasonable amount is within trial court s discretion). Consequently, interest on the award of attorneys fees accrues from the date of the judgment. ¶35 Tenant argues that the interest awarded on unpaid rent was incorrectly calculated. Tenant offers no explanation of the error in support of this claim and therefore we do not address it. See Modular Sys. Inc. v. Naisbitt, 114 Ariz. 582, 587, 562 19 P.2d 1080, 1085 particularity (App. how the 1977) trial (appellant court erred must or state issue is with deemed abandoned). ¶36 Tenant also argues that the trial court erred in not crediting Tenant for the $2,750.00 security deposit it paid to Landlord upon signing the lease. Landlord concedes that Tenant is entitled to credit for this deposit, but argues modifying the judgment is unnecessary as it will apply the credit regardless of the language Landlord, we of find the the judgment. judgment Given should be the concession modified to by credit Tenant for the security deposit. D. ¶37 Lease Commissions and Renovation Costs On cross-appeal, Landlord argues that the trial court abused its discretion in reducing the damages awarded for the renovation presented costs and evidence expenses and leasing commissions. indicating commissions it had relating to Although incurred the new Landlord $37,354.59 lease with in Bed Depot, the trial court found this amount to be excessive and unreasonable and reduced that, the terms under it of by the two-thirds. lease, it Landlord is entitled argues to all renovation costs and leasing commissions and the trial court had no discretion to reduce the amount. ¶38 When abandons the a tenant premises, in the a We disagree. commercial landlord 20 has lease a transaction duty to make reasonable efforts to rent [the premises] at a fair rental. Dushoff v. Phoenix Co., 22 Ariz. App. 445, 449, 528 P.2d 637, 641 (1974) (emphasis added); see also Fairway Builders, Inc. v. Malouf Towers Rental Co., Inc., 124 Ariz. 242, 255, 603 P.2d 513, 526 (App. 1979) (noting that the key requirement [in mitigation] is that the injured party exercise [r]easonable care to mitigate damages ). Whether a landlord acts reasonably in seeking a new tenant and preparing the premises for the new tenant s use is circumstances. determined by examining the totality of the Dushoff, 22 Ariz. App. at 449, 528 P.2d at 641. Whether the duty to mitigate damages has been violated is a question of fact for the trier of fact. 256, 603 P.2d at 527. We will Fairway, 124 Ariz. at affirm the trial court s decision if it is correct for any reason[.] Glaze v. Marcus, 151 Ariz. 538, 540, 729 P.2d 342, 344 (App. 1986). ¶39 The lease here provides that in the event of Tenant s default, Landlord shall be entitled to recover from Tenant all damages incurred . . . including, without limitation thereof, . . . any installation other of costs incurred improvements for by Landlord Tenant or including any the replacement tenant and any leasing or rental commissions paid on account of this Lease or any subsequent lease made during the period which was to be the term hereof[.] 21 ¶40 Landlord argues that this language does not expressly limit renovations reasonableness expenses or commissions standard. incurred for Landlord the nor does further renovations it contends and impose that commission consistent with its duty to mitigate damages. a the was Tenant counters that some rational maximum reflecting the parties intent in relation to incurring expenses associated with mitigation must be recognized Landlord be on the grounds permitted to of unconscionability, make extravagant and lest the unreasonable renovations for its own benefit or the benefit of a new tenant at Tenant s expense. ¶41 In this case, the record reflects that Landlord made significant changes to the premises to accommodate Bed Depot, including installing knocking a down roll-up walls, door. demolishing In exchange a for bathroom, and making such extensive modifications, Bed Depot agreed to a lease term of five years, more than four years beyond Tenant s original term, 1 and extended its existing lease on the adjacent space to correspond to the new lease terms for Suite 142. ¶42 regarding The the trial court considered reasonableness of 1 the the evidence expenses presented incurred by Tenant s lease was scheduled to terminate June 14, 2007. Bed Depot s lease extended to September 2011. 22 Landlord in its efforts to mitigate damages by re-letting the space and concluded: [T]estimony concerning the nature and extent of the renovations, together with the extended duration of the successor lease[,] [and] the payment of a commission in the purported amount were inconsistent with the [Landlord s] duty to mitigate damages and, on the contrary, represented an effort on the part of the [Landlord] to derive greater revenues over a longer period of time from a more credit-worthy tenant and, as such, were excessive and unreasonable. We agree with the reasoning of the trial court. Notwithstanding the language of the lease provision regarding damages in the event of default, we find that the actions by Landlord in reletting the premises exceeded what was necessary to reasonably mitigate its damages and instead worked to benefit Landlord in excess of its damages at the expense of Tenant. find that the trial court did not abuse its We therefore discretion in determining that a reduced amount of damages was appropriate under the circumstances. E. ¶43 Attorneys Fees Both parties seek an award of attorneys appeal pursuant to A.R.S. § 12-341.01 (2003). fees on In the exercise of our discretion, we decline to award attorneys fees to either party. We award costs incurred on appeal to Tenant upon compliance with Arizona Rule of Civil Appellate Procedure 21(a). 23 CONCLUSION ¶44 Based on the foregoing, we find that the trial court erred in awarding prejudgment interest for the attorneys fees award and the commissions. award for the renovation costs and lease We modify the judgment to read that interest on those awards shall accrue from the date of judgment. We further modify the judgment to reflect that Tenant is entitled to credit in the amount Landlord. We of $2,750 affirm for the the security remainder of deposit the trial paid to court s judgment. /s/ _________________________________ MICHAEL J. BROWN, Judge CONCURRING: /s/ ______________________________ PATRICK IRVINE, Presiding Judge /s/ ______________________________ DONN KESSLER, Judge 24

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