A landlord and tenants entered into an oral lease agreement, with an alleged option to purchase. The tenants paid the landlord the agreed-upon rent for several years but also paid an extra amount for several more years, apparently to fund the purchase. When the landlord tried to increase rent, the tenants requested that the purchase payments be applied to rent. The landlord rejected this proposal and filed a detainer action. In response, the tenants asserted counterclaims for (1) breach of contract for the amounts paid toward purchase; (2) breach of the covenant of good faith and fair dealing; (3) breach of A.R.S. § 33-1321, which governs security deposits; (4) breach of A.R.S. § 33-1324, which governs the duty to provide fit and habitable premises; and (5) unjust enrichment.
In superior court, the tenants recovered on their breach of contract and statutory claims, while the other claims were denied or dismissed. The Court of Appeals reversed in part, holding that the superior court lacked jurisdiction to consider breach of contract or unjust enrichment counterclaims in detainer actions, because detainer actions concern only the right of possession and the landlord’s obligations under the rental agreement. The Court of Appeals held that the superior court did have jurisdiction over the statutory claims and the breach of the duty of good faith and fair dealing claim, to the extent it concerned the lease agreement and not the option to purchase.
The Court of Appeals also upheld the superior court’s decision to award attorney’s fees to the landlord under A.R.S. § 12-1178(A) and declined to apply the net judgment rule to detainer actions.
Judge Thumma delivered the opinion of the Court, in which Judges Perkins and McMurdie joined.
Posted by: Travis Hunt