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Spirit Master Funding IV LLC v. Martinsville Corral Inc.

United States District Court, D. Arizona

September 14, 2016

Spirit Master Funding IV LLC, Plaintiff,
v.
Martinsville Corral Incorporated, Victor Spina, Amber Spina, William Spina, Beth Spina, Defendants.

          FINDINGS OF FACT AND CONCLUSIONS OF LAW

          HONORABLE G. MURRAY SNOW UNITED STATES DISTRICT JUDGE.

         On August 11, 2016, this matter was tried to the Court without a jury. Pursuant to Federal Rule of Civil Procedure 52, the Court hereby makes its findings of fact and conclusions of law.

         BACKGROUND

         This case arises out of a lease agreement (the “Lease Agreement”) between Plaintiff Spirit Master Funding IV LLC (“Spirit Master”) and Defendant Martinsville Corral Incorporated (“MCI”). Defendants Victor Spina, Amber Spina, William Spina and Beth Spina are the guarantors of the lease. Plaintiff filed suit in this Court on April 7, 2014, alleging that Defendants had breached the Lease Agreement. Early proceedings in litigation disposed of several of Plaintiff's claims. After competing motions for partial summary judgment, the Court found that MCI had, by failing to submit timely financial statements, committed a breach of the lease that was not sufficiently material to allow foreclosure.

         In the Final Pretrial Order of June 11, 2016, the parties stipulated that the only contested issue of fact was “[w]hether Plaintiff incurred damages as a result of Martinsville's failure to submit timely financial statements.” The only contested issue of law was “[w]hether Spirit [Master] is entitled to recover attorneys' fees as damages.” The parties disagree as to whether this question should be answered by Arizona or Indiana law.

         FINDINGS OF FACT

         1. The Lease Agreement contains a choice of law provision providing that “[t]his Lease shall be governed by, and construed with, the laws of the state in which the Property is located, without giving effect to any state's conflict of law principles.” (Lease Agreement § 17.19.)

         2. The Property to which the Lease Agreement refers is located in the state of Indiana.

         3. The Lease Agreement was attached to Plaintiff's Complaint, filed on April 7, 2014.

         4. Spirit Master's Response to MCI's Motion to Dismiss, filed on June 16, 2014, contained no references or citations to Indiana law.

         5. The Lease Agreement was attached to Plaintiff's Amended Complaint, filed on September 3, 2014.

         6. On September 18, 2015, Plaintiff submitted a Motion for Partial Summary Judgment, which included two citations to Indiana cases and, in a footnote, a reference to the Lease Agreement's choice of law provision. (Doc. 79 at 7 & n.2.)

         7. On March 21, 2016, this Court ruled that MCI had breached the Lease Agreement by its failure to submit timely financial statements, but that this breach was not a material breach.

         8. On March 21, 2016, this Court ruled that Spirit Master's damages as a result of this breach were those, if any, “that accrued as a result of the delay in submission” of the financial statements.

         9. On March 21, 2016, this Court ruled that a genuine issue of material fact existed as to whether Spirit Master suffered damages as a result of MCI's failure to submit timely financial statements.

         10. On June 10, 2016, Plaintiff submitted Proposed Findings of Fact, which included six citations to Indiana cases and, in a footnote, a reference to the Lease Agreement's choice of law provision. (Doc. 104 at 4 & n.1, 5.)

         11. As of August 29, 2016, Spirit Master has not presented evidence as to the amount, if any, of Spirit Master's damages as a result of MCI's failure to submit timely financial statements apart from a claim to recover its attorneys' fees pursuant to the lease.

         12. The Lease Agreement provides that: “[I]n the event of any judicial or other adversarial proceeding concerning this Lease, to the extent permitted by Law, Lessor shall be entitled to recover all of its reasonable attorneys' fees and other Costs in addition to any other relief to which it may be entitled. In addition, Lessor shall, upon demand, be entitled to all attorneys' fees and all other Costs incurred in the preparation and service of any ...


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