Court Opinion

ID: 9747082
Source: CourtListenerOpinion
Date Created: 2023-08-27 14:56:13.983289+00
Date Added: 2024-06-11T07:25:19.937076
License: Public Domain

STEIN, J., Concurring and Dissenting.
I respectfully dissent from that portion of the opinion which concludes that the trial court incorrectly awarded compensation for loss of the bonus value of the lease to the lessee, Taco Bell. I concur in all other aspects of the opinion.
I.

Absent a Specific Provision in the Lease, Upon Condemnation Compensation for the “Bonus Value” Should Be Awarded to the Lessee

Upon condemnation, unless the lease provides otherwise, the lessee is entitled to compensation for the loss of his leasehold estate, (Code Civ. Proc., § 1260.220, subd, (a).) The value of the lessee’s interest is measured by “the difference between the amount of rent he is obligated to pay under the lease for the remainder of the term and the amount the lease would bring at a sale in the open market.” (6 Miller & Starr, Cal. Real Estate (2d ed. 1989) § 18:83, p. 203.) This difference is ordinarily described as the “ ‘bonus value’ of the lease.” (See 4 Nichols, Eminent Domain (rev. 3d ed. 1994) § 12D.04[4](2), 12D-60.) The majority opinion recognizes this general *1487rule1 but concludes that this lease awards the right to recover “bonus value” to the landowner. They find implicit in the trial court’s award of these damages to Taco Bell a “policy of judicial disfavor toward contractual allocation of damages in eminent domain proceedings.” (Maj. opn., ante, p. 1481.) They reverse the trial court after finding its policy “inconsistent with modern commercial practices” (maj. opn., ante, p. 1481) and California cases awarding bonus value on condemnation to the landowner.2
The trial court’s decision is not based on a policy, but rather on a finding of fact that there is no specific provision in this lease reserving bonus value to the lessor. The record supports this finding. Mr. Bonine, the agent who negotiated the lease for the lessee, testified that he never assigned Taco Bell’s rights to recover goodwill to the owner in the event of condemnation; nor did the lease give up any rights of the lessee against the condemning authority. As the majority notes, there is conflicting evidence. A specific provision in a draft of the lease awarding “bonus value” to the lessee in the event of a condemnation of the whole property was deleted. However, when faced with a conflict in the evidence “ ‘[a]n appellate court is without power to judge the effect or value of the evidence, weigh the evidence, consider the credibility of witnesses, or resolve conflicts in the evidence or in the reasonable inferences that may by drawn therefrom.’ ” (Smith v. County of Santa Barbara (1992) 7 Cal.App.4th 770, 776 [9 Cal.Rptr.2d 120]; Kimble v. Board of Education (1987) 192 Cal.App.3d 1423, 1427-1428 [238 Cal.Rptr. 160].) We are required to draw all presumptions in favor of the trial court’s determination and review the record in the light most favorable to the judgment. (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 927 [148 Cal.Rptr. 389, 582 P.2d 980]; Fortman v. Hemco, Inc. (1989) 211 Cal.App.3d 241, 259 [259 Cal.Rptr. 311].) Any conflicts in the evidence, including conflicting inferences, should be resolved in favor of the judgment and the prevailing party. (Nestle v. City of Santa Monica (1972) 6 Cal.3d 920, 925-926 [101 Cal.Rptr. 568, 496 P.2d 480]; Gray v. Fox (1984) 151 Cal.App.3d 482, 487 [198 Cal.Rptr. 720].) Since the testimony of Mr. Bonine is sufficient to support the trial court’s finding that there is no specific provision in this lease regarding the award of damages for “bonus value” on condemnation, I would uphold the trial court’s application of the general rule awarding these damages to the lessee.
*1488II.

The Lessee Did Not Waive the Right to Recover Damages for Bonus Value

Section 14 of tins lease concerns the lessee’s rights upon condemnation. Reference to the lessee’s right to recover for loss of “bonus value” was deleted from subsection A, which concerned condemnation of the whole property. The majority opinion concludes that “[tjhere can be no question that the lessee waived a right to recover bonus value of the lease” when that term was deleted from the lease. (Maj. opn., ante, p. 1482.) I do not find the record that compelling. The lessee retained that right to recover damages for loss of bonus value in the event of a “partial take, remainder usable.” (Lease § 14, subd. (C).) The provisions of.this lease concerning damages for bonus value must be given a reasonable interpretation. (Civ. Code, § 1643.) I can find no reasonable explanation for why the lessee would waive these damages upon condemnation of the whole premises, but reserve them in the event only a portion of the leased premises were taken.
At the time this lease was entered into, December 16, 1975, there was uncertainty in the law as to the effect of below market rent in evaluating a condemned property. If the actual rental under the existing lease was less than fair rental value, then “the fair market value of the parcel taken will be reduced accordingly and the condemnor then pays less by way of just compensation.” (People ex rel. Dept. Pub. Wks. v. Lynbar, Inc. (1967) 253 Cal.App.2d 870, 884 [62 Cal.Rptr. 320].) When the property to be condemned consisted of a fee and leasehold interests, there was confusion as to how it was to be valued. Some courts used the “undivided fee” rule while others used the “ ‘aggregate of the separate interests’ ” rule. (County of Los Angeles v. American Sav. & Loan Assn. (1972) 26 Cal.App.3d 7, 11-12 [102 Cal.Rptr. 439].) There were also questions about the lessee’s right to recover for the loss of goodwill in the event of condemnation. (Community Redevelopment Agency v. Abrams (1975) 15 Cal.3d 813, 825 [126 Cal.Rptr. 473, 543 P.2d 905, 81 A.L.R.3d 174].) Code of Civil Procedure section 1263.510, requiring compensation for loss of goodwill, although enacted in 1975, was not effective until July 1, 1976. (Stats. 1975, ch. 1275, § 2, p. 3453.) It was not until 1984 that the courts recognized that the value of below-market rate rent could be recovered as an element of lost goodwill. (People ex rel. Dept, of Transportation v. Muller (1984) 36 Cal.3d 263, 272 [203 Cal.Rptr. 772, 681 P.2d 1340].)
The only difference under this lease between condemnation of the whole premises and only a part, with the remainder usable, is that the former *1489terminates the lease. (Lease § 14, subds. (A) & (C).) Section 14 of this lease ends with the provision that: “The above rights of Lessee shall be in and to the compensation otherwise payable to Lessor. Termination of this lease as a result of condemnation shall not, however, affect the rights of the respective parties to such award.” I would therefore interpret these provisions of the lease to mean that if there is a condemnation of the whole premises, the lease terminates and the landowner will recover from the condemner the full value of all interests taken. Any portion of that award which represents bonus value of below market rent would be owed to the lessee by the landowner. In the event of a partial taking where the remainder is usable, the lease does not terminate so the landowner is not involved in the condemnation. The lessee in this situation will recover damages for bonus value directly from the condemner.
III.

The Lease Terms Regarding Bonus Value Have No Application to the Lessee’s Claim for Loss of Goodwill

As noted above, it is now recognized that the lessee may recover for lost goodwill (Code Civ. Proc., § 1263.510), which may include as an element the bonus value to the business of below market rent. (People ex rel. Dept, of Transportation v. Muller, supra, 36 Cal.3d at p. 272.) Compensation for the loss of goodwill is payable only to “[t]he owner of a business conducted on the property taken.” (Code Civ. Proc., § 1263.510, subd. (a).) The only limitation on compensation for loss of goodwill, which could involve the terms of the lease between the business owner and the landowner, is the proscription that “[compensation for the loss will not be duplicated in the compensation otherwise awarded to the owner.” (Code Civ. Proc., 1263.510, subd. (a)(4).)
If the school district has been required to pay the bonus value of this lease twice, once to the landowner as fair market value of the property and once to Taco Bell as goodwill, it is not the fault of the trial court. Rather, this result stems from the school district’s decision to settle the value of the landowner’s interest separate from the lessee’s. Normally the condemnor does not consider the separate interests in the property but treats it as though under a single ownership. Once the total compensation has been fixed, the landowner and the lessee establish the value of their respective interests and the total award is apportioned between them. (Code Civ. Proc., § 1260.220, subd. (b).) By settling separately with the landowner, the school district assumed the risk that it might be required to pay more than the total value of *1490the property if the trial court did not agree with the landowner’s contention that he was entitled to be compensated as though the property were leased at market value.
A petition for a rehearing was denied June 10, 1994, and respondent’s petition for review by the Supreme Court was denied August 11, 1994.

[T]he lessee will have a right to recover the balance of the market value, above that recovered by the lessor, as lease bonus value.” (Maj. opn., ante, p. 1479.)

In each of the cases cited, the lease specifically assigned bonus value on condemnation to the lessor. (People ex rel. Dept. Pub. Wks. v. Amsden Corp. (1973) 33 Cal.App.3d 83, 86 [109 Cal.Rptr. 1]; Dix Box Co. v. Stone (1966) 244 Cal.App.2d 69, 70-71 [52 Cal.Rptr. 847]; City of Beverly Hills v. Albright (1960) 184 Cal.App.2d 562, 564 [7 Cal.Rptr. 706].)