37 Cal.App.5th 22
Cal. Ct. App.2019Background
- In 2008 Edgar Fragoso and Eva Meneses (operators of El Parral) signed a 15-year commercial lease with landlord Thee Aguila, Inc.; the lease contained a condemnation clause allocating eminent-domain payments to the landlord except for tenant trade fixtures and removable personal property.
- LAUSD filed an eminent domain action in 2009; a prejudgment possession order issued in November 2009, and the final condemnation judgment was entered March 9, 2011.
- The eminent domain judgment awarded Thee Aguila $6,198,100 for its property interest and awarded Meneses, Fragoso, and El Parral $6,100,000 for their interests, expressly including claims for leasehold value, goodwill, fixtures, relocation benefits, litigation expenses, and costs.
- Thee Aguila sued Meneses and Fragoso in 2014 alleging (1) the lease (or an oral agreement) required tenants to remit their condemnation proceeds to the landlord, and alternatively (2) that tenant rights had never transferred from prior owners (the Orozcos) and thus the landlord held the goodwill/operating rights.
- After a bench trial, the trial court ruled the lease’s condemnation clause did not entitle Thee Aguila to El Parral’s goodwill award and that the eminent domain judgment precluded Thee Aguila’s claims (collateral estoppel). Judgment for defendants was entered and a new-trial motion was denied; Thee Aguila appealed.
Issues
| Issue | Plaintiff's Argument (Thee Aguila) | Defendant's Argument (Meneses/Fragoso) | Held |
|---|---|---|---|
| Whether the lease’s condemnation clause vested landlord with entitlement to all condemnation awards (including business goodwill) | Lease language grants landlord property in “any payment made under the threat of eminent domain,” so landlord is entitled to awards for diminution of leasehold and fee, thus including goodwill | Goodwill of a business owner is a separate compensable interest under CCP §1263.510; the lease language does not displace statutory/owner goodwill rights | Court: Lease does not entitle landlord to business goodwill; goodwill is compensable to the business owner and the lease language is not read to override that rule (de novo review) |
| Whether the eminent domain judgment precludes Thee Aguila from litigating entitlement to the condemnation proceeds awarded to the tenants (issue preclusion / collateral estoppel) | Because Thee Aguila and the tenants were co-defendants in the eminent domain action, Thee Aguila argues they were not adversaries there and the judgment should not preclude disputes among defendants now | Issues of what sums were payable to landlord versus tenants were fully litigated and finally resolved in the eminent domain proceeding; parties and their claims were before the court and the judgment apportioned awards | Court: Collateral estoppel applies — the eminent domain judgment necessarily decided the allocation of compensation between landlord and tenants and is final; Thee Aguila is precluded from relitigating those issues |
| Whether unpaid rent/key-money claims survived termination after prejudgment possession/order for possession | Thee Aguila contends tenants owed rent/key-money for Dec 2009–Jan 2010 and additional payments under lease addendum | Lease terminated upon prejudgment possession; Code Civ. Proc. §§1265.110/1265.140 terminated landlord’s right to rent after possession ordered; record shows $150,000 paid and no other proof of additional payments before termination | Court: Landlord not entitled to rent for the months after prejudgment possession; key-money/additional rent claims fail for lack of record evidence |
| Whether Thee Aguila could assert post-condemnation assignment from prior operators to capture goodwill awarded to El Parral | Thee Aguila points to a 2012 assignment from prior owners (Orozcos) claiming the operating permit/rights never transferred to tenants, so goodwill belonged to Orozcos then to landlord | The Orozcos were not operating El Parral at the time of condemnation; any competing claim to goodwill should have been raised in the eminent domain action | Court: Assignment theory fails — tenants were the business operators at condemnation and any challenge should have been litigated in the eminent domain proceeding; collateral estoppel and the record defeat this claim |
Key Cases Cited
- City of Vista v. Fielder, 13 Cal.4th 612 (California Supreme Court) (distinguishes leasehold interests from business goodwill; goodwill may be compensable separately)
- Lucido v. Superior Court, 51 Cal.3d 335 (California Supreme Court) (articulates traditional collateral estoppel requirements)
- Johnson v. GlaxoSmithKline, Inc., 166 Cal.App.4th 1497 (California Court of Appeal) (standard of review for collateral estoppel is de novo)
- Los Angeles County Metropolitan Transportation Authority v. Yum Yum Donut Shops, Inc., 32 Cal.App.5th 662 (California Court of Appeal) (recognizes business goodwill as compensable in eminent domain)
- McFadden v. Los Angeles County Treasurer & Tax Collector, 34 Cal.App.5th 1072 (California Court of Appeal) (issues about parties’ positions should be raised in the condemnations proceeding)