City of Glendale v. Superior Court

• Decision Date: 29 September 1993
• Docket Number: No. B072610,B072610
• Citation: 23 Cal.Rptr.2d 305,18 Cal.App.4th 1768
• Court: California Court of Appeals Court of Appeals
• Parties: CITY OF GLENDALE, Petitioner, v. SUPERIOR COURT OF The County of Los Angeles, Respondent, GIOVANETTO ENTERPRISES, INC., Real Party in Interest.

Page 305

23 Cal.Rptr.2d 305

18 Cal.App.4th 1768

CITY OF GLENDALE, Petitioner, v. SUPERIOR COURT OF The County of Los Angeles, Respondent GIOVANETTO ENTERPRISES, INC., Real Party in Interest.

No. B072610.

Court of Appeal, Second District, Division 3, California.

Sept. 29, 1993.

Scott H. Howard, City Atty., Carmen Merino, Deputy City Atty., Glendale, Freilich, Kaufman, Fox & Sohagi, Benjamin Kaufman and Deborah J. Fox, Los Angeles, for petitioner

No appearance by respondent.

Laskin & Graham and Richard Laskin, Glendale, for real party in interest.

CROSKEY, Acting Presiding Justice.

The City of Glendale ("City") seeks a writ of mandate directing the trial court to vacate its order finding that the City had breached a long term lease of City-owned property to the real party in interest, Giovanetto Enterprises, Inc. ("GEI"), by exercising its power of eminent domain prior to the end of the term.

As we conclude that the condemnation of a leasehold interest by a public entity lessor cannot breach a contractual commitment in a lease for a minimum fixed term, we grant the writ.

FACTUAL AND PROCEDURAL BACKGROUND

On April 3, 1985, City entered into a 20-year written lease under which GEI agreed to lease certain City-owned property for the operation of a restaurant. The lease agreement contained no provision regarding the City's possible future exercise of its power of eminent domain over the leasehold. Indeed, evidence presented to the trial court failed to demonstrate that the issue was ever discussed by the parties during the negotiation of the lease terms. The City did, however, expressly reserve the right to unilaterally terminate the lease after ten years, and provided for payment of certain costs, expenses and loss to GEI should this option be exercised. ¹

In 1990, just short of five years after the commencement of the lease, the City apparently determined that the leased premises were needed for the construction of a public building and decided to condemn GEI's leasehold. ² On February 8, 1990, the On March 19, 1990, GEI filed an answer to the City's complaint and a cross-complaint in which it alleged that the City's exercise of eminent domain constituted a breach of the lease agreement entitling it to contract damages rather than the recovery permitted by eminent domain law, which GEI contends would be more limited. Certain law and motion proceedings followed, which related to the City's initial position that the lease was unenforceable because not specifically authorized by a City ordinance. The City's charter prohibits any lease for a term in excess of five years without such an ordinance. Ultimately, it was discovered that a proper ordinance had been enacted and the City's demurrer to GEI's cross-complaint was overruled after we issued a writ of mandate so directing the trial court. ⁴

                City filed a complaint in eminent domain.  Pursuant to Code of Civil Procedure section 1255.010, the City deposited approximately $294,000 representing the estimated fair market value of GEI's leasehold interest.  On April 25, 1990, pursuant to a stipulation, GEI withdrew this deposit thereby waiving any claim as to the lack of a public purpose in the condemnation of the leasehold.  (Code Civ.Proc., § 1255.260; 3  San Diego Gas & Electric Co. v. 3250 Corp.  (1988) 205 Cal.App.3d 1075, 1081-1082, 252 Cal.Rptr. 853.)
                

Following our remand of the case, the trial court bifurcated the issue of the City's liability for breach of contract under GEI's cross-complaint from the issue of the damages GEI is entitled to receive, whether under the City's complaint or its own cross-complaint. After receiving some evidence from the parties, ⁵ the court determined as a matter of law, and based largely upon language utilized by us in our unpublished opinion granting GEI writ relief, ⁶ that the City's exercise of eminent domain on the leasehold constituted a breach of the lease for which GEI was entitled to contract damages. Indeed, the Pending the setting of a trial date to resolve the remaining issue of damages, the trial court invited the City to bring the matter once again to this court for resolution of the question which is now before us.

trial court held that this result was compelled by our decision as the law of the case. ⁷

ISSUE PRESENTED

The principal issue which we must resolve is whether a public entity lessor, which is a party to a lease with a minimum fixed term, may be liable for breach of contract for exercising its power of eminent domain over the leasehold interest prior to the expiration of such term.

We answer that question in the negative. In resolving the issue we also consider GEI's arguments regarding estoppel and law of the case. However, we must first address GEI's procedural argument that this is not a proper matter for extraordinary relief.

DISCUSSION

1. This Issue is Properly Resolved By Writ

GEI contends that appellate review at this incomplete stage of these bifurcated proceedings is not warranted. It is true that, in general, an appellate court should not intervene in the middle of a bifurcated trial. However, there are rare exceptions where bifurcation will isolate an issue which is separate and independent from those of all other claims and the circumstances are "so unusual" that postponement of final judgment on the bifurcated claim would cause "so serious a hardship and inconvenience as to require [the court] to augment the number of existing exceptions [to the single judgment rule]." (Armstrong Petroleum Corp. v. Superior Court (1981) 114 Cal.App.3d 732, 736-737, 170 Cal.Rptr. 767.)

Moreover, relief by extraordinary writ is appropriate where the party seeking the writ lacks an adequate means, such as an immediate direct appeal, by which to obtain relief. (Code Civ.Proc., § 1086; Brown v. Superior Court (1971) 5 Cal.3d 509, 515, 96 Cal.Rptr. 584, 487 P.2d 1224; Omaha Indemnity Co. v. Superior Court (1989) 209 Cal.App.3d 1266, 1274, 258 Cal.Rptr. 66.) Included among this category of cases are those in which relief by writ is necessary to prevent an expensive trial and ultimate reversal. (Holtz v. Superior Court (1970) 3 Cal.3d 296, 301, 90 Cal.Rptr. 345, 475 P.2d 441; City of Huntington Beach v. Superior Court (1978) 78 Cal.App.3d 333, 339, 144 Cal.Rptr. 236.) Even where an adequate remedy is available by appeal, the general requirement of inadequacy of the appellate remedy is relaxed where the issue raised in a writ petition is of widespread public importance. (Brandt v. Superior Court (1985) 37 Cal.3d 813, 816, 210 Cal.Rptr. 211, 693 P.2d 796; Britt v. Superior Court (1978) 20 Cal.3d 844, 851, 143 Cal.Rptr. 695, 574 P.2d 766; Simon v. Superior Court (1992) 4 Cal.App.4th 63, 68, 5 Cal.Rptr.2d 428.)

Here, the City could, of course, await trial of the damage issue and appeal from the final judgment. However, if the City prevails on its contention that a public entity has no duty in its capacity as the landlord to a lessee of city-owned property to refrain from the exercise of the power of eminent domain, no trial of the contract damage issue would be necessary. Relief by petition for writ of mandate is thus necessary to correct an error which would otherwise result in an expensive Further, the issue presented is both novel and of general importance. It impacts any public entity which also acts in a capacity as a landlord of public property. The possible application of a damage standard different from that specified in the eminent domain law is a matter of no small concern. As we discuss below, the trial court's decision is erroneous and could well prejudice the City's case to the extent that it exposed the City to a damage claim not authorized by law. These circumstances bring this matter within the category of cases in which prompt appellate review of the liability phase of a bifurcated trial is appropriate.

trial and possible reversal. (City of Huntington Beach v. Superior Court, supra, 78 Cal.App.3d at p. 339, 144 Cal.Rptr. 236.)

2. The City's Exercise of the Power Eminent Domain Did Not Constitute a Breach of the Lease

The lease agreement provides in paragraph 19(a), that "Following the expiration of ten (10) lease years, Lessor may elect to terminate this Lease where Lessor determines that the premises is needed for a municipal purpose. Lessor shall give Lessee one year's written notice of any election to terminate." This language demonstrates the City's contractual commitment not to elect to terminate the lease until after ten years have expired and then only to do so for a municipal purpose. It also appears to be clear that a termination, under the lease agreement, could not be effective earlier than the end of the eleventh year since a one-year notice period is required and the election by the City could not be made (nor the required notice given) until the "expiration " of the tenth year.

Testimony given during the liability phase of the bifurcated trial reveals that the guaranteed ten-year term was specifically bargained for by both parties and that City inserted the right to terminate with a one-year notice after the expiration of ten years and only for "a municipal purpose." GEI was able to negotiate the guaranteed term because the building, in 1985, was in a state of disrepair requiring investment of substantial funds to rehabilitate the premises and the City wanted a viable business in the location.

However, this does not support GEI's claim that the City had contractually promised not to exercise its eminent domain power. Clearly, there is no express promise. GEI contends that such a commitment is necessarily implied by the terms of the lease. We disagree.

The contractual commitments assumed by the City under the lease were entered into in its proprietary capacity as the owner of the property involved. Its agreement not to terminate the lease for a fixed period of time was a legal and binding commitment; but it says nothing about the exercise of its sovereign...