Pepsi-Cola Metropolitan Bottling Co., Inc. v. Romley

• Decision Date: 27 January 1978
• Docket Number: PEPSI-COLA,No. 1,CA-CIV,1
• Citation: Pepsi-Cola Metropolitan Bottling Co., Inc. v. Romley, 578 P.2d 994, 118 Ariz. 565 (Ariz. App. 1978)
• Parties: METROPOLITAN BOTTLING COMPANY, INC., a New Jersey Corporation, Appellant, v. Elias M. ROMLEY, Appellee. 3401.
• Court: Arizona Court of Appeals

Page 994

578 P.2d 994

118 Ariz. 565

PEPSI-COLA METROPOLITAN BOTTLING COMPANY, INC., a New Jersey Corporation, Appellant, v. Elias M. ROMLEY, Appellee.

No. 1 CA-CIV 3401.

Court of Appeals of Arizona,Division 1,Department B.

Jan. 27, 1978.

Rehearing Denied March 24, 1978.

Review Denied April 25, 1978.

Jennings, Strouss & Salmon by Nicholas Udall, Robert E. Hurley, Richard B. Burnham, Phoenix, for appellant.

Moore & Romley by Elias M. Romley, Arthur E. Romley, Phoenix, for appellee.

OPINION

JACOBSON, Judge.

The main issue on the merits of this appeal is whether the trial court properly allowed parol evidence to be introduced to explain a "condemnation" clause contained in a lease between appellant, Pepsi-Cola Metropolitan Bottling Company (Pepsi- Cola) as lessee and appellee, Elias M. Romley (Romley) as lessor.

Although this issue arose out of a condemnation action brought by the State of Arizona, because of the proceedings in the trial court, the condemnor was not an active party litigant in the trial court and does not appear on appeal.

On June 17, 1972, the State of Arizona commenced this action to condemn several lots located in the central industrial district, together with the improvements situated on that property. The parcel involved lies on the east side of the Black Canyon Freeway on the northeast corner of Colter Street and the east access road of the freeway in Phoenix, Arizona. The parcel was owned by Romley and was leased by him to Pepsi-Cola.

Prior to the commencement of the condemnation proceedings, Romley and the State of Arizona agreed upon the fair market value of the property and improvements, which value included the leasehold interest, if any, of Pepsi-Cola. This amount was deposited into court and the state obtained immediate possession of the property.

Subsequently, Romley and Pepsi-Cola stipulated that the amount agreed upon between Romley and the state included the value of Pepsi-Cola's leasehold interest, if any; that the amount of that leasehold interest would not exceed $387,920.00; that the balance of any monies paid by the state could be paid to Romley and various mortgage holders; and that the action between Romley and Pepsi-Cola concerning the money deposited with the court would be divided for trial purposes into two issues: (1) the extent of the interest of Pepsi-Cola under its lease with Romley; and (2) the valuation of that interest.

The parties further stipulated that the state would not participate in the trial of this action other than to prepare and present to the court the Judgment and Final Order of Condemnation.

After condemning the property, the State of Arizona paid to Pepsi-Cola certain relocation expenses to compensate it for removing its personal property and equipment from the leased premises. The state and Pepsi-Cola specifically agreed that this payment was not compensation for any damages as a result of the condemnation of the leasehold interest.

On the trial of the first issue, the trial court determined that under the terms of its lease, Pepsi-Cola was entitled to receive for condemnation of its leasehold interest, damages based upon the unamortized cost to Pepsi-Cola of its improvements made to the leased property in 1966. The trial court specifically found that Pepsi-Cola was not entitled to damages based upon an amount by which the economic rent as of June 19, 1972 exceeded the contract rent of the leased premises reduced to present value. These determinations were made the subject of a written order signed by the trial judge on July 30, 1975.

Following entry of the July 30, 1975 order, the parties stipulated to waive a jury trial as to the valuation of the interest determined by the trial court and further stipulated that based upon the measure of damages imposed by the trial court, the value of Pepsi-Cola's unamortized costs of improvement was $46,000.00. Based upon this stipulation, the trial court entered its judgment on October 6, 1975 and Pepsi-Cola appealed on December 1, 1975.

PROCEDURAL MATTERS

Before setting out the facts underlying the lease between the parties, it is necessary to dispose of two procedural issues raised by Romley concerning our jurisdiction to hear this appeal.

Romley first contends that the July 30, 1975 order which determined the extent and measure of Pepsi-Cola's damages was an appealable interlocutory judgment under A.R.S. § 12-2101(G), and thus failure to appeal that judgment within 60 days precludes this court from considering the propriety of that order. A.R.S. § 12-2101 provides that an appeal may be taken:

"G. From an interlocutory judgment which determines the rights of the parties and directs an accounting or other proceeding to determine the amount of the recovery."

We need not determine whether substantively the July 30, 1975 order falls within the definition of A.R.S. § 12-2101(G) as we feel our recent opinion in Cook v. Cook, 26 Ariz.App. 163, 547 P.2d 15 (1976) controls the result we must reach in this case. In Cook, we stated:

"We hold . . . that, under the language of A.R.S. § 12-2101(G), a summary judgment in favor of a plaintiff on a question of liability can be appealable. We further hold that the particular language of this statute requires that the interlocutory judgment, in order to be appealable, must in reality reflect a final 'determination of the rights of the parties' with respect to liability, and a determination that the only question remaining to be resolved is the 'amount of recovery.' To fulfill these requirements, the (interlocutory) judgment appealed from must not only be signed by the judge as required by Rule 58, Arizona Rules of Civil Procedure, but must also contain some additional express language indicating finality." (emphasis added) Id. at 168, 547 P.2d at 20.

The trial court's order of July 30, 1975, contained no language which would indicate that this order was "final." Under the rationale of Cook, the order was therefore not appealable. Pepsi-Cola's timely appeal from the final judgment of October 6, 1975, properly placed before us the propriety of all prior non-appealable orders, including the order of July 30, 1975. A.R.S. § 12-2102; Cf. Wells v. Tanner Bros. Contracting Co., 103 Ariz. 217, 439 P.2d 489 (1968). We therefore have jurisdiction to consider the merits of the July 30, 1975 order.

Romley also urges that the bond posted by Pepsi-Cola on appeal was fatally defective. This contention was the subject of a motion to dismiss during the pendency of this appeal, which motion we denied. We do not feel it necessary to reconsider that disposition. For the reasons stated in our order denying the motion to dismiss, we reject Romley's contention that the bond was defective so as to prohibit our entertaining jurisdiction of this appeal. ¹

THE LEASE

The facts surrounding the controversy between Romley and Pepsi-Cola are that on September 28, 1975, Romley and Pepsi-Cola ² entered into a lease agreement for 25 years for a portion of the property subsequently condemned by the State of Arizona. It is tacitly agreed that at that time neither party was aware of any condemnation action being instituted in the foreseeable future. However, that lease contained the following provision:

"If all of the demised premises, or if part thereof, but more than 25% of the usable floor area of the building or buildings on the demised premises shall be appropriated and taken for any public use by virtue of eminent domain or condemnation proceedings, the Lessee shall have the right to terminate this Lease upon written notice to the Lessor and rental shall be paid only to the time when the Lessee surrenders possession of the premises. Any rental paid in advance beyond the time Lessee surrenders possession of the premises shall be returned by the Lessor to the Lessee on demand. In the event less than 25% of the usable floor area is taken in such proceedings, or in the event that more than 25% of the usable floor area is taken and the Lessee does not exercise its right to terminate this Lease, then this Lease shall continue in full force and effect, except that there shall be a reduction of the rent reserved hereunder which shall be made proportionate by an amount which the usable floor area taken bears to the original floor area of the building. Any award made for such condemnation or taking shall be applied to the repair and restoration of the remaining portion of the demised premises and the balance, if any, shall belong solely to the Lessor, and the Lessee shall have no interest therein. However, nothing herein contained shall be deemed to prevent Lessee from recovering from the condemning authority damages sustained by Lessee due to such taking . . . ."

In 1964, Pepsi-Cola desired to increase the size of its bottling plant located on the leased premises and to that end a new lease was entered into expanding the leased premises. This new lease was executed on August 27, 1964 at which time the 1955 lease agreement was cancelled. Although there were various language differences between the 1955 and 1964 leases, the leases were identical insofar as the "condemnation clause" was concerned. The trial court found that at the time the 1964 lease was executed, the parties were aware that in the foreseeable future the Papago Freeway would be constructed which would result in the taking by condemnation of a part or all of the leased premises.

At the time of trial, Romley, over objection, was allowed to testify that at the time he and general counsel for Pepsi-Cola were negotiating the terms for the new 1964 lease, those parties read the 1955 condemnation clause and agreed that the correct interpretation of that clause was that in the event all of the property were condemned, that the entire award for the value of the leased premises would be paid to Romley and that Pepsi-Cola would have no interest in such an award. Romley further testified that in the interest of fairness, it was...