San Francisco Bay Area Rapid Transit Dist. v. McKeegan

• Decision Date: 27 August 1968
• Court: California Court of Appeals Court of Appeals
• Parties: SAN FRANCISCO BAY AREA RAPID TRANSIT DISTRICT, a public body, corporate and politic, Plaintiff, v. Edward J. McKEEGAN, Lillian McKeegan, Elizabeth M. Henry and Howard McKell, Defendants and Respondents, Arnold L. Santucci and Vida L. Santucci, Defendants and Appellants. Civ. 24323.

Page 204

71 Cal.Rptr. 204

265 Cal.App.2d 263

SAN FRANCISCO BAY AREA RAPID TRANSIT DISTRICT, a public body, corporate and politic, Plaintiff, v. Edward J. McKEEGAN, Lillian McKeegan, Elizabeth M. Henry and Howard McKell, Defendants and Respondents Arnold L. Santucci and Vida L. Santucci, Defendants and Appellants.

Civ. 24323.

Court of Appeal, First District, Division 2, California.

Aug. 27, 1968.

Breed, Robinson & Stewart, by James R. McCall, Oakland, for appellants.

Tinning & DeLap, by Dana Murdock, Robert N. Sanford, Jr., Richmond, for respondents.

TAYLOR, Associate Justice.

This appeal by the lessees (Arnold and Vida L. Santucci) from a conditional order granting a new trial to the lessors (McKeegan, Henry and McKell) after a jury trial to apportion a condemnation award in the stipulated amount of $150,000, presents a question of first impression under the 1965 amendments to section 657 of the Code of Civil Procedure as construed in Mercer v. Perez, 68 A.C. 102, 65 Cal.Rptr. 315, 436 P.2d 315, and Treber v. Superior Court, 68 A.C. 126, 65 Cal.Rptr. 330, 436 P.2d 330.

A chronology of the pertinent events is necessary for an understanding and discussion of the issues presented. On October 27, 1965, the San Francisco Bay Area Rapid Transit District filed its complaint in eminent domain to condemn a parcel at 19th Street and MacDonald Avenue in Richmond, which included the two concrete block buildings owned by the lessors and occupied by the lessees for the operation of their automatic car wash and brake clinic. The total fair market value of the real and personal property condemned was stipulated to be $150,000. The apportionment of this amount was submitted to a jury, pursuant to Code of Civil Procedure section 1246.1.

The lease of the parties for a period of 25 years beginning September 1, 1955, and ending on August 31, 1980, was subject to an option to renew for 10 years at a rental to be agreed upon at the time of the exercise of the option. The lease provided that the premises could be used only for a car wash and brake shop and that all trade fixtures installed at the expense of the lessees could be removed by them.

The lessees were required to pay all of the taxes and expenses in addition to the monthly rental. The monthly rental consisted of: (1) a minimum monthly rental of $550 ($350 for the car wash and $200 for the brake repair clinic); and (2) a percentage rental equal to 5 percent of all gross sales of the car wash over and above $7,000 a month, and 5 percent of all gross sales of the brake clinic over and above $4,000.

The lessees acquired their interest (the lease and the trade fixtures) in May 1963, from one Wooster, for $81,500. As $6,500 of this amount was specifically for goodwill and a covenant not to compete, in 1963 the lessees paid $75,000 for the interest subsequently condemned. In August 1964, the lessees acquired new wheel washing equipment for $5,400. The lessees, on the basis of the above figures, testified that the fair market value of their interest as of October 27, 1965, was $81,000. ¹

The car wash and office equipment had been acquired new in 1955 for $18,000 and was still in good condition. The brake clinic equipment was bought new in 1960 for $4,437.20. In 1962, the 'cash flow' ² from both businesses was $33,000.

The lessors' experts valued the personalty at $3,500--$4,000, a figure apparently representing the salvage value of the equipment; they estimated its replacement cost at $24,000--$25,000. Another expert for the lessors testified that, excluding the personalty, the fair market value of the land and improvements belonging to the lessors was $124,000; that of the leasehold, $17,350. At the end of 1962 or beginning of 1963, one of the lessors purchased his one-fourth interest for $6,000 plus his share of the $8,000--$10,000 loan then outstanding, or a total of about $8,000--$8,500. Another lessor testified that the income from the brake shop never exceeded the monthly $200 minimum, while the car wash exceeded the monthly minimum 5--6 months of the year. In 1965 and 1966, business fell off because the redevelopment and construction in the area changed some of the access routes.

The lessees' expert testified that the terms of the lease were very favorable compared to similar leases in the area. For example, most of the minimum monthly rentals for car washes were at least $500, and the percentage rental was the second lowest found. The percentage provisions of the other leases ranged from 16 to 18 percent.

The trial court instructed the jury that in finding the lessees' compensable interest, they were to subtract the reserved rent ³ from the fair market value of the lessees' interest, and were not to consider for any purpose the option to renew or extend the term of the lease. After the jury returned a verdict finding that the lessees and lessors were each entitled to $75,000, the lessors moved for a new trial on grounds of insufficient evidence, verdict against the law, errors in law and excessive damages.

At the hearing of the motion for a new trial on November 3, 1966, the court noted that it did not think the 15-year remainder on the lease could be worth half the value of the fee. The lessors took the position that the maximum value of the lessee's total interest was around $25,000.

At the conclusion of the hearing, the trial court made a minute order conditionally granting the motion for a new trial on the ground of insufficiency of the evidence unless the lessees filed within 20 days, a written remittitur of all sums in excess of $21,225 for their leasehold interest and the personal property. The same day, the trial court prepared, filed and signed ⁴ a memorandum of decision setting forth its view of the evidence and reasoning in granting the new trial. The pertinent portion of the memorandum of decision states: 'The lease, executed June 28, 1955, commenced September 1, 1955, for a term of 25 years, terminating in 1980. The monthly rent reserved was $350 per month, plus a percentage of the gross. The brake shop never yielded any such percentage and the car wash was diminishing to a point where very little could be expected in the future. The rent reserved under the remainder of the lease is $58,275 ⁵ (date of take October 14, 1966, to end of lease August 30, 1980), excluding any bonus rent.

'Accepting plaintiff's testimony of a value of $80,000, weak as it is, and subtracting the rent reserved as we must, the highest supportable verdict would be $21,225.00.

'The motion for a new trial will be granted upon the ground of insufficiency of the evidence to justify the verdict unless the defendant (lessee) Santucci files, within twenty days from the date of service of notice hereof, a written remittitur of all sums in excess of $21,225.00 for his leasehold interest in the property and in the personal property taken herein.'

Six days later, on November 9, 1966, the trial court signed a formal conditional order granting a new trial, prepared by the attorneys for the lessors. This document stated that the motion for a new trial was granted because there was an insufficiency of the evidence to justify a verdict in favor of the lessees for $75,000 since the lessors' testimony as to the value was doubtful and the evidence produced by the lessors was of sufficient weight to clearly establish that the verdict was excessive and because the jury did not consider and properly credit the lessors for the rent reserved under the lease. This appeal ensued.

The major question on appeal is the proper effect to be given to the above mentioned orders in view of the 1965 amendments to section 657 of the Code of Civil Procedure, set forth, so far as pertinent in the footnote below. ⁶ Preliminarily, we note that neither the trial court at the time of the entry of its orders, nor the parties at the time of the filing of their briefs on appeal, had, as does this court, the benefit of the Supreme Court's first interpretation and discussion of these amendments in Mercer v. Perez, supra, and one of its companion cases, Treber v. Superior Court, supra.

In Mercer, the Supreme Court reversed an order for a new trial that adequately stated the grounds for granting the motion, insufficiency of the evidence, but wholly failed to specify the court's reasons for doing so. The court discussed at length the history and purposes of the new statutory requirements, stating in 68 A.C. at page 111, 65 Cal.Rptr. at page 321, 436 P.2d at page 321: 'As orders granting motions for new trial are infrequently reversed, It is essential that they be the product of a mature and careful reflection on the part of the judge. Society has a manifest interest in avoiding needless retrials: they cause hardship to the litigants, delay the administration of justice, and result in social and economic waste. (Jehl v. Southern Pac. Co. (1967) 66 A.C. 853, 860--861, fn. 9, 59 Cal.Rptr. 276, 427 P.2d 988.) Accordingly, one of the functions of the requirement of specification of reasons is To promote judicial deliberation before judicial action, and thereby 'discourage hasty or ill-considered orders for new trial.' (Review of Selected 1965 Code Legislation (Cont.Ed.Bar), p. 81.) This objective is furthered, It bears emphasizing, by the change in the law which now forbids the judge from shifting to the attorney for the prevailing party the duty to prepare either the statement of grounds or the specification of reasons.

'The second purpose of this requirement is to make the right to appeal from the order more meaningful.' (Italics supplied.)

The court further stated at page 116, 65 Cal.Rptr. at page 324, 436 P.2d at page 324: 'As the motion for a new trial finds both its source and its limitations in the statutes (citation), the procedural steps prescribed by law for making and determining such a motion Are mandatory and must be strictly followed (citations)' (italics added), and held at page 118,...