West Valley City v. Majestic Inv. Co.

• Decision Date: 16 October 1991
• Docket Number: No. 890379-CA,890379-CA
• Citation: 818 P.2d 1311
• Parties: WEST VALLEY CITY, Plaintiff and Appellant, v. MAJESTIC INVESTMENT COMPANY; The Lockhart Company; Prudential Federal Savings and Loan Association, Defendants and Appellees.
• Court: Utah Court of Appeals

Page 1311

818 P.2d 1311

WEST VALLEY CITY, Plaintiff and Appellant, v. MAJESTIC INVESTMENT COMPANY; The Lockhart Company;

Prudential Federal Savings and Loan Association,

Defendants and Appellees.

No. 890379-CA.

Court of Appeals of Utah.

Oct. 16, 1991.

Harold A. Hintze, Paul T. Morris, and J. Richard Catten, West Valley City, for plaintiff and appellant.

Robert S. Campbell, Matthew C. Barneck, Clark W. Sessions, and Paul T. Moxley, Salt Lake City, for defendants and appellees.

Before BENCH, GREENWOOD and ORME, JJ.

OPINION

ORME, Judge:

Appellant West Valley City appeals from a judgment awarding compensation for condemned property to appellee Majestic Investment Corporation. We affirm.

FACTS

Majestic Investment Corporation held interests in two parcels of property located in West Valley City which Majestic leased from Henry S. Pickrell and Barbara M. Pickrell. Majestic built two commercial buildings on the property and leased them in turn to Prudential Federal Savings and Loan and The Lockhart Company. West Valley City brought this action to condemn Majestic's interests by right of eminent domain. West Valley City had previously acquired the Pickrells' interests in the property.

Majestic and the Pickrells executed a lease for the underlying real estate (the ground lease) for a term of thirty-five years, commencing May 1, 1975. The base rent for the combined parcels was $750 per month, with provisions for upward adjustment at the 11th, 21st, and 31st years of the lease. The ground lease contained a clause providing that in the event of condemnation, the ground lease would terminate and the parties' respective rights and obligations would "be adjusted as of the time of such condemnation." The lease also contained a formula for calculating Majestic's interest in any condemnation award for the value of the buildings and improvements.

On April 11, 1975, Majestic executed leases with Prudential and Lockhart providing for an initial aggregate base rent of $750 plus the amortized construction costs, with interest at twelve percent. These leases were for a twenty-five year period and were subject to adjustment every ten years. Each lease also established a total lease payment of $112,500, subject to escalation. At trial, Majestic introduced the testimony of three persons involved with the original lease negotiations between Majestic and Prudential, and Majestic and Lockhart. These witnesses testified that the rental payment was combined with the amortization of the construction costs as a method of establishing an initial base rent.

West Valley City asserted that the leases were merely "pass-through" devices, since the ground lease provided for a payment of $750 per month and the combined Prudential/Lockhart leases provided for a rental of $750 per month. If the leases were true "pass-through" agreements, with Majestic receiving exactly the amount it was obliged to pay, Majestic would not have a "bonus value" interest in the property.

West Valley City argues that recoupment of the construction costs created no bonus value in the land for which Majestic would be due compensation. The City claims the trial court erred in allowing parol evidence concerning the lease terms providing for recoupment of construction costs. The City also argues that the trial court failed to properly value the property and then improperly applied the contractual formula for apportionment of condemnation awards. Majestic responds that the property was properly valued and the award properly apportioned. Majestic asks that the City's challenge to the findings based on parol evidence be disregarded because no objection was raised to the parol evidence at trial. ¹

STANDARDS OF REVIEW

Our review of a trial court's interpretation of a contract begins with a question of law, reviewed for correctness: Is the contract unambiguous? Wilburn v. Interstate Elec., 748 P.2d 582, 585 (Utah App.1988). If it is, its interpretation is itself a question of law. Id. at 584. If the trial court determines the contract to be ambiguous, we begin by determining whether the court correctly made that determination as a matter of law, again applying a correction of error standard. Id. at 585. If the contract is ambiguous, i.e., susceptible to varying interpretation, extrinsic evidence may be introduced to clarify the parties' contractual intent. Barnes v. Wood, 750 P.2d 1226, 1229 (Utah App.1988). We review the trial court's construction based on extrinsic evidence under the more deferential clearly-erroneous standard. Id.

A party challenging the court's interpretation of ambiguous terms of a contract faces a substantial appellate burden. We affirm the trial court's findings if they are based on sufficient evidence, viewing the evidence in the light most favorable to the trial court's construction. See Wilburn, 748 P.2d at 585; Seashores Inc. v. Hancey, 738 P.2d 645, 647 (Utah App.1987); Utah R.Civ.P. 52. The challenging party must marshal all relevant evidence presented at trial which tends to support the findings and demonstrate why the findings are clearly erroneous. Bell v. Elder, 782 P.2d 545, 547 (Utah App.1989). We have shown no reluctance to affirm when the appellant fails to adequately marshal the evidence. See, e.g., Grahn v. Gregory, 800 P.2d 320 (Utah App.1990); Turnbaugh v. Anderson, 793 P.2d 939 (Utah App.1990).

PAROL EVIDENCE

Complaints about the introduction of parol evidence require an objection at trial in order to be raised on appeal. See Co-Vest Corp. v. Corbett, 735 P.2d 1308, 1309 (Utah 1987) (failure to object to extrinsic evidence waives the issue on appeal). The City's argument for a contrary result, premised on the notion that the parol evidence rule is substantive in nature rather than procedural, is indefensible. ²

No objection was raised at trial to the testimony of the three witnesses who were involved in the initial negotiation and execution of the Prudential and Lockhart leases. These witnesses testified that the formula for amortizing the construction costs of the buildings was included to fix an initial monthly rental amount and to escalate monthly rental payments at certain intervals, and not simply to provide for repayment of the actual construction costs. This provision would have the effect of increasing the total amount paid under the Prudential and Lockhart leases by increasing the monthly amount for the duration of the leases. Thus, Majestic would actually receive more than the principal amount and associated interest for its construction costs.

West Valley City argued that the increases in the monthly rental amounts worked to accelerate the total amount due, but not to escalate the total amount due. According to West Valley City's theory, once the precise amount of construction costs, plus interest, was recovered, Prudential's and Lockhart's obligation to pay "rent" for the improvements would terminate. ³

The trial court extensively relied on the parol evidence to find that Majestic was entitled to compensation for the taking of its leasehold interests in the buildings subject to the Prudential and Lockhart leases. The court agreed with the position advanced by Majestic, i.e., that the escalation provisions of the leases augmented the total amount to be paid over the full lease term. Thus, the Prudential and Lockhart leases presented "bonus value" to Majestic and were not merely "pass-through" leases. Majestic continued to pay $750 to the Pickrells, and continued to receive $750 collectively from Prudential and Lockhart, each lease being subject to adjustment, for the ground. However, Majestic's income from the property continued to increase as the construction cost repayment increased, creating a bonus value in the leasehold. Viewing the evidence in the light most favorable to the court's finding, as we must, we hold the finding of value in Majestic's leasehold not to be clearly erroneous, and to be supported by substantial and competent evidence, and therefore must allow the finding to stand undisturbed.

AWARD FOR TAKING OF THE LAND

In addition to attacking the finding of bonus value in the land and in the improvements, the City challenges the amount of the court's award for Majestic's interests in the land and in the improvements and buildings. ⁴ The City argues that the court did not rely upon parol evidence in resolution of these issues and we should therefore apply a less deferential standard of review. Indeed, when reviewing the trial court's conclusions of law, we accord them no particular deference, but apply a correction of error standard. Turnbaugh v. Anderson, 793 P.2d 939, 941 (Utah App.1990).

Distillation of West Valley City's claims reveals a common theme. While the City strains to attack the court's conclusions of law, it actually does so as a guise to challenging the court's factual findings. The essence of the City's argument is that the evidence did not support the court's finding that Majestic had an interest in the land value. The court's factual findings and legal conclusions are set forth in commendable detail, and are accompanied by a lengthy memorandum decision. The appellate courts of this state have repeatedly required trial courts to provide a particularized statement of factual findings and legal conclusions. See, e.g., Acton v. Deliran, 737 P.2d 996, 999 (Utah 1987); State v. Lovegren, 798 P.2d 767, 771 (Utah App.1990). The trial judge in the instant case more than met the spirit and letter of this requirement.

In order to successfully challenge the trial court's decision, where it is premised on factual interpretation of the lease, the City must begin by undertaking the arduous and painstaking marshaling process discussed early in this opinion. After marshaling the evidence supporting the trial court's findings, the City must then show that these same findings are "so lacking in support as to be 'against the clear weight of the evidence,' thus making them clearly erroneous."...