New Haven Unified School District v. Taco Bell Corp.

New Haven Unified School District (School District), the plaintiff in an action to condemn a leasehold interest in Union City, California, appeals from a judgment awarding compensation to the lessee, Taco Bell Corporation (Taco Bell).

In 1989, School District announced plans to expand a high school within its jurisdiction by acquiring an adjacent shopping center along Alvarado Niles Road, a principal thoroughfare of Union City. Later that year, it filed a complaint in eminent domain against the owner of the shopping center, Howard Van Orden, Jr., and each of the tenants, including Taco Bell. The School District ultimately negotiated purchase of the underlying fee from the landlord, Van Orden.

Taco Bell had operated its restaurant in the shopping center under a long-term lease which was negotiated in 1975 between the predecessor of *1477 Van Orden and another restaurant chain specializing in Mexican fast food. The lease extended to the year 2006, including one renewal period plus an option to extend for a further 10 years beyond 2006, and offered substantially below market rental. Taco Bell took over operation of the restaurant in 1983 after purchasing the other…

I respectfully dissent from that portion of the opinion which concludes that the trial court incorrectly awarded compensation for loss of the bonus value of the lease to the lessee, Taco Bell. I concur in all other aspects of the opinion.

I.

Absent a Specific Provision in the Lease, Upon Condemnation Compensation for the “Bonus Value” Should Be Awarded to the Lessee

Upon condemnation, unless the lease provides otherwise, the lessee is entitled to compensation for the loss of his leasehold estate, (Code Civ. Proc., § 1260.220, subd, (a).) The value of the lessee’s interest is measured by “the difference between the amount of rent he is obligated to pay under the lease for the remainder of the term and the amount the lease would bring at a sale in the open market.” (6 Miller & Starr, Cal. Real Estate (2d ed. 1989) § 18:83, p. 203.) This difference is ordinarily described as the “ ‘bonus value’ of the lease.” (See 4 Nichols, Eminent Domain (rev. 3d ed. 1994) § 12D.04[4](2), 12D-60.) The majority opinion recognizes this general *1487 rule 1 but concludes that this lease awards the right to recover “bonus value” to the landowner. They find implicit in the trial court’s award of…

New Haven Unified School District (School District), the plaintiff in an action to condemn a leasehold interest in Union City, California, appeals from a judgment awarding compensation to the lessee, Taco Bell Corporation (Taco Bell).

In 1989, School District announced plans to expand a high school within its jurisdiction by acquiring an adjacent shopping center along Alvarado Niles Road, a principal thoroughfare of Union City. Later that year, it filed a complaint in eminent domain against the owner of the shopping center, Howard Van Orden, Jr., and each of the tenants, including Taco Bell. The School District ultimately negotiated purchase of the underlying fee from the landlord, Van Orden.

Taco Bell had operated its restaurant in the shopping center under a long-term lease which was negotiated in 1975 between the predecessor of Van Orden and another restaurant chain specializing in Mexican fast food. The lease extended to the year 2006, including one renewal period plus an option to extend for a further 10 years beyond 2006, and offered substantially below market rental. Taco Bell took over operation of the restaurant in 1983 after purchasing the other…