Case Summary: Los Angeles Unified School District (“LASD”) filed an action in eminent domain to obtain property owned by A&D Investment Corporation to construct a new school. Several smaller businesses occupied the property including Mid Town. Mid Town did not have a written lease with A&D Investment and rented month-to-month.
Prior to Trial LASD filed a motion for pretrial determination to dismiss Mid Town in absence of a lease under Code of Civil Procedure Section 1260.040. The lower court granted the motion. Mid Town appealed.
The appeal court took up the issue as to whether or not Mid Town had a right to compensation for goodwill even though Mid Town did not hold a written long term lease.
A business owner conducting business on property taken by eminent domain may be compensated for loss of goodwill. Civ. Pro. Code §1263.510. This section was added as part of the overhaul of eminent domain law “in response to widespread criticism of the injustice wrought by the Legislature’s historical refusal to compensate condemnees whose on going businesses were diminished in value by a forced relocation.” People ex rel. Dept. of Transportation v. Muller (1984) 36 Cal.3d 263, 270.)
Section 1263.510 only requires that the business suffer a loss by the taking of the property. The lower court relied on a previous decision where a leaseholder business did not have a written lease, it failed to state a claim for a loss of good will. San Diego Metropolitan Transit Development Bd. V. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517 (Handlery). The Appellate Court dismissed the lower court’s argument distinguishing Handlery on factual basis.
In Handlery, prior to the eminent domain, the property owner refused to enter into a new long-term lease with Handlery. The owner only allowed Handlery to remain on the property because of the pending eminent domain action. (Handlery (1999) 73 Cal.App.4th, at 531.)
The current case distinguishes itself from Handlery. Here, even tough a written lease does not exist, the owner of the property showed no interest in having Mid Town leave the premises. Though the length of a lease may factor into the amount of compensation for good will, pursuant to the statute, the lack of a written lease does not preclude such recovery.
Because the property owner had no intention to remove Mid Town and Mid Town did have an interest in good will during the eminent domain proceedings. Therefore, the lower court wrongly allowed for the dismissal of Mid Town. The appellate court reversed the decision.