Appealing Both Merits And Fee Judgments Was Properly Done Here; Special Benefit Doctrine Was Not Proven By Tenant.
In Elks Building Association of Santa Ana v. J.K. Properties, Inc., Case No. G056187 (4th Dist., Div. 3 Sept. 10, 2019) (unpublished), tenant JK Properties assumed a lease to the Saddleback Inn in Santa Ana, whose landlord was the Elks Building Association of Santa Ana. The Saddleback Inn, although visited by Presidents Nixon and Reagan in its glory days, was likely being illegally used as an apartment complex rather than a motel—with a 2011 fire severely damaging the building on the property. JK was able to recover almost $2.9 million in insurance proceeds, but the City of Santa Ana ordered JK to demolish all four buildings (with JK defying this order for three of the remaining buildings because the fourth building was almost gone and was demolished by JK). Apartment squatters stayed on, with the City obtaining a receiver to attend to the property. Believe it or not, a second fire occurred, damaging the remaining buildings such that the receiver borrowed over $1.2 million to demolish the entire property. Elks then sued JK for unpaid rent, receivership costs, receivership attorney’s fees, unpaid property taxes, the $2.9 million in JK-received insurance proceeds (given the lease specified that the buildings be returned intact to landlord), and prejudgment interest. The lower court awarded almost $6 million in damages to Elks, with $92,952 being receivership attorney’s fees. JK appealed.
The 4/3 DCA affirmed, in an opinion authored by Justice Bedsworth.
First of all, it did observe that JK properly separately appealed both the merits and fee judgments such that it preserved challenges to both—something we bloggers have advocated all along the way. (Torres v. City of San Diego, 154 Cal.App.4th 214, 222 (2007).)
JK’s principal argument on appeal was that it conferred on the Elks the special benefit of free demolition, given that landlord was able to sell the property for about $4 million more because the expense of demolition had been spared. There were two problems with the argument: (1) the underlying facts were not proven at trial (given that the sale involved both an inn and adjoining lodge parcel, with no apportionment on a valuation basis); and (2) the receiver did the yeoman’s work of demolition such that the special benefit doctrine was not causally demonstrated. With respect to fees, that award stood given the failure to reverse the damages award to any extent.
BLOG OBSERVATION—Kevin A. Day and Jacob M. Clark of AlvaradoSmith were the winning attorneys on appeal, and we believe they were both involved in the trial on this matter. Congratulations!