Los Angeles Unified Sch. Dist. v. Casasola

187 Cal.App.4th 189
114 Cal.Rptr.3d 318

LOS ANGELES UNIFIED SCHOOL DISTRICT, Plaintiff and Respondent,
v.
Rudy CASASOLA et al., Defendants and Appellants.

No. B215465.

Court of Appeal, Second District, Division 4, California.

Aug. 5, 2010.
Review Denied Nov. 17, 2010.

Callanan, Rogers & Dzida and Joseph S. Dzida, Los Angeles, for Defendants and Appellants.

Oliver, Sandifer & Murphy, Connie Cooke Sandifer, Los Angeles, and Cynthia C. Marian for Plaintiff and Respondent.

SUZUKAWA, J.

Respondent Los Angeles Unified School District (the District) acquired by eminent domain property on which appellants Rudy and Teresa Casasola (the Casasolas) operated a small business. The Casasolas relocated their business to a new, larger property and spent nearly $1.4 million moving their equipment and repurposing the new property to accommodate their business. They then sought reimbursement from the District for their relocation expenses. The District paid the Casasolas $224,252 in moving and reestablishment expenses, but rejected the remainder of the claim.

The Casasolas challenge this determination on appeal, contending that their reasonable relocation expenses are reimbursable as expenses incurred to mitigate loss of business goodwill. They also challenge the trial court's award to the District of $180,000 in penalties, contending that the penalties are unconscionable. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

I. The Eminent Domain Complaint

The Casasolas are the owners of a catering truck supply company (referred to as Rudy's Wholesale or Western Catering). Until October 2007, the

catering supply company was located on the 4600 block of Western Avenue in Los Angeles (the property or the Western Avenue property).

On April 26, 2006, the District filed an eminent domain complaint seeking to condemn the property. The Casasolas answered, claiming, among other things, the right to compensation for loss of business goodwill under Code of Civil Procedure section 1263.510 (section 1263.510).

II. The Casasolas' Purchase of Replacement Property and Their Attempts to Vacate the Western Avenue Property¹

The Casasolas purchased a replacement property located at 6236 South St. Andrews Place (the St. Andrews property). The St. Andrews property was much larger than the Western Avenue property, and it required considerable reconfiguration to accommodate the Casasolas' catering business.² The Casasolas had difficulty getting the work permitted and completed, and they repeatedly requested additional time to remain on the property.

On August 30, 2007, the parties signed a stipulation giving the Casasolas until September 4 to vacate the property (the August 30 stipulation). In relevant part, the stipulation provided: "Casasola may continue to occupy its premises at the Subject Property until no later than 7:00 a.m. on September 4, 2007, on the terms and conditions set forth herein. District will not enforce the Order for Prejudgment Possession as against Casasola until such time and date provided that Casasola has complied with the terms of this Stipulation. Casasola stipulates it will not move to stay the Order. [ Handwritten: ] However, Casasola may stay until September 9, 2007, but $5,000 shall be deducted from the compensation paid by District to Casasola for each day (or partial day) Casasola remains on the property after September 4, 2007."

In mid-September 2007, the Casasolas asked for additional time to vacate the property because the work on the St. Andrews property was not yet

complete. They also asked the District to waive the $5,000 per day penalty imposed under the August 30 stipulation. On September 21, 2007, district relocation program manager Mort Bernstein and relocation specialist Mary O'Toole met with the Casasolas and told them that the District would be willing to forgive the $5,000 per day penalty if the Casasolas agreed to vacate the property by September 30, 2007. The Casasolas agreed to do so.

On September 28, 2007, the Casasolas contacted O'Toole and asked to remain on the property after September 30. The District refused the request. At the end of the day on September 28, Mr. Casasola told O'Toole that he would tell his drivers that the business would be closed as of

September 30, and that O'Toole could pick up the keys to the premises on Monday, October 1. O'Toole reminded the Casasolas that if they did not vacate the property by September 30, "the verbal agreement was null and void."

The Casasolas did not vacate the property on September 30 as agreed. They remained in possession of the property until October 10, when they finally relinquished the keys to O'Toole.

III. The Casasolas' Mitigation Claim

The Casasolas filed a "Statement Regarding Expense of Mitigation to Avoid Loss of Business Goodwill" (Mitigation Statement) on May 12, 2008. They asserted that a displaced property owner must take steps to mitigate losses, including loss of goodwill, pursuant to section 1263.510, and that expenses associated with mitigation are compensable as lost goodwill pursuant to People ex rel. Dept. of Transportation v. Muller (1984) 36 Cal.3d 263, 203 Cal.Rptr. 772, 681 P.2d 1340 ( Muller ) and Redevelopment Agency v. Arvey Corp. (1992) 3 Cal.App.4th 1357, 5 Cal.Rptr.2d 161 ( Arvey ). Accordingly, the Casasolas asserted that they were entitled to be reimbursed for the following mitigation expenses incurred in connection with repurposing the St. Andrews property for their catering business (rounded to the nearest dollar):

Professional consulting fees:	$ 216,127
Architectural plans (Marta Perlas):	$ 32,465
Electrician (Stephan Jones):	$ 69,330
General contractor (Isaac Carvajal):	$ 243,900
Survey plans (RS Engineering):	$ 9,400
Roofing (Millenium Roofing):	$ 21,500
Plumbing (K Plumbing):	$ 96,008
Tile (Manuel Morones):	$ 36,069
Architect (MVA Architects):	$ 79,717
Plumbing (Manuel Chamul Plumbing):	$ 43,798
Office finishing (Cristopher Gutierrez):	$ 27,227
Home Depot:	$ 13,898
Willy Garcia:	$ 7,200
Bruce Miller:	$ 25,691

Fred Taylor:	$ 57,737
Refrigeration (Rite MP Refrigeration):	$ 20,000
Elevator (Metropolitan Elevator):	$ 15,000
Ronald Greene:	$ 231,198
APS Refrigeration Cold Container:	$ 6,789
Martin Arana:	$ 14,800
DWP License Fee:	$ 7,354
Engineering (R.P.M. Engineering):	$ 2,060
M.R.L. Development:	$ 63,005
Counter work (Erick Sologaitoa):	$ 7,000
Alarm system (ADT Security):	$ 8,000
TOTAL:	$1,355,2733

Of these alleged mitigation expenses, the Casasolas asserted that the District had paid or agreed to reimburse them for $213,252 in "moving expenses," $10,000 in "reestablishment expenses," and $1,000 in "searching expenses." Further, the District had disallowed $470,010, which it categorized as unreimbursable reestablishment expenses. The Casasolas did not discuss the status of the remaining $661,011 in unpaid claims. The Casasolas claimed that all expenses for which the District had not reimbursed them or agreed to reimburse them (i.e., the $470,010 in disallowed claims and the $661,011 in claims not yet acted upon) were compensable as expenses to mitigate loss of goodwill.

IV. The District's Motion to Exclude Evidence of the Casasolas' Claimed Mitigation Expenses

On June 27, 2008, the District filed a "Motion for Determination of Admissibility/Compensability of Mitigation Expenses in an Eminent Domain Action." The District asserted that the Casasolas should not be permitted to

testify at trial about the sums they had expended to reestablish their business at the St. Andrews property because: (1) they were entitled under section 1263.510 to be compensated for lost goodwill, but not for "mitigation expenses," i.e., expenses to mitigate loss of goodwill; (2) the Casasolas' claimed mitigation expenses exceeded by more than $1 million the potential losses they sought to mitigate; ⁴ (3) relocation expenses are compensable in a separate administrative proceeding, not in an eminent domain action; and (4) permitting evidence of the Casasolas' claimed mitigation expenses would be time consuming and prejudicial.

The Casasolas opposed the motion. They contended: (1) California law recognizes the right to recover mitigation costs in eminent domain cases; (2) mitigation costs are compensable even when mitigation efforts do not succeed; (3) the burden of proving lack of reasonableness is on the party causing the damage, not the property owner; (4) mitigation costs are reimbursable even if they exceed the damages prevented or reasonably anticipated; (5) they were not seeking a double recovery because they were " not seeking to recover benefits that could be awarded under the relocation regulations. The School District has denied their request for reimbursement of these costs under those regulations."

The trial court granted the motion to exclude evidence of relocation expenses. It said: "[T]o the extent that [the Casasolas] expended extraordinary amounts of money in obtaining and having alternative locations, those are not compensable, as they are relocation expenses, not an adequate measure of goodwill, not a goodwill aspect that was contemplated in any way, shape or form by even accepting the high number of goodwill of ... $126,000. Even if I deemed it to be some sort of a number that should be considered [,] ... it would have been wholly irrational for someone to spend a million dollars to save a business worth $126,000. More significantly and importantly, if you look at what elements of damages are allowed to be claimed, that type of expense is separately compensable under an entirely separate statutory scheme but not under the law of eminent domain. The cases on which Mr. Casasola relies really are distinguishable, because to the extent a mitigation expense is considered at all, it's really considered as part of a computation of goodwill discount, but that was not in fact done in this case, nor properly could it have...