Los Angeles County Metropolitan etc. v. Yum Yum Donut Shops

Filed 2/26/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
LOS ANGELES COUNTY B276280
METROPOLITAN
TRANSPORTATION (Los Angeles County
AUTHORITY, Super. Ct. No. BC514144)
Plaintiff and Respondent,
v.
YUM YUM DONUT SHOPS, INC.,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Mark V. Mooney, Judge. Reversed.
Murphy & Evertz, Douglas J. Evertz and
Emily L. Madueno for Defendant and Appellant.
Nossaman, David Graeler and Jennifer L. Meeker
for Plaintiff and Respondent.
——————————
Plaintiff Los Angeles County Metropolitan Transportation
Authority (MTA) sued defendant Yum Yum Donut Shops, Inc.
(Yum Yum) in eminent domain to take1 one of Yum Yum’s donut
shops that was in the path of a proposed rail line. Yum Yum
sought compensation for the loss of goodwill resulting from that
taking under Code of Civil Procedure section 1263.510
(section 1263.510).2 Under that statute, a condemnee must
establish in a court trial entitlement to goodwill, including
whether the loss of goodwill cannot be prevented by relocating or
making other reasonable mitigation efforts. It is that condition to
entitlement that is the subject of this appeal. If the condemnee
meets the entitlement threshold in section 1263.510,
section 1263.510 further provides for a jury trial to determine
the value of the loss of goodwill.
The trial court concluded Yum Yum was not entitled to
compensation for goodwill because Yum Yum unreasonably
1 A taking occurs “[w]hen the state exercises its power
of eminent domain over a parcel of land.” (People ex rel. Dept.
of Transportation v. Dry Canyon Enterprises, LLC (2012)
211 Cal.App.4th 486, 489 (Dry Canyon).)
2 Section 1263.510, subdivision (a) provides: “The owner of
a business conducted on the property taken . . . shall be
compensated for loss of goodwill if the owner proves all of the
following: [¶] (1) The loss is caused by the taking of the
property or the injury to the remainder. [¶] (2) The loss cannot
reasonably be prevented by a relocation of the business or by
taking steps and adopting procedures that a reasonably prudent
person would take and adopt in preserving the goodwill. [¶]
(3) Compensation for the loss will not be included in
payments under Section 7262 of the Government Code. [¶]
(4) Compensation for the loss will not be duplicated in the
compensation otherwise awarded to the owner.”
2
refused to relocate the shop to one of three sites MTA proposed
at the entitlement trial. The undisputed expert testimony
elicited at trial, however, established Yum Yum would lose some
of the donut shop’s goodwill even if Yum Yum relocated the shop
to one of those sites.
Accordingly, the question here is whether a condemnee is
entitled to compensation for lost goodwill if any portion of that
loss is unavoidable. We answer that question in the affirmative
based on the statute’s legislative history, accompanying
Law Review Commission Comments, case law, and the general
principles governing mitigation of damages. Under these
authorities, a condemnee need only prove some or any
unavoidable loss of goodwill to satisfy the condemnee’s burden to
demonstrate entitlement to compensation for goodwill under
section 1263.510.
We conclude the trial court erred in finding that
Yum Yum’s failure to mitigate some of its loss of goodwill
precluded compensation for any loss of goodwill, reverse, and
remand for a jury trial on the value of Yum Yum’s lost goodwill.
FACTUAL AND PROCEDURAL BACKGROUND
Yum Yum operates a chain of donut shops, including one
located at 3642 Crenshaw Boulevard in Los Angeles, which
facility Yum Yum leased and identified as Store 58. Yum Yum
operated Store 58 for over 30 years until December 4, 2013, and
had a “longterm lease.” Yum Yum believed Store 58 benefitted
from its location3 according to Yum Yum’s criteria for selecting
shop locations.
3 Specifically, Store 58 occupied a 1,232-square-foot
freestanding building that fronted the side of the street that
3
Those criteria were: “(a) Located on the morning traffic
side of the street. [¶] (b) Located on a heavily trafficked street
leading to a freeway. [¶] (c) Easy access for ingress, parking,
and egress. [¶] (d) Visible shop with visible convenient front end
parking located near the shop’s entrance. [¶] (e) Free-standing
building or, at minimum, a visible endcap space fronting directly
on the street so as not to be blocked by other center tenants. [¶]
(f) Located at or near a signalized intersection. [¶] (g) Suitable,
visible pole sign available. [¶] (h) Enjoys a one-mile trade
radius. [¶] (i) Building signs available with visibility from
multiple directions. [¶] (j) Located in a densely populated area.
[¶] (k) Located in a neighborhood with favorable demographics:
a lower to middle income community. [¶] (l) Occupying a 1,200-
square-foot to 1,700-square-foot space.”
MTA sought to condemn Store 58 because it was in or
appurtenant to the proposed path of a dual-track light rail line—
the Crenshaw/LAX Transit Corridor Project—that MTA
was planning to construct. MTA commenced eminent domain
proceedings against Yum Yum in the trial court, and obtained
an order for prejudgment possession of Store 58. Yum Yum
carried heavy morning traffic toward Interstate 10, and “[d]onut
shops thrive on morning business.” The shop’s two driveways
made ingress and egress convenient because they allowed drivers
to turn right into the shop’s parking lot and then turn right to
return to the street. Just south of the shop was a signalized
intersection that slowed traffic, thus making the shop more
visible and convenient to enter and exit. The shop’s “pole sign”
occupied the highest, largest place on the pole. The shop had, in
total, three building signs visible from three directions: north,
south, and west. The shop had a “one-mile trade radius” within a
densely populated neighborhood with demographics (lower-to-
middle income) that were favorable to Yum Yum’s business.
4
then evaluated three potential sites to relocate Store 58, which
sites MTA had proposed, and concluded those locations each
failed to satisfy some of the aforementioned criteria.4
Subsequently, the parties appeared at a bench trial on
whether Yum Yum was entitled to compensation for the loss of
goodwill resulting from MTA’s taking of Store 58.
MTA’s expert on goodwill, Aaron Amster, a business
appraiser, testified that the value of Store 58’s goodwill was
$620,000. Amster further testified that if Yum Yum relocated to
one of MTA’s three proposed sites, Yum Yum would recapture
$202,000, $138,000, or $340,000 in goodwill, respectively.
Amster opined, “some goodwill could have been preserved at all
three of these potential relocation sites.” On cross-examination,
Amster stated his opinion’s corollary: “There would have been a
loss of goodwill” if Yum Yum “had relocated [the shop] to one of
these three locations.” Further, Amster answered in the
affirmative when Yum Yum’s counsel asked him, “there still
would have been a loss of goodwill had [the shop] relocated
according to your opinion?” In closing, Yum Yum argued it was
entitled to compensation for the value of lost goodwill under
section 1263.510 because Amster conceded Yum Yum would lose
some goodwill even if it relocated the shop to one of the three
potential relocation sites. Yum Yum further argued it was
entitled to a jury trial under section 1263.510 to determine that
value.
4 Yum Yum also rejected at least seven other potential
relocation sites MTA proposed. We do not address those sites
because MTA only contends Yum Yum acted unreasonably in
rejecting the three sites noted above.
5
MTA argued that Yum Yum applied overly strict location
selection criteria and unreasonably rejected the three potential
relocation sites, thus precluding Yum Yum from seeking
compensation for any lost goodwill under section 1263.510,
subdivision (a)(2).
In its statement of decision, the trial court interpreted
section 1263.510 as follows: “Where the condemnee cannot
establish the facts showing it took reasonable steps to preserve
its goodwill, it will not be entitled to any compensation for alleged
loss of goodwill” and, if a business can retain some goodwill by
relocating, it must do so. (Italics added.) The trial court cited
section 1263.510, subdivision (b), 11 Miller & Starr, California
Real Estate (3d ed. 2011) section 30A:45, pages 108-112 and
1 Matteoni & Veit, Condemnation Practice in California
(Cont.Ed.Bar 3d ed. 2011) section 4:71, page 117 as authority for
these propositions.
The trial court found Yum Yum acted unreasonably in
applying overly strict location selection criteria and rejecting the
three potential relocation sites based on Amster’s testimony.5
Thus, the trial court found Yum Yum was not entitled to a
jury trial on the value of the compensation for any lost goodwill
resulting from the taking of the shop because Yum Yum
unreasonably failed to preserve some of the shop’s goodwill and
could have done so.6 The trial court never held a jury trial on the
5 The trial court also found Yum Yum was uncooperative
with MTA’s relocation agent, placed an inexperienced individual
in charge of its relocation efforts, and failed to investigate
relocation assistance benefits.
6
MTA did not argue, and the trial court did not find
Yum Yum failed to prove the taking caused a loss of goodwill or
6
value of Yum Yum’s lost goodwill, and entered a final judgment
in MTA’s favor. Yum Yum timely appealed.
STANDARD OF REVIEW
“A trial court’s finding that a business owner has not
established entitlement to compensation for a loss of goodwill is
generally reviewed under the substantial evidence standard.
(See Dry Canyon, supra, 211 Cal.App.4th at p. 493.) To the
extent the [trial] court’s conclusion is premised on the
interpretation of the requirements of a statute, . . . we review
de novo. (Id. at p. 491.)” (People ex rel. Dept. of Transportation v.
Presidio Performing Arts Foundation (2016) 5 Cal.App.5th 190,
200 (Presidio).) Substantial evidence is evidence that is “ ‘of
“ponderable legal significance.” It must be “reasonable in nature,
credible, and of solid value.” ’ ” (County of Riverside v. City of
Murrieta (1998) 65 Cal.App.4th 616, 627.)
DISCUSSION
A. The Legislative History Of Section 1263.510 Indicates
The Statute Is To Be Construed Liberally In Favor Of
Providing A Remedy To Condemnees For Loss Of
Goodwill Resulting From A Taking
Section 1263.5107 provides for compensation for the
loss of goodwill resulting from a taking.8 Section 1263.510,
that compensation for the lost goodwill would be duplicative of
any other compensation for the taking, such as lost property
value and relocation expenses. (See § 1263.510, subd. (a)(1), (3),
(4).) Having not raised these other grounds below, MTA has
forfeited them. (Keyes v. Bowen (2010) 189 Cal.App.4th 647, 655.)
7 Ante, footnote 2.
7
subdivision (b) defines goodwill as “the benefits that accrue to a
business as a result of its location, reputation for dependability,
skill or quality, and any other circumstances resulting in
probable retention of old or acquisition of new patronage.”
“[T]he Legislature enacted section 1263.510 in 1975 as part
of a comprehensive revision of eminent domain law.” (Chhour v.
Community Redevelopment Agency (1996) 46 Cal.App.4th 273,
278 (Chhour).) Previously, only constitutional provisions9
governed “ ‘the form of property . . . requiring just
compensation,’ ” and courts did not view those provisions as
providing for goodwill as a compensable form of property.
(Chhour, supra, 46 Cal.App.4th at p. 278, citing Community
Redevelopment Agency v. Abrams (1975) 15 Cal.3d 813, 819
(Abrams), Oakland v. Pacific Coast Lumber etc. Co. (1915)
171 Cal. 392, 398.)
“This judicial stinginess was displaced by the passage of
Code of Civil Procedure section 1263.510.” (Chhour, supra,
46 Cal.App.4th at p. 278.) “The section was enacted in
response to widespread criticism of the injustice wrought by
the . . . historic refusal to compensate condemnees whose ongoing
businesses were diminished in value by a forced relocation.”
(People ex rel. Dept. of Transportation v. Muller (1984) 36 Cal.3d
8 Ante, footnote 1.
9 MTA brought this action under Article I, section 19 of the
California Constitution, which section provides in relevant part:
“Private property may be taken or damaged for a public use and
only when just compensation, ascertained by a jury unless
waived, has first been paid to, or into court for, the owner.”
(See Community Redevelopment Agency v. Abrams (1975)
15 Cal.3d 813, 816, fn. 2.)
8
263, 270 (Muller), citing Abrams, supra, 15 Cal.3d at p. 831.)
Thus, section 1263.510 is a remedial statute that is “ ‘to be
liberally construed, with a view to effect its objects and to
promote justice.’ ” (Muller, supra, 36 Cal.3d at p. 270.) We
are mindful of this legislative history as we interpret
section 1263.510.
B. Section 1263.510 Operates By A Two-Step Process:
(1) The Court Determines The Condemnee’s
Entitlement To Compensation For Lost Goodwill,
And (2) A Jury Determines That Goodwill’s Value
Determining liability for loss of goodwill under
section 1263.510 involves a two-step process. “First, the court
determines entitlement: that is, whether the party seeking
compensation has presented sufficient evidence of the conditions
for compensation set forth in subdivision (a)—causation,
unavoidability, and no double recovery—such that the party is
entitled to some compensation. If the party meets this burden,
the matter proceeds to a second step, in which a jury (unless
waived) determines the amount of the loss.” (Presidio, supra,
5 Cal.App.5th at p. 201.) Thus, if that party meets certain
“ ‘qualifying conditions for such compensation,’ ” it has a right to
a jury trial on the amount of compensation due. (Dry Canyon,
supra, 211 Cal.App.4th at p. 491.)
Here, as set forth above, in the first phase, the trial court
hinged its decision that Yum Yum was not entitled to
compensation on the qualifying condition that Presidio described
as “unavoidability.” (Presidio, supra, 5 Cal.App.5th at p. 201.)
Section 1263.510, subdivision (a)(2) sets forth that condition as
follows: “The loss cannot reasonably be prevented by a relocation
of the business or by taking steps and adopting procedures that a
9
reasonably prudent person would take and adopt in preserving
the goodwill.” Thus, we interpret section 1263.510,
subdivision (a)(2) according to the canons of statutory
construction in the following subsection. (See Dry Canyon,
supra, 211 Cal.App.4th at p. 492.)
C. Entitlement Under Section 1263.510,
Subdivision (a)(2) Exists Where The Condemnee
Would Lose Goodwill That Could Not Be Avoided By
Relocating Or Taking Other Reasonable Steps
As MTA argues, the language of section 1263.510 is
unambiguous. The statute’s unambiguous plain language
provides that a condemnee must show it cannot prevent a loss of
goodwill by relocating or otherwise taking reasonable steps to
prevent that loss to be entitled to a jury trial on the amount of
that unavoidable loss. A fortiori, if the condemnee would lose
goodwill—even if it relocated its business or otherwise reasonably
mitigated the loss—the condemnee satisfies its threshold burden.
Nothing in section 1263.510’s language provides that the
condemnee is entitled to no compensation at all for lost goodwill
if the condemnee fails to mitigate a portion of that loss. We
believe the statute’s legislative history, the Law Review
Commission Comments, and case law applying the statute
support this interpretation. The legislative history recounted
above establishes that the statute is remedial, and thus to be
construed liberally in favor of compensating business owners for
lost goodwill. (Muller, supra, 36 Cal.3d at p. 270.)
“ ‘We give the California Law Revision Commission
comments “substantial weight” in construing’ ” statutes.
(City of Corona v. Liston Brick Co. (2012) 208 Cal.App.4th 536,
545 [referring to Evidence Code].) A Law Revision Commission
10
Comment to section 1263.510 provides, “Goodwill loss is
recoverable under Section 1263.510 only to the extent it cannot
reasonably be prevented by relocation or other efforts by the
owner to mitigate.” (Italics added.) Nowhere does the
Commission state that the unreasonable failure to mitigate some
loss of goodwill precludes recovery of compensation for any loss of
goodwill that could not be avoided despite the exercise of
reasonable mitigation efforts. To conclude otherwise would be to
ignore the Commission’s juxtaposition of “to the extent” close to
“cannot reasonably be prevented.”
Our interpretation of section 1263.510 is not without
precedent. For example, in Presidio, the First District reversed
the trial court’s finding that the condemnee had failed to
establish entitlement to goodwill compensation because the
trial court disagreed with the condemnee’s method of calculating
lost goodwill. (Presidio, supra, 5 Cal.App.5th at p. 204.) There,
the trial court had found, “[a]though it was ‘clear that Caltrans’
taking caused the Foundation to suffer a loss of goodwill,’ ” the
Foundation had “failed to prove ‘the quantitative . . . loss of
goodwill.’ ” (Id. at p. 199.)
In reversing the trial court, the Presidio court first
described the condemnee’s initial burden during the entitlement
phase: “In the entitlement stage of the proceeding, the party
seeking compensation must show that it has suffered a ‘loss
of goodwill.’ [Citations.] The precise amount of the lost goodwill,
however, is an issue for the jury in the second phase of the
proceeding. [Citation.] Accordingly, in the entitlement phase,
the party seeking compensation need only show that there was
some loss of the benefit that the business was enjoying before the
taking due to its location, reputation, and the like, without
11
necessarily having to quantify its precise value.” (Presidio,
supra, 5 Cal.App.5th at p. 204.)
To underscore that the purpose of the entitlement phase is
to discern whether the condemnee suffered “some” loss of
goodwill, the court then analyzed whether the condemnee’s
method of valuing loss of goodwill was “doomed from the start”:
“[I]f the trial court erred in concluding that the party had not
established some loss of goodwill in the entitlement phase, the
error would be harmless if the party could never prove the
amount of that loss anyway.” (Presidio, supra, 5 Cal.App.5th
at pp. 204, 205.)
In its analysis, Presidio cited with approval the
Fourth District’s opinion in Redevelopment Agency v.
Metropolitan Theatres Corp. (1989) 215 Cal.App.3d 808, 811
& footnotes 3–4 (Metropolitan Theatres). (Presidio, supra,
5 Cal.App.5th at p. 204.) In Metropolitan Theatres, the parties
stipulated “Metropolitan was entitled to be compensated for a
loss of goodwill.” (Metropolitan Theatres, at p. 810.) The
appellate court affirmed the trial court’s refusal to instruct the
jury that the condemnee bore the burden of proving the amount
of goodwill loss. “While it is true that the existence of a loss [of
goodwill] cannot be established without showing that a loss [of
goodwill] occurred in some amount or another (which is nothing
more than a semantic tautology), merely showing that a loss
occurred is not logically tantamount to establishing by a
particular standard of proof what the precise amount of the loss
in question is.” (Id. at p. 811, fn. 3.) By differentiating the
fact of a loss from establishing the amount of the loss, the
Metropolitan Theatres court reinforces our own conclusion that
at the entitlement phase, a condemnee only need demonstrate
12
loss of some goodwill to proceed to a jury trial on the amount of
compensable lost goodwill.
Similarly, our colleagues in Division Six have observed “a
business owner is entitled to a jury trial on the amount of
goodwill lost by a taking only if he or she first establishes, as a
threshold matter, that the business had goodwill to lose.”
(Dry Canyon, supra, 211 Cal.App.4th at p. 491.) The corollary of
that holding is that once a condemnee has established it has
suffered a loss of goodwill, it is entitled to have a jury determine
the amount of lost goodwill.
Finally, the general rule of mitigation of tort damages is
instructive. Specifically, this general rule provides, “ ‘a party
must make reasonable efforts to mitigate damages, and
recovery will not be allowed for damages that a party . . . could
have avoided by reasonable effort.’ ” (State Dept. of Health
Services v. Superior Court (2003) 31 Cal.4th 1026, 1049
(Health Services) [recognizing that the defense of mitigation of
damages applies to “many different sorts of legal claims”
including statutory sexual harassment claims]; Rest.2d Torts,
§ 918, com. b, p. 502 [if party fails to mitigate, damages are
reduced to value of efforts party should have made or amount of
expense party should have incurred].) Tort law does not preclude
a plaintiff from recovering damages altogether simply because a
plaintiff has failed to mitigate some of its damages. (See, e.g.,
Health Services, at pp. 1043, 1049 [plaintiff claiming damages for
sexual harassment could have prevented “at least some” damages
by using employer’s internal remedies].) At oral argument,
Yum Yum’s counsel conceded that at the jury trial phase, MTA
may assert an offset for the portion of loss of goodwill that could
have been avoided by reasonable mitigation efforts.
13
D. The Trial Court’s Authorities Are Inapposite Because
They Do Not Address Mitigation Or Whether The
Condemnee Had Any Goodwill To Lose In The First
Place
As noted earlier, the trial court’s ruling turned on its
following reasoning: “Where the condemnee cannot establish the
facts showing it took reasonable steps to preserve its goodwill, it
will not be entitled to any compensation for alleged loss of
goodwill,” and “[u]ltimately, ‘ . . . if a business can retain some
goodwill value at a new location by serving new customers, it
must do so, even if it loses many of its old patrons.’ ” We
respectfully observe those statements of law are inaccurate.
The trial court cited 11 Miller & Starr, supra,
section 30A:45, pages 108–11210 and 1 Matteoni & Veit,
supra, section 4:71, page 117 in support of its conclusions. The
eight cases cited by these treatises do not support the statements
of law that the trial court endorsed.
10 We set forth the text from the current edition of the
treatise, which is the same as the text cited by the trial court:
“In order to recover goodwill damages, the condemnee has the
burden of proof in showing that the loss is caused by the taking of
the property or the injury to the remainder, and that the loss
cannot reasonably be prevented by relocating the business or by
taking steps and adopting procedures that a reasonably prudent
person would take for the purpose of preserving goodwill. Where
the condemnee cannot establish these facts, it will not be entitled
to any compensation for alleged loss of goodwill. The right to
compensation for lost goodwill is a question for the court, not the
jury. If the court finds that the condemnee has met his or her
burden of proof, the question of the amount of goodwill loss will
be presented to the jury.” (7 Miller & Starr, Cal. Real Estate
(4th ed. 2018) § 24:45, p. 119, fn. and italics omitted.)
14
First, they do not address the pivotal issue here, and
“ ‘[c]ases are not authority for propositions not considered.’ ”
(Emeryville Redevelopment Agency v. Harcros Pigments, Inc.
(2002) 101 Cal.App.4th 1083, 1102 (Emeryville).) Specifically,
seven of those cases do not turn on the threshold issue of
mitigation under section 1263.510. (City of Santa Clarita v. NTS
Technical Systems (2006) 137 Cal.App.4th 264, 269–270
[taking did not cause loss of goodwill and court determines
such causation, not jury]; Emeryville, at pp. 1116–1120 [loss of
goodwill not caused by taking but by inevitable transition of
environmentally unsound property to better use; additionally,
compensation for post-remediation value of property duplicative
of compensation for lost goodwill]; Muller, supra, 36 Cal.3d
at pp. 270–272 [loss of cheap rent constituted compensable loss
of goodwill where taking caused condemnee to pay higher rent
at nearby location to maintain patronage and profits];
Los Angeles Unified School Dist. v. Casasola (2010)
187 Cal.App.4th 189, 201–202, 210 [claimed mitigation
expenses not compensable if they constitute relocation expenses];
Redevelopment Agency v. Arvey Corp. (1992) 3 Cal.App.4th 1357,
1362 [expenses payable as relocation assistance under
Government Code section 7262 not goodwill under
section 1263.510]; Albers v. County of Los Angeles (1965)
62 Cal.2d 250 [pre-section-1263.510 case interpreting
constitutional “ ‘just compensation’ ” requirement]; Abrams,
supra, 15 Cal.3d 813, 817 [goodwill not compensable under
constitutional “ ‘just compensation’ ” clauses; section 1263.510
inapplicable because eminent domain proceedings commenced
pre-enactment].)
15
MTA argues Yum Yum was required to relocate the shop
and relies on the same authority the trial court cited: 1 Matteoni
& Veit, supra, section 4:71, page 117. Specifically, that treatise
states, “It is therefore conceivable that if a business can retain
some goodwill value at a new location serving new customers,
it must do so, even if it loses many of its old patrons.” (Id.
at pp. 117–118.) The treatise cites no authority for this
proposition.
At the bench trial, Yum Yum argued that it would have to
invest $250,000 to $300,000 to relocate Store 58 and most of
those expenses would not have been reimbursable under the
Relocation Act (Gov. Code, § 7262, subd. (a), Cal. Code Regs.,
tit. 25, §§ 6090, subds. (a), (b) & (i), 6094). We are aware of
no authority compelling a condemnee to relocate when the
investment required to relocate would make it diseconomic to do
so. Indeed, the authority is to the contrary. (Unocal California
Pipeline Co. v. Conway (1994) 23 Cal.App.4th 331, 336 (Unocal)
[“We are not deciding whether loss of goodwill is an appropriate
item of damages here. What we are deciding is that relocation
is not a requirement to be eligible for such damages.”].) As
Division 6 explained in Unocal: “In order to recover for loss of
goodwill the owner is required to show ‘ [t]he loss cannot
reasonably be prevented by a relocation of the business . . . .’ If
anything, that language indicates loss will be compensated where
there is no relocation.” (Ibid.)
The only case involving the threshold issue of mitigation
that the treatises cite is Regents of University of California v.
Sheily (2004) 122 Cal.App.4th 824 (Sheily). Sheily did not
consider whether a condemnee loses all entitlement to goodwill
damages if the condemnee failed to mitigate only some of its loss
16
of goodwill. Instead, Sheily addressed whether substantial
evidence supported the trial court’s finding of the absence of any
effort to mitigate. In addition, as set forth below, MTA’s own
uncontroverted evidence supported the existence of loss of some
goodwill that could not have been reasonably mitigated.
E. Yum Yum Established Entitlement To Goodwill
Damages Because MTA’s Uncontradicted Expert
Testimony Established That Yum Yum Would Lose
Goodwill Even If It Relocated The Shop
MTA’s expert on goodwill, Amster, conceded Yum Yum
would have lost some of Store 58’s goodwill even if Yum Yum had
relocated the shop to one of MTA’s three proposed relocation
sites. Specifically, Amster stated Yum Yum could have preserved
only $202,000, $138,000, or $340,000 of the shop’s preexisting
$620,000 of goodwill, depending on where Yum Yum could have
relocated the shop.11 Then on cross-examination, Amster
affirmatively stated Yum Yum would have lost goodwill even if it
relocated the shop. Neither party disputed these opinions.
MTA focuses almost exclusively on the existence of
substantial evidence to support the trial court’s finding that
Yum Yum failed to mitigate damages. The trial court based its
finding, however, on an erroneous legal assumption that if
Yum Yum failed to mitigate as to some of its loss of goodwill, it
11 MTA asserts Amster’s testimony only proves Yum Yum
could have preserved some goodwill. MTA’s assertion ignores the
obvious corollary: If Yum Yum could have preserved some
portion of the shop’s goodwill, Yum Yum necessarily would lose
some other portion of that goodwill. Moreover, as set forth below,
Yum Yum’s counsel elicited that corollary from Amster on cross-
examination.
17
was not entitled to any compensation for goodwill. It was
uncontroverted that Yum Yum would have lost quantifiable
goodwill even if it had relocated to any of the three locations MTA
proposed. We thus cannot conclude that the trial court’s
erroneous interpretation of the law was harmless.
18
DISPOSITION
The judgment is reversed, and the matter remanded with
instructions to (1) enter an order that Yum Yum established its
entitlement to compensation for goodwill resulting from the
taking of the shop, and (2) hold a jury trial to determine the value
of that loss. Yum Yum is awarded its costs on appeal.
CERTIFIED FOR PUBLICATION.
BENDIX, J.
We concur:
CHANEY, Acting P. J.
WEINGART, J.*
* Judge of the Los Angeles Superior Court, assigned
by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
19