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District Court of Appeal, Second District, Division 1, California.


Civ. 11045.

Decided: May 07, 1937

Clarence W. Morris and Lincoln V. Johnson, both of San Francisco, for the People. Schauer, Ryon & McMahon, of Santa Barbara, Thomas F. Murphine, of Los Angeles, and Robert W. McIntyre, of Santa Barbara, for respondent.

This is an appeal from a judgment rendered in an action in eminent domain brought by the state to condemn an easement for highway purposes over certain real property, situate in the city of Santa Barbara, owned by the Southern Pacific Company (hereinafter referred to as the railroad company), and occupied by respondent corporation as a lumber yard and plant; the appellant's main point being that no damage was proved or at least, that the amount of damage found is grossly excessive. The complaint is in the usual form used for actions of this character and alleges that respondent corporation claims some right, title, or interest in real property by reason of a purported unrecorded lease; and further that said lease has expired and that respondent corporation has no right, title or interest in or to the said real property or any part thereof. The answer admits the formal allegations of the complaint as to public necessity; denies that respondent has no interest in the property sought to be condemned; and affirmatively alleges a leasehold interest in the land under a lease which has an unexpired term of 25 years.

It appears from the record that in June of 1925, L. A. Ganahl as agent for and president of respondent corporation entered into negotiations with the railroad company for the leasing of a suitable piece of property in the city of Santa Barbara for the establishment of a lumber yard and plant; during the course of these negotiations, it was represented to him that, while the lease itself would be on the standard printed form of lease used by the railroad company which contained a provision that the lease could be terminated on 30 days' notice, it would be necessary for him, in order to secure the lease, to enter into a spur–track agreement with the railroad company. The lease as finally executed provided for a term of one year from December 1, 1925, at a rental of $50 per month, payable in advance, any holding over of the term to be deemed to be on a month to month basis. Under the spur–track agreement the railroad company was to install the spur track adjacent to the land covered by the lease upon payment to it by respondent of the sum of $2,600, the estimated cost of such installation. It further provided that approximately $1,016.21 of the sum advanced by respondent would be rebated to it at the rate of $2 for each carload of freight shipped over the spur track by respondent. At the time of trial of the action the evidence showed that the sum of $278 had been rebated to respondent leaving unrefunded a balance of $738.21.

As has been stated, negotiations were commenced in June of 1925, the spur–track agreement bearing date of July 24, 1925, and the lease bearing date of December 22, 1925. However, owing to considerable delay incident to a controversy with the city of Santa Barbara over rezoning the property covered by the lease, it was not until February 15, 1926, that the lease and the spur–track agreement were finally executed and delivered to and by both parties. Subsequently, apparently relying upon its lease and agreement with the railroad company, respondent invested approximately $40,000 in permanent improvements upon the leased land and established an efficient lumber yard, building supply, and planing mill plant, constituting an integral operating unit, which was so used until January 24, 1934, when railroad company caused to be served upon respondent notice of termination of the lease. This action was commenced on April 12, 1934; construction of a three–lane main state highway across a part of the land occupied by respondent was begun on June 6, 1934, and on June 8, 1934, a new lease was entered into between respondent and the railway company concerning the remaining land, and which was other than that involved in this action.

In addition to the lease and spur–track agreement, there was introduced at the trial of the action much correspondence which had passed between the parties to these agreements. At the conclusion of the trial the court found that the Ganahl Lumber Company on the 12th day of April, 1934, “was the owner of a leasehold interest in and to certain property theretofore leased to it by Southern Pacific Company * * * that on the said 12th day of April, 1934, the said leasehold interest of Ganahl Lumber Company had an unexpired term of twenty–two years and eleven months and that on the said 12th day of April, 1934, and for a long time theretofore, the said defendant Ganahl Lumber Company had established on its said leasehold interest from Southern Pacific Company and was the sole owner of a coordinated, synchronized, perfected and efficient lumber, planing mill and building material supply plant consisting of a planing mill with machinery therein attached to and forming a part of the buildings containing said planing mill and affixed and attached to the real property so leased by Ganahl Lumber Company and being part and parcel thereof; * * * that the spur–track * * * was constructed upon a narrow strip of land * * * ; that said narrow strip of land and spur–track thereon were appurtenant to and appurtenances of the land leased as herein found to Ganahl Lumber Company * * * and necessary for efficient use and operation of the said leased property; the Court further finds that during the year 1934 the Southern Pacific Company contrary to the terms of said spur–track and lease agreement endeavored to cancel the same by the service of notice purporting to do so; that at the time of the said purported attempt to cancel and terminate said lease and spur–track agreement Ganahl Lumber Company, defendant herein, was not in default thereunder and had complied with all conditions, terms and agreements on its part to be performed under said lease and spur–track agreement, and that the attempted cancellation and termination was ineffective and of no force and effect whatever, and that on the said 12th day of April, 1934, the said lease and spur–track agreement between Southern Pacific Company and Ganahl Lumber Company, as heretofore found herein to exist, was in full existence and effect with an unexpired term thereof of twenty–two years and eleven months to run therefrom and thereafter, and that defendant Ganahl Lumber Company had and has at all times fully complied with all terms, conditions and agreements in said spur–track and lease agreement on its part to be kept, fulfilled and performed.”

As conclusions of law from said findings, the court found that the plaintiff was entitled to a decree in condemnation, upon the payment into court for the defendant the sum of $25,092, together with 7 per cent. interest thereon from the 12th day of April, 1934, to date of deposit.

Appellant claims that the spur–track agreement and the lease cannot be construed together, for the reason that the subject–matter of each is separate and distinct from the other, and that the spur–track agreement cannot extend the term of the lease until the full rebate under the spur–track agreement has been received.

Obviously, the two instruments have reference to the same transaction, i.e., the establishment of an efficient lumber, planing mill, and building material supply plant upon the property covered by the lease, appurtenant to which and as a necessary adjunct thereto the spur–track was installed. The evidence shows that railroad company would not give the lease without the spur track; that the lease on a standard printed form provided for cancellation on thirty days' notice, while the spur–track agreement provided that the respondent should pay $2,600 for the construction of the track and that the sum of $1,016.21 should be repaid by the railroad company to respondent in the form of rebates at the rate of $2 for each carload of freight shipped by respondent. It was found by the court, and we believe justly, that the lease and spur–track agreement were in full existence on the 12th day of April, 1934, with a term of twenty–two years and eleven months to run. There was ample evidence introduced to support the findings of the trial court and to explain the apparent conflicting provisions contained in the two instruments.

Upon the conflicting testimony of several expert witnesses, the jury fixed the damages to respondent corporation at the sum of $25,092. This we cannot disturb because it is directly supported by evidence. Such other points as have been raised by appellant, we believe are without merit.

The judgment appealed from is affirmed.

I dissent. For the purpose of determinating whether the lease was terminated by the notice of its cancellation that was given by the railroad company to Ganahl Lumber Company. It may be conceded that the provisions of the lease should be considered together with those of the spur–track agreement. Nevertheless, it is undeniable that, although the lease expressly and specifically provides for the manner of its cancellation, the spur–track agreement is absolutely silent even on the subject of its cancellation, to say nothing of the cancellation of the lease. For aught that appears in the agreement, its existence might continue indefinitely. True, it does contain a provision to the effect that the Ganahl Lumber Company is entitled to a rebate of approximately $1,000 on account of the cost of the construction of the spur–track and which rebate is to be made by an allowance of $2 per car of lumber, etc., that may be delivered to Ganahl Lumber Company over the spur track. However, to my mind, that fact, together with the assumed estimate of the respective parties to the agreement to the effect that at the rate of $2 per car it would take 35 years to pay the amount of the rebate, furnishes no sufficient ground for rejecting and disregarding the plain language of the lease that it might be canceled on a thirty–day notice to that effect. In itself, and giving the utmost available force to the arrangement concerning the payment of the rebate, at most, it amounts to nothing more than a possible implication that the duration of the spur–track agreement might extend for a period of 35 years. Inasmuch as the number of cars of lumber that would be shipped over the spur track was not only undetermined, but also was indeterminable, it is clear that the period of time that would be required to pay the full amount of the rebate was entirely speculative; and as a consequence, that that obligation might be discharged much faster, or even much slower than the parties to the agreement anticipated that it would be paid. Hence, as against and contrary to the express language of the lease, by which the railroad company was given the right to terminate it on a thirty–day notice, to rule that by the indefinite understanding of the parties to the agreement a definite term was fixed, is to place a construction upon the entire agreement with which I am unable to agree. From the entire situation, it is perfectly consistent to conclude that the intention of the parties was that, although it was within the power of the railroad company to cancel the lease on a thirty–day notice to that effect––until such cancellation occurred, the railroad company would pay to Ganahl Lumber Company a rebate of $2 for each car of lumber that was delivered to it over the spur track, until the sum of $1,000 had been thus paid, regardless of the length of time that might be consumed in that manner.

Furthermore, a review of the pertinent evidence is convincing that the amount of the award of damages is grossly excessive.

YORK, Justice.

I concur: DORAN, J.