Opinion
D079471 D079904
04-17-2024
MEDICAL ACQUISITION COMPANY, INC., Plaintiff and Appellant, v. TRI-CITY HEALTHCARE DISTRICT, Defendant and Respondent.
David A. Kay for Plaintiff and Appellant. Buchalter, Robert M. Dato, Paul J. Fraidenburgh, and Douglas C. Straus for Defendant and Respondent.
NOT TO BE PUBLISHED
CONSOLIDATED APPEALS from a judgment and postjudgment orders of the Superior Court of San Diego County, Nos. 37-2014-00009108-CU-BC-NC, 37-2014-000022523-CU-MC-NC Robert P. Dahlquist, Judge. Affirmed.
David A. Kay for Plaintiff and Appellant.
Buchalter, Robert M. Dato, Paul J. Fraidenburgh, and Douglas C. Straus for Defendant and Respondent.
O'ROURKE, J.
This is the second appeal arising from a dispute over the construction of a medical office building by a private entity, respondent Medical Acquisition Company, Inc. (MAC), on land that was leased from a public agency, appellant Tri-City Healthcare District (Tri-City).
MAC argues the trial court erred by: (1) failing to consider on remand its inverse condemnation cause of action and whether its leases with Tri-City had terminated; (2) awarding MAC no damages as a result of Tri-City's abandonment of its eminent domain proceeding; (3) declining to award the full amount of attorney fees and costs it requested; and (4) awarding Tri-City interest on excess compensation MAC withdrew out of Tri-City's just compensation deposit following the jury trial.
For reasons we will explain, we disagree with each of MAC's contentions.
FACTUAL AND PROCEDURAL BACKGROUND
Sections I and II of the Factual and Procedural Background are derived from this court's prior unpublished opinion, Medical Acquisition Company, Inc. v. Tri-City Healthcare District (Dec. 21, 2018, D071311) [nonpub. opn.] (MAC I).
Tri-City is a public agency organized under California's Local Health Care District Law (Health &Saf. Code, § 32000 et seq.). The Local Health Care District Law "protect[s] the public health and welfare by furnishing hospital services in areas where hospital facilities are for some reason inadequate ...." (Talley v. Northern San Diego County Hospital District (1953) 41 Cal.2d 33, 40, overruled on other grounds in Muskopf v. Corning Hospital District (1961) 55 Cal.2d 211, 213.) Tri-City owns property in Oceanside on which it operates a hospital campus.
MAC is a privately held medical factoring company headquartered in Carlsbad. MAC's medical factoring involves purchasing a receivable or a bill at a discount from a hospital treating an uninsured patient in need of, but unable to pay for, surgery after an accident caused by another party. MAC then seeks collection from the party at fault for the accident.
In 2009, MAC began factoring some of Tri-City's surgeries. Subsequently, Tri-City and MAC developed the idea of constructing a medical office building on Tri-City's campus for surgeries. Construction of the building was estimated to cost about $15 million, which MAC could not afford on its own.
In December 2010, MAC and Tri-City executed two agreements in furtherance of the project: (1) under a 50-year ground lease, Tri-City would lease land to MAC, and MAC would construct a three-story, approximately 60,000-square-foot building on the land at its own expense (the ground lease); and (2) under a 15-year building lease, MAC would lease about 25,000 square feet of the constructed building to Tri-City, and Tri-City would prepay up to $7.5 million in rent (the building lease). The parties understood that Tri-City would be paying for half of the construction costs of the building through the rent prepayment provision; however, the provision was phrased in "discretionary," voluntary language to avoid the need to put the project out for public bidding, which is ordinarily required for a hospital district's construction contracts exceeding $25,000.
In 2011, MAC hired a general contractor, obtained all necessary approvals and permits for construction of the building, and began construction.
Through June 2012, construction of the building proceeded as expected. In July 2012, however, Tri-City stopped making its monthly prepayments of rent and sent MAC a "notice of default" on the ground lease even though MAC was not in default.
The parties entered a transition agreement in November 2012, the purpose of which was to terminate the leases, transition the construction project to Tri-City, and compensate MAC for its expenses and efforts. However, escrow did not close under the transition agreement because the project had not been subjected to competitive bidding and the subcontracts involved expenditures of more than $25,000. Accordingly, the parties agreed that MAC would continue constructing the building until the subcontracts were spent down below $25,000 and that MAC would not enter any new subcontracts exceeding $25,000.
MAC fulfilled its obligations under the transition agreement and amendments, and by late May 2013, the shell of the building was substantially complete. At that stage, the building required tenant improvements, otherwise known as stabilization, before it could be occupied.
In January 2014, Tri-City sent MAC a letter claiming that the leases were void due to conflicts of interest under Government Code section 1090 and that MAC must return all of Tri-City's prepaid rent and surrender the building. In all, Tri-City had paid $5 million of prepaid rent.
II. Initial Superior Court Proceedings
In April 2014, MAC filed a complaint in superior court against Tri-City asserting various claims, including breach of the ground lease, breach of the implied covenant of good faith and fair dealing in both the ground and building leases, inverse condemnation, and declaratory relief. The theory of MAC's contract-based causes of action was that Tri-City had unreasonably decided to stop prepaying rent (and fund construction costs), leading to delayed construction and lost rental income. As to inverse condemnation, MAC alleged Tri-City had taken possession of the property covered by the ground lease and the improvements on the property. MAC sought a declaration that the ground and building leases were valid, not void, "except as MAC's interest has been taken by [Tri-City's] exercise of its powers of eminent domain ...."
In July 2014, Tri-City filed its own complaint against MAC claiming, inter alia, the leases were void because of conflicts of interest. Tri-City later amended its complaint to include a cause of action for eminent domain of MAC's leasehold interest and pursued immediate possession using quick take procedures. (Medical Acquisition Co., Inc. v. Superior Court (2018) 19 Cal.App.5th 313, 323-324 [citing Cal. Const., art I, § 19; Code Civ. Proc. §§ 1255.410, 1255.220; and Mt. San Jacinto Community College Dist. v. Superior Court (2007) 40 Cal.4th 648, 653].) Tri-City sought to condemn "all right, title and interest to the Ground Lease" and pay MAC "just compensation" as required by law. Tri-City deposited $4.7 million with the state treasurer as the probable amount of just compensation owed to MAC for the taking based on Tri-City's building appraisal. On September 12, 2014, Tri-City was awarded possession of the building. MAC withdrew the deposited funds, "returned to its business of purchasing medical liens," added a new line of business purchasing statutory medical liens, and hired three additional employees.
Tri-City's conflict of interest claims have been fully resolved and are not relevant to this appeal.
Further statutory references are to the Code of Civil Procedure.
Before trial, the parties and the court discussed the overlap between MAC's inverse condemnation cause of action and Tri-City's eminent domain cause of action. MAC's attorney explained to the court the inverse condemnation claim and its overlap with the eminent domain proceeding as follows:
"[W]e filed first and we filed inverse condemnation. And it was months later when Tri-City then filed for eminent domain, which I think overlapped and subsumed the inverse condemnation claim. Even though it is still
pending, I think it mirrors claims on the same issue. It's essentially for taking the leasehold interest and the improvements on it."
Because the parties agreed that Tri-City was taking the property, the trial on the eminent domain cause of action was limited to the valuation of the property.
MAC's counsel later raised the issue that, although the causes of action overlap, Tri-City had stated it might attempt to abandon the eminent domain proceeding. The court responded that it was aware Tri-City could still abandon the proceeding, but the court nonetheless did not have any intention of giving any instructions on inverse condemnation.
Prior to selecting jury instructions, the court reminded the parties that they could preserve their right to appeal by stating "over our objection" in response to the court's decisions. MAC sought jury instructions on inverse condemnation and just compensation after a taking. The court denied MAC's proposed inverse condemnation instructions, and MAC's attorney responded that the inverse condemnation instruction was "[d]enied over our objection."
Following the trial, the jury found that Tri-City did not breach the ground lease but did breach the covenant of good faith and fair dealing implied in both leases. The jury awarded approximately $2.9 million in damages to MAC, primarily consisting of lost rental income of $126,605 per month. This amount represented income MAC would have earned had the building been constructed and occupied by February 1, 2013, the date MAC's contractor testified that the building would have been ready for occupancy without delays caused by the stop payment, transition agreement, and related issues, until the point of Tri-City's possession of the building on September 12, 2014. For Tri-City's eminent domain taking, the jury used MAC's appraisal and valued the property at approximately $16.8 million. The jury verdict form did not provide for jury findings on inverse condemnation. The court entered judgment accordingly. The judgment also provided that MAC was entitled to reasonable attorney fees for any appeal and postjudgment proceedings.
Based on the jury's valuation, MAC filed a motion under section 1255.030 for an order requiring Tri-City to increase its deposit of probable compensation by about $12.2 million, and the court granted the motion. Eventually, Tri-City deposited the additional sum, and MAC filed an application to withdraw the additional deposit in full. The court issued an order permitting MAC to withdraw $4.4 million without any bond and the remainder of the deposit after posting a bond. MAC filed a petition for writ of mandate challenging the undertaking requirement. We denied the petition in Medical Acquisition Co., Inc. v. Superior Court, supra, 19 Cal.App.5th at p. 334. MAC withdrew the $4.4 million that did not require a bond in addition to the $4.7 million it had previously withdrawn.
In December 2016, Tri-City filed a notice of abandonment of the eminent domain proceeding under section 1268.510, subdivision (a). MAC filed a motion to set aside the abandonment. In March 2017, the court heard argument and granted MAC's motion.
Tri-City filed timely appeals of the judgment and various postjudgment orders, including the order to increase the deposit and the order setting aside the abandonment.
III. First Appeal
We issued an opinion on Tri-City's appeals on December 21, 2018, concluding that the trial court erred by setting aside Tri-City's abandonment of the eminent domain cause of action but otherwise affirming the judgment. (MAC I, supra, D071311.)
As to eminent domain, we determined that the element of justifiable, detrimental reliance was missing because: (1) Tri-City provided repeated warnings that it might abandon the eminent domain proceeding if the jury valued the property significantly higher than its own valuation; and (2) MAC failed to adequately explain how it took action to its detriment based on Tri-City's eminent domain proceeding. (MAC I, supra, D071311.)
We further explained that "the record does not show that [MAC's] current business activities are incompatible with repossessing the building" and MAC's expenditure of the funds deposited by Tri-City did not prevent it from repossessing the building. (MAC I, supra, D071311.) Instead, MAC was "entitled to recover damages and litigation expenses" that arose "from Tri-City's abandonment of the eminent domain proceeding," including "lost leasing opportunities or business interferences." (Ibid.) We cited section 1268.620, which" 'provides for restoration of possession of the property and damages where the defendant was dispossessed from property prior to a dismissal or a final judgment that the plaintiff cannot acquire the property.' (Cal. Law Revision Com. com., 19A West's Ann. Code Civ. Proc. (2007 ed.) foll. § 1268.620, p. 238.)" (Ibid.) Such recovery, we explained, "would restore MAC to substantially the same position as before." (Ibid.) And, once MAC repossessed the building, "if Tri-City acts unreasonably or refuses to honor its lease obligations, MAC has remedies at its disposal, including within the leases themselves." (Ibid.) Thus, on remand, we directed the trial court, "to conduct further proceedings consistent with the views expressed in this opinion to effectuate Tri-City's abandonment of the eminent domain proceeding." (Ibid.)
We otherwise affirmed, including as to the $2.9 million in damages the jury awarded to MAC for Tri-City's breach of the implied covenant of good faith and fair dealing in both the ground and building leases, despite the jury's determination that Tri-City did not breach the ground lease. (MAC I, supra, D071311.) We explained that the record showed that the rent prepayment provision in the building lease was intended to fund construction of the ground lease improvement, thus it was reasonably foreseeable that a breach of the rent prepayment provision of the building lease would cause damages related to the ground lease, despite the absence of a ground lease breach. (Ibid.)
Our disposition stated:
"The judgment and postjudgment orders are reversed to the extent they are inconsistent with Tri-City's abandonment of the eminent domain proceeding. In all other respects, the judgment and postjudgment orders are affirmed, including as to the jury's award of damages to MAC for its claim of breach of the implied covenant of good faith and fair dealing. The matter is remanded for the trial court to conduct further proceedings as it deems necessary to effectuate Tri-City's abandonment of the eminent domain proceeding, consistent with the views expressed in this opinion ...." (MAC I, supra, D071311.)
IV. Superior Court Proceedings on Remand
A. Pretrial Motions
Following our appeal, both parties brought a series of motions in the trial court.
In September 2019, the court granted Tri-City's motion to dismiss the eminent domain cause of action and confirm delivery of ground lease rights to MAC pursuant to our opinion. The court explained that MAC's repossession of the building was both contemplated by our opinion and logical following the abandonment of the eminent domain cause of action in order to restore the parties to their prior positions. At the same time, the court denied Tri-City's motion to recover a portion of its deposit that MAC had withdrawn, finding such claims premature prior to a determination of damages caused by Tri-City's abandonment of the eminent domain proceeding. The court stated that its "order does not affect MAC's claim[ ] for . . . inverse condemnation," which would "remain to be adjudicated by dispositive motions(s) or trial."
Subsequently, MAC brought two separate motions for orders confirming the ground and building leases were terminated: (1) by statute (§§ 1265.110 and 1265.140) and merger of MAC's possessory interest and Tri-City's reversionary interest as of Tri-City's September 2014 possession of the property; and (2) due to Tri-City's breach of the implied covenant of good faith and fair dealing. The trial court denied the motions without prejudice to MAC's ability to make these claims in a different proceeding, explaining that MAC's motions involved new claims and defenses and fell outside the limited scope of our direction to "conduct further proceedings . . . to effectuate Tri-City's abandonment of the eminent domain proceeding."
Both MAC and Tri-City also brought motions for summary adjudication of MAC's inverse condemnation cause of action, which the court heard in July 2020. In its motion, MAC sought the $16.8 million in damages that represented the jury's valuation of the property Tri-City seized. MAC argued Tri-City's September 2014 physical occupation of the ground lease premises and building was a permanent possession that necessarily involved Tri-City terminating the leases under sections 1265.110 and 1265.140, subdivision (b), and the doctrine of merger. Tri-City, on the other hand, argued that the inverse condemnation action had been finally adjudicated and was outside the scope of the remittitur; it further asserted that adjudication was permanent because MAC failed to appeal the court's refusal to instruct the jury on inverse condemnation.
The court denied both motions, concluding that adjudication of the inverse condemnation cause of action fell outside the scope of the limited purpose of the remittitur; the court reasoned that, in our prior opinion, "there is no hint, let alone specific direction, that that cause of action should be adjudicated." Rather, the remand was for the "limited purpose" of enabling Tri-City's abandonment of the eminent domain proceeding and determining the damages such abandonment caused MAC. Adjudicating the inverse condemnation cause of action, according to the court, was not necessary to effectuate either of those tasks.
On January 10, 2021, after Tri-City issued a notice of default, MAC surrendered possession of the building to Tri-City.
B. Trial
In May 2021, the court held a bench trial "to effectuate Tri-City's abandonment of the eminent domain proceeding" as we directed. To do so, the court concluded it was required to make two determinations: (1) the damages to MAC caused by Tri-City bringing and then abandoning the eminent domain proceeding; and (2) the amount of excess probable compensation MAC had withdrawn from the funds deposited by Tri-City.
At trial, both parties presented experts on the issue of damages caused by the abandonment of the eminent domain proceeding. Both sets of experts used similar methodologies in the calculation of damages, estimating lost rental income based on net operating income less ground lease and parking costs, assuming three tenants: Tri-City with its existing building lease, Total Renal Care based on a letter of intent to lease space, and a third hypothetical tenant. Tri-City's damages expert applied the hypothetical tenant rental amount and certain fees used by MAC's experts. Thus, each side's calculations yielded similar results in terms of the amount of rent and expenses when examining an equivalent time period. However, the experts' final calculation of damages differed in two main ways: (1) whether to credit Tri-City for $75,000 per month in prepaid rent up to $5 million; and (2) whether to make deductions for costs of tenant improvements for which MAC would have been responsible.
MAC's experts calculated damages based on projected lost rental income to be either: (1) $7,185,150 for losses between Tri-City's September 2014 possession and the court's November 2019 order confirming possession of the property in MAC, or (2) $9,112,264 for losses between Tri-City's September 2014 possession and MAC's January 2021 surrender of the building. MAC's calculations did not credit Tri-City for prepaid rent or factor in tenant improvement costs required for occupancy. As to prepaid rent, MAC's experts did not deny Tri-City had made the payments but left to the court whether to provide Tri-City with any credit because of potential "legal issues there" and because it would be "really easy for the Court" to apply prepaid rent. And MAC's experts treated tenant improvement costs as capital expenses that do not occur yearly and should be deducted from the value of the building because "someone is going to incur it." However, another of MAC's witnesses admitted MAC would have had to pay stabilization costs to obtain tenants once and had not yet done so.
Tri-City's experts, on the other hand, considered both the prepaid rent and tenant improvements in determining damages. They applied $4,656,500 of the $5 million prepaid rent for the 62-month period between Tri-City's September 2014 property possession and the court's November 2019 confirmation of repossession to MAC. Except on rare occasions, one expert explained, medical office building leases include tenant improvement allowances. And it ordinarily takes at least six months to find tenants for medical offices (the lease up period), after which tenant improvements are made and paid (the build out period). Accordingly, Tri-City's experts deducted from rental income improvement allowances of $2.375 million, including a $1.25 million tenant improvement allowance in the building lease and a $1.125 million allowance for the hypothetical third tenant. While the Total Renal Care lease did not include a tenant improvement allowance, MAC would not have received rent under Total Renal Care's potential lease for approximately six months during the build out period, which represented $197,538 in rent. The potential lease also included additional free months of rent which MAC's experts did not include in their damages calculation.
Taking into account prepaid rent, tenant improvement allowances, the lease up period, the build out period, and free rent incentives that MAC did not consider, Tri-City's experts estimated that MAC would have had a net loss of over $980,000 through the court's November 2019 confirmation of MAC's possession of the building. Alternatively, for the period between Tri-City's September 2014 possession and its December 2016 notice of abandonment of the eminent domain proceeding, Tri-City's experts estimated that MAC would have had a net loss of over $2.3 million. Either way, Tri-City's experts opined, MAC suffered no damages as a result of Tri-City's abandonment of the eminent domain proceeding.
The court determined that MAC's damage experts were not credible because their opinions were "far removed from the actual, verifiable facts," "their most significant assumptions uniformly favor MAC," and they demonstrated a biased demeanor while testifying by refusing to concede when most objective professionals would have. The court stated that it was unreasonable to exclude interior improvements required for tenant occupation and prepaid rent representing approximately 41% of the building space. The court further explained that the projected $1.4 million annual income was belied by MAC's "aggressive[ ]" refusal to resume possession following the first appeal. Further, the court expressed disbelief at MAC's expert's valuation of the leasehold interest at $22.7 million in September 2014 when the jury had determined its value at $16.83 million in 2016. In contrast, the court found Tri-City's experts' damages analysis credible.
Thus, as to the first question of damages for the abandonment of the eminent domain proceeding, the court determined: (1) the proper time period for measuring damages from abandonment of the eminent domain proceeding began with Tri-City's September 2014 possession of the building and ended no later than the court's November 2019 order confirming MAC's possession; (2) during that time period, MAC suffered no damages as a direct result of the abandonment of the eminent domain proceeding because of the prepaid rent it already received and tenant improvement allowances it would have incurred; and (3) MAC's claims for further damages caused by Tri-City's continued breaches of good faith and fair dealing or that the leases were terminable due to Tri-City's breaches were outside the scope of the remittitur, and MAC would have to pursue these claims in a different proceeding.
As to the second issue, the court determined the amount of excess compensation MAC withdrew and now owed to Tri-City to be $4,042,754.84, consisting of the $9,100,000 total withdrawn less the amounts awarded to MAC in the original judgment: (1) $2,933,700 for the breach of the implied covenant of good faith and fair dealing, (2) $1,878,205.08 in attorney fees, (3) $62,068.37 in costs, and (4) $183,271.71 in expert witness fees. MAC did not dispute this amount. The court reserved the question of interest on excess compensation for a noticed motion.
C. Posttrial Proceedings
1. Litigation Expenses
After trial, MAC sought $2,017,829.62 in litigation expenses under section 1268.610 for the period following the first trial. That amount included a $1,225,267.00 contingency fee from one law firm for representation between March 2020 and July 2021, a $183,790.05 continency fee due to in-house counsel, invoices paid to three other law practices ($417,878.51, $2,760, and $107,989.36), $76,206.25 in expert fees, and $3,938.45 in "other litigation expenses." The court determined that MAC's request was "unreasonably inflated," citing Serrano v. Unruh (1982) 32 Cal.3d 621. The court noted a variety of concerns with MAC's fee request, including: (1) MAC's failure to differentiate between recoverable expenses associated with the eminent domain claim and other nonrecoverable litigation expenses; (2) the contingency fees requested arose during the postappeal period when MAC had not made any recovery; (3) MAC's failure to provide meaningful information about the nature of the services provided; and (4) MAC's failure to provide hours and hourly rates for the invoices paid to the three firms. Thus, the court granted MAC's request in the reduced amount of $360,438.45, consisting of a lodestar calculation for approximately 841 out of 867 hours requested by the firm for the March 2020 through July 2021 representation and the full amount of "other litigation expenses." As to inhouse counsel and the three remaining firms, the court declined to award fees because of MAC's failure to provide meaningful information about the services provided, failure to provide hours and hourly rates, and the possibility of duplicative services that were inefficient and unreasonable.
Subsequently, the court awarded $102,940.91 in costs to MAC, including the $76,206.25 expert fees not awarded as litigation expenses, but denied MAC's request for $2,400.95 in fees related to preparing transcripts.
2. Prejudgment Interest
Tri-City brought a motion under section 1255.280, subdivision (b)(2), for prejudgment interest on the $4,042,754.84 in excess compensation withdrawn by MAC. MAC argued that section 1268.160 applied as the withdrawal occurred after the original judgment and that section precludes interest on excess compensation paid to the plaintiff. The court disagreed with MAC and awarded Tri-City $1,135,083.12 in interest, representing 7% interest from the June 29, 2017, withdrawal to the July 2, 2021, postappeal judgment.
DISCUSSION
MAC appeals the judgment after remand, the orders granting its litigation expenses and costs only in part, and the order granting prejudgment interest to Tri-City.
I. Proceedings After Remand
MAC first contends the trial court erred by declining to adjudicate its inverse condemnation cause of action and to determine that the leases were terminated, arguing these matters were within the scope of our remittitur and required to be adjudicated prior to the entry of the final judgment. We conclude MAC forfeited its inverse condemnation claim by failing to raise the issue in the first appeal, leaving the initial final judgment on inverse condemnation untouched. Upon remand, the trial court acted in accordance with our direction to effectuate Tri-City's abandonment of the eminent domain proceeding.
A. Judgment on Inverse Condemnation
MAC argues "there was never any adjudication of the inverse condemnation cause of action" and, consequently, the judgment violates the one final judgment rule permitting only a single appeal"' "from the final judgment in an entire action." '" (In re Baycol Cases I &II (2011) 51 Cal.4th 751, 756. (Baycol).) We disagree. There was a final, appealable judgment following the first trial, including on the overlapping eminent domain and inverse condemnation causes of action. We conclude MAC forfeited a separate claim of inverse condemnation by failing to file a cross-appeal from that judgment.
The court's decision not to instruct the jury separately on inverse condemnation over MAC's objection, despite the possibility Tri-City would abandon the eminent domain claim, rendered MAC an aggrieved party with standing to appeal under section 902. A party can be aggrieved even if the judgment was in its favor, and "[w]e liberally construe the issue of standing." (Apple, Inc. v. Franchise Tax Bd. (2011) 199 Cal.App.4th 1, 13; see Kardly v. State Farm Mut. Auto. Ins. Co. (1995) 31 Cal.App.4th 1746, 1748, fn. 1 [plaintiffs who received damage award could have cross-appealed unfavorable evidentiary ruling and forfeited the argument by failing to do so].)
"A party is entitled upon request to correct, nonargumentative instructions on every theory of the case advanced by him which is supported by substantial evidence." (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 572.) A court's failure to give a requested instruction is reviewable on appeal. (Id. at pp. 559-560.) "[I]f [a decision or] an order is appealable, appeal must be taken or the right to appellate review is forfeited. (See § 906 [the powers of a reviewing court do not include the power to 'review any decision or order from which an appeal might have been taken' but was not]; . . . Kinoshita v. Horio, [186 Cal.App.3d 959,] 967[ ] ['If [a] ruling is appealable, the aggrieved party must appeal or the right to contest it is lost.'].)" (Baycol, supra, 51 Cal.4th at p. 762, fn. 8.)
MAC sought a jury instruction on its inverse condemnation theory in case Tri-City later abandoned its eminent domain claim, the trial court declined to give the instruction, MAC objected to preserve the issue for appeal, and there was a final, appealable judgment in the case. MAC acknowledges "the trial court refused to instruct the jury on the inverse condemnation cause of action." Because the court declined to do so, the matter went to judgment without the jury separately considering MAC's inverse condemnation theory. Yet MAC did not appeal this unfavorable ruling.
Consequently, while inverse condemnation actions generally can proceed after the abandonment of eminent domain proceedings that do not proceed to final judgment, as evident in the cases cited by MAC, Redevelopment Agency v. Heller (1988) 200 Cal.App.3d 517, 522 (Heller), and Tilem v. City of Los Angeles (1983) 142 Cal.App.3d 694, 698 (Tilem), we agree with Tri-City that MAC forfeited the ability to pursue its inverse condemnation claim by failing to appeal on that issue following the jury trial. Neither Heller nor Tilem involved a prior appeal resulting in forfeiture and a limited scope of jurisdiction on remand, as discussed below.
Moreover, the holdings in both cases are consistent with the result here. Tilem permitted damages on an inverse condemnation action after the abandonment of an eminent domain proceeding, explaining "[t]he measure of damages may be the cost of repairs, the loss of use of the property, loss of rent, loss of profits, or increased operating expenses pending repairs." (Tilem, supra, 142 Cal.App.3d at p. 703.) In Heller, the court determined that an inverse condemnation action, rather than an abandoned eminent domain proceeding that would not go to final judgment, was the correct "procedural vehicle" to establish damages for depression of the property value and deprivation of its use due to precondemnation conduct. (Heller, supra, 200 Cal.App.3d at pp. 520, 522.) The court explained: ". . . [D]amages for loss of rental income due to unreasonable precondemnation activity may be recovered either in an eminent domain proceeding which proceeds to final judgment or in an inverse condemnation action, but not both. Where, as here, the eminent domain action will not proceed to final judgment because the agency has abandoned the proceeding, the property owner must resort to inverse condemnation because there is nothing left to the eminent domain proceeding." (Id. at pp. 522.) In neither Heller nor Tilem was there discussion of section 1268.620 damages.
In this case, MAC received damages for the period preceding Tri-City's possession, and the eminent domain action proceeded to final judgment before we required the trial court to permit Tri-City to abandon the eminent domain action. We determined in our prior opinion that the appropriate procedural vehicle for loss of use and loss of opportunity damages under these circumstances, where Tri-City possessed the property and then abandoned the eminent domain proceeding, was through section 1268.620, and MAC had the opportunity to prove up those damages. As explained by Heller, MAC is not also entitled to damages for the same losses in an inverse condemnation action. MAC's cause of action for inverse condemnation in its operative complaint did not seek anything further, merely demanding just compensation to the extent that "TCHD has taken or takes such property interests through exercise of powers of eminent domain. . ."
B. Scope of Remittitur
Relying on our disposition, the trial court concluded its jurisdiction did not extend to MAC's inverse condemnation action or to a determination whether the lease agreements had or could be terminated. This interpretation was correct.
"The order of the reviewing court is contained in its remittitur, which defines the scope of the jurisdiction of the court to which the matter is returned. 'The order of the appellate court as stated in the remittitur, "is decisive of the character of the judgment to which the appellant is entitled. The lower court cannot reopen the case on the facts, allow the filing of amended or supplemental pleadings, nor retry the case, and if it should do so, the judgment rendered thereon would be void." '" (Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 701 (Griset); Hampton v. Superior Court of Los Angeles County (1952) 38 Cal.2d 652, 655 [trial court is "empowered to act only in accordance with the directions of the reviewing court"].) "[T]he dispositional language of the opinion . . . constitutes the remittitur directions." (Frankel v. Four Star International, Inc. (1980) 104 Cal.App.3d 897, 902.) "We look to the wording of our directions to determine whether the trial court's order comports with them. [Citation.] When . . . the reviewing court remands the matter for further proceedings, its directions must be read in conjunction with the opinion as a whole." (Ayyad v. Sprint Spectrum, L.P. (2012) 210 Cal.App.4th 851, 859 (Ayyad).)
"A new trial order limited to certain issues vacates only the portion of the judgment pertaining to those issues, while 'the portion of the judgment pertaining to the unaffected issues remains in place. . .'" (Ayyad, supra, 210 Cal.App.4th at p. 861.) "The issues the trial court may address in the remand proceedings are therefore limited to those specified in the reviewing court's directions, and if the reviewing court does not direct the trial court to take a particular action or make a particular determination, the trial court is not authorized to do so." (Id. at pp. 859-860.) Appellate courts need not "attempt to envision and to set forth in detail the entire universe of matters prohibited by its directions on remand," and the trial court may not address issues not discussed "merely because the reviewing court has not expressly forbidden the trial court from doing so." (Id. at p. 863.) "Whether the trial court correctly interpreted our opinion is an issue of law subject to de novo review." (Id. at p. 859.)
In Ayyad, for example, the disposition in the earlier decision stated the "judgment . . . is affirmed," but remanded for "retrial on the issue of [defendant's] damages, and the calculation of any offset to which [defendant] may be entitled." (Ayyad, supra, 210 Cal.App.4th at p. 857.) On remand, the trial court denied defendant's motion to compel arbitration, finding it lacked jurisdiction to retry other issues. (Id. at p. 858.) The Court of Appeal affirmed, explaining that because the prior judgment had been affirmed, "it became final as to the issues unaffected by the new trial order" and "[t]he trial court's jurisdiction did not extend to issues outside the scope of our directions." (Id. at pp. 861-862; id. at pp. 859-860 [if trial court is not directed "to take a particular action or make a particular determination," it cannot do so].)
We reversed the judgment and postjudgment orders only to the extent they disallowed Tri-City's abandonment of the eminent domain proceeding, and we remanded for proceedings "necessary to effectuate Tri-City's abandonment of the eminent domain proceeding." (MAC I, supra, D071311.) We otherwise affirmed the judgment.
As explained by the trial court, our prior opinion contains no direction to the trial court to adjudicate the inverse condemnation cause of action, to consider whether the leases had or could be terminated, or to add damages to the jury's determination. As such, the trial court properly refrained from considering these issues and was instead limited to permitting Tri-City's abandonment of the eminent domain proceeding, determining damages for the abandonment, and returning Tri-City's excess just compensation deposit.
MAC advances a broad interpretation of our direction to the trial court to hold proceedings "to effectuate Tri-City's abandonment of the eminent domain proceeding," arguing that the trial court should have resolved "all issues caused by the abandonment" (italics added). MAC also maintains that "[t]he normal procedure following a reversal and remand of a portion of the judgment is to resolve all issues related to the reversal ...." This broad interpretation is unfounded. Rather, in remand proceedings, the trial court is "limited to those [issues] specified in the reviewing court's directions." (Ayyad, supra, 210 Cal.App.4th at pp. 859-860.) The court's decision on the inverse condemnation action, therefore, was not affected and remains final to the same extent it was final following the first judgment.
MAC additionally argues, "Even where an appellate court decides a certain action should be taken, it does not foreclose the trial court from performing other actions which are not specifically mentioned." Thus, MAC explains, because "there is no specific instruction that the trial court should not allow the inverse condemnation cause of action" and "no specific instruction that the trial court should not consider the validity of the leases and the proper span of breach damages," the trial court was permitted to do so. Following the rule stated in Ayyad, which we find eminently prudent, we reject MAC's argument that the absence of a direction to the trial court not to consider certain issues permits the trial court to do so within the scope of the remittitur.
Our prior opinion does not in any way suggest that litigating the inverse condemnation cause of action was necessary to effectuate abandonment of Tri-City's eminent domain cause of action. Indeed, MAC's opening brief makes clear that an inverse condemnation cause of action is separate from and unnecessary to the resolution of an eminent domain cause of action. As MAC explains, inverse condemnation actions may proceed after the abandonment of the eminent domain proceeding. (Citing Heller, supra, 200 Cal.App.3d at p. 522 ["Where, as here, the eminent domain action will not proceed to final judgment because the agency has abandoned the proceeding, the property owner must resort to inverse condemnation because there is nothing left to the eminent domain proceeding."].) Adjudicating MAC's inverse condemnation action thus would not effectuate Tri-City's eminent domain abandonment and was not within the scope of our remittitur.
Likewise, the court properly determined that MAC's motion to confirm the leases had been or could be terminated exceeded its jurisdiction on remand. Our opinion specifically contemplated the continuation of the lease as demonstrated by our statement that MAC would have available remedies were Tri-City to breach the leases. We cited to section 1268.620, which" 'provides for restoration of possession of the property and' . . . loss of use and loss of opportunity damages proximately caused by the [eminent domain] proceeding and [its] dismissal." Our directions to the court to hold proceedings to effectuate Tri-City's abandonment of the eminent domain proceeding necessarily excluded any proceedings to determine the continued validity of the contracts or additional damages for breach of the duty of good faith and fair dealing through the end of the lease period.
The case Atchison, Topeka &Santa Fe Railway Co. v. Superior Court (1939) 12 Cal.2d 549 (Atchison), cited by MAC, does not require a different result. In that case, the plaintiff alleged damages for personal injury based on two different theories: a violation of the Federal Safety Appliance Act (36 U.S. Stats. at L. 298, 45 U.S.C.A., secs. 11-16) and common-law negligence. (Atchison, at p. 551.) Under the statutory theory, liability was absolute, regardless of negligence, and negligence-based defenses were unavailable. (Ibid.) After the defendant presented evidence to support an assumption of the risk defense, the plaintiff decided to proceed only on the statutory theory, resulting in the exclusion of the defendant's evidence. (Id. at p. 552.) The United States Supreme Court later held that there was no statutory violation as a matter of law, stating: "Judgment reversed, and cause remanded for further proceedings not inconsistent with this opinion." (Id. at p. 553.) The California Supreme Court then held that the United States Supreme Court decision did not preclude retrial of the negligence theory because the decision did not prohibit it. (Id. at p. 556.) Unlike Atchinson, where the disposition reversed the judgment as a whole and remanded for unspecified proceedings not inconsistent with the opinion, our prior opinion affirmed the judgment except as to the eminent domain abandonment and remanded specifically for proceedings necessary to effectuate that abandonment.
In sum, the trial court properly concluded its limited jurisdiction on remand did not extend to MAC's claims of inverse condemnation, termination of contracts, or additional damages for the breach of duty of good faith and fair dealing. We decline to consider the merits of MAC's arguments on these issues, which were beyond the scope of the trial court's jurisdiction on remand and properly not considered below.
II. Damages
MAC then argues that the court erred by awarding no damages for the eminent domain abandonment period. If an eminent domain plaintiff takes possession of the property at issue and the proceeding is thereafter dismissed for any reason, section 1268.620, subdivision (b), requires the court to "provi[de] as shall be just for the payment of all damages proximately caused by the proceeding and its dismissal as to that property." MAC contends the court was bound by res judicata and law of the case to the jury's finding that Tri-City breached the duty of good faith and fair dealing and resulting damages, improperly deducted Tri-City's prepaid rent and tenant improvements from MAC's lost rent, and should have awarded damages through the end of the lease period in 2081. We disagree with each contention.
A. Res Judicata
MAC argues the jury's finding that Tri-City breached the duty of good faith and fair dealing and the resulting damage award had res judicata effect, which the court disregarded in its statement of decision. MAC appears only to raise a claim preclusion argument. "Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them." (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896.) "Claim preclusion arises if a second suit involves: (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit." (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824.)" 'Whether the doctrine of res judicata applies in a particular case is a question of law which we review de novo.' " (Ayala v. Dawson (2017) 13 Cal.App.5th 1319, 1325.) We agree with Tri-City that the doctrine of res judicata is inapplicable here, within a single suit, on remand to determine statutory damages from Tri-City's abandonment of an eminent domain proceeding.
Additionally, there was no relitigation of any cause of action here. We disagree with MAC's contention that the court "ignor[ed] the prior jury's findings to conclude that Tri-City did nothing wrong in dealing with MAC." The court tried only the issue of damages for the abandonment of the eminent domain proceeding; it did not re-try wrongdoing and did not conclude MAC was entitled to no damages because, as MAC puts it, Tri-City "did nothing wrong." There is nothing in the court's decision contrary to the jury's finding that Tri-City breached the duty of good faith and fair dealing. Rather, MAC received no damages on remand because MAC had already received prepaid rent from Tri-City and would have had to stabilize the building before making a profit.
Further, even if res judicata applied, the jury did not determine that Tri-City would be responsible for stabilizing the building in the absence of the eminent domain proceeding; likewise, there was no jury finding that Tri-City was not entitled to any credit for its prepaid rent. MAC misleadingly claims that tenant improvements "must have been resolved against Tri-City in the jury trial" because "MAC's expert at trial calculated all lease up and tenant improvement costs to establish the damages awarded by the jury." Indeed, MAC's expert at the first trial did account for costs of $2,462,556 to stabilize the property and $4,033,504 in prepaid rent. However, he used those amounts to reduce the value of the property in determining how much just compensation Tri-City should pay for taking MAC's property by eminent domain, not in the amount of lost rental damages. Once Tri-City abandoned the eminent domain proceeding, damages to MAC no longer accounted for stabilization costs and prepaid rent.
B. Law of the Case
Nor was the court's consideration of prepaid rent and stabilization costs contrary to the law established by our prior opinion."' "The doctrine of 'law of the case' deals with the effect of the first appellate decision on the subsequent retrial or appeal: The decision of an appellate court, stating a rule of law necessary to the decision of the case, conclusively establishes that rule and makes it determinative of the rights of the same parties in any subsequent retrial or appeal in the same case." [Citation.]'" (Leider v. Lewis (2017) 2 Cal.5th 1121, 1127.)
In MAC I, we affirmed the jury's damage award for Tri-City's breach of the duty of good faith and fair dealing. As previously discussed, the jury determined MAC was entitled to lost rental income based on the assumption that prepaid rent and building stabilization costs were considered as part of just compensation for the property taken by eminent domain. Our opinion did not and could not have determined that prepaid rent and building stabilization costs could not be considered absent the payment of just compensation for eminent domain taking.
C. Amount of Damages
Finally, MAC argues the court's award of "zero compensation" was contrary to the just compensation requirements of section 1268.620 and the Fifth Amendment to the United States Constitution. MAC contends the court erred by accounting for prepaid rent and tenant improvement costs in determining damages for Tri-City's possession prior to abandonment. We disagree.
"The demands of fairness are satisfied when compensation is determined on the basis of substantial evidence establishing, to a reasonable certainty, the value of the property taken...." (Los Angeles County Metropolitan Transportation Authority v. Continental Development Corporation (1997) 16 Cal.4th 694, 711.)" 'Substantial evidence is evidence that is "of ponderable legal significance," "reasonable in nature, credible, and of solid value," and" 'substantial' proof of the essentials which the law requires in a particular case." '" (DeNike v. Mathew Enterprise, Inc. (2022) 76 Cal.App.5th 371, 381.) In a substantial evidence review, we defer to the trier of fact's determination as to the credibility of witnesses. (Ibid.) "To the extent [a] question requires us to construe a statute . . . or apply law to undisputed facts-these are . . . questions which we review de novo." (McConnell v. Advantest America, Inc. (2023) 92 Cal.App.5th 596, 606-607.)
We agree with the trial court that the relevant period for assessing MAC's damages from Tri-City's possession of the property and subsequent abandonment of the eminent domain proceeding ended no later than the court's November 4, 2019, confirmation of repossession of the property in MAC. And we conclude substantial evidence supports the court's decision that MAC received just compensation for Tri-City's possession of the building beginning on September 12, 2014. In other words, the court properly determined that MAC was entitled to no further compensation beyond the prepaid rent it had already received from Tri-City.
MAC's expert calculated lost rental income from September 12, 2014, through November 4, 2019, as $7,185,150. This starting point figure was, in essence, undisputed for this period. MAC's expert testified that his numbers were very close to Tri-City's expert's, except whether to account for prepaid rent and tenant improvement costs. Indeed, Tri-City's expert used MAC's expert's baseline figures in calculating damages.
Tri-City's experts explained that MAC's damage calculations were incorrect because they failed to: (1) consider Tri-City's prepaid rent, resulting in double rent; (2) account for tenant improvement allowances, which ordinarily are included in medical office leases; and (3) include any build out time for tenant improvements during which it would receive no rent.
We defer to the trial court's conclusion that Tri-City's experts were credible and MAC's experts were not. Substantial undisputed evidence and credible evidence from Tri-City's experts supports the court's determination of damages. Taking MAC's figure of $7,185,150 in lost rental income, crediting Tri-City for $4,656,500 in prepaid rent, assuming MAC would have expended (at least) $2,375,600 in tenant improvement allowances, and eliminating $197,538 in rent during Total Renal Care's build up period results in no lost rental income during the relevant period.
It was proper for the trial court to deduct prepaid rent and tenant improvement costs because they had not previously been accounted for and would have occurred during that time. As previously discussed, MAC's experts deducted stabilization costs and prepaid rent in determining the value of the property had Tri-City gone forward with eminent domain. Once Tri-City abandoned the eminent domain proceeding, it was proper to deduct them from damages caused by the abandonment. It is fair for Tri-City to receive credit for rent actually paid and not yet credited. MAC would have had to pay the tenant improvement expenses once prior to earning a profit, had not paid the expenses, and, having relinquished possession of the property to Tri-City, will not ever do so.
III. Litigation Expenses
A. Attorney Fees
MAC argues the court erred by awarding $360,438.45 in section 1268.610 litigation expenses, rather than its requested $1,941,623.37, for the period following the first trial (excluding $76,206.25 in expert fees awarded separately). On appeal, MAC contends the trial court's expense award was erroneous because: (1) MAC was not required to allocate its attorneys' time between eminent domain and other issues or provided detailed time records; and (2) Tri-City had the burden to show that the expenses were not reasonable or necessary. We disagree.
Section 1268.610, subdivision (a)(1), requires the court to award litigation expenses to the defendant when an eminent domain proceeding is dismissed for any reason. Section 1235.140 limits litigation expenses to those that were "reasonably and necessarily incurred in the proceeding" or "to protect the defendant's interests in the proceeding." (§ 1235.140, subds. (a) &(b).) Whether litigation expenses were reasonably and necessarily incurred falls within the trial court's discretion. (People ex rel. Dept. of Transportation v. Yuki (1995) 31 Cal.App.4th 1754, 1767.) A court properly determines reasonable attorney fees using a lodestar calculation "based on the 'careful compilation of the time spent and reasonable hourly compensation of each attorney.'" (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1131-1132.) The court must exclude from reasonable compensation "inefficient or duplicative efforts." (Ibid.) Where a fee request" 'appears unreasonably inflated,'" the court's discretion includes the ability" 'to reduce the award or deny one altogether,'" particularly compared to the resulting level of success. (Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 990.)
We conclude the court did not abuse its discretion in determining the fee award. MAC's argument that it was not required to provide information on the fees requested but Tri-City should have established the reasonableness and necessity of its fee award defies logic. (See Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1320 ["As the moving party, the prevailing defendant seeking fees and costs' "bear[s] the burden of establishing entitlement to an award and documenting the appropriate hours expended and hourly rates." [Citation.] To that end, the court may require [a] defendant[ ] to produce records sufficient to provide' "a proper basis for determining how much time was spent on particular claims."' [Citation.] The court also may properly reduce compensation on account of any failure to maintain appropriate time records. [Citation.]' "].)
The court acted within its discretion in determining that the fees requested were unreasonably inflated and MAC failed to provide sufficient information to award certain fees on an hourly basis. MAC requested a $1,225,267 contingency fee for 867.65 hours of work by three attorneys at one firm between March 2020 and July 2021. The court noted that MAC did not receive any recovery during that time. The court properly determined reasonable fees for these services using a lodestar calculation of nearly all hours requested and the hourly fee provided.
The remainder of the attorney fees incurred involved MAC's general counsel and three additional firms during overlapping periods. In support of its argument on these attorney fees, MAC points only to a declaration provided by its general counsel containing her and the firms' time, making conclusory statements that each request was reasonable and necessary. She presented her hourly rate and time spent without further detail on the services she provided. Pursuant to her contract with MAC, however, she requested a percentage of the value of any award to MAC for her services between 2016 and 2020. As previously discussed, MAC did not receive any award during this time. As to the other firms, the general counsel provided total invoice amounts without describing the services rendered or providing the hourly rates and the hours spent. Nor do there appear to be declarations from these firms regarding their time spent and services provided.
The court acted within its discretion in declining to award fees for MAC's general counsel and the other three firms because the court lacked information required to determine the reasonableness and necessity of these fees.
B. Transcript Costs
MAC next claims the court improperly declined to award costs under section 1268.610 for three transcripts: $3,438.50 for a transcript prepared by Johnell Gallivan, $361.00 for a transcript prepared by Joanne Castro, and $2,400.95 for transcripts prepared by Kramm Court Reporting. However, it appears that the trial court awarded costs for the Gallivan and Castro transcripts. At most, the court deducted the costs for the Kramm Court Reporting transcripts, which MAC paid in August 2016, November 2016, and July 2017. MAC concedes the court correctly determined that at least some of these costs were incurred prior to the original judgment; MAC was awarded costs for the original judgment. The court had discretion not to award costs without knowing which costs derived from the period prior to the original judgment. MAC has not provided us any citation to the record indicating the court abused its discretion by determining these transcripts, contents unknown, were not timely and not reasonable and necessary to the eminent domain proceeding.
IV. Prejudgment interest
Finally, MAC disputes the court's award of $1,135,083.12 in interest to Tri-City on MAC's second, $4.4 million withdrawal on June 29, 2017, under section 1255.280. This issue is a matter of law involving statutory interpretation that we review de novo. (Union of Medical Marijuana Patients, Inc. v. City of San Diego (2019) 7 Cal.5th 1171, 1183.)
MAC argues the court erred by awarding Tri-City interest on the excess amount of Tri-City's deposit that MAC withdrew because interest is chargeable only on a prejudgment withdrawal of excess compensation, not a postjudgment withdrawal. MAC argues the matter is governed by section 1268.160, subdivisions (a) and (b), which state:
"(a) Any amount withdrawn by a party pursuant to this article in excess of the amount to which he is entitled as finally determined in the eminent domain proceeding shall be paid to the parties entitled thereto. The court shall enter judgment accordingly.
"(b) The judgment so entered shall not include interest except that any amount that is to be paid to a defendant shall include legal interest from the date of its withdrawal by another defendant."
Tri-City, on the other hand, cites to section 1268.110, which deals with deposits after the entry of judgment. (§ 1268.110, subd. (a).) Subdivision (c) of that section reads: "(c) Any amount deposited pursuant to this article on a judgment that is later reversed, vacated, or set aside shall be deemed to be an amount deposited pursuant to Article 1 (commencing with Section 1255.010) of Chapter 6." Section 1255.280, subdivisions (a) and (b) later provide:
"(a) Any amount withdrawn by a party pursuant to this article in excess of the amount to which he is entitled as finally determined in the eminent domain proceeding shall be paid to the parties entitled thereto. The court shall enter judgment accordingly.
"(b) The judgment so entered shall not include interest except in the following cases:
"(1) Any amount that is to be paid to a defendant shall include legal interest from the date of its withdrawal by another defendant.
"(2) If the amount originally deposited by a plaintiff was increased pursuant to Section 1255.030 on motion of a party obligated to pay under this section, any amount that is attributable to such increase and that is to be repaid to the plaintiff shall include legal interest from the date of its withdrawal."
We conclude sections 1268.110, subdivision (c), and 1255.280, subdivision (b)(2), operate to deem withdrawals "attributable to" a section 1255.030 motion to increase a deposit as prejudgment withdrawals subject to interest. It would make little sense to deem an increased deposit prejudgment but not the related withdrawal. Here, MAC's second withdrawal was based on a section 1255.030 motion increasing the deposit; consequently, the court properly included interest on MAC's repayment of excess compensation attributable to that withdrawal.
DISPOSITION
We affirm the judgment and postjudgment orders. MAC shall bear costs on appeal. (Cal. Rules of Court, Rule 8.278(a)(1)-(2).)
WE CONCUR: McCONNELL, P. J. DO, J.