McKay v. State of California

Opinion

KING, J.

In this case we hold that Health and Safety Code section 13007 permits recovery of lost profits from a business connected to property that is damaged by a negligently set fire. The State of California (the State) appeals from a money judgment for damages resulting when employees of the Department of Forestry and Fire Prevention set a controlled-burn fire adjacent to property owned by Steven A. McKay and Burt Cohen. We affirm.

McKay and Cohen own a 50-acre parcel of agricultural property and a retail produce outlet. Beginning in 1982, they improved a section of the property with trellises and irrigation pipe. They planted fruit trees, nut trees, grapevines and berry plants, which were designed to supply the retail outlet.

On October 22, 1988, employees of the Department of Forestry and Fire Prevention negligently started a controlled-burn fire on adjacent property. The fire spread to the McKay-Cohen farm and burned 25 acres, including 6 acres of trees, plants, trellises, irrigation pipe and other improvements. The business was destroyed as a result of the fire.

The State conceded liability for negligence but disputed the measure of damages. The market value of the burned six acres of improved property before the fire was $70,500, while the market value after the fire was

[939]

somewhere between $30,000 and $39,000. The State contended that McKay and Cohen could recover only this amount. McKay and Cohen argued they were also entitled to recover damages for loss of profits from their retail business. They presented evidence of lost profits of either $87,500 or $189,000. The trial court awarded $35,000 for the damage to the land and improvements, plus lost profits in the sum of $87,500, for a total money judgment of $122,500.

The State’s sole contention is that McKay and Cohen were only entitled to recover damages for the reduction in the value of their real property, and thus the court erred in awarding $87,500 for lost profits. The State relies on the general proposition that, “Where fruit trees are injured or destroyed, the measure [of damages] is the difference in the value of the orchard land before and after their loss.” (6 Witkin, Summary of Cal. Law (9th ed. 1988) § 1466, p. 938; see Civ. Code, § 3346;