Urban Renewal Agency v. Hackney

BROWN (H. C.), J. The Urban Renewal Agency of the City of Monterey instituted this action in eminent domain against Terry Cooper Hackney, Martha Cooper Votaw, and Alicia Orcutt (owners), the owners of an unimproved point of land in Monterey. Joined as defendants in the action were the Travelodge Corporation, J. Dustin Smith and Elizabeth M. Smith, who claimed a leasehold interest in the property. The trial proceedings were bifurcated in order to determine whether the Travelodge or the Smiths (appellants) had any interest in the subject real property, by reason of their purported lease before considering the question of compensation. The trial court sitting without a jury found the purported lease to be void because of uncertainty; because it violated the rule against perpetuities; because it was abandoned; and because of impossibility of performance. The court entered judgment that Travelodge and the Smiths had “no right, title, interest in or lien or charge against, or leasehold interest in . . .” the parcel. Owners and the Agency then settled on a condemnation award of $175,000, and judgment was entered in favor of the owners and against the Agency in that amount. Travelodge and the Smiths appeal.

The facts: On December 2, 1958, the City of Monterey passed a resolution forbidding construction on a certain area (including owners’ land) overlooking Fisherman’s Wharf in Monterey. In February of 1960 the Smiths, who desired to build and manage a motel (pursuant to an oral agreement with the Travelodge Corporation), discussed with the owners the possibility of leasing the owners’ land as a site for the motel. The owners advised the Smiths that the property was subject to the city’s freeze on construction in the area, and that building permits had been applied for in the past without success. Although informed of the difficulty, if not impossibility, of obtaining permits, Smith convinced owners that they had much to gain if the motel could be constructed and nothing to lose if a permit was not granted. In April of 1960 Smith presented to the owners a prepared Travelodge lease form, which had not been executed by Smiths or Travelodge. Some of the material terms of the form lease were as follows: [456]The term was 49 years, commencing on the day the lease was recorded in Monterey County. The lease was to be placed in escrow with the Monterey Title Company, accompanied by $1,000 deposit from the appellants to be applied to rent. Travelodge agreed to submit plans and specifications to be approved by owners for construction of the motel within 60 days after the execution of the lease. Rent was to be $10 per month per unit, commencing upon the recordation of the lease, and 7% percent of the gross receipts after the motel went into operation. The lease also contained provisions relating to construction, financing, keeping of records, insurance and taxes.