Los Angeles Equestrian Center, Inc. v. City of Los Angeles

17 Cal. App. 4th 432, 21 Cal. Rptr. 2d 313, 93 Daily Journal DAR 9465, 93 Cal. Daily Op. Serv. 5590, 1993 Cal. App. LEXIS 759
CourtCalifornia Court of Appeal
DecidedJuly 22, 1993
DocketB065304
StatusPublished
Cited by26 cases

This text of 17 Cal. App. 4th 432 (Los Angeles Equestrian Center, Inc. v. City of Los Angeles) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Los Angeles Equestrian Center, Inc. v. City of Los Angeles, 17 Cal. App. 4th 432, 21 Cal. Rptr. 2d 313, 93 Daily Journal DAR 9465, 93 Cal. Daily Op. Serv. 5590, 1993 Cal. App. LEXIS 759 (Cal. Ct. App. 1993).

Opinion

Opinion

LILLIE, P. J.

Plaintiffs appeal from summary judgment in favor of defendants on plaintiffs’ complaint for $200 million damages alleging various contract and tort theories. 1 The underlying dispute arises out of a concession agreement with the City of Los Angeles for operation of an equestrian facility on City-owned land in Griffith Park. In 1988, plaintiffs lost their interest in the concession agreement after LAEC, ECA, and Polo *437 Club filed for voluntary chapter 11 bankruptcy, City refused to approve the bankruptcy reorganization plan, and Gibraltar Savings and Loan Association foreclosed and assumed operation of the equestrian facility.

Factual and Procedural Background

The following facts are gleaned from those parts of City’s separate statement of undisputed facts which are undisputed by plaintiffs, and from evidence submitted by plaintiffs in opposition to the motion for summary judgment; our summary of the facts after plaintiff corporations filed for protection under chapter 11 of the bankruptcy laws in 1984 is obtained primarily from plaintiff corporations’ second amended joint and consolidated plan of reorganization and joint disclosure statement filed with the bankruptcy court.

In 1976, City and Better Built Enterprises entered into concession agreement No. 183 for the development and operation of the Los Angeles Equestrian Center, located on 72 acres of land owned by City in Griffith Park. Under the agreement, the concessionaire was granted the exclusive right to maintain and operate the boarding facilities for horses for a term of 25 years; the concessionaire agreed to pay rental of 4 percent of gross receipts from boarding, 4 percent of gross receipts from rentals, and 4 percent of gross receipts from retail sales, with a minimum annual rental of $12,000 in the event the above payments total less than $12,000. The concessionaire agreed to undertake certain improvements, including a horse boarding facility for 200 box stalls and 4 riding rings. Upon termination of the agreement, all permanent improvements were to become the property of City.

The agreement required City approval prior to performing certain activities, including erecting improvements, transferring title to permanent improvements, subleasing or assigning any interest, and changing the hours of operations and prices charged to the public.

The agreement also provided that at the conclusion of the fifth year under the agreement, and every five years thereafter, “City will perform a detailed analysis of the performance and financial status of the concession. If it appears at that time that any of the terms of the Agreement require change due to changing economic conditions, etc., City will meet with concessionaire to renegotiate rental or other provisions of the Agreement. If both parties agree to change any of the conditions of the Agreement, an amendment will be prepared for approval by City, the City Attorney . . . and the City Council.”

*438 In 1977, Better Built Enterprises transferred its concession rights to Ride-A-Way Corporation, which in 1981, transferred its rights to Griffith Park Equestrian Center (Center), a California limited partnership. 2 In 1981 and 1983 respectively, City and Center entered into a first and then a second amendment to the concession agreement. According to the first amendment to the concession agreement, Center found “the remaining 19 years of the agreement term to be insufficient for obtaining long term financing to complete the project [development and operation of an equestrian center in Griffith Park],” and City was “desirous of perpetuating the established momentum of project development. . . .” The parties agreed to extend the initial term of the agreement for five years with two additional five-year terms and to change the monthly rental rate to 5 percent of gross receipts for the first five years of operation (through December 26, 1986), which rental would be “adjusted upward by a percentage equal to 50% of the total cumulative Los Angeles/Long Beach Consumer Price Index,” with a required annual guarantee of $30,000.

Construction on the equestrian center, including boarding and training facilities, show grounds, indoor arena, and commercial buildings, began in late 1981 and was completed in mid-1982, with the hope that the Center would host part of the equestrian events at the 1984 Olympic Games held in Los Angeles. In addition to the costs of expedited construction, plaintiffs invested heavily in the start-up costs of presenting major show jumping events to qualify the facility for the 1984 Olympics; in 1982, EGA and LAEC negotiated a $10 million loan with Gibraltar Savings to consolidate construction loans and to obtain financing to complete improvements already in progress at the Center. Gibraltar allegedly withheld $2 million until the completion of certain improvements and attainment of a certain occupancy level and net operating income; not all of the planned improvements were able to be completed, resulting in significant operating losses. In addition, the failure to participate in any of the equestrian Olympic activities contributed to the Center’s problems.

In a second amendment to the concession agreement, dated June 2, 1983, City consented “to the estate created by the Concession Agreement being *439 encumbered by a note and Deed of Trust in favor of Gibraltar Savings and Loan Association and, if necessary, to the conveyance of said estate by judicial foreclosure or trustee’s sale.” The amendment also stated in pertinent part that “In the event Concessionaire shall be adjudicated a bankrupt or become involved in any proceedings under bankruptcy laws of the United States, or if the leasehold interest created hereby or any improvements executed pursuant to this lease shall be transferred by operation of law, . . . the trustee in bankruptcy, receiver, assignee or judgment purchaser shall be bound by all provisions of this lease including but not limited to the provision that operation of the premises be operated as an equestrian center to provide services to the public.”

In January 1984, Garcia requested, and the City granted, permission for the Center to sell 300 stalls and lease them back, as part of a program to refinance the horse stalls; however, the Center was required to keep 275 stalls available for rental by the public. Apparently no stalls were sold under this plan. By the fall of 1984, the corporate plaintiffs were seriously in default with respect to the Gibraltar loan and were encountering difficulty in covering the regular expenses of operation of the Center.

In September 1984, the corporate plaintiffs filed voluntary petitions under chapter 11 of the Bankruptcy Code. Reports prepared by a public accounting firm in 1985 and 1986 on the financial and operational management of the Center recommended that the Center reduce the rental rate paid to the City, provide additional revenue-producing facilities, and add a freeway access off-ramp for direct access to the Center.

After filing the bankruptcy petitions, the Center remained operational; LAEC paid only the minimum rent to City of $2,500 per month. By 1988, LAEC owed the City about $650,000 in prepetition and postpetition rent.

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17 Cal. App. 4th 432, 21 Cal. Rptr. 2d 313, 93 Daily Journal DAR 9465, 93 Cal. Daily Op. Serv. 5590, 1993 Cal. App. LEXIS 759, Counsel Stack Legal Research, https://law.counselstack.com/opinion/los-angeles-equestrian-center-inc-v-city-of-los-angeles-calctapp-1993.