New Gourmet Concepts, Inc. v. SIEDO INVESTMENTS CO., LLC

988 So. 2d 961, 2007 Ala. LEXIS 224, 2007 WL 3050975
CourtSupreme Court of Alabama
DecidedOctober 19, 2007
Docket1060442 and 1060473
StatusPublished
Cited by2 cases

This text of 988 So. 2d 961 (New Gourmet Concepts, Inc. v. SIEDO INVESTMENTS CO., LLC) is published on Counsel Stack Legal Research, covering Supreme Court of Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
New Gourmet Concepts, Inc. v. SIEDO INVESTMENTS CO., LLC, 988 So. 2d 961, 2007 Ala. LEXIS 224, 2007 WL 3050975 (Ala. 2007).

Opinion

988 So.2d 961 (2007)

NEW GOURMET CONCEPTS, INC.
v.
SIEDO INVESTMENTS COMPANY, L.L.C., et al.
Eric, Inc.
v.
Siedo Investments Company, L.L.C., et al.

1060442 and 1060473.

Supreme Court of Alabama.

October 19, 2007.
Rehearing Applications Denied January 18, 2008.

Albert L. Jordan and Stephen P. Leara of Wallace, Jordan, Ratliff & Brandt, L.L.C., Birmingham, for appellant New Gourmet Concepts, Inc.

*962 L. Vastine Stabler, Jr., Birmingham, for appellant Eric, Inc.

Eddie Leitman and Christopher R. Hood of Leitman, Siegal & Payne, P.C., Birmingham, for appellee Siedo Investments Company, L.L.C.

STUART, Justice.

In 2005, the Board of Trustees of the University of Alabama at Birmingham ("UAB") used the power of eminent domain to acquire a parcel of real estate bordering UAB's campus ("the subject property"), which was then owned by Siedo Investments Company, L.L.C. At the time the subject property was condemned, BSD Foods, Ltd. ("BSD"), was leasing the subject property from Siedo; it, in turn, had subleased portions of the subject property to New Gourmet Concepts, Inc. ("NGC"), and Eric, Inc. After the subject property was condemned, NGC and Eric sought part of the condemnation proceeds based on their leasehold interests in the condemned property. The trial court held that NGC and Eric were not entitled to any share of the condemnation proceeds, and NGC and Eric appealed. We reverse and remand.

I.

The subject property, located at 514-518 18th Street South, was acquired by the Siegal family in two transactions — in 1927 they purchased the building and underlying land, and at some time in the 1950s they purchased the adjoining parking lot. For a period of years, the Siegal family operated Alabama Auto Parts Company on the premises; however, on October 31, 1983, the Siegal family, operating as Siedo, leased the subject property to Wendy's of Tuscaloosa, Inc., for the operation of a fast-food restaurant.[1] Paragraph 18 of the lease between Siedo and Wendy's ("the condemnation clause") provided as follows:

"If there is a partial taking of the demised premises by eminent domain, as the result of which the ground floor area is reduced by not more than ten percent (10%), the term of this lease will continue and Landlord at Landlord's expense, will restore the remaining premises to a complete architectural unit with store front, signs and interior of equal appearance and utility as they had previous to the taking, but there will be a pro rata reduction in the rent payable each month and Tenant will have no right to any of the proceeds of such taking. If on the other hand, the taking exceeds ten percent (10%) of the ground floor area, Tenant may, at Tenant's option, terminate this lease by giving Landlord thirty (30) days' notice in writing; or in the event the improvements are condemned and ordered torn down or removed by a lawful authority, then the term of this lease shall cease as of the date possession shall be taken by such authority, and the rent will be apportioned as of the date of such taking. In the event that any portion of the parking area be taken for any public or quasi-public use, under any statute or by right of eminent domain, or private purchase in lieu thereof, so as to materially or substantially interfere with the conduct of Tenant's business in the demised premises, or as to reduce the parking area by an amount in excess of fifteen percent (15%), Tenant may, at Tenant's option, terminate this lease by giving Landlord thirty (30) days' notice in writing and be liable for rent only up to the time of such taking, provided, however, *963 that Tenant may not terminate the lease in the event Landlord shall make available other reasonably accessible parking area as a substitute for the parking area so taken."

As contemplated in the lease, Wendy's immediately thereafter assigned its rights under the lease to BSD. The relevant terms of the lease, including the condemnation clause, were not modified by that assignment. BSD operated two restaurants on the subject property from 1984 to 1987; however, the restaurants closed in 1987, and the subject property remained vacant for approximately 10 years. BSD continued to pay rent to Siedo during that period pursuant to the terms of the lease.

On August 6, 1997, BSD entered into a sublease with NGC for the storefront at 514 18th Street South. On March 11, 1998, BSD entered into a sublease with Eric for the storefront at 518 18th Street South. NGC and Eric subsequently opened and operated McAlister's Deli and Panda Buffet restaurants, respectively, and shared use of the parking lot adjacent to the property.

On January 21, 2005, UAB filed an eminent domain action in the Probate Court of Jefferson County seeking to condemn the subject property, along with the rest of the city block in which the subject property was located, in order to construct a new teaching hospital for UAB's medical school. UAB named as parties in the eminent domain action Siedo, BSD, NGC, and Eric. The probate court appointed commissioners to determine the value of the subject property, and, on June 24, 2005, the probate court confirmed the commissioners' report concluding that the subject property was worth $2,100,000 and ordered that "all rights, title, and interests" in the subject property were condemned and awarded to UAB with "such condemnation to be effective upon the payment of the damages and compensation so assessed and reported by said commissioners, or the deposit of the same in court." On July 19, 2005, UAB paid the award into the court and acquired fee simple title to the subject property. On July 22, 2005, UAB filed a notice of appeal with the Jefferson Circuit Court, challenging the probate court's valuation of the subject property. Siedo filed its cross-appeal three days later.

On September 28, 2005, while its underlying dispute with UAB was still pending, Siedo moved for a partial summary judgment on the claims of BSD, NGC, and Eric, all of which were claiming the right to share in whatever condemnation proceeds Siedo ultimately received because of their leasehold interests in the subject property. See Harco Drug, Inc. v. Notsla, Inc., 382 So.2d 1, 3 (Ala.1980) ("In all cases where property taken for public use is in multiple ownership, each of the owners of an interest in the property has a corresponding right to share in the award."). However, Siedo argued that BSD, NGC, and Eric were precluded from sharing in the condemnation award because, Siedo claimed, under the terms of the condemnation clause, the lease automatically terminated upon condemnation. Siedo urged the trial court to adopt the majority rule that such an "automatic termination" provision cut off the tenant's right to share in a condemnation award. See Fibreglas Fabricators, Inc. v. Kylberg, 799 P.2d 371, 375-76 (Colo.1990) ("Most jurisdictions that have considered the legal effect of a condemnation clause providing only for automatic termination of the lease upon condemnation have held that because the lessee's leasehold interest is destroyed at the time of condemnation, the lessee no longer has any interest in the condemned property for which he or she should be compensated, *964 and the lessee is foreclosed from sharing in the condemnation proceeds.").

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Bluebook (online)
988 So. 2d 961, 2007 Ala. LEXIS 224, 2007 WL 3050975, Counsel Stack Legal Research, https://law.counselstack.com/opinion/new-gourmet-concepts-inc-v-siedo-investments-co-llc-ala-2007.