Facts

In 1957, plaintiffs and Bank of America entered into a 50-year lease of unimproved land owned by plaintiffs' family in downtown Ventura. The Bank agreed to build a building which was to be modern and of "first-class" design. Rent on the property was artificially low, because at the end of the lease term in 2007, the building was to be surrendered to plaintiffs.

Without informing plaintiffs, the Bank built the building so that approximately 20% of the building extended over the property line onto an adjacent parcel that the Bank owned.

In 1986, the bank building and the adjacent parcel were sold by the Bank to defendant Ventura Realty Company. The ground lease was assigned to Ventura Realty at the same time. During its tenancy, Ventura Realty added to the building, causing it to extend even further onto the adjacent parcel that Ventura Realty had purchased from the Bank.

The Lease expired in 2007. Ventura refused to vacate the building and return it to plaintiff and, instead, claimed that the portion of the building that was built onto the adjacent parcel belonged to them, and that plaintiff was entitled only to recover the part of the building that was originally built on plaintiff's property.

PLAINTIFFS' CONTENTIONS:
Plaintiffs contended that upon termination of the Lease, Ventura Realty was to surrender the entire building, including the portion of the building that extended onto the adjacent parcel which was owned by Ventura Realty. Plaintiffs also contended that they were entitled to damages due to the condition of the building, which had deteriorated over the years so that the building was no longer a "first class" building as required by the Lease.

DEFENDANTS' CONTENTIONS:
Defendant Ventura Realty contended that it was entitled to keep the portion of the building located on Ventura Realty's parcel and co-share in all structural issues and operations of the building to support the portion of the building located on its property (e.g., heating, air conditioning, foundation, roof, security, etc.).

Bank of America cross-claimed against Ventura Realty for breach of contract and indemnity.

Settlement Discussions

Plaintiff demanded that defendants vacate the entire building, pay damages for repairs and rent, and pay attorney fees and costs. Defendant Ventura Realty demanded that plaintiffs deed over title to the portion of the building which extended onto defendant's property and pay no attorney fees, costs or damages.

Result

Prior to trial, Bank of America prevailed on summary judgment on all of its claims against Ventura Realty as well as Ventura Realty's cross-claims against the Bank. In granting summary judgment for the Bank, the court held that Ventura Realty was "100% responsible" for the Hennings' alleged damages, not the Bank. In the bench trial of the first phase of the litigation pertaining to equitable claims, the court awarded plaintiffs the entire building that is on both plaintiffs' and defendant's land, plus all of defendant's land on which the building extended (requiring a redrawing of property lines), with plaintiffs to pay market value for the land under that portion of the building which extended onto defendant's property. The valuation issue was to be decided in the form of an offset against damages. The court also awarded a perpetual 5-foot easement onto defendant's property in favor of plaintiffs. The court ruled it would award to plaintiffs damages and attorney fees in a separate trial and motion. As to the second phase regarding damages and fees, the parties settled by defendants stipulating to judgment in favor of plaintiffs for a total of $1.26 million ($460,000 in damages; $800,000 in attorney fees and costs). The Stipulated Judgment also included, among other things, all equitable relief granted to plaintiffs pursuant to the interlocutory judgment issued by the court in the first phase. As part of the settlement, defendant Ventura Realty Company waived its offset claim for the value of the land awarded to plaintiff by the court and agreed to fully indemnify defendant Bank of America for all obligations under the Stipulated Judgment. Defendant Bank of America waived its claim against defendant Ventura Realty for attorney fees and costs. Defendant Ventura Realty also agreed to deed to plaintiffs a portion of the 5-foot easement area around the building which was awarded to plaintiffs by the court.

Other Information

FILING DATE: Oct. 26, 2007