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Salvaging the Situation
by Ron Davis

Valuable restaurant equipment used by a tenant of a Utah shopping center has become the property of the center's owners--and for a pittance in payment.

The shopping center, located in Orem, is owned by a married couple. And the tenant subleased space at the center as a franchisee of Burger King Corp., which in turn leased from the owners. The tenant, however, owned the restaurant equipment (which includes furniture) used to operate the Burger King franchise.

A key condition of that lease between Burger King and the shopping center owners gave the owners, at lease termination, possession of "any additions or improvements" that Burger King made to the premises. So when the tenant eventually suffered financial problems and closed the Burger King restaurant, the shopping center owners re-leased the premises to another restaurant operator and allowed him to use the equipment that had remained there.

But Burger King still had an interest in the property and informed the shopping center owners that the equipment there could neither be removed nor used without payment. The tenant then asked the shopping center owners to allow him to remove the equipment, but the owners denied his request.

The tenant then sued, seeking payment for the full, or "in-place," value of the equipment. A Utah court, based on an appraisal, refused to order payment based on the in-place value, but instead required the shopping center owners to pay only the "salvage" value, which was less than a third of the in-place value. The tenant appealed that decision.

The Utah Supreme Court agreed with the lower court, explaining, "If a tenant's right to occupy his premises has ended, such as after the termination of a lease, he no longer possesses the right to use the personal property in place, but is entitled only to remove the property and sell it for its salvage value. In this case, the tenant was entitled only to remove the equipment from the premises because his sublease had been terminated. Therefore, the correct measure of damages was the value that his equipment would have if removed." (Lysenko v. Sawaya, 7 P.3d 783 [Utah 2000]

Decision: August 2000
Published: October 2000



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