Eminent Domain

Eminent Domain

Lake Tahoe – October 22–23, 2015

PRESENTED BY

Bruce W. Beach & Stephen D. RoachAttorney MAI, SRW, AI-GRS

Eminent Domain UpdateRecent California Case Studies & Condemnation Law

©2015 Best Best & Krieger LLP

Eminent Domain

Today’s Focus

• Recent developments in eminent domain

• Case analysis

• The discovery process in eminent domain

Eminent Domain

Police Power• Question:• The Outdoor Advertising Act requires a Caltrans permit for any billboard

within 660 feet of a State Highway and limits the size of each billboard to 1,200 square feet. An 8,000 square foot wall sign was erected on the side of a building within 600 feet of a State Highway in Los Angeles in connection with the 1984 Olympics. No permit from Caltrans was ever sought or obtained. In 1999, the property was sold to a new owner, and in 2006, Caltrans issued a Notice of Violation for failure to have the required permit. The new owner filed a petition for writ of mandate and inverse condemnation, claiming the future value of the revenue from the billboard exceeded $12,000,000. Caltrans demurred to the owner’s lawsuit.

• What action do you think the trial court took on the demurrer and the decision on appeal?

Eminent Domain

Police Power• Answer:• The trial court sustained the demurrer, and the Court of Appeal (COA)

affirmed the trial court’s decision. The COA held that there were no extraordinary circumstances for the application of estoppel or laches against the government. On the inverse condemnation claim, the COA held that Caltrans’ enforcement of the Outdoor Advertising Act was an exercise of its police powers and did not constitute a taking. The COA distinguished the facts in this case, since the billboard was not lawfully erected, as compared to those situations where just compensation was required to be paid when the owners lawfully erected billboards but were forced to remove them by a public project.

• • (West Washington Properties, LLC v. California Dept. of Transportation

(2012) 210 Cal.App.4th 1136.)

Eminent Domain

Highest and Best Use• Question:• The County filed an action to acquire 439 acres of rural land, 200 acres of

which the County was already leasing for a landfill, with the remainder being utilized for grazing. The owners’ appraiser concluded the highest and best use would be for orchards. In order to make that use, an irrigation system would need to be developed. The owners’ appraiser used seven comparable sales, making adjustments to those sales regarding various improvements that were not present on the subject land. The County’s appraiser concluded that grazing was the highest and best use of the property and did not discuss whether a conversion to orchards was feasible. The County brought a motion to exclude the owner’s appraiser’s testimony as based on opinion evidence as to the value of other properties.

• • Should the trial court grant the motion?

Eminent Domain

Highest and Best Use• Answer:• The trial court granted the County’s motion, and a Stipulated

Judgment was entered, valuing the property based upon the County’s appraisal. The owner appealed, and the Court of Appeal reversed the trial court’s decision. The Court of Appeal recognized that while opinions of the value of other properties raised collateral questions that could unduly prolong trial, testimony relating to adjustments to comparable sales normally does not raise collateral issues of significant magnitude and is a necessary attribute of the comparable sales approach. As such, the Court of Appeal held that the owner’s appraisal did not violate Evidence Code section 822.

• • (County of Glen v. Foley (2012) 212 Cal.App.4th 393.)

Eminent Domain

Goodwill

• Question:• Caltrans condemned a strip of land owned by a winemaker

to widen a highway. The parties agreed as to the value of the land but disagreed on loss of goodwill. The owner’s expert testified that the loss of goodwill was $240,000 for the wine which the winery had planned to, but had not yet developed. The owner’s appraiser used a “cost to create” methodology. After the parties rested, Caltrans moved for non-suit on the basis that the owner had not proven that it had any business goodwill to lose.

• What action should the trial court take?

Eminent Domain

Goodwill

• Answer:• The trial court granted non-suit and the Court of

Appeal affirmed, holding that the existence of goodwill is an essential pre-condition to recovery that goodwill actually existed to be lost. The Court of Appeal concluded that there was no evidence presented by the owner of any pre-existing goodwill.

• (People, ex rel. Dept. of Transportation v. Dry Canyon Enterprises (2012) 211 Cal.App.4th 486.)

Eminent Domain

Resolution of Necessity• Question:• A park district approved a resolution of necessity to condemn

shoreline acreage to construct a segment of the San Francisco Bay Trail. The district determined the project was exempt from CEQA, which the property owner challenged, contending an EIR was required. The trial court granted the owner’s petition and vacated the CEQA exemption but did not set aside the approval of the resolution of necessity. The trial court allowed the district to proceed with the condemnation action, provided that CEQA compliance was completed before the district completed acquisition through the eminent domain action. The owner appealed, contending that the eminent domain action should have been vacated.

• • What action did the Court of Appeal take?

Eminent Domain

Resolution of Necessity

• Answer:• The Court of Appeal affirmed the trial court’s decision,

allowing the eminent domain action to go forward so long as CEQA compliance was completed before the end of the eminent domain action. The Court of Appeal determined that it was within the trial court’s discretion to allow the condemnation action to proceed.

• • (Golden Gate Land Holding, LLC v. East Bay Regional

Park District (2013) 215 Cal.App.4th 353.)

Eminent Domain

Dedication• Question:• Koontz owned an undeveloped 14.9-acre parcel east of Orlando, Florida. Koontz

decided to develop a 3.7-acre portion of the property, applied for a permit from the River Water Management District, and agreed to mitigate the environmental effects by offering a conservation easement on the 11.2-acre remainder. The District believed the conservation easement to be inadequate and offered to approve Koontz’ permits if he agreed to (1) either reduce his project to one acre and deed a conservation easement over to the District for the remaining 13.9 acres, or (2) proceed with the project as proposed but hire contractors to make improvements to the District-owned land several miles away. Koontz believed the District’s demands for mitigation were excessive. The State Supreme Court denied relief and distinguished the Nollan and Dolan cases relief upon by the property owner. The matter went to the U.S. Supreme Court.

• • What action did the U.S. Supreme Court take?

Eminent Domain

Dedication

• Answer:• The U.S. Supreme Court reversed the State Supreme Court

decision, holding that the principles of Nollan and Dolan do not change depending upon whether the government approves a permit on condition that the applicant turn over the property or denies a permit because the applicant refuses to do so. The Supreme Court held that the exactions, whether property or money, must satisfy the nexus and rough proportionality requirements of Nollan/Dolan.

• • (Koontz v. St. John’s River Water Mgmt. Dist., No. 11-1447,

Supreme Court of the United States, 133 S.Ct. 2586; 2013 U.S. LEXIS 4918.)

Eminent Domain

Dedication• Question:• A property owner owned a 9-acre parcel at the intersection of two 60-

foot-wide improved streets. The parcel was zoned as light industrial but used for agriculture. In 2005, the City amended the circulation element of its General Plan, and realigned a planned street that cut a diagonal 94-foot swath through the subject property. In 2009, the City filed an eminent domain action and valued the property as agricultural based upon the position that the owner would be required to dedicate the take for any industrial development. The dedication issue was bifurcated for trial, and the trial court determined that the dedication was reasonably probable and constitutional. The property owner appealed.

• • What action did the Court of Appeal take?

Eminent Domain

Dedication• Answer:• The Court of Appeal reversed, holding that the issues surrounding a dedication

requirement are essential to the determination of compensation and must be ascertained by a jury, not the trial court. The Court of Appeal reasoned that the reasonable probability of a dedication requirement is a question fact, not a question of of law, and is part of the jury’s determination of just compensation.

• • (City of Perris v. Stamper, (2013) Cal. LEXIS 10264, review granted

November 13, 2013 by the California Supreme Court, with review limited to the following: (1) Is the constitutionality of an otherwise reasonably probable dedication requirement that a government entity claims it would have required in order to grant the property owner permission to put his property to a higher use, a question that must be resolved by the jury?; (2) Was the dedication requirement claimed by the City of Perris a project impact that the Eminent Domain Law requires to be ignored in determining compensation?)

Eminent Domain

Pre-condemnation Damages• Question:• Defendants bought an undeveloped parcel in Prunedale near Highway 101, intending

to build a home. In 2003, Caltrans held a public meeting about the project but did not notify the defendants. A month later, the defendants started construction of their home and moved into the home in September 2004. The defendants first learned of the project in 2005, and testified they would not have built their home had they known of the project. In 2008, Caltrans determined to take the entire property. Between 2006 and 2008, real estate values dramatically decreased. At trial, Caltrans sought to exclude defendants’ testimony on pre-condemnation damages. The court denied Caltrans’ motion. The defendants testified to pre-condemnation damages of $400,000, and the jury awarded pre-condemnation damages of $175,000. The defendants argued that they were entitled to $400,000 in pre-condemnation damages, which the trial court granted along with their motion for attorney fees. The only reason for the decrease in the value of the property was due to market conditions, not the project.

• • What action would the Court of Appeal take?

Eminent Domain

Pre-condemnation Damages

• Answer: • The Court of Appeal reversed, finding that the defendants

had failed to present evidence that the value of the home was damaged by Caltrans’ action rather than by a general decline in property values. The defendants’ appraiser acknowledged at trial that Caltrans was not responsible for the market decline. The Court of Appeal struck pre-condemnation damages and the award of litigation expenses.

• • (People, ex rel. Dept. of Transportation v. McNamara (2013)

218 Cal.App.4th 1200.)

Eminent Domain

Costs of Suit

• Question:• A trial court granted the State’s motion to tax costs arising

from the appeal of a condemnation action based upon the property owner’s failure to timely file a memorandum of costs, pursuant to California Rules of Court, rule 8.278, requiring the memo to be filed within 40 days after the Clerk sends notice of issuance of the remittitur. The owner contended that he did not file the memorandum of costs within the 40 days because he was seeking review by the U.S. Supreme Court.

• • What action did the Court of Appeal take?

Eminent Domain

Costs of Suit• Answer: • The Court of Appeal affirmed the trial court’s decision, granting

the State’s motion to tax costs for the failure of the owner to timely file his memorandum of costs. For the award of attorney fees in an eminent domain action, the defendant must file his motion within 30 days after entry of judgment. (Code Civ. Proc., § 1250.410(b).) In all other cases, the motion for attorney fees must be filed within the time period to appeal, which is 60 days. (Calif. Rules of Court, rules 3.1702, 8.104 and 8.108.)

• • (People, ex rel. Dept. of Transportation v. Constant (S221163,

Supreme Court of California, 2014 Cal. LEXIS 11013, November 25, 2014 [nonpub. opn.].)

Eminent Domain

Dedication

• Question:• In 2011, a property owner sued the County for inverse

condemnation to recover compensation for a 50-foot-wide roadway easement across his property. In 1975, the previous owner had quitclaimed certain property rights to the County. In 2008, the new owner of the property became aware of the roadway easement.

• • What action should the trial court take on the

County’s demurrer to the owner’s claim was time barred?

Eminent Domain

Dedication

• Answer:• The trial court sustained the County’s demurrer to the

claim based upon the statute of limitations. The Court of Appeal affirmed on the basis that the owner did not challenge the imposition of the condition on the approval of his subdivision application within 90 days, so the statute of limitations applicable to that determination barred the claim.

• • (French v. County of Calaveras (2012) Cal.App. [unpub.,

LEXIS 8059].)

Eminent Domain

Scope of Project• Question:• A public agency condemned a portion of plaintiff’s property for

widening a highway. The jury awarded $107,000 in severance damages. Later, the property owner experienced flooding on the remaining parcel and filed an inverse condemnation action, alleging that the public agency had not constructed the project in accordance with their approved plans. The public agency brought a motion for judgment on the pleadings, contending that the damages were already paid as part of the eminent domain action

• • What action would the trial court and the Court of Appeal take?

Eminent Domain

Scope of Project

• Answer:• The trial court granted the public agency’s motion for

summary judgment, but the Court of Appeal reversed, finding three issues of fact: (1) whether the subject drainage facilities were part of the approved project; (2) whether evidence on flooding was presented during the eminent domain trial; and (3) whether flood damage arising from the project was foreseeable.

• • (Hsu v. Riverside County Transportation Commission,

S211418, Supreme Court of California, 2013 Cal. LEXIS 6818, August 14, 2013.)

Eminent Domain

Evidence Code section 822• Question:• A property owner owns 10.75 acres of land. The City filed an eminent domain

proceeding to acquire easements for storm drain, landscaping, slope easements, temporary construction easements and a right-of-way, totaling 1.54 acres. After the City commenced eminent domain actions, the County Transportation Commission became interested in acquiring the property and rendered an appraisal for the entire property, valuing it at $20 per square foot. The County Transportation Commission and the property owner entered into purchase and sale agreement for the remainder of the property, minus the portion to be acquired by the City for its project. The County Transportation Commission also had an option to purchase the take area if the City failed to acquire the property in its action. The option price was $21 per square foot. The City valued the take at $3.00 per square foot. The property owner sought to use the County Transportation Commission’s opinion through the owner to establish value. The City brought in limine motions to preclude the owner’s testimony based upon the County Transportation Commission’s appraisal.

• • What would the trial court and the Court of Appeal do?

Eminent Domain

Evidence Code section 822• Answer:• The trial court ruled that all of the owner’s evidence of valuation was

inadmissible under Evidence Code section 822, subd. (a). The trial court found that the purchase and sale agreement between the owner and the County Transportation Commission for the remainder of the owner’s property and the appraisal on the entire property related to that agreement were inadmissible for purposes of cross-examination. The Court of Appeal affirmed, ruling that the exceptions to Evidence Code section 822, subd. (a) only allowed a party to an eminent domain proceeding to impeach an expert with a prior inconsistent valuation by that expert, but not impeach with the opinion of some other appraiser. Additionally, the City’s appraiser testified that he did not rely on the appraisal or the purchase and sale agreements for the purpose of his opinion.

• (City of Corona v. Liston Brick (2012) 208 Cal.App.4th 536.)

Eminent Domain

Pre-condemnation Activities• Question:• In order to construct a tunnel to transport water, a State agency

obtained a one-year temporary easement to conduct environmental surveys. The activities included entering properties to conduct borings and drillings to a depth of 200 feet and upon completion, filling the borings with a slurry seal. The trial court denied the agency’s petition for geological activities, ruling that the activities constituted a taking and that the activities could be authorized by adopting a Resolution of Necessity in a direct condemnation action and not by pre-condemnation preliminary investigation procedure. The agency appealed the trial court’s denial of its request to conduct geological activities.

• • What would the Court of Appeal do?

Eminent Domain

Pre-condemnation Activities• Answer:• The Court of Appeal determined that the geological activities and

the environmental activities, as authorized, constituted a taking and needed a Resolution of Necessity. The geological activities will intentionally result in permanent physical occupation of private property, and the environmental activities will work a taking because they intentionally acquire a temporary property interest of a sufficient character and duration to require being compensated. A petition for review to the California Supreme Court has been granted.

• (Property Reserve, Inc. v. Superior Court (2014) 224 Cal.App.4th 828.)

Eminent Domain

Income Approach• Question:• A public utility company initiated eminent domain proceedings to

condemn an easement for electrical transmission lines across a number of properties. The parties exchanged valuation information, with the public utility concluding a value of $172,200, and that the remainder did not experience any severance damages because it continued to be raw and undeveloped land. The owners’ expert based his appraisal on the assumption that the highest and best use of the property was to lease it for a solar energy project. He then capitalized the payments under a hypothetical lease, and concluded the property was worth $17 million and that severance damages were approximately $14.7 million. (continued)

Eminent Domain

Income Approach• The utility filed an in limine motion to exclude the testimony on the

grounds that the opinion was unreliable. The trial court granted the motion and excluded the appraisal on the ground that there was no agreement upon which the appraiser could reasonably rely in forming his opinion regarding the present worth of the lease payments. The property owner requested a continuance to obtain a replacement appraisal, which the property owner obtained. The public utility filed a second in limine motion to exclude the opinions of the new witness, which the court additionally granted and determined that it would not grant any further continuances and entered judgment in favor of the utility. The property owner appealed the trial court’s rulings excluding its claim for severance damages.

• • What would the Court of Appeal do?

Eminent Domain

Income Approach

• Answer:• The Court of Appeal affirmed the trial court’s rulings excluding

the evidence. The Court of Appeal determined that the trial court was correct in its ruling excluding the opinions on the grounds that the second appraiser was not qualified to render a valuation opinion, and the opinion was based upon speculation and matters upon which an expert could not reasonably rely to conclude severance damages.

• (So. Cal. Edison Co. v. Minn, F061227, Court of Appeal of California, Fifth Appellate District, 2011 Cal.App. [unpub. LEXIS 8948], November 21, 2011.)

Eminent Domain

Attorney Fees

• Question: A public agency and the property owner submitted their final offer and final demand twenty days before the scheduled trial. The agency accepted the offer five days before trial, and the parties entered into a Stipulation for Judgment. The Stipulated Judgment allowed the owners to recover their costs of suit but did not mention litigation expenses. The property owner sought and the trial court awarded litigation expenses. Caltrans sought a writ of mandate to review the award of litigation expenses.

• • What would the Court of Appeal do?

Eminent Domain

Attorney Fees

• Answer:• The Court of Appeal determined that the issue was

not appealable but was subject to writ. The Court of Appeal concluded that the award of litigation expenses was improper and that the statute does not require a party to decline or accept a final offer or final demand at some specific point prior to trial.

• (People, ex rel. Dept. of Transportation v. Superior Court (2012) 203 Cal.App.4th 1505.)

Eminent Domain

Goodwill• Question:• The Los Angeles Unified School District filed an eminent domain action to

acquire commercial property to construct a school. One of the small businesses occupying the property was Recovery Resource, a recycling business that occupied the property under a month-to-month tenancy. Recovery Resource claimed loss of goodwill of approximately $2 million. Before the trial on just compensation, the District filed a motion under Code of Civil Procedure section 1260.040 for a pre-trial determination that Recovery Resource was not entitled to compensation for loss of goodwill because the District did not cause any loss to the business. Instead, the District argued Recovery Resource lost its business when the property owner terminated Recovery Resource’s leasehold and filed an action for unlawful detainer against Recovery Resource for failure to pay rent. Recovery Resource did not oppose the motion but did appeal the decision for failure to pay rent.

• What action do you believe the Court of Appeal would take?

Eminent Domain

Goodwill• Answer:• Both the trial court and the Court of Appeal determined it was not the condemnation that

terminated Recovery Resource’s right to possession, but rather the owner’s decision to not continue the month-to-month tenancy. This occurred when the owner filed an unlawful detainer action for Recovery Resource’s failure to pay rent. The Court of Appeal held that the value of the lost goodwill is affected by the probable remaining term of the tenancy. Evidence of the remaining length of the lease and the existence of an option to renew a lease are relevant for determining the amount of compensation, if any, to be paid for loss of goodwill. Where there is evidence that a landlord was satisfied with the month-to-month arrangement and would have continued but for the condemnation proceedings, there could be sufficient evidence to show that the business owner was required to move because of the condemnation action, not because of the month-to-month lease arrangement. Here, Recovery Resource’s lease termination was due to its own financial and economic problems and not a consequence of the eminent domain action.

• (Los Angeles Unified School District v. Recovery Resources, LLC (2012) Cal.App. [unpub., LEXIS 3849].)

Eminent Domain

Resolution of Necessity• Question:• A property owner appealed a judgment and a final order of

condemnation in an eminent domain proceeding by the City of San Buenaventura. Before the trial, the City adopted a resolution of necessity for the taking of a sewer line easement. The property owner contended that the trial court erroneously required him to prove that, in adopting the resolution of necessity, the City committed a gross abuse of discretion. The property owner argued that his burden was merely to prove substantial evidence of a gross abuse of discretion. The property owner contends he met his burden in contending that the City had irrevocably committed itself to the taking of the easement.

• What action would the Court of Appeal take?

Eminent Domain

Resolution of Necessity• Answer:• The property owner failed to carry his burden of proving his contention

of a gross abuse of discretion. As such, the burden never shifted to the City to prove that the taking met the statutory criteria and, thus, the adoption of the resolution of necessity conclusively established the statutory criteria for a taking. Additionally, the Court of Appeal determined that the resolution of necessity adequately identified the project for which the easements would be acquired. The court determined that the project was described as the construction, placement and maintenance of a sewer easement line that will serve a residential development. It was inconsequential, according to the Court of Appeal, whether the development consists of 128 units or 60 units; in either case, the development required sewer service.

• (City of San Buenaventura v. Karno (2012) Cal.App. [unpub., LEXIS 8708].)

Eminent Domain

Highest and Best Use• Question:• The City of San Diego filed an eminent domain action against Caryon

Properties to acquire temporary and permanent easements to expand Carroll Canyon Road. The parties disputed the value of the property to be acquired and whether a portion of the property could be rezoned for light industrial use, substantially increasing the property’s value. The City brought a motion to exclude the property owner’s valuation evidence and to determine the scope of existing easements, including a flood easement prohibiting structures on the property. After the evidentiary hearing, the court excluded Caryon’s expert valuation testimony based upon the improbability of rezoning the property and on the court’s interpretation of the existing flood easement essentially being a designation of open space. The property owner sought over $4.0 million, but stipulated to judgment of $170,000 and appealed the court’s ruling excluding his evidence.

• What would the Court of Appeal do?

Eminent Domain

Highest and Best Use• Answer:• When the surrounding property and this property (Lot 75) were being developed,

Lot 75 was included within the Community Plan as open space. The City asserted Lot 75 could not be developed, as it was dedicated for open space as part of the overall development of the area. Caryon contended that 8.83 acres of the 34 acres could be rezoned for light industrial use, resulting in a value of $4.9 million. In order to rezone Lot 75, the property owner would need to present an application to the City, and because the Community Plan designated Lot 75 as open space, the developer would need a General Plan and Community Plan Amendment. The trial court, after listening to various witnesses regarding the highest and best use of the property and existing restrictions, including flood easements, concluded that any contention that the City would, in the near future, rezone the property to a designation inconsistent with open space was speculation and conjecture. The Court of Appeal affirmed.

• (City of San Diego v. Caryon Properties, LLC (2015) Cal.App. [unpub., LEXIS 6260].)

Eminent Domain

Loss of Access• Question:• In 2009, the MTA built the Atlantic Boulevard Metro Gold Line Light Rail Station in the

middle of Pomona Boulevard. The station was directly in front of the entrances to and exits from the property owner’s shopping center. The property owner filed an inverse condemnation and nuisance action against the MTA, contending that the station, in the middle of Pomona Boulevard, effectively turned the street into a one-way street, substantially impairing access to the shopping center, causing a loss of tenants and a diminution in value. The property owner also alleged the station, parked trains and parking structure obscured the visibility of the shopping center, and that the station and the parking structure constituted a nuisance. Two months before trial, MTA filed a motion to exclude evidence under Code of Civil Procedure section 1260.040. MTA contended that the shopping center lacked a legally compensable claim because the property owner could not state a claim for alteration of traffic flows in the abutting street, a loss of view claim, or that the station and parking structure constituted a public nuisance since the activities were expressly authorized by statute.

• What would the trial court and the Court of Appeal do?

Eminent Domain

Loss of Access• Answer:• The trial court granted MTA’s dismissal motion. The court found that a

reduction in access is not a compensable taking since street alterations which cause significantly increased traffic or reduced access do not give rise to a compensable interest. Continuing, the court found that without a compensable claim for loss of ingress/egress, the property owner also could not state a claim for diminution of visibility. As to the nuisance claim, the trial court found that the conduct at issue was expressly authorized pursuant to statute, and there was no indication that MTA’s activities involved unnecessary action or were committed with the purpose of harassing the property owner. The Court of Appeal affirmed the trial court’s decision.

• (Downey Real Estate Holding, LLC v. Los Angeles County Metropolitan Transit Authority (2015) Cal.App. [unpub., LEXIS 3993].)

Eminent Domain

Severance Damages• Question:• The Santa Ana Watershed Project Authority (“Authority”) filed an

eminent domain action to construct a 23-mile segment on what it believed to be existing rights-of-way. The pipeline carries up to 30 million gallons per day of non-reclaimable wastewater (referred to as “salt water” or “brine”) from Santa Ana River watershed to treatment facilities in Orange County to be disposed of in the Pacific Ocean. Castle & Cooke, owners of 400 acres in Lake Elsinore, discovered that some or all of the pipeline in their property was not within the existing public rights-of-way. This required the Authority to file an eminent domain action to acquire non-exclusive easements for the segments on the owner’s property not within the existing public right-of-way. (continued)

Eminent Domain

Severance Damages• Before trial, the Authority brought motions in limine to preclude

the property owner from introducing evidence on severance damages, contending that the damages were speculative and conjectural. The Authority argued that the pipeline did not cause damage to the property and, therefore, there were no severance damages. The property owner contended that the pipeline makes it more difficult to develop, as well as other factors, that reduced the fair market value of the remaining property as a result of the Project and that they were entitled to severance damages. The trial court determined that there were no severance damages. The owner challenged the trial court’s ruling and appealed.

• What would the Court of Appeal decide?

Eminent Domain

Severance Damages• Answer:• The Court of Appeal relied upon Metropolitan Water District of

Southern California v. Campus Crusade for Christ, Inc. (2007) 41 Cal.App.4th 954 (“Campus Crusade”). The Court of Appeal determined that there were two components to the severance damages issue: a procedure component and a substantive component. Procedurally, the trial court is to determine the existence of severance damages, and the jury is to determine the amount of severance damages. However, the Court of Appeal relied upon Campus Crusade and found that the two concepts were not so “easily separable.” If the facts raise damage issues which are not totally speculative and conjectural, the matter is to be presented to the jury, not dismissed by the trial court. (continued)

Eminent Domain

Severance Damages• In this instance, the public agency constructed a pipeline through the

owner’s property. The property owner identified various factors created by the pipeline’s presence affecting the fair market value of the remaining property. The owner argued that their remaining property value was reduced because: 1) no structures can be built over the pipeline; 2) the pipeline might rupture, causing damage to the surrounding property; 3) the pipeline could make it more difficult to connect utilities to structures; 4) the pipeline carries hazardous waste which must be disclosed to potential buyers; 5) the pipeline could affect future grading on the remaining property; and 6) future development may require approval from the Authority before development could occur. The Court of Appeal determined that the issues raised by the owner constituted real physical disturbance of their property rights, which naturally tend to decrease the market value of the remaining property. (continued)

Eminent Domain

Severance Damages

• Conclusion: The Court of Appeal determined that there was sufficient evidence that the issue was to be resolved by a jury, not by the court.

• (Santa Ana Watershed Project Authority v. Castle & Cooke, Lake Elsinore West, Inc. (E052217, Court of Appeal, not certified for publication.)

Eminent Domain

Severance Damages

• Question:• In the City‘s action for eminent domain, the trial court excluded

the owner’s proffered evidence of severance damages. The owners sought permanent severance damages for the loss of value to the remainder of their property from changes in the building’s view and curb appeal, adverse effects on drainage, a deeper utility line that would be more costly to service and increase traffic hazards. The court granted the City’s motion in limine and ruled that the owners’ evidence of severance damages, which included expert testimony, was inadmissible on the basis that it was conjectural and speculative.

• Would the Court of Appeal agree?

Eminent Domain

Severance Damages

• Answer:• The Court of Appeal reversed, holding that the trial court

erred by misapplying the standards for admissibility of evidence in an eminent domain action. Showing of a substantial impairment is not a predicate to a jury determination of severance damages, except as to interference with access to the property from a public street. The owners’ evidence was relevant and admissible because changes, “at least arguably,” had the potential to affect the market value of the remaining property.

• (City of Livermore v. Baca (2012) 205 Cal.App.4th 1460.)

Eminent Domain

Compensable Interest• Question:• The property owner owned property when a condemnation action was

filed by the City, but subsequently lost the property through foreclosure. After the foreclosure sale, the successors-in-interest stipulated to the City’s acquisition of the subject property for the agreed-upon price. The superior court entered judgment that terminated the action as to the previous property owners on the ground that they had been divested of all interest in the property and lacked standing to object to the terms of the settlement or to seek greater compensation. The previous property owners appealed the stipulated judgment, contending that they had a property interest subject to being compensated for additional market value in the property.

• What result would come from the Court of Appeal?

Eminent Domain

Compensable Interest• Answer:• The Court of Appeal upheld the trial court’s decision. The Court held that

the previous property owner lacked standing to bring an appeal because he had been divested of all ownership in the property by foreclosure. In addition, the bankruptcy trustee and court determined there was no equity in the property and the bank could proceed with foreclosure on that basis. The previous property owner opposed a compromise agreement in the bankruptcy court, arguing that the foreclosure and subsequent transfer would eliminate his claim for greater compensation in the eminent domain action. The Court of Appeal found that by making this argument, the previous owner implicitly challenged the bankruptcy trustee’s valuation, and the bankruptcy court rejected the challenge.

• (City of Southgate v. Salvador Jauregui, et al. (2012) Cal.App. [unpub. LEXIS 239.].)

Eminent Domain

Loss of Access• Question:• The Sacramento Area Flood Control Agency (“Agency”) sought to

acquire a fee-simple interest, a road easement and a temporary construction easement over the property owner’s 131-acre parcel for a levee improvement project. The property owner lost on the compensation awarded at trial and appealed on three issues: First, the property owner contended that the project caused a damage for loss of future access. Second, the property owner objected to the court allowing a critique of the property owner’s appraiser’s testimony. Third, the property owner contended that the Agency’s attorney engaged in misconduct during the jury argument. The trial court dismissed these issues, and the property owner appealed.

• What action did the Court of Appeal take?

Eminent Domain

Loss of Access

• Answer:• On the first issue related to future access, the Court of

Appeal determined that the property was not landlocked, as argued by the property owner. While access was lost from one road, alternative access still remained under the same conditions in the after condition as existed in the before condition. While there was an issue regarding whether the County would allow access onto the adjacent public street, the testimony by the Agency’s appraiser was that the likelihood of obtaining a permit was very high, if not guaranteed, and that no loss of access would result for this reason. (continued)

Eminent Domain

Loss of Access

• On the second issue, the trial court allowed the Agency’s appraiser to critique the property owner’s appraiser on rebuttal. The property owner contended that: 1) Code of Civil Procedure section 2034.310 prohibits an expert from offering testimony that contradicts the opinion of the opposing party’s expert on rebuttal; 2) the Agency failed to disclose that its appraiser would offer an opinion concerning the appraiser’s opinion; 3) the criticism was, in part, based upon undisclosed sales data; and 4) the Agency’s appraiser testified that the property owner’s appraiser violated appraiser standards. (continued)

Eminent Domain

Loss of Access

• The Court of Appeal found that the issues raised were not error. The property owner’s reliance on Section 2034.310 was misplaced since the Civil Discovery Act does not apply to eminent domain proceedings (§2034.310). On the contention that the Agency failed to disclose that its appraiser would offer an opinion on the property owner’s appraisal and, in part, used undisclosed sales data, the Court stated that such testimony and rebuttal was proper under eminent domain rules. On testimony regarding appraisal standards, the Agency’s attorney did not offer evidence that the appraiser violated appraisal standards but rather whether his appraisal methodology constituted an improper appraisal technique. (continued)

Eminent Domain

Loss of Access• Finally, the Agency’s attorney’s comments in closing argument, that the

Agency’s attorney’s commenting on the property owner’s absence when he know the owner was unable to attend for medical reasons was improper, and that the Agency’s attorney’s statement that the Agency cannot afford to pay more than fair market value for the property was misconduct. The Court of Appeal determined there was no misconduct in that there was no evidence offered that the Agency’s attorney knew that the property owner did not attend for medical reasons and that the public entity should not have to pay more than just compensation for the property, was consistent with general principle that just compensation means just not only to the party to whose property is taken but also to the public agency.

• (Sacramento Area Flood Control Agency v. Dhaliwal (2015) Cal.App. [unpub. LEXIS 2751].)

Eminent Domain

Compensable Interest

• Question:• Is a building restriction in a deed a compensable interest when

the eminent domain action violated the restriction?• Assume that a bank owns two adjoining properties. It sells

one property, and in the deed, the bank provides a restriction that the property cannot be used for an electrical transmission station and the land retained by the bank was made subject to the same restriction. A public utility sought to acquire the bank’s property to build an electrical substation.

• Does the restriction in favor of the adjoining property have a compensable interest in the bank’s property in the eminent domain action?

Eminent Domain

Compensable Interest

• Answer:• Yes. The California Supreme Court reversed the court

below, disapproved a previous decision that held such a restriction was not proper and therefore not compensable. The Supreme Court’s new ruling determined the building restriction is similar to easements, which restrict property and are entitled to compensation. Both are “property rights” and therefore entitled to compensation.

• (Southern California Edison Co. v. Bourgerie (1973) 9 Cal.3d 169.)

Eminent Domain

Option Holder

• Question:

• Is an option to purchase a compensable interest?

Eminent Domain

Option Holder

• Answer:• Yes. The owner of an unexercised option to purchase

real property has a compensable interest when the property is encumbered. The optionee, in acquiring the right, expects to realize a value in excess of the option price and will expend time and money to further the expectation. However, the option price can be introduced as an admission against interest on the value of the property. The measure of the damage to the optionee, if any, is the value in excess of the option price.

• (County of San Diego v. Miller (1975) 13 Cal.3d 684.)

Eminent Domain

Compensable Interest

• Question:

• Is a right of first refusal triggered by condemnation, entitling the holder to compensation?

Eminent Domain

Compensable Interest

• Answer:• No. A right of first refusal is a conditional right

to acquire property and depends on the owner’s willingness to sell the property. The right requires a voluntary determination by the owner to sell, and condemnation is an involuntary taking that preempts the private contractual right.

• (Campbell v. Alger (1999) 71 Cal.App.4th 200.)

Eminent Domain

Discovery in Eminent Domain

• 1. Eminent Domain — Special Proceeding(a) Civil case(b) Not actions at law

Eminent Domain

Discovery in Eminent Domain

• 2. Civil Discovery ActNot applicable to exchanges of lists of experts and valuation data in eminent domain proceedings (CCP, § 2034.010)

Eminent Domain

Discovery in Eminent Domain

• 3. Eminent Domain Law(a) Eminent Domain Law provisions supplement,

but do not replace, restrict or prevent the use of other discovery procedures or limit matters that are discoverable in eminent domain proceedings (CCP, § 1258.010)

(b) Special provisions for expert exchange (CCP, § 1258.010) and settlement offers/demands (CCP, § 1250.410)

Eminent Domain

Discovery in Eminent Domain

• 4. Exchange of experts and valuation data(a) Discovery (CCP, § 1258.020)

(i) Discovery cutoff — 20 days before trial date on compensation (CCP, § 1258.020)

(ii) 30-day discovery cutoff in other civil cases

(continued)

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Discovery in Eminent Domain

(b) Case Management Conference (CMC)(i) 180 days after Complaint is filed(ii) Sets trial date(iii) Orders discovery and expert exchange(iv) Court issues Order, which is also a Stipulation

(continued)

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Discovery in Eminent Domain

(c) Demand to Exchange(i) Not later than 10 days after trial date selected,

any party may file and serve on any other party a demand to exchange experts and valuation data (CCP, § 1258.210)

(ii) Exchange date — 90 days prior to trial or date set by court or agreement (CCP, § 1258.220)

(iii) Contents of demand (CCP, § 1258.210(b))(continued)

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Discovery in Eminent Domain

(d) Exchange(i) The lists are deposited with the court (not filed) and clerk shall

make an entry in the Register of Actions(CCP, § 1268.230)

(ii) Lists are returned to attorneys after trial or destroyed (CCP, § 1258.230(b))

(iii) List of witnesses (CCP, § 1258.240)(iv) Statement of Valuation Data (CCP, § 1258.250)(v) Contents of statement (CCP, § 1250.260)(vi) Additional witnesses (CCP, § 1258.270)(vii) Failure to exchange (CCP, § 1258.280)(viii) Inadmissible testimony (CCP, § 1258.290)(ix) Alternative court procedures (CCP, § 1258.300)

Eminent Domain

Discovery in Eminent Domain

• 5. Settlement(a) Final offers/demands — 20 days prior to trial

(CCP, § 1250.410)(b) Trial continuance — amended offer 20 days before new trial date

(People, ex rel. Dept. of Transportation v. Hansen’s Truck Stop, Inc., et al. (2015) 236 Cal.App.4th 178.)

(c) Conditioned offer — unreasonable(City and County of San Francisco v. PCF Acquisitionco, LLC (2015) 237 Cal.App.4th 90, 97.)

(d) Interest/costs as part of an offer/demand(County of Contra Costa v. Pinole Point Properties, Inc. (1994) 27 Cal.App.4th 1105.)

(continued)

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Discovery in Eminent Domain

(e) Including attorney fees and litigation expenses as part of a demand (County of Contra Costa v. Pinole Point Properties, Inc. (1994) 27 Cal.App.4th 1105.)

(f) Motion for attorney fees is to be made within 30 days after entry of judgment (CCP, § 1250.410(b).)

(g) Offer must be unreasonable and Demand reasonable viewed in the light of the evidence admitted and compensation awarded in the proceeding. The costs to be awarded shall include the defendant’s litigation expenses

Eminent Domain

Thank you for attending.

Stephen D. Roach, MAI, SRA, AI-GRSPrincipalJones, Roach & Caringella, Inc.2221 Camino del Rio S., Suite 202San Diego, California 92108-3609Phone: (619) 565-2400Email: steve@jrcvaluation.comURL: www.jrcvaluation.com

Bruce W. BeachPartnerBest Best & Krieger LLP655 West Broadway, 15th FloorSan Diego, California 92101Phone: (619) 525-1300Email: Bruce.Beach@bbklaw.comURL: www.bbklaw.com