Update: California Supreme Court Oral Arguments

Today, the California Supreme Court heard oral arguments in the Property Reserve v. Superior Court case.  Today was also the day the Court began showing live webcasts of oral arguments online, so I was able to not only hear the arguments but see the Justices and attorneys in action.  If the Court provides a link to the oral arguments, I will include that in another post.

My initial reaction from the oral arguments – all of the Justices were very engaged in the arguments and the Court hammered both sides pretty soundly.  If I had to pick a winner, I think they went easier on the State.

The Court did seem concerned about activities taking place on properties under the Right of Entry statutes and whether the activities constituted a taking but it also seemed like the State was able to waylay some of those concerns by saying the Right of Entry statutes, as drafted, protect property owners and offer them avenues to obtain compensation for the entry and a jury trial on the amount of damages, if they so choose.

The Court seemed to like the notion that the statutes already provide an expedited eminent domain proceeding because the Justices spent considerable time grappling with the idea of denying owners their rights under Article I, Section 19 of the California Constitution and finding how the Right of Entry statutes are reflective of constitutional rights.  The Chief Justice and Justice Liu asked the million dollar question: What is at stake if agencies cannot get onto properties to complete their precondemnation investigations — would public projects stop, would they be endlessly delayed, would they cost way more to build, and if we take away this course of action, what happens?

The Petitioners argued that they are not challenging the constitutionality of the Right of Entry statutes, but are merely saying that if an interest in property is obtained by an agency using the statutes, then it is a taking deserving of all of the trappings of an eminent domain case.  The Court seemed skeptical that such a line could be drawn.  At one point, I thought one of the Justices was going to call them on splitting hairs…

The Justices tried to force petitioners to define the line between what constitutes a taking versus a non-compensable entry, but petitioners dodged those traps, for the most part.  The glaring omission in the argument is that there appeared to be no middle ground – if the Court strikes down the Right of Entry statutes (which petitioners say they aren’t requesting), and at the same time, we can’t expect agencies to go through double-condemnation (one for testing and one for the actual project) to get a project off the ground, what is an agency to do?  The petitioners want the Court to require agencies to acquire an investigatory easement before proceeding with testing but isn’t that the exact double-condemnation situation that everyone recognizes creates the problem?

It was definitely interesting, for me, anyway. I can’t say with any certainty how the Court will rule on the matter, but based on the oral arguments, the Court is definitely wrestling with the issues.  We should hopefully see a decision within the next 90 days!

As a side note, unfortunately the City of Perris v. Stamper oral arguments were continued and will not take place on May 5.  The hearing is being rescheduled for the late May calendar.  We will let you know the date when it is set by the Court.

City of Perris v. Stamper Oral Arguments Are Next Week

If you are an eminent domain junkie like us, then you will appreciate knowing that the City of Perris v. Stamper case (S213468) will be heard by the California Supreme Court on May 5, 2016, at 9:00 a.m. in San Francisco. As a quick refresher, this is yet another case where the Court is trying to delineate the role of the judge versus the jury in eminent domain cases. The case considers the constitutionality of a dedication requirement imposed by the City of Perris.  The Court will be addressing two questions:

  1. Is the constitutionality of an otherwise reasonably probable dedication requirement that a governmental entity claims it would have required in order to grant the property owner permission to put his or her property to a higher use a question that must be resolved by a jury pursuant to article I, section 19 of the California Constitution?
  2. Was the dedication requirement claimed by the City of Perris a “project effect” that the eminent domain law requires to be ignored in determining just compensation?

(If you’d like a more detailed discussion, you can review our original post from August 2013.)

The Court typically issues a decision within 90 days of oral arguments, so in addition to getting a decision on the Property Reserve v. Superior Court case (which is being heard on May 3), we should have the answers to the above-questions as well.  This should be a very interesting summer!

Absent a “Taking,” Property Owner Cannot Recover for Loss of View

One of the most valuable assets many homeowners enjoy is their property’s view. If the government undertakes an activity that eliminates or obstructs that view, is an owner entitled to relief?  In Boxer v. City of Beverly Hills (April 26, 2016, B258459), the California Court of Appeal held that in an eminent domain action (where there is a direct taking of property), view impacts are compensable, but in the absence of a taking of property, a property owner is not entitled to compensation for loss of view.

Background

In Boxer v. City of Beverly Hills, a group of property owners filed an inverse condemnation action against the City based on the City’s planting of redwood trees on adjacent City-owned property, which trees obstructed the owners’ views of Beverly Hills, the Hollywood Hills, the Hollywood sign, the Griffith Observatory, downtown Los Angeles, and – on a clear day – Mount Baldy 50 miles away.  The trial court dismissed the action, concluding that the allegations of impairment of view did not establish a taking under inverse condemnation law.  The owners appealed.

Court of Appeal Affirms No Liability Solely for Loss of View

On appeal, the Court explained that a property has been “taken or damaged” so as to give rise to a claim for inverse condemnation when the property has been physically taken or damaged, or experiences an intangible intrusion that is direct, substantial, and peculiar to the property itself. In the second instance, the owner must demonstrate that the consequences are “not far removed” from a direct physical intrusion.  Neither the mere existence of a public use or a diminution in value to the property alone establishes a compensable taking or damaging of property.

The Court identifies several examples of the limited circumstances in which an intangible intrusion may be sufficient to trigger inverse condemnation liability, such as where:

  • An adjacent sewage treatment facility rendered the owner’s home uninhabitable and caused nausea and burning eyes;
  • Noise, dust, and debris from a freeway expansion that included a 23-foot embankment directly in front of the owner’s home caused physical damage and respiratory problems; and
  • Noise from commercial jet aircraft landing and taking off substantially interfered with the use and enjoyment of neighboring residential property.

In the context of view impairment, the Court explained that as a general rule, a landowner has no natural right to air, light or an unobstructed view, and such rights are only created by private parties through the granting of an easement or CC&Rs, or through local government regulations. As a result, view impairment, standing alone, cannot constitute an “intangible intrusion” that triggers inverse condemnation liability.

The Court then walked through several cases in which view impairment was found compensable in direct eminent domain actions. The Court explained that once a taking is established, any diminution in value due to loss of view is taken into account in determining damages.  Therefore, if there has been a direct taking or other compensable claim triggering inverse condemnation liability (such as a substantial impairment of access), view impacts are compensable.  In other words:  “a compensable visibility interest has been recognized when the government has physically taken part of someone’s property, but this is merely an aspect of the owner’s damages, and is not itself a taking or damaging of the property.”

Despite there likely being a significant diminution in property value due to the City’s blocking previously unobstructed views enjoyed by the homeowners, because there was no physical taking of property, the Court of Appeal affirmed there was no liability.

Conclusion: Physical Takings Open the Door to Liability

While the Boxer case involved the narrow issue of liability for view impairment due to an agency’s planting trees on government-owned property, it potentially has much broader impacts, and serves as a strong lesson for public agencies planning public projects.  Many public projects involve some impact to views enjoyed by adjacent property owners; once there is a taking of property – no matter how small – the door has been opened to potential exposure for diminution in value.  As a result, it is essential for agencies to engage in early pre-condemnation planning and undertake efforts to avoid small sliver acquisitions or temporary construction easements.

For property owners, it serves as a reminder that no matter how unique or special a view your property may have, it can be gone in an instant – possibly without any recourse absent a physical taking or other local regulations. If your local government agency does not have height restrictions in place, it is imperative to secure view rights privately, either through an easement on adjoining property, or through CC&Rs in the development community.

In most cases, Boxer may establish a bright-line rule that there must be a taking in order for a property owner to recover for view impairment caused by a public project.  What that means is that two property owners, identically situated and identically impacted by a government agency’s project, may be treated completely differently if the agency acquires one inch from one owner and nothing from the other.

While this may seem unfair, the California Supreme Court once addressed a similar quandary regarding the ability to offset general benefits from public projects in eminent domain actions, and explained that “[t]he law has no mechanism by which to ensure an absolutely fair distribution of costs and benefits across the entire community. We must instead search for the rule of greatest relative fairness, or least unfairness.”  (Los Angeles County Metropolitan Transportation Authority v. Continental Development (1997) 16 Cal.4th 694, 716.)

We’re left questioning whether this bright-line approach is the least unfair, and if not, whether a better approach exists. And while Boxer appears to establish a clear delineation for recovery depending on whether a taking exists, we’re also left questioning whether such a rule applies in all circumstances, especially when other published appellate decisions suggest a potentially different result in the case of substantial impacts to a property owner’s abutter’s rights.

Eminent Domain for California’s Social Infrastructure

While much of the focus in California lately has been on eminent domain for transportation projects, there’s some new condemnations moving forward in both Northern California and Southern California for social — or community — development projects.

  • downloadDown south, the San Diego Union Tribune reports that the Port of San Diego has exercised its condemnation powers to acquire four acres of prime property on Chula Vista’s Bayfront in order to construct the Chula Vista Bayfront Master Plan project.  The Master Plan, approved by the Coastal Commission in 2012, is a joint project between the Port and the City of Chula Vista to transform 550 acres into a waterfront destination.  The Port originally appraised the 4-acre parcel at $2.4 million, but reduced its appraised value and offer to $1.6 million after it discovered the presence of contamination.  The next step will be filing the eminent domain lawsuit in court.

 

  • Up Plans for the upcoming civic center project in downtown Fremont call for a new city hall to be built in 2020. Courtesy of City of Fremontnorth, the Mercury News reports that the City of Freemont has adopted a resolution of necessity allowing for the use of eminent domain to acquire a 1.54-acre parcel needed for the development of the Downtown Civic Center.  The City Council also approved a relocation plan for up to 23 businesses displaced by the acquisition of the property at 39156-39200 State Street, which structures will be demolished under Freemont’s plans for a new City Hall and other municipal buildings.  Adopted in 2014, the Civic Center Master Plan identifies a 5.7-acre site on the northeastern corner of Capitol Avenue and State Street for a large public plaza, city administrative offices, and other community-focused uses as well as adjacent parking.  Groundbreaking is expected to start in 2017.  The article reports that the property owner has retained an attorney and an appraiser, but has not responded to the City’s appraisal or offer or otherwise engaged in negotiations with the City.

Join Us at IRWA Los Angeles’ Annual Valuation Seminar and IRWA San Jose’s Spring Conference

SE-Corner-final-notitleThere are a couple exciting International Right of Way Association (IRWA) events coming up next week:

  • On April 26, I will be participating in IRWA Chapter 1’s (Los Angeles) 2016 Annual Valuation Seminar.  I will be presenting with Brad Thompson of Mason & Mason on “Project Benefits and Construction-Related Impacts:  Tangible or Speculative?”.
  • On April 29, I will also be participating in IRWA Chapter 42’s (San Jose) 4th Annual Spring Conference.  I will be presenting with my partner, Artin Shaverdian, and Steve Parent of Bender Rosenthal on “The Value of Transit Proximity:  Assessing Project Benefits”.

The 2016 Annual Valuation Seminar is approved for 8 hours of BREA credit and will take place at the Quiet Cannon, 901 North Via San Clemente in Montebello. For more information, or to register for this event, click here.  The 4th Annual Spring Conference will be held at the Santa Clara Valley Transportation Authority (VTA) Auditorium at 3331 North First Street in San Jose. Applications for up to 7 hours of IRWA, BREA, SBE, SR/WA and MCLE are pending. For more information, or to register for this event, click here.

Anyone who is not an IRWA member is welcome to attend both events.  I look forward to seeing you there!

Two San Diego Projects Moving Forward

There are two interesting projects in San Diego County that are moving forward, both of which involve at least some use of eminent domain.

The San Marcos Creek Specific Plan is proceeding in, not surprisingly, San Marcos.   The project involves efforts to create a new downtown area for the City.  The project has been a long time in the San Marcos Creekmaking, with the City adopting its initial specific plan back in July 2007.  A 2015 PowerPoint presentation describes the City’s plans for the area.  And just this week, the City filed at least four eminent domain actions as part of its efforts to implement the Specific Plan.

The other projects is the Citracado Parkway Extension Project in the City of Escondido.  The Final EIR for the project describes it as follows:

The project proposes to improve and extend Citracado Parkway from West Valley Parkway to Andreasen Drive, and annex three parcels within unincorporated San Diego County.

The City of Escondido also filed an eminent domain action this week in order to implement its project.

Property Reserve Case Set for Oral Argument

The California Supreme Court announced today that the Property Reserve case will be heard on May 3, 2016, at 9:00 a.m. in San Francisco.  (I’m assuming this is not an April Fool’s joke, since eminent domain attorneys have been awaiting this for a long time now.)California Supreme Court

The Court will decide whether California’s precondemnation right of entry statutes are constitutional.  As has been discussed at length for more than a year in our industry, the decision could effect sweeping changes in how condemning agencies access properties for necessary inspections and testing.  We posted a detailed discussion of the Court of Appeal opinion when it was issued back in March 2014.

The Court will not issue a decision on May 3, but the tone of the argument and the Court’s questions could provide key insights into how the Court will ultimately rule.  Typically, the Court issues its decision within 90 days of oral argument, so we should have a decision sometime this summer.  Stay tuned.

California Transportation Commission Allocates $170 Million to Projects Around the State

At its March meeting, the California Transportation Commission (CTC) approved funding to improve and maintain California’s multimodal transportation system.  According to the District 2 Press Release, allocations included:

  • •$12.5 million for 11 capital improvement projects both on and off the state highway system as part of the State Transportation Improvement Program (STIP),
  • •$17.8 million for two Transit and Intercity Rail Capital Program projects, and
  • •$15.5 million for 22 Active Transportation Program projects – the most recent active transportation investment from the largest program of its kind in the nation.

The allocations included funds for traditional road projects as well as regional planning but also included money for a number of alternative transportation projects, such as bike lanes and pedestrian safety enhancements.  Some highlights include:

  • Butte County: $1.4 million to the county to construct Class II bike lanes on Neal Road and Cohasset Road.
  • Sacramento County: $1.5 million to the county to construct sidewalks, bike lanes and signal upgrades on Howe Avenue.
  • San Mateo County: $5,570,000 to install pedestrian crosswalk safety enhancements on State Highways 82 and 84.
  • •San Joaquin County: $6.8 million to the San Joaquin Regional Transit District for construction of high-frequency, limited-stop Bus Rapid Transit services in two new corridors and the purchase of 12 new diesel-hybrid buses.
  • •Stanislaus County: $321,000 to the City of Ceres to install yellow and lighted crosswalks, close sidewalk gaps, improve existing sidewalks and ramps for accessibility.

A complete list of the projects receiving allocations, can be found here.

Eminent Domain Case Analyzes Mitigation Credits as a Highest and Best Use

Eminent domain practitioners are well versed in analyzing a property’s highest and best use.  Under these principles, a property being condemned is not necessarily valued based on its current, existing use.  Where the appraiser can show that the property’s actual value is based on a different use, that use can often be the foundation for the valuation (assuming that other use meets the four-part test of highest and best use, which is beyond the scope of this post; if you’re really bored today, here’s a link to Wikipedia’s discussion of highest and best use).

In County of Santa Barbara v. Double H Properties, LLC (March 15, 2016) the Court of Appeal analyzed a somewhat unique California Tiger Salamanderhighest and best use argument.  There, the County was condemning a conservation easement in order to create a habitat for the California tiger salamander.  In addition to valuing the property as rural agricultural land (the same highest and best use the County’s appraiser applied), the owner’s appraiser sought to value the easement by analyzing value of the property for “mitigation credits.”  Such credits arise where a developer seeks to develop one property, impacting sensitive habitat.  In order to obtain entitlements, the developer can often mitigate those impacts by purchasing “mitigation credits” in an approved mitigation bank.  The mitigation bank, in turn, preserves other property with sensitive habitat as an offset to the impacts the developer’s project will cause.  (If all this sounds a bit complicated, it is.  But you don’t really need to understand the details in order to understand this court decision, so please keep reading.  If you really want to learn more about mitigation banking, the EPA has a detailed fact sheet that will get you started.)

In Double H Properties, the appraiser opined that the property had a higher value when viewed as mitigation credits than it did when viewed as rural agricultural land.  The County sought to exclude that “alternative” valuation as mitigation credits, and the trial court agreed with the County.

The key to understanding the decision is understanding that the owner did not (at least according to the Court of Appeal) finish the analysis necessary to support the alternative valuation.  The owner’s appraiser conducted no analysis and offered no opinion regarding whether the property was eligible for marketable mitigation credits.  And the owner did not designate any expert on that subject.  In the absence of evidence that either (1) the property already qualified for mitigation credits (apparently, it did not), or (2) it was reasonably probable that the property could be entitled for such credits, the Court of Appeal upheld the trial court’s decision to exclude the alternative valuation.

A few other comments about this case are warranted.  First, the owner apparently did submit a declaration by a zoologist in an effort to prove the property’s viability for mitigation credits.  This may indeed have carried the day, but for one crucial problem.  The owner had not designated the zoologist as an expert and, therefore, his opinions regarding the property’s viability (or potential viability) for mitigation credits was inadmissible.  This highlights a key issue in eminent domain cases:  if you want a witness to testify to an opinion, that witness must be listed on the expert designation.

Second, the case also contains a clever attempt by the owner to recover attorneys’ fees incurred by the owner’s lender in defending the eminent domain action.  We have often run into situations where the mortgage contains an attorneys’ fees provision that forces the owner to pay its lender’s attorneys’ fees in defending the action.  In the absence of a finding that the owner is entitled to recover attorneys’ fees (again, beyond the subject of this post) those lender’s fees become something the owner must pay.

But in the Double H Properties case, the lender apparently agreed to tack those attorneys’ fees on to the owner’s loan balance.  Thus, at the end of the case, the owner had a larger outstanding loan on its remainder property.  The owner claimed that this qualified as compensable severance damages.

I actually find this to be a pretty clever argument, but the Court of Appeal was unpersuaded.  It concluded that no published decision has ever recognized “costs incurred due to a contractual agreement between the property owner and a third party” as a source of severance damages, and it declined to create such law.

Finally, one other important note about this case.  It is an unpublished decision, which means it cannot be cited as precedence in any other case.  So while it may be interesting, it does not create any new law.

U.S. Supreme Court Steers Clear of Two Eminent Domain Cases

In the last month, the U.S. Supreme Court haUSSCOTUSs declined to hear appeals on two eminent domain-related cases.  The first case, California Building Industry Association v. City of San Jose, is one we discussed last year.  If you recall,  the California Supreme Court held that San Jose’s inclusionary housing ordinance that required all new residential development projects of 20 or more units to sell at least 15 percent of the for-sale units at a price that is affordable to low or moderate income households did not impose an exaction on developers that constituted a taking.

The U.S. Supreme Court’s February 29 declination to hear BIA’s appeal means that developers in San Jose must either include affordable housing in their projects, pay an in-lieu fee to the City or build affordable units offsite.  A sigh of relief can be heard around the state as other municipalities with similar ordinances on the books can proceed with their plans to increase affordable housing for their lower-income residents.  (You can read more about reactions to the decision here.)

And yesterday, the U.S. Supreme Court declined to hear an appeal on an eminent domain case from West Virginia.  In the case, Beacon Resources Inc. v. W. Virginia DOT, Beacon was leasing 187 acres and was extracting coal from it.  The West Virginia Department of Transportation filed a condemnation action seeking to acquire 30 of the 187 acres for a highway project.  While the DOT and property owner agreed to the surface value of the land, Beacon and the DOT disagreed on the value of the underlying coal.

At trial, the DOT requested a jury instruction that compensation could not include any lost profits to Beacon and the court refused to give that instruction.  The jury awarded Beacon $24 million for the coal and the DOT appealed after its motion for a new trial was denied.  On appeal, the West Virginia Supreme Court vacated the award and remanded the case for a new trial stating the lower court erred in not giving the requested jury instruction.  Beacon appealed the state supreme court’s ruling and as reported by Law360, the U.S. Supreme Court declined to hear the appeal.

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