California Eminent Domain Report : a blog following condemnation, inverse condemnation, and regulatory takings written by attorneys with Nossaman LLP.

Eminent domain is typically used in the context of a freeway widening, a grade separation project, a utility corridor, or perhaps a new school.  It's not often you hear about the use of eminent domain in the healthcare industry.  But it does happen. 

Take a recent example in Oceanside:  the Tri-City Medical Center, a public hospital, is looking to expand its facility.  It apparently has the power of eminent domain, and according to a North County Times article, OCEANSIDE:  Tri-City seeks to take land through eminent domain, it's ready to use that power this week by adopting a resolution of necessity and proceeding with the condemnation of a .83-acre parcel.

Like any government agency, Tri-City has obtained an appraisal and attempted to voluntarily purchase the property; however, it's $1.5 million offer is too low for the property's owner, who believes the property is worth $2.5-$3 million.  Tri-City has also followed the necessary steps of offering to pay up to $5,000 for the owner to obtain an independent appraisal.

However, there may be other issues.  At the resolution of necessity hearing, the owner intends to raise right to take challenges, particularly based on the fact that Tri-City apparently does not have an identified use for the property.  (Property owners are typically required to raise any challenges at the resolution hearing or those challenges may be waived.)

Tri-City has apparently stated that its acquisition of the property will provide flexibility for future development; this "purpose" could be a bit troubling.  (See City of Stockton v. Marina Towers [denying agency's right to take where there were no real plans for the acquired property at the time of the adoption of the resolution of necessity].)  However, Tri-City also claims the property will provide better access to the emergency room and that there is a chronic need for parking.  If Tri-City can show that it is acquiring the property in order to serve the hospital's dire parking needs, then the owner's challenge may be more of an uphill battle.

If no deal is reached in the near future, we'll follow this one and see whether the owner is successful in court challenging Tri-City's right to take.

10/5/11 UPDATE:  Tri-City's Board of Directors declined to adopt the resolution of necessity, so condemnation proceedings will not be moving forward, at least not at this time.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

According to a Turlock Journal article, "TID moves ahead with eminent domain," the Turlock Irrigation District approved the adoption of a resolution of necessity in order to move forward with eminent domain for the Hughson/Grayson 115 kv transmission line project.  

As expected, impacted property owners are not satisfied with the agency's appraised value.  The article reports that residents are in the process of obtaining their own appraisals, and have requested a 30 day extension prior to the commencement of eminent domain proceedings.  (As a public agency, the irrigation district is required to pay up to $5,000 for each of the owners to obtain their own appraisals; the relocation act also requires agencies to allow sufficient time for the parties to negotiate in good faith prior to commencing eminent domain proceedings.)

It sounds like the agency, however, cannot wait any longer, as it intends to start construction of the project in December.  Given the extended time required under California's prejudgment possession procedures, even if the agency files the eminent domain lawsuits tomorrow, it will be difficult to obtain possession -- at least for occupied properties -- this quickly.   

If you're interested in learning more about the resolution of necessity process, the initiation of eminent domain proceedings, or the timeline for agencies to obtain prejudgment possession, feel free to review our Eminent Domain Handbook.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

When eminent domain attorneys think of just compensation in the context of an eminent domain case, we're typically thinking about the value of what we can see:  the dirt itself; and anything built on that dirt.  But every so often, a property's real value lies not in what is on the surface, but what sits below the surface. 

A recent post by the Biersdorf law firm, Mineral Rights in Eminent Domain Cases, reminds us about this often overlooked issue.  The post contains a nice summary of when and how these issues can arise, and I won't repeat all of what they have to say.  The bottom line is that when a condemning agency acquires a fee interest, that interest may well include mineral rights that have cognizable value.  Indeed, even if the taking is merely an easement, it is conceivable that the easement could impair the remainder's value by, for example, making mineral extraction more costly - or even impossible. 

But before property owners conclude that this is a potential gold mine (yes, silly pun intended), there are some warnings against thinking you can extract a lot of extra value (see, I did it again) from subsurface minerals. 

First, in order to claim compensation for lost mineral rights, the owner has to actually lose those rights.  It might seem obvious that the property's owner is going to lose his or her mineral rights when the government condemns the property, but this is not always the case.  In fact, in many situations, the fee owner does not actually own the mineral rights.  While it often gets overlooked in the boiler plate of a typical real estate contract, sellers often reserve for themselves mineral rights below large tracts of land when they sell that land off for subdivision and development. 

Second, even if the owner does own the mineral rights, there has to be something there that has real value.  This doesn't mean that you have to have an actual stream of gold running beneath the surface; any number of things can have real value in the marketplace.  (Even something as seemingly simple as clay can have huge market value under the right circumstances.) 

Third, even if something of value does lurk beneath the surface, the owner still must deal with highest and best use issues.  If the minerals can be extracted without interfering with current (or planned) surface uses of the property, the owner should be able to recover both the full value of the property using conventional valuation methodologies, plus whatever added value an appraiser might quantify based on the minerals.

But in many cases, mineral extraction will either preclude other surface uses, or will simply be too costly to implement on a scale as small as a single parcel.  If this is the case, the appraiser would need to determine whether the property's value is greater if converted to a mineral extraction use than it is for any other reasonable use of the property.  This may involve examining possible assemblage to generate the economies of scale necessary to support mineral extraction, and there may be significant legal hurdles to extracting the minerals, even if the costs of doing so can be justified.  (Picture for a minute asking the city council to approve a small oil drilling rig in the front yard of a quiet suburban tract home.) 

Ultimately, this is an issue that arises only rarely.  But when it does, ignoring it can prove extraordinarily costly.  For an owner who doesn't understand these issues, they may lose a huge component of the just compensation to which they are entitled.  And for the government, if they fail to catch a major mineral deposit in their initial analysis of a planned project's cost, they could face a massive claim that can blow the project's budget faster than oil shoots out of a rig that just struck a huge deposit.

Thanks to theBiersdorf firm for flagging the issue; it's certainly a good one for all eminent domain attorneys to keep in mind.  

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

The California Court of Appeal issued an interesting unpublished decision yesterday addressing a number of eminent domain issues, ranging from right to take challenges, entitlement to goodwill, severance damages, and jury instructions.  The case, City of San Luis Obispo v. Hanson, garnered enough attention that several third parties filed Amicus briefs with the Court.

By way of background, the City of San Luis Obispo decided to realign a road partly in order to accommodate a newly approved Costco development.  The realignment required right-of-way acquisition from a property on which the Rose Garden Inn operated.  After Costco was unable to reach an agreement with the property's owner on the acquisition price, the City adopted an appraisal (which found no severance damages) prepared by an appraiser hired by Costco, made an offer based on that appraisal, and passed a resolution of necessity to acquire the property by eminent domain. 

The property owner's right to take challenge was unsuccessful, and the case proceeded to trial on compensation.  The trial court found the Inn was not entitled to lost business goodwill, and the jury returned a verdict finding only about a quarter of the amount of severance damages claimed by the owner.

On appeal, the following issues were decided:

• The Road Realignment Met the "Public Necessity" Test:  While the road realignment was partly caused by Costco's project, and Costco would clearly benefit from the realignment, the project still met the "public necessity" test in that the road was needed by the public and the City had considered realignment regardless of the Costco development.
• The City's Adoption of Costco's Appraiser's Value Was Appropriate:  The Court held that the City could adopt the opinion of the appraiser retained by Costco (instead of hiring its own appraiser to value the take), as long as the appraiser was independent and impartial, and the City was not required to turn over the full appraisal on which its offer was based (it was only required to provide a copy of the summary basis of appraisal).
• The City was not Precommitted to Taking the Property by Eminent Domain:  Even though the Costco project was already approved (which required the realignment), the City did not abuse its discretion in adopting the resolution of necessity because it was not precommitted to the taking; the City substantially debated the issue and ultimately could have modified the realignment had it chosen to do so.
• The City's Severance Damages Determination Was Appropriate:  The City's appraiser determined the severance damages suffered solely based on the cost to cure method of valuation, and it assumed that the City would build driveways on the remainder of the property.  The Court held that the appraiser was not required to value the remainder of the property before and after the taking, and that a condemning agency may agree to do work on the owner's property to reduce compensable damages (as long as it does not contradict the resolution of necessity).
• The Trial Court Appropriately Declined to Allow Testimony on the Business' Alleged Lost Goodwill:  The business' goodwill appraiser determined that the business possessed goodwill equal to ten percent of total income, and that all the goodwill would be lost because of the uncertainty of the project.  The court appropriately excluded this testimony because it was already part of the appraiser's calculation of severance damages the business would suffer, and because the appraiser's ten percent figure was arbitrary and could not be supported.
• The Jury Instruction Stating the Costs of the Acquisition Would be Borne by the Public Was Appropriate:  The jury was not told that Costco would be paying the ultimate costs of the acquisition, but instead that the public must pay the compensation.  The Court held this instruction was appropriate, as the jury need not be made aware of Costco's role, and ultimately, Costco may be partly reimbursed by the City if Costco paid more than its fair share of the roadway (since other property owners benefiting from the project must pay a portion as well through assessments/development impact fees).

In all, this was an exciting case for an eminent domain attorney, as it dealt with many issues that rarely occur in one case.  Although the case is unpublished, and therefore cannot be cited as law, it is useful to see how at least one Court of Appeal panel views these issues.

• Email This
• Print
• Comments
• Trackbacks
• Share Link