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

Before a public agency can exercise the power of eminent domain, it must adopt a resolution of necessity making certain findings in support of the taking of property.  The resolution defines the scope of the agency's acquisition, and the agency is typically prevented from contradicting the terms of the resolution in the eminent domain action.

There is a delicate balancing-act in drafting the scope of the taking in the resolution.  If the scope is too narrow, the agency may ultimately need to go back and acquire additional rights or property.  On the other hand, if the scope is too broad, it provides an opportunity for property owners to present a claim for much greater damages.  We've seen numerous eminent domain cases go to trial based on a dispute as to the scope of the take and what actions the resolution of necessity allows the condemning agency to undertake.  

A recent unpublished California Court of Appeal decision, People ex rel. Department of Transportation v. 927 Indio Muerto, provides an example of an eminent domain case going to trial primarily based on a dispute over the interpretation of the terms of a resolution of necessity.  The case involves Caltrans' acquisition of a fee and easement interest in a portion of property in an effort to expand Highway 101 in Santa Barbara County.  The resolution of necessity adopted by the California Transportation Commission provided that the acquisition included the right to enter the owner's remaining property at any time within 120 days after an order for possession or final judgment to complete work related to the project.

The court granted Caltrans' motion for prejudgment possession, the tenants on the property were temporarily relocated, and upon completion of the project, the tenants returned to the property.  The 2,600 square foot easement portion of the acquisition was paved with concrete and Caltrans allowed the tenants to utilize this area for their business operations.

At trial, Caltrans' appraiser testified that as a result of the acquisition, the businesses suffered no loss of goodwill.  The business' appraiser testified they suffered a $710,000 loss of goodwill.  The jury awarded the business $75,000 for loss of goodwill.  The owners and tenants appealed on a number of issues, primarily based on the terms of the resolution of necessity. 

1. Did the Resolution of Necessity Authorize Caltrans to Re-Enter the Property?  The owner contended that the resolution of necessity was vague and could be interpreted to allow Caltrans to re-enter the owner's property for 120 days after final judgment.  The owner sought compensation accordingly.  The trial court refused to give this instruction, instead interpreting the resolution as giving Caltrans the authority to either enter (i) after an order for possession or (ii) after final judgment.  Since Caltrans entered after an order for possession, Caltrans had no right to re-enter after a final judgment, and the owner was not entitled to compensation based on such an interpretation.  The Court of Appeal agreed this was the appropriate reading of the resolution of necessity.
2. Did the Court -- as Opposed to the Jury -- Appropriately Define the Scope of the Easement?  The trial court made a finding that the resolution of necessity allowed the property owner and businesses to continue to utilize the area of the property encumbered by the easement, and it instructed the jury to issue its determination of just compensation based on this instruction.  The owner claimed that the jury -- not the judge -- should have decided this issue.  The Court of Appeal concluded this was an issue appropriately determined by the judge, not the jury, since the jury is solely to determine just compensation.
3. Was the Court's Interpretation of the Scope of the Easement Supported by the Evidence?  The property owner also argued that the trial court's interpretation of the scope of the easement -- that the owner/business could use the area for future business operations -- was simply contrary to the evidence.  The Court of Appeal disagreed, concluding there was substantial evidence that the businesses could continue to use the easement area, and in fact they were doing so at the time of trial. 

In this case, the trial court and the Court of Appeal both interpreted the resolution of necessity in favor of the condemning agency.  The agency likely benefitted from the fact that the project had been completed prior to trial and therefore it was much easier to rely on what had actually happened when interpreting the scope of the resolution.  If the trial took place before construction, the result might not have been as clear.  The case serves as a good reminder to closely review the scope of the proposed resolution of necessity before it is adopted.  

(NOTE to Business Appraisers:  you may want to read the opinion as there is a useful discussion about the exclusion of the business' appraiser's testimony regarding loss profits due to speculation.)

UPDATE:  On December 2, 2011, the Court of Appeal order this previously unpublished opinion publiblished.  The case is now citable precedent, Joffe v. City of Huntington Park (2011) 201 Cal. App. 4th 492.

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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.

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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.

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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.

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We reported back in October that the Long Beach City Council approved the use of eminent domain to acquire nearly 10,000 square feet of property to widen Pacific Coast Highway.  Now in February, the City Council is once again considering the issue.  So why, nearly four months later, is the issue back before the City Council?  According to a recent Costa Costa Times article, the reason is because the project description has changed.

Back in the "pre-Kelo" era, agencies would routinely proceed with planned eminent domain despite minor changes to the project description.  However, with recent procedural reforms and greater public scrutiny of eminent domain, Long Beach has correctly determined that taking a step back is a wise move here. 

While the public hearing procedure can be burdensome and time consuming, a public agency that proceeds with eminent domain using a resolution of necessity that does not match what the agency needs to acquire is at great risk.  Sometimes, even now, the agency will get away with changing the project description without adopting a new resolution of necessity, but for a saavy property owner, such a misstep can provide leverage for a right-to-take challenge that could significantly delay -- or even defeat -- a project.  By going back through its administrative process, Long Beach should avoid such a challenge, which could mean that its "delay" actually gets the project built faster. 

This is a good opportunity to point out how important it is for public agencies (1) to work with their engineers and planners to ensure the project description is perfect the first time around, and (2) to allow for sufficient time in case project details do change.  If the agency is facing tight project deadlines, especially when funding is at risk, changing the project description or take area could mean starting from scratch:  a new appraisal; a new offer and negotiation process with the property owner; and a new hearing on a resolution of necessity.

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Perhaps the most talked-about California eminent domain case in 2009 has been the City of Stockton v. Marina Towers decision, in which the Court struck down the City's right to take property where the resolution of necessity contained no real public purpose (not surprising, since the City did not know at the time it filed the action what it would do with the property).   The case's tag-line usually played out like this:  the "project" was the condemnation itself, which does not qualify as a public purpose.   

This holding was itself somewhat interesting, as California law contains relatively few examples of a court's rejecting the government's right to take property.  What gave it real pizazz, however, was the fact that while the case was pending, the City of Stockton figured out what it wanted to do with the property -- and it proceeded to build the new, Stockton Ballpark on it. 

With no right to take, who now owned the shiny new stadium?  The court's solution was to allow the government a chance to file a new action to condemn the property now that a legitimate public use had attached.  And this week, the City Council voted to do just that, authorizing a new condemnation action to acquire the property. 

Record Staff Writer David Siders writes in a December 2 article "Stockton revisits ballpark land seizure:  Disputed property line divides left field from right" that the City agreed to commence a new action following a short public hearing Tuesday night.  The City's action was in response to a court-imposed December deadline to re-file; despite its action, the City claims to want to reach a settlement:

"This has gone on way too long, and we need to resolve this," Mayor Ann Johnston said.

That said, the parties may have vastly different views about the property's value:

During the initial eminent domain trial, a jury put the value of the Marina Towers property at just less than $2 million. Marina Towers previously said the value is closer to $6 million.

We'll let you know what ultimately happens. 

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