A Reminder to Carefully Review Your Right Of Way Contracts
Posted in Court Decisions

It's common practice for government agencies and property owners to reach an agreement on the acquisition of property without the use of eminent domain.  Agencies understand the negative connotation of condemnation, along with the litigation costs involved, and right-of-way agents typically make strong efforts to negotiate a voluntary purchase.  Acquisitions are usually resolved by the parties' entering into a standard right of way contract or purchase agreement.  But once the eminent domain action is filed, attorneys like to resolve the case through the entry of judgment -- as opposed to using the standard purchase agreement -- and a recent California Court of Appeal decision serves as a good reminder as to why this is the case.  

The case, People ex rel. Department of Transportation v. Scotti, deals with a dispute as to whether the right of way purchase agreement covered payment of the property owner's attorneys' fees.  Caltrans' property negotiator could not reach a voluntary acquisition of the owner's property, and an eminent domain case followed.  After the exchange of expert appraisals, the parties entered into a right of way contract and the condemnation action was dismissed.  

The owner then filed a motion for attorneys' and expert fees pursuant to Code of Civil Procedure section 1268.610, which entitles a defendant in an eminent domain action to recover litigation expenses any time the action is dismissed.  Caltrans argued that the owner was not entitled to attorneys' fees because the right of way contract provided that the purchase price was "inclusive of interest, fees and costs."  The trial court entered judgment finding the owner was not entitled to an award of costs and attorneys' fees.  

On appeal, the Court explained that the statute is clear and the owner is entitled to attorneys' fees given Caltrans' dismissal of the case; however, there was a contractual interpretation dispute as to whether the owner had already recovered those fees as part of the purchase agreement.  The Court concluded that the right of way contract was ambiguous as to attorneys' and expert fees, and therefore it was appropriate to look outside of the four corners of the agreement to determine whether these fees were included in the purchase price.  Caltrans' right of way agent declared that the "fees" provision of the contract included the owner's attorneys' and expert fees, and the Court interpreted the provision in this manner.  Therefore, the trial court decision was upheld.

The Scotti case is why attorneys like to avoid dismissals in eminent domain actions, and prefer to have a judgment entered by the court.  The case also serves as a good reminder to agencies, right of way agents, and property owners to carefully review voluntary purchase agreements.  Make the terms explicitly clear:  if the purchase price is inclusive of attorneys' and expert fees, say so.

Obviously, most purchase agreements are utilized before a condemnation action is filed, and therefore the dismissal statute does not come into play.  Regardless, be careful using a standard purchase agreement for every situation; carefully review those agreements and make sure they take into account the particulars of the deal.  

  • Bradford B. Kuhn
    Partner

    Brad Kuhn, Chair of Nossaman's Eminent Domain & Valuation Group, guides private and public sector clients through complex real estate development and infrastructure projects – particularly with eminent domain/inverse ...

California Eminent Domain Report is a one-stop resource for everything new and noteworthy in eminent domain in California. We cover all aspects of eminent domain in California, including condemnation, inverse condemnation, and regulatory takings. We also keep track of current cases, project announcements, budget issues, legislative reform efforts, and report on all major California eminent domain conferences and seminars.

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