California Eminent Domain Report

When I was a child, a long long time ago, I learned the importance of paying attention to detail.  While I will not bore you with the details of my adolescence and the shenanigans that forced my parents to drive home this message, I will tell you that I certainly learned to always cross my T's and dot my I's.  Late last week, the California Court of Appeal issued an unpublished decision in Compton Unified School District v. Hassan, Case No. B233412, prohibiting an after-the-fact challenge to a condemnation order issued almost two years prior, largely on the basis of the agency's attention to detail.  For me, this decision is a reminder of a life long lesson learned early on.  Hopefully, it is the same for you.

In Compton Unified School District v. Hassan, the School District filed a complaint in eminent domain in 2003 in order to acquire title to a run down condominium complex that had no utilities, was in a significant state of disrepair, and was sometimes used as a crack den.  The complex, which was spread over eight lots, contained a total of 168 condominium units.  When the School District filed the complaint, it also deposited $2,500,000.  Because there appeared to be fraudulent liens on the property, the School District hired a title expert to determine which liens were valid and which liens were fraudulent.  As a result of this process, the School District determined that Alain Hassan had valid lien interests in four of the condominium units.  Accordingly, the School District added Hassan as a defendant through a Doe amendment - crossing its T's.

Although the School District was able to identify Alain Hassan through a title search, it was unable to locate Hassan's whereabouts.  The only "Alain Hassan" that the School District could locate lived in Brewster, Massachusetts, and when counsel for the School District contacted this Alain Hassan he disclaimed any interest in the condominium complex.  Because the School District was unable to locate any other Alain Hassan, it obtained an order permitting it to serve Hassan by publication in the Los Angeles Times.  The School District completed the service by publication and obtained a default against Hassan in May 2005 - dotting its I's.

After taking Hassan's default, the School District discovered through a 1993 deposition transcript that Hassan was residing in France.  However, since a default had been entered, the School District apparently made no additional efforts to locate or communicate with Hassan.  Instead, the School District proceeded with the condemnation and obtained a jury verdict in 2007, valuing the four units from $17,790 to $19,820.  After paying significant sums in delinquent property taxes, the School District deposited only $25,570.83 for Hassan's four units.  In August 2008, a final order of condemnation was entered.

In May 2010, almost two years later, Hassan made his first appearance, filing a procedurally defective motion to withdraw the funds on deposit.  After withdrawing the first motion, Hassan filed a second motion in December 2010 seeking to withdraw the funds on deposit, or, in the alternative, $247,000 (his asserted value of the four units), or $3,751,237 (his asserted value of the 92 additional properties that he claimed to have an interest in).  The School District opposed the motion to the extent it sought anything beyond the funds on deposit on the basis that the motion was time barred, that the court had previously determined that Hassan's interest was limited to the four units, and that the motion was procedurally defective.  The court rejected Hassan's arguments and entered an order in favor of the School District, limiting the disbursement to $25,570.83 plus interest from the date of deposit.

Hassan appealed, arguing that his motion was not time barred because he never received proper notice.  The Court of Appeal explained that under Code of Civil Procedure section 473, subdivision (b), the time limit for a defendant to set aside a default is within either six months of entry of default, or six months after entry of the default judgment, and Hassan was well beyond this time period.  The Court of Appeal also found that Hassan could not rely on Code of Civil Procedure section 473.5, which allows a defendant to set aside a default up to two years after entry of the default judgment, because section 473.5 is only implicated when the defendant can show "lack of actual notice," and since an eminent domain proceeding is in rem, "actual notice" is not required. 

The Court of Appeal also denied Hassan equitable relief from the default, since "the District's declarations constitute substantial evidence that Hassan was properly served by publication after a due diligence search was made for Hassan."  Providing an alternative rationale, the Court of Appeal also stated that Hassan would not be entitled to equitable relief because his delay caused the School District substantial prejudice, as "the District has disbursed most of the court-approved funds on deposit in this matter, and has insufficient funds with which to increase compensation to Hassan."

As for Hassan's asserted interest in the 92 additional properties, the Court of Appeal held that Hassan could not re-litigate that issue, since the "eminent domain judgment against him is res judicata as to all issues related to his title to any of the 168 properties."  Thus, the Court of Appeal found that the only issue that Hassan could contest was the amount of the award for the four units, and Hassan presented no evidence, other than his bare assertion, to combat the School District's substantial showing.  Therefore, the Court of Appeal affirmed the judgment in its entirety.

The lesson learned from all this, is that it is worth the time to go through all the steps - crossing your T's and dotting your I's - and detailing your efforts, because you never know when someone from France is going to claim an interest in the property. 

As an aside, if you read this entire blog post, I thank you.  It was much longer than I prefer, but the facts are actually even more complicated, and juicier then my summary.