Eminent domain actions are unique in that "the court, rather than the jury, typically decides questions concerning the preconditions to recovery of a particular type of compensation, even if the determination turns on contested issues of fact." (See Emeryville Redevelopment Agency v. Harcros Pigments, Inc. (2002) 101 Cal.App.4th 1083, 1116.) This is consistent with the general rule in eminent domain that the jury’s role is only to determine the amount of damages, leaving other questions to be resolved by the Court. While these factual disputes are typically decided by the judge at the time of trial (or immediately before trial through motions in limine), neither the public agency nor the property or business owner needs to wait until this late date to have such contested issues determined. It can be done much earlier, saving both parties considerable time and expense, and potentially leading to early settlements.
How is this early dispute-resolution accomplished? Through a unique eminent domain statute -- Code of Civil Procedure section 1260.040 -- which provides that if there is a dispute over a legal issue affecting valuation,
either party may move the court for a ruling on the issue. Section 1260.040 is a powerful statute, unique to eminent domain law, which allows evidentiary issues and issues affecting compensation to be adjudicated by motion.
(Dina v. People ex rel. Department of Transportation (2007) 151 Cal.App.4th 1029, 1044.) If taken advantage of, this unique legal issues motion process will allow for early rulings that can be used by appraisers and other experts if there is a dispute about whether, for example,
- a particular type of damage is compensable (e.g., noise, dust, fumes, vibration, construction impacts, view, etc.);
- separate properties constitute a larger parcel;
- there is a reasonable probability for a zone change;
- a business satisfies the entitlement factors to seek goodwill; or
- contamination can be offset (or any other legal issue impacting compensation).
Despite what would appear to be a fantastic opportunity for agencies and owners, it does not appear that parties use this statute often: there are only two appellate decisions discussing the statute (and one was from just a few months ago). But I thought I'd share how we recently used the statute to resolve a significant condemnation action.
The case involved the partial acquisition of a well-known art gallery in Santa Monica for a new light rail station. The agency was able to resolve the case with all but one tenant, who was making significant claims for loss of business goodwill, declines in value to art inventory, and leasehold bonus value (the tenant occupied a large, desirable gallery rent-free). All told, the owner claimed damages of over $10.1 million, plus costs, interest and attorneys' fees. On the other hand, the agency's experts (real estate, goodwill, and art appraisers) valued the losses at approximately $100,000. Given that the parties were over $10 million apart, it seemed like a jury trial was inevitable.
This is where the legal issues motion procedure came into play. One of the primary disputes between the parties involved the tenant's ability to remain at the property absent the condemnation action (i.e., the expected duration or future term of the lease). The agency claimed it was only for several more months, while the business owner claimed many more years.
We filed a legal issues motion on behalf of the agency to have the court determine this factually contested issue that hugely impacted compensation. The court ultimately decided the legal issues motion in the agency's favor, and the case promptly settled for $125,000. Instead of waiting for this decision at trial, both parties recognized significant cost savings by securing an early ruling. This serves as an example of how the procedure can be used, and a reminder for both agencies and property owners to take advantage of the statute where it makes sense to do so.
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 ...
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