125 Cal.Rptr.2d 12, 2
Cal. Daily Op. Serv. 8255, 2002 Daily Journal D.A.R. 10,329
EMERYVILLE REDEVELOPMENT AGENCY, Plaintiff and
Appellant,
v.
HARCROS PIGMENTS, INC., Defendant and Appellant.
EMERYVILLE REDEVELOPMENT AGENCY, Plaintiff and
Appellant,
v.
ELEMENTIS PIGMENTS, INC., Defendant and
Respondent.
No. A090932., Nos. A091716, A093126.
Court of Appeal, First District, Division 4,
California.
Aug. 9, 2002.
COUNSEL
Natalie E. West, Carol R. Victor, Kevin D. Siegel, Karen W. Murphy, Michael
Biddle, Benjamin L. Stock and Thomas A. Douvan for Plaintiff and Appellant.
Lee C. Rosenthal and William F. DiCamillo for California Redevelopment
Association as Amicus Curiae on behalf of Plaintiff and Appellant.
James M. Berg, F. Gale Connor and Jeffrey B. Kirschenbaum for Defendant and
Appellant and for Defendant and Respondent.
SEPULVEDA, J.
These consolidated appeals arise from a judgment and posttrial orders in an
eminent domain proceeding brought by the Emeryville Redevelopment Agency
(Agency or plaintiff) to condemn about 13 acres of chemically contaminated land
owned by defendant Elementis Pigments, Inc., formerly Harcros Pigments, Inc.
(Elementis or defendant). The appeals, and a cross-appeal by Elementis, present
numerous questions of eminent domain law. We have concluded that the judgment
must be reversed. Specifically, we hold that (1) the Agency's own purchases of
neighboring properties were inadmissible to establish the value of the
condemned property; (2) the jury could not consider, and the appraisal witnesses
could not rely upon, a recital in a contract for the purchase of a neighboring
property, which purported to "apportion" the overall price for the
property between two segments divided by a political boundary; (3) it was error
to admit, over objection, evidence concerning specific development plans for
the property, since no one disputed the highest and best use for it and no
other materiality was shown; (4) because it was undisputed that the property
must inevitably be adapted to a higher and more valuable use, and because there
was no proper ground for finding a qualifying period of "interim
use," the trial court properly withheld from the jury Elementis's claim
for loss of goodwill; (5) for the same reasons, however, defendant cannot recover
for the value of equipment or fixtures "in place, in use." Our
reversal of the judgment, coupled with intervening external events, makes it
unnecessary or improper to address other issues, notably whether the trial
court erred by excluding evidence of soil remediation costs and staying a
corresponding portion of the judgment pending resolution of a federal
cost-recovery action, and whether the court erred by awarding Elementis its
attorneys fees. *1092
Background
The
property in question was originally occupied by a Native American midden, or
shellmound, rising to a height of at least 40 feet. In the late 1800's the
property held an amusement park known as Shellmound Park. Sometime in the
1920's it was leveled and developed for industrial use. At one time part of the
property included a pesticide-manufacturing operation. In 1987 the property was
designated for inclusion in a 270-acre redevelopment project. In 1990, it was
acquired by Elementis, which manufactured iron oxide pigments on the property.
In 1992 Elementis notified the City of Emeryville (City) that it was
permanently laying off 70 of its 85 employees. After that time it apparently
continued to manufacture, or at least to blend, iron oxide pigments on a small
part of the property.
In January 1996 Elementis indicated to the Agency that it was willing to sell
the property to the Agency for fair market value. The Agency expressed interest
but stated that "the existence of hazardous materials is of concern and
will greatly impact [the property's] fair market value," and "at this
time the Agency has little understanding as to the extent of contamination on
the site and the cost of remediation." Almost a year later the parties
negotiated two right-of-entry agreements permitting the Agency to conduct
activities relating to appraisal and environmental testing. Ultimately the soil
on the property was found to contain significant levels of contaminants
including lead and arsenic. A dispute thereafter arose between the parties
concerning, at least ostensibly, who would control the "remediation"
(cleanup) of the property and what methodology would be employed.
On February 19, 1998, the Agency filed this action in eminent domain. [FN1] In
May of 1998, the Agency deposited probable compensation of $1,062,000 with the
State Treasurer and applied to the court for prejudgment possession and an
order for entry. The court ultimately authorized the Agency to take possession
of the most contaminated portions of the property by September 30, 1998, and
the remainder by December 31, 1998. Around the end of 1998, Elementis relocated
what remained of its operation to Colton in Southern California. The parties
later stipulated that the "valuation date" for purposes of this
matter would be November 1, 1998.
FN1 A month earlier Elementis had sued the Agency and the City for
inverse condemnation, breach of contract, and deprivation of civil rights. The
parties later stipulated to consolidate the two actions. Shortly before trial
Elementis dismissed the inverse condemnation complaint.
On January 11, 1999, after a trial limited to the "right to take,"
the court found that the Agency had the right to acquire the property by
eminent domain. *1093
In 1999, during demolition and soil remediation, extensive remnants of the
original Emeryville shellmound were discovered on the subject property along
with the remains of well over 100 humans. These materials constituted a
cultural resource protected under the California Environmental Quality Act,
Public Resources Code sections 21000 et seq. (CEQA) and triggered certain
statutory requirements governing the treatment and disposition of such remains.
(Pub. Resources Code, § 5097.98). The Agency proceeded to take various steps to
comply with these provisions. Defendant contended at trial that the Agency's
actions exceeded statutory requirements and, thus, the reasonable cost of such
compliance.
On August 4, 1999, the Agency and the City filed a complaint in the United
States District Court for the Northern District of California, seeking monetary
damages and other relief from Elementis, its predecessors, and others, based on
the contamination of the subject property and neighboring properties, the
necessity of remediating those properties, and the costs incurred in doing so.
(City of Emeryville v. Elementis Pigments, Inc. (N.D.Cal., Aug. 6, 1999)
No. C 99-03719 BZ.) The complaint invoked a variety of federal and state laws,
most notably the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 United States Code section 9601 et seq. (CERCLA).
On November 8, 1999, with the federal action still pending, trial commenced in
this action on the issue of the "just compensation" to be awarded to
Elementis. On December 20, 1999, the jury returned a verdict fixing the fair
market value of the property at $12,493,283. The trial court entered a judgment
condemning the property to the Agency. However the court stayed a portion of
the award, equal to the soil remediation costs claimed to have been incurred by
the Agency, pending further developments in the federal lawsuit.
The Agency filed a timely appeal from the judgment (case No. A090932), in which
Elementis filed a cross-appeal. The Agency appealed separately from
postjudgment orders allowing, and fixing the amount of, costs and attorneys
fees. (case Nos. A091716, A093126.) We have already consolidated the first two
appeals, and have implicitly granted the plaintiff's unopposed request that all
three appeals be considered together.
While the appeals were pending, both parties requested judicial notice of a
written settlement agreement reached by them and approved by the court in the
federal lawsuit. In the agreement, Elementis promised to compensate the City
with (1) "cash consideration" of $3,850,000, and (2)
"forebearance *1094 consideration" in the form of the
relinquishment of claims against the City for over $2,450,800 in relocation
benefits. It was further agreed that the cash consideration (plus interest)
would "be a credit in Emeryville's favor against any sums Emeryville may
be required to pay Elementis in satisfaction of a final judgment resulting from
the Eminent Domain Appeal or subsequent proceeding resulting from that
Appeal."
I. Agency's Purchases of Neighboring
Properties
The
state's power to take property by eminent domain is conditioned on its
obligation to pay "just compensation" to the owner. (U.S. Const., 5th
Amend.; Cal. Const., art. I, § 19.) "Just compensation" is defined as
"fair market value" (Code Civ. Proc., § 1263.310), which in turn is
defined as "the highest price on the date of valuation that would be
agreed to by a seller ... and a buyer ... each dealing with the other with full
knowledge of all the uses and purposes for which the property is reasonably
adaptable and available" (id., § 1263.320). (1) The constitutional
guarantee of "just compensation" is obviously intended to protect the
landowner, but it also protects the public by limiting its liability to losses
that can fairly be attributed to the taking. " 'A landowner is not
entitled to be placed in a better position financially than he was before the
condemnation; neither is the state required to pay more than land is worth
merely because of some theoretical, intangible concept.' " (San Diego
County Water Authority v. Mireiter (1993) 18 Cal.App.4th 1808, 1817 [23 Cal.Rptr.2d
455] (Mireiter), quoting City of Fresno v. Cloud (1972) 26
Cal.App.3d 113, 123 [102 Cal.Rptr. 874].)
(2) Here both parties sought to establish the fair market value of the subject
property through analyses, by expert appraisers, of "comparable sales."
(See Evid. Code, § 816; cf. id., § 819 [capitalized income approach].)
Under this method, the appraiser identifies sales of properties deemed to
resemble the condemned property in relevant respects, and then derives a market
value for the condemned property from the prices paid for these
"comparables," typically adjusting the price to reflect such matters
as material differences between the properties and differences in market forces
between the time and location of the comparable sale and that of the property
being valued.
(3a) Prior to trial the Agency moved in limine to bar Elementis from using, as
comparables, any "sales of property to the Redevelopment Agency." The
motion asserted that 6 of the 15 transactions disclosed prior to trial as a
basis for the appraisal by defendant's witness Clevenger were *1095
purchases by the Agency, for public use, of property it could have condemned,
and were therefore inadmissible under Evidence Code section 822, subdivision
(a)(1) (section 822(a)(1)). The court denied the motion. At trial, Clevenger
relied on 12 comparables, of which three were purchases by the Agency of
properties neighboring the Elementis land.
This evidence should have been excluded under section 822(a)(1), which at the
time of trial provided as follows: "(a) In an eminent domain or inverse
condemnation proceeding, ... the following matter is inadmissible as evidence
and shall not be taken into account as a basis for an opinion as to the value
of property: [¶] (1) The price or other terms and circumstances of an
acquisition of property or a property interest if the acquisition was for a
public use for which the property could have been taken by eminent domain,
except that the price or other terms and circumstances of an acquisition of
property appropriated to a public use or a property interest so appropriated
shall not be excluded under this section if the acquisition was for the same
public use for which the property could have been taken by eminent
domain."
(4) We first reject Elementis's assertion that the decision whether to admit
the evidence in question, over an objection based on the foregoing statute, is
subject to deferential review as a matter entrusted to the trial court's
discretion. Whatever section 822(a)(1) means, it does not confer a
discretionary power on the trial court. It categorically excludes evidence of a
specified character, subject to a stated exception. [FN2] (5) Nor is there any
dispute as to the relevant facts. Accordingly we must exercise our independent
judgment in reviewing the ruling at issue. "The interpretation of a
statute ... is a question of law ...." (California Teachers Assn. v.
San Diego Community College Dist. (1981) 28 Cal.3d 692, 699 [170 Cal.Rptr.
817, 621 P.2d 856].) "A trial court's interpretation of a statute is
reviewed de novo," and "the application of a statutory standard to
undisputed facts is reviewed de novo." (Harustak v. Wilkins (2000)
84 Cal.App.4th 208, 212 [100 Cal.Rptr.2d 718].)
FN2 Evidence otherwise barred by section 822(a)(1) may become admissible
where there is "no relevant, comparable market" for the condemned
property. (Evid. Code, § 823.) Elementis does not rely on this statute. None of
the appraisers had any difficulty finding other comparable properties.
(6) We also reject any suggestion that the statute was intended only, or
primarily, for the protection of property owners, and thus should have little
or no effect where, as here, the condemnee offers evidence of other
acquisitions for a public use. The only support offered for such a view is a
dictum *1096 in County of Los Angeles v. American Sav. &
Loan Assn. (1972) 26 Cal.App.3d 7, 13 [102 Cal.Rptr. 439], that the purpose
of section 822(a)(1) is "to preclude use of the price or other terms that
may have been acceded to by the transferor only because of the threat of
condemnation." This statement cannot justify a departure from the language
of the statute, which on its face embodies the former court-made rule that
"it is not competent for either party in a condemnation proceeding
to put in evidence the amount paid by a condemning party to the owners of
adjacent lands, however similar they may be to that in controversy, because the
price paid under such circumstances 'is not a reasonable or fair test of market
value.' " (City of Los Angeles v. Cole (1946) 28 Cal.2d 509,
517-518 [170 P.2d 928], italics added; see Ventura County Flood Control
Dist. v. Campbell (1999) 71 Cal.App.4th 211, 222 [83 Cal.Rptr.2d 725]; cf. County
of Los Angeles v. Faus (1957) 48 Cal.2d 672, 680 [312 P.2d 680] [arguably
overruling Cole on this point, but itself abrogated to that extent by §
822(a)(1)].) As discussed more fully in the following section, the price
distortions in such a transaction are at least as likely to favor the seller as
the buyer. (See discussion at p. 1107, post.)
(3b) We turn to the question whether the Agency's purchases here fall within
the rule declared by the statute, i.e., that evidence of an acquisition of
property is categorically inadmissible "if the acquisition was for a
public use for which the property could have been taken by eminent domain
...." (§ 822(a)(1).) It is undisputed that the evidence here fit this
description. The Agency purchased these properties for redevelopment, a public
use. Accordingly those purchases were inadmissible unless they came within an exception
to the statutory rule of inadmissibility.
As in effect at trial the statute's single exception exempted evidence of
"an acquisition of property appropriated to a public use ... if the
acquisition was for the same public use for which the property could have been
taken by eminent domain." (Former § 822(a)(1); Stats. 1987, ch. 1278, § 1,
p. 4548, italics added.) Elementis has never attempted to show that the
purchases here fall within this exception, and we are satisfied that they do
not. The exception applies only to acquisitions of "property appropriated
to a public use," which generally means property already in public use.
This phrase is most commonly used where an entity seeks to condemn property
already put to a public use by another entity charged with a public function.
(See Code Civ. Proc., § 1235.180 [defining " '[p]roperty appropriated to
public use' " as "property either already in use for a public purpose
or set aside for a specific public purpose with the intention of using it for
such purpose within a reasonable time"]; id., § 1240.510 [one
authorized to exercise power of eminent domain may take property
"appropriated to public *1097 use" where taking will
not unduly interfere with existing use]; id., § 1240.610 [entity may
take property where new use is "a more necessary public use than the use
to which the property is appropriated"]; id., § 1240.650, subd. (a)
[new use is deemed more necessary than existing use where second taker is
public entity and current holder is not]; Health & Saf. Code, § 33395
[redevelopment agency may take "property already devoted to a public
use," but "[p]roperty of a public body shall not be acquired without
its consent"].)
That the exception applies only to property already in public use is also
evident from the legislative history. Prior to 1986, the statute excluded all
evidence of acquisitions for a purpose for which the property could have been
taken by eminent domain. (Stats. 1980, ch. 381, § 5, p. 758.) Toward the end of
the 1986 session, the Legislature amended the statute, by negative
qualification, so that the statute only barred evidence of acquisitions of
"property not appropriated to a public use." (Stats. 1986, ch. 1238,
§ 2, p. 4349.) In 1987, the Legislature restated this qualification as an
affirmative exception and further qualified the exception so that it
only applied "if the acquisition was for the same public use for which the
property could have been taken by eminent domain." (Former § 822(a)(1);
Stats. 1987, ch. 1278, § 1, p. 4548.)
Contemporaneous evidence of legislative intent establishes that (1) the 1986
amendment was never intended to apply to acquisitions of private property, but
was aimed at a very specific category of public utility property; and (2) the
1987 amendment was an attempt to correct a perceived overbreadth in the
1986 amendment by further limiting the class of transactions which would be
admissible. [FN3] An undated "Author's Statement," addressed to an
unidentified committee (presumably the Assembly Committee on the Judiciary),
states that the 1986 amendment "sought to correct a problem for water
districts in that the only comparables were other water districts. [FN4]
The intent was to provide comparables, but the language is too broad
.... [¶] [This bill] will allow the purchase price of a public property
to be used as a 'comparable' only when the same public use will be
continued ...." (Assemblyman Harris, Author's Statement on Assem. Bill No.
616 (1987-1988 Reg. Sess.), p. 1, italics added.) An Assembly committee
analysis *1098 reports the view of the originating agency that
the 1986 amendment permitted evidence of "acquisition[s] of comparable
property that is already in public use .... [¶] ... [¶] ... [T]he
exception ... is too broad because it permits the use of a price paid for
public property ... without regard [to] whether the acquisition was for a
purpose for which the acquiring agency had the power to condemn the
property." (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 616 (1987-1988
Reg. Sess.), for hearing of May 13, 1987, at pp. 1-2, italics added.)
Similarly, a Senate committee analysis noted that under the 1986 exception,
"the admission and use of ... an acquisition of property that is already
in public use is permitted .... [T]he price paid by a public entity to a private
owner is generally inadmissible but the price paid for public property
between public entities may be admissible .... [¶] This bill narrows the
exception to the general rule ...." (Sen. Com. on Judiciary, Analysis
of Assem. Bill No. 616 (1987-1988 Reg. Sess.), as amended July 1, 1987, for
hearing of July 7, 1987, at pp. 1-2, italics added.)
FN3 In support of its motion in limine the Agency requested
judicial notice of copies of the materials quoted in this paragraph. So far as
we can tell, Elementis raised no objection to the request. We discern no
potential objection other than one of authenticity. We have discovered the same
materials through independent research. We conclude that they are properly before
us.
FN4 As adopted, the bill making the 1987 amendment also created a
new statute (Pub. Util. Code, § 1405.1) which affected only the condemnation of
property belonging to "water corporations" or "water
companies." (Stats. 1987, ch. 1278, § 2, pp. 4549-4551.)
In sum, the statute as in effect at trial prescribed (1) a rule of excluding
acquisitions for public use, which rule plainly applied to the purchases in
question; (2) an exception for property already in public use,
which exception plainly did not apply; and (3) a limitation on the
exception, which was irrelevant because the exception was inapplicable by
its core terms.
Elementis makes no attempt to explain how the purchases here could be admitted
consistent with the statutory language or history. Instead it cites City and
County of San Francisco v. Golden Gate Heights Investments (1993) 14
Cal.App.4th 1203 [18 Cal.Rptr.2d 467] (Golden Gate). In that case
another division of this court affirmed a judgment despite the trial court's
admission of evidence, over the condemnee's objection, of a city's purchase of
neighboring properties. The condemnee contended that the 1987 amendment to
section 822(a)(1) applied only to utility property. The court seemed to dismiss
this interpretation, stating, "We do not read the statute as so limited.
Nor does [the condemnee's] cited authority so state." (Golden Gate,
at p. 1210, citing 1 Matteoni & Veit, Condemnation Practice in Cal.
(Cont.Ed.Bar supp. 1992) § 9.49, p. 161.) But the court offered no
interpretation of its own. Instead it held that any error in the admission of
the evidence was harmless. (Ibid.)
We are uncertain that Golden Gate is properly understood to hold
that the evidence there was admissible. Certainly no supporting analysis or
rule of decision is provided. So far as we can tell, any attempt to follow that
case would read section 822(a)(1) right out of the code. In any event, the
matters *1099 we have already discussed compel us to conclude
that the evidence here fell squarely within the general rule of
inadmissibility.
We also note that in 2000 the Legislature again amended the statute. As
amended, the statute continues to declare the general inadmissibility of
"an acquisition of property ... for a public use for which the property
could have been taken by eminent domain." (§ 822(a)(1).) In place of the
confusingly qualified 1987 exception, the statute now provides, "The price
or other terms and circumstances shall not be excluded pursuant to this
paragraph if the proceeding relates to the valuation of all or part of a water
system as defined in Section 240 of the Public Utilities Code." (Ibid.,
italics added.)
A Senate Floor Analysis indicates that the California Law Revision Commission,
which sought the 2000 amendment, considered the prior language "confusing,"
and believed that the court in Golden Gate had "misconstrued this
poorly drafted exemption ... [by] allowing evidence of prices paid by the same
condemnor to acquire adjacent private property for public use." (Sen. Com.
on Judiciary, Office of Floor Analyses, Analysis of Assem. Bill No. 321
(1999-2000 Reg. Sess.) as amended Aug. 16, 1999, pp. 3, 4
[<http://www.leginfo.ca.gov/pub/99- 00/bill/asm/ab_0301-0350/ab_321_cfa_
19990824_173049_sen_floor.html> [as of Aug. 9, 2002]].) According to the bill's
author, the 1986 and 1987 amendments were "created for the acquisition of
property by water districts." (Ibid.; see also Assem. Floor
Analysis of Assem. Bill No. 321 (1999-2000 Reg. Sess.) as amended May 6, 1999,
pp. 1-2 [<http://www.leginfo.ca.gov/pub/99-00/bill/asm/ab_ 0301-0350/
ab_321_cfa_19990514_164948_asm_floor.html> [as of Aug. 9, 2002]] ["CLRC
recommended this 'clarification' after an appeals court misinterpreted Evidence
Code Section 822."].)
These amendments postdated the trial in this matter and therefore cannot, of
their own force, govern the issue before us. (7) But while the interpretation
of existing laws is a quintessentially judicial function, courts may and must
give due consideration to the Legislature's stated views on "the prior import
of its statutes." (Western Security Bank v. Superior Court (1997)
15 Cal.4th 232, 244 [62 Cal.Rptr.2d 243, 933 P.2d 507]; see ibid.,
quoting California Emp. etc. Com. v. Payne (1947) 31 Cal.2d 210, 213-214
[187 P.2d 702] [" '[A] subsequent expression of the Legislature as to the
intent of the prior statute, although not binding on the court, may properly be
used in determining the effect of a prior act.' "]; Hunt v. Superior
Court (1999) 21 Cal.4th 984, 1007-1008 [90 Cal.Rptr.2d 236, 987 P.2d 705].)
(3c) In adopting the 2000 amendment the Legislature confirmed that the statute
does not authorize the admission of evidence of acquisitions of property
privately *1100 held for private use. To this extent, at least,
we believe that amendment both declared, and accurately characterized the
effect of, existing law.
In sum, section 822(a)(1) has always barred evidence of acquisitions for public
use of purely private property. The purchases at issue here fell squarely
within this ban, and were inadmissible. Accordingly, it was error to admit
evidence of these purchases over the Agency's objection.
II. Contractual Recital in Comparable Sale
(8a) The
expert appraisal witnesses for both sides accepted as a comparable sale, and
relied for their valuations upon, the 1997 sale of the "Ikea
property," which straddled the boundary between the cites of Emeryville
and Oakland. The purchase price for the property was stated in the governing
contract as "$21.00 per foot, which equals $14,148,592.92." However,
in pretrial discovery it emerged that Elementis's appraiser Clevenger set a
per- square-foot value of $27.64 on the Emeryville portion of the
property. Asked in deposition how he arrived at this figure, he alluded to a
contract provision purporting to "allocate[]" specified proportions
of the purchase price between the Emeryville and Oakland portions of the
property. [FN5] When pressed by counsel to explain his reasoning, he merely
cited this provision, saying, "That's what it says. You didn't read
it."
FN5 "Allocation of Purchase Price. Seventy-three percent
(73%) of the applicable Purchase Price is allocated to the portion of the
Property situated in the City of Emeryville and the remaining twenty-seven
percent (27%) of the applicable Purchase Price is allocated to the portion of
the Property situated in the City of Oakland. The Purchase Price shall be
payable on the Closing Date in Cash upon the Close of Escrow."
Based on these facts the Agency moved in limine "[t]o preclude evidence
contesting the purchase price of ... the Barbary/Ikea sale at $21 per square
foot, or, in the alternative for judicial determination of the purchase price
of that sale as intended by the purchase agreement." The Agency cited,
among other things, the rule against "appraising the comparable," as
codified in Evidence Code section 822, subdivision (a)(4) (see p. 1102, post).
Plaintiff asserted that the cited provision of the contract was probably
intended to minimize the seller's liability for Oakland's real estate property
transfer tax, which had no parallel in the City.
The trial court denied the motion, writing: "The plain language of the
contract ... allocates the purchase price between two zones of the property.
The trier of fact is entitled to hear and weigh the expert opinions regarding *1101
the allocation and whether there is a fair market value difference between the
portion of the [Ikea] property located in Emeryville versus the property
located in Oakland."
This was error. The recital as to the "allocation" between the two
"zones" of the property was inadmissible both as direct evidence and
as a basis for Clevenger's expert opinion. To begin with, it was inconsistent
with the purpose for which comparable sales are admitted, which is to
"giv[e] the jury the benefit of some 'objective' market evaluation
against which to check an appraiser's valuation [citation]." (People ex
rel. Dept. Pub. Wks. v. Reardon (1971) 4 Cal.3d 507, 515 [93 Cal.Rptr. 852,
483 P.2d 20], italics added.) The objective datum in a real estate sale
is the consideration actually given for the property purchased.
It is this exchange of values which defines the market and provides an
objective benchmark for other exchanges of comparable properties.
The only "objectively determinable market" price in the Ikea contract
was the sum agreed to be paid for the property as a whole, i.e.,
$14,148,592.92. The "allocation" provision had no effect on the
exchange of values between the parties and carried no assurance that it
accurately reflected market forces. Nor did it have any discernible effect on
the legal relations of the contracting parties. It was not a contractual
undertaking, but a declaratory statement on a matter of no apparent consequence
as between the signatories. The law has long distinguished between a
"covenant" which creates legal rights and obligations, and a
"mere recital" which a party inserts for his or her own reasons into
a contractual instrument. Recitals are given limited effect even as between the
parties. [FN6]
FN6 See McDonough v. Chu Chew Shong (1937) 21 Cal.App.2d
257, 259 [68 P.2d 976] (designation of offenses in contract to indemnify bail
bondsman was a "mere recital and form[ed] no part of the contractual
obligation"); County of Los Angeles v. Farnsworth (1935) 4
Cal.App.2d 516, 522 [41 P.2d 577] (reference to county's prior acceptance of
highways for dedication "was nothing more than a recital of something that
had already taken place and was not in any sense contractual"); Hunt v.
United Bank & Trust Co. (1930) 210 Cal. 108, 115 [291 P. 184] (while
recitals may operate as covenants if intended to effect an undertaking,
"[t]he essential feature of a contract is the promise"); O'Sullivan
v. Griffith (1908) 153 Cal. 502, 506 (recitals concerning issuance of
franchises to grantors "d[id] not state any contract or agreement on the
part of the grantors," but "merely declare[d] the chain of
title" and "serve[d] as a more particular description of the thing
[granted]"; while "[t]hey might constitute an estoppel against the
grantors," they "d[id]
not express any agreement"); cf. Golden West Baseball Co.
v. City of Anaheim (1994) 25 Cal.App.4th 11, 37-38 [31 Cal.Rptr.2d 378]
(provision of lease was not " 'mere' recital," and even if it was,
resort to it was necessary to interpret covenants).
The recital here does not even concern a matter of fact but states at
most the opinion of one or both parties that one part of the property is
more *1102 valuable than another. Statements of opinion are
admissible in evidence only when they satisfy the requirements of Evidence Code
section 800 et seq. Evidence Code section 822, subdivision (a)(4) (section
822(a)(4)) renders inadmissible "[a]n opinion as to the value of any
property or interest other than that being valued." The
"allocation" provision recited an opinion concerning the relative
value of two portions of the Ikea property. Since each such portion was
"a[] property or property interest other than that being valued"
(i.e., other than the Elementis property), the recital was an appraisal of the
comparable (or a part thereof) and was inadmissible under section 822(a)(4).
Elementis contends that the allocation provision was admissible on a "
'zone of value' " theory under Mireiter, supra, 18
Cal.App.4th 1808, 1818. The question there was whether an appraiser could
permissibly derive a value by dividing the condemned property into three
"zones" and analyzing comparable sales for each. The court's analysis
has no bearing on an attempt, such as the one here, to divide a comparable
property into "zones" and allocate a purchase price between them.
Such an attempt is a patent appraisal of the comparable barred by section
822(a)(4).
Similarly unavailing is Elementis's citation of People v. University Hill
Foundation (1961) 188 Cal.App.2d 327, 333 [10 Cal.Rptr. 437]. The court
there found "no prejudicial error" in connection with an appraiser's
testimony purporting to allocate a comparable sale between land and buildings.
From the opinion we cannot ascertain the nature of the objection in the trial
court or of the point being urged on appeal. In any event the case, like Mireiter,
supra, 18 Cal.App.4th 1808, fails to mention the rule against appraising
the comparable. (9) "Cases are not authority for propositions not
considered." (City of Oakland v. Public Employees' Retirement System
(2002) 95 Cal.App.4th 29, 57 [115 Cal.Rptr.2d 151].)
(8b) Section 822(a)(4) was duly invoked here. It operated not only to bar
direct evidence of the "allocation" recital, but also to prevent its
being "taken into account as a basis" for appraisal testimony. (§
822(a)(4).) The trial court erred by permitting the recital to be admitted in
evidence and relied upon by the witness Clevenger.
III. Evidence of Project
(10) Plaintiff moved in limine to exclude evidence of a
development project, generally referred to below as the Emeryville Town Center
project, *1103 in which it planned, and had agreed with a
developer, to include the subject property. Plaintiff cited the rule that
evidence of a specific plan or project is inadmissible to show the value of the
subject property. (Code Civ. Proc., § 1263.330 ["The fair market value of
the property taken shall not include any increase or decrease in the value of
the property that is attributable to ... [¶] (a) The project for which the
property is taken ...."]; Merced Irrigation Dist. v. Woolstenhulme
(1971) 4 Cal.3d 478, 491 [93 Cal.Rptr. 833, 483 P.2d 1] ["the increase in
value which a condemned tract gains when it is valued as part of the proposed
project ... could never be considered in determining 'just compensation' under
the established definition of 'market value' " (italics omitted)].)
The trial court denied the motion. Citing City of Los Angeles v. Decker
(1977) 18 Cal.3d 860 [135 Cal.Rptr. 647, 558 P.2d 545] (Decker) the
court wrote that "evidence of the Emeryville Town Center project" was
admissible "to help demonstrate the highest and best use of the
property," and "to rebut plaintiff[']s contentions that the property
is stigmatized and not suitable for development."
This ruling cannot be sustained. In Decker, supra, 18 Cal.3d 860,
a city sought to condemn land near an airport. The "principal valuation
issue at trial" was the highest and best use for the property. (Id.
at p. 864.) The landowner's appraiser testified that the highest and best use
was airport related purposes, "especially parking." (Ibid.)
The city's appraisers testified that the highest and best use was residential.
(Ibid.) In argument to the jury, the city's attorney denied that there
was demand for airport parking. (Id. at pp. 864-865.) The jury found a
value based on residential use. (Id. at p. 865.) Shortly after entry of
judgment, the city approved an environmental impact report recommending
construction of a parking facility on the property. (Ibid.) It was
assumed that the city knew, at the time of trial, that the property was going
to be used for a parking lot. (Id. at p. 866.)
The court considered the "intersection of ... two rules" (Decker,
supra, 18 Cal.3d 860, 867), i.e., (1) that "condemned property is not
to be valued as part of the proposed improvement" (id. at p. 866),
and (2) that " '[i]f ... the condemnor's proposed use is one of the
highest and best uses of the property, the adaptability of the property for
that purpose may be shown by the property owner' " (id. at p. 867,
quoting 12 Cal. Law Revision Com. Rep. (1974) § 1263.330, p. 1834). The court
reasoned that "[t]he city's determination as to the adaptability of the
property for airport parking purposes was relevant to show that the property in
the hands of defendant and not as part of the project could have been used for
airport parking." *1104 (Decker, at p. 869, italics
omitted.) Thus "the evidence of the city's determinations as to the need
for airport parking and the suitability of defendant's property for such
purpose would have been admissible to show the highest and best use of the
property in the hands of defendant." (Ibid.) The court held that
the city, through its attorney, committed misconduct warranting reversal. (Id.
at pp. 871-872.)
The present case bears virtually no resemblance to Decker, supra, 18
Cal.3d 860. There the question of highest and best use was disputed, with the
condemnor "den[ying] that the use which it was in fact going to make of
the property was the highest and best use," and "even conceal[ing]
such fact from defendant." (Id. at p. 867.) Here it was undisputed
that the highest and best use for the property was mixed commercial use. Nor
did the Agency suggest, as the condemner did in Decker, that there was
no "need" for mixed commercial property. Rather counsel for the
Agency said, in her opening statement, "No one disagrees about the highest
and best use of this property. Everyone agrees that ultimately this property
can be used for some sort of mixed-use commercial/retail development." Counsel
for Elementis said the same thing in his closing jury argument, referring to
the property's "highest and best use, which everyone is agreeing is a
mixed-use shopping center." The court itself, in ruling on another motion
in limine, noted that one of defendant's experts "agree[d] that the
highest and best use of the subject property is mixed commercial uses
encompassing retail, food and beverage and entertainment."
Because these matters were undisputed, the rationale for admitting the evidence
in Decker was inapplicable. Other cases cited by defendant are likewise
inapposite. In People ex rel. Dept. of Transportation v. Tanczos (1996)
42 Cal.App.4th 1215 [50 Cal.Rptr.2d 70], it was error to exclude evidence of
the condemnees' building plans, because the condemnor made feasibility
"the central issue" by contending that the property could not
accommodate a use of the type depicted in the plans. (Id. at p. 1219.)
Excluding the evidence prevented the condemnees from "defend[ing] their
position [or] challeng[ing] the State's." (Id. at p. 1220.) In People
v. La Macchia (1953) 41 Cal.2d 738 [264 P.2d 15], an unspecified
"portion" of testimony concerning the condemnees' plans was properly
admitted "as a description of the uses to which the properties were
adaptable," but the majority of the testimony was objectionable as falling
"squarely within the rule which prohibits the admission of evidence
concerning an owner's purposes with regard to his property." (Id.
at p. 752.) The prejudicial effect of the latter evidence, however, was
"offset" by other similar evidence received without objection. (Ibid.)
In San Diego Metropolitan Transit Development Bd. v. Cushman (1997) 53
Cal.App.4th 918, 929 *1105 [62 Cal.Rptr.2d 121], evidence of
certain diagrams showing where an existing building might be expanded was held
admissible in support of a claim for severance damages where it did not
constitute evidence of "a specific plan."
We believe the lesson of Decker and similar cases is that evidence of
specific project plans is inadmissible in the absence of specific facts or
points of contention which demonstrably enhance the probative value of the
evidence to a point where it outweighs the inherent potential for prejudice.
That test is not satisfied merely because the plans "illustrate" or
"demonstrate" an undisputed potential use for the property. If
evidence of project plans could be introduced on that rationale, it would seem
to be admissible in every case, and the rule to which Decker is
an exception would cease to exist.
The trial court also indicated that evidence of the Agency's plans was
admissible to rebut the Agency's evidence that development of the property
would encounter barriers such as "stigma" and the costs and
risks of hazardous substance remediation and archaeological mitigation. Thus
the court said, "I expect there is going to be some expert testimony from
the Agency or offered by the Agency that suggests that this is very difficult
property, a person or an entity going into the negotiation process for the
acquisition of this property would be very concerned about all the downside
risks to this property, and it seems to me that it is relevant. [¶] And I think
Decker permits the defendants in this instance to say, Yes, those are
factors to be considered, but it's also true that good things have happened
from the development of similarly situated property in this area or in this
vicinity."
The court thus concluded that evidence of the Agency's plans, and apparently of
its dealings with the proposed developer, had sufficient probative value with
respect to the feasibility of development to outweigh the risk that the
jury would improperly consider those plans and dealings in determining value.
In fact, however, the Agency's expectation that it (or a
developer aided by it) could surmount obstacles to development had little
tendency to show how a hypothetical buyer in the open market would have viewed
those obstacles. Almost any property can be developed; the
question is at what cost. (See Roemer v. Pappas (1988) 203 Cal.App.3d
201, 210 [249 Cal.Rptr. 743] (conc. opn. of Poch, J.) ["Aside from the
crater of an active volcano, there is probably no piece of land that cannot be
developed, given a big enough investment of money and effort." (Italics
omitted.)].) The very function of a redevelopment agency is to restore to
productive use properties suffering from "blight," which can only be
developed to productive use with public assistance. (See Health & Saf.
Code, §§ 33030, 33031.) It is thus the *1106 declared policy of
the state "[t]hat whenever the redevelopment of blighted areas cannot
be accomplished by private enterprise alone, without public
participation and assistance in the acquisition of land, in planning and in
the financing of land assembly, in the work of clearance, and in the
making of improvements necessary therefor, it is in the public interest to
employ the power of eminent domain, to advance or expend public funds for
these purposes, and to provide a means by which blighted areas may be
redeveloped or rehabilitated." (Id., § 33037, subd. (b), italics
added.)
The function and powers of redevelopment agencies, as well as the prescribed
conditions for exercising those powers, militate distinctly against the
supposition that such an agency's plans for a property tend to show what a
buyer on the open market would expect to pay for developing that same property.
Agency counsel here asserted that the project was "taking such enormous
public subsidies that it could never be built by the private market." If
the landowner were free to rely on evidence of the Agency's intentions to show
economic feasibility, it would seem equally logical for the agency to respond
with evidence of all the direct and indirect subsidies and other forms of
assistance it and other public entities expected to provide in support of the
project. The landowner would presumably counterattack with criticism of the
Agency's decisions, perhaps presenting a sample of unguarded comments from
records of agency proceedings. The jury would be drawn into something approaching
a referendum on the condemnor's conduct. When the smoke cleared the jury might
be prejudiced in any number of ways for or against either party. The surest
outcome is that it would have been grossly distracted from the issue at hand,
which is the market value of the property.
The Agency's plans for the property are admissible only if, and to the extent,
they are shown to possess a distinct and substantial probative value other
than to establish points on which there is no controversy. Since no such value
was ever identified here, it was error to admit evidence of those plans.
IV. Prejudice
(11) We
are satisfied that the foregoing errors require reversal in that, had they not
been made, the jury would probably have fixed the fair market value at a figure
more favorable to the Agency.
Elementis argues that the evidence of Agency purchases was harmless because, of
the 25 sales cited by the appraisal witnesses, only three were Agency
purchases. Those three purchases, however, seem to have played a *1107
central role in Elementis's trial strategy. They were the first comparables
discussed by counsel in his opening jury summation. They also formed a primary
basis for a complex network of prejudicial insinuations concerning the Agency's
conduct before and during trial.
One such insinuation, conveyed through questioning of a member of the Agency's
governing board and a member of its staff, suggested that if the price paid for
these properties exceeded fair market value, it constituted a "gift"
of "taxpayer funds" or "public funds." This suggestion was
inaccurate at best. California law encourages a condemner to make a generous
settlement offer before taking any condemnation case to trial, and exposes the
condemner to adverse consequences if the offer is found to be unreasonable.
[FN7] Under the statutory constraints thus imposed, one would expect a prudent
condemner to offer its best estimate of fair market value plus some
reflection of its own savings from avoiding trial, with a further upward
adjustment for elimination of potential liability for the condemnee's
litigation expenses. The chances seem good that such an offer would exceed the
fair market value of the property. Indeed courts have recognized that a
prospective condemner may well pay a price in lieu of condemnation "more
generous than is required under the Constitution." (Klopping v. City of
Whittier (1972) 8 Cal.3d 39, 51-52, fn. 4 [104 Cal.Rptr. 1, 500 P.2d 1345];
see South Bay Irr. Dist. v. California-American Water Co. (1976) 61
Cal.App.3d 944, 984 [133 Cal.Rptr. 166] ["a public agency may agree upon a
price more favorable to the seller than a private investor would agree
upon"]; ibid., quoting the trial judge [" 'historically
governmental agencies have paid a premium over earnings when acquiring utility properties'
"].)
FN7 In all cases a condemner must make a "final offer of
compensation" prior to trial. (Code Civ. Proc., § 1250.410, subd. (a).) If
the trial court ultimately finds that the offer was unreasonable, it
"shall" allow the condemnee to recover "litigation
expenses," including attorneys fees, expert fees, and trial preparation
costs. (Code Civ. Proc., §§ 1250.410, subd. (b), 1235.140.) Moreover, at least
where an acquisition will displace an existing use, the condemner must
"make every reasonable effort" to acquire the property "by
negotiation." (Gov. Code, § 7267.1, subd. (a); see § 7267.)
Counsel's contrary suggestion apparently rests on the concurring opinion in Redevelopment
Agency v. Gilmore (1985) 38 Cal.3d 790, 809 [214 Cal.Rptr. 904, 700 P.2d
794], which Elementis quotes in its brief on appeal. There Justice Mosk wrote
that "to assess more than just compensation runs the risk of
violating the prohibition against making a gift of public funds. (Art. XVI, §
6.)" (Ibid., italics added.) But he was not speaking of purchases
in lieu of condemnation; he was speaking of judicial rules awarding excessive
compensation in litigated cases. (Ibid.) Indeed it was also
Justice Mosk who wrote the opinion in Klopping v. City of Whittier, supra,
8 Cal.3d 39, in *1108 which a unanimous court flatly contradicted
the premise that the price paid in lieu of condemnation cannot lawfully exceed
fair market value.
Counsel's suggestion to the contrary was not only inaccurate but also highly
damaging to the Agency's position. It created obvious impediments to any
inference setting a fair market value below what the Agency had paid for
neighboring properties. The denials by Agency witnesses of any "gift of
public property" strengthened the inference that the prices paid for these
properties were in fact at or below fair market value-the very inference
proscribed by section 822(a)(1). Counsel sought to reinforce this inference by
arguing that these purchases were "Agency-controlled transactions,"
presumably meaning that the prices paid must be low because of "what
happens when you go to fight City Hall." And should the jurors conclude
that any of the sums paid exceeded fair market value, they were faced
with the unsavory spectacle of a "gift of public funds." Counsel also
suggested that the price paid for these properties, whether above or below
market value, should set a minimum level for the jury's verdict because
otherwise the Agency would have succeeded in perniciously discriminating
against Elementis by treating it differently from its neighbors.
The evidence of Agency purchases also played an implicit role in counsel's
attempts to paint Elementis as the victim of an Agency strategy to suppress
evidence of the subject property's true value. In this context, the Agency's
failure to itself present evidence of its purchases of neighboring properties-a
failure reflecting its correct belief that the evidence was categorically
inadmissible-supported the overall attack on the credibility of the Agency's
evidence, and that of its appraiser.
We note that even without these prejudicial inferences, the jury's finding of
fair market value probably rested in significant part on at least one of the
subject purchases: the "Sepulveda Property," which was immediately
adjacent to the Elementis property. Elementis's appraiser Clevenger testified
that the Sepulveda sale took place in "November '98, almost right exactly
on [the] valuation date" of the Elementis property. He said that the
purchase reflected a negotiated "agreement of the market value." He
said that he understood the purchase documents to reflect a belief by the
"parties to that transaction ... that ... a fair market value was
being paid." He also asserted that the Sepulveda property was "highly
contaminated with the same kind of material or chemical that the subject
property is contaminated *1109 with." [FN8] The Agency paid
$28.50 per square foot for the Sepulveda property. The jury fixed the value of
the Elementis property at $29 per square foot. These nearly identical values
strongly suggest that the jury weighed the Sepulveda property heavily in its
calculations.
FN8 A foundational objection to the last-quoted testimony was
sustained in mid-answer, but it is impossible to tell what portion of the
answer was deemed objectionable, and no part of it was stricken.
The inference of prejudice that rises from the admission of the Agency
purchases takes on added weight from the other errors we have noted. The
evidence of the "allocation" provision in the Ikea purchase contract
was likely to encourage the jury to fix a higher value by providing a seemingly
"hard" number of $27.64 per square foot-much closer to the found
value of the Elementis property ($29) than the actual $21 price, which was the
only figure properly drawn from the Ikea contract.
Likewise the evidence concerning the Agency's plans for the condemned property
contributed significantly to the overall likelihood that the jury fixed a
higher value than it would have allowed in the absence of the errors. In jury
argument counsel accused the Agency of using the condemnation of the Elementis
property case as a "cost recovery vehicle ... to subsidize its shopping
center." He later returned to this point: "At the end of the day,
they're trying to undercompensate this property owner in order to subsidize
their property, pure and simple, and it's an end-justifies-the-means
mentality which ignores the rights of the property owner, which are the only
thing at issue here. The question isn't whether or not they get to build
their shopping center on that property. The question is should we get paid
the fair market value." (Italics added.) Elsewhere counsel cited the
intended use to trivialize the Agency's decontamination efforts, referring to
"the remediation efforts that the City wanted to pursue for its shopping
center ...." Similarly counsel mocked an offer to purchase the property as
"essentially" saying, "Do our demolition, indemnify us, if
there's any cost overruns in our shopping center project, that's your
responsibility." (Italics added.)
In sum, the improperly admitted evidence had a natural tendency to adversely
affect the verdict in a number of respects. Evidence of Agency purchases
provided the foundation for raising the issue of a "gift of public
funds," and for all but compelling an inference that the price paid for
those properties was no higher than their market value. The Agency's own
failure to rely on those purchases raised an appearance that it was attempting
to hide relevant evidence. Those purchases also provided the sole basis for the
inflammatory suggestion that Elementis was the victim of unwholesome *1110
discrimination which the jury ought to remedy with a generous award. Evidence
of the "allocation" of the Ikea purchase price provided an inflated
starting point for the comparison of that purchase to the hypothetical sale of
the Elementis property. And the evidence of the Agency's intended plans for the
Elementis property provided a foundation for trivializing the Agency's
performance of its function and the very substantial hurdles it faced in
preparing the subject property for redevelopment. At least in combination,
these effects were prejudicial, requiring reversal for a new trial.
V. Fixtures and Equipment
(12a)
Plaintiff contends that the trial court erred by permitting Elementis to seek
compensation of $1,657,148 for fixtures and equipment situated on the condemned
property at the time of the taking. Elementis contends that the issue was
properly submitted to the jury and that plaintiff suffered no prejudice because
the jury only awarded $466,000. We believe any recovery exceeding the salvage
value of the equipment violated the principle of "consistent use,"
which was not rendered inapplicable by defendant's claim of a compensable
"interim use."
(13) Where condemned property includes fixtures or other improvements, they
must be "taken into account in determining compensation." (Code Civ.
Proc., § 1263.210, subd. (a) (section 1263.210(a)).) "Taken into
account," however, does not mean-as defendant's selective quotation would
suggest-that improvements must always be "paid for by the condemnor."
(Legis. Com. com., 19A West's Ann. Code Civ. Proc. (1982 ed.) foll. § 1263.205,
p. 24.) Rather, under section 1263.210(a), "[i]f the improvements serve to
enhance the value of the property over its unimproved condition, the property
receives the enhanced value; if the improvements serve to decrease the value of
the property below its unimproved condition, the property suffers the decreased
value." (Cal. Law Revision Com. com., 19A West's Ann. Code Civ. Proc., supra,
foll. § 1263.210, p. 26.)
Although we know of no case so stating, we have little doubt that California
law incorporates the principle of "consistent use," i.e., "that
land cannot be valued based on one use while improvements are valued based on
another." (The Appraisal Institute, The Appraisal of Real Estate (12th ed.
2001), p. 324; see Spano v. State of New York (1964) 22 A.D.2d 757 [253
N.Y.S.2d 730] ["It was error ... to award anything for the value of the
buildings while at the same time fixing the land value for commercial usage
since the two bases are entirely inconsistent."].) Thus a landowner cannot
*1111 recover compensation based on a use more valuable than the
existing one while simultaneously claiming recovery under section 1263.210(a)
for existing improvements that are incompatible with that use. This principle
would seem inherent in the Law Review Commission's recognition that
improvements can "decrease the value of the property below its unimproved
condition." (Cal. Law Revision Com. com., 19A West's Ann. Code Civ. Proc.,
supra, foll § 1263.210, p. 26; see also 1 Matteoni & Veit,
Condemnation Practice in Cal. (Cont.Ed.Bar 2d ed. through June 2002 update) §
4.18, p. 109 ["Often, when property is ready for immediate development,
the presence of older improvements may actually reduce the property's value
because of the cost of removal."]; 2 Smith et al., Cal. Civil Practice
Real Property Litigation (1994) § 15:92, p. 115.) [FN9]
FN9 "For example, a property may be improved with a
single-family residence, but the highest and best use of the land may be
commercial. In order to realize the value of the commercial land, the residence
will have to be removed. Unless the residence has some salvage value, the cost
of demolition and removal must be offset against the value of the land without
any improvements to arrive at the proper valuation." (2 Smith et al., Cal.
Civil Practice Real Property Litigation, supra, § 15:92, p. 115.)
(12b) Elementis does not dispute the soundness of this general principle, nor
that its factual premise was established here, i.e., the fixtures for which
defendant sought compensation were incompatible with the highest and best use
on which both parties predicated their appraisals of the property. As defense
expert Clevenger conceded, the property could not "be developed for its
highest and best use with the equipment in place." However, Elementis
contends that the rule of consistent use does not bar recovery for the fixtures
and equipment here because the existing use could have continued temporarily
until the property was ready for development. This prospect of "interim
use," Elementis contends, enhanced the overall value of the property. For
this proposition defendant quotes another section of the same text on which
plaintiff relies: "The use to which a site or improved property is put
until it is ready for its highest and best use is called an interim use.
Thus, interim use is a current highest and best use that is likely to
change in a relatively short time-say, five to seven years." [FN10]
(Appraisal Institute, The Appraisal of Real Estate, supra, pp. 323-324,
first italics in original.)
FN10 The Elementis appraisers were somewhat vague with respect to
the claimed duration of any "interim use," but did not suggest more
than three years. Clevenger referred to a period of "two or three
years." Defense expert Gimmy testified, "[Y]ou have to get
entitlements and get the property clean .... And that process generally takes one,
two or three years at the most. There's examples of projects in the
area taking up to
around two years or so before they're off the ground after the land is purchased."
Elementis's claim for the "interim use" value of the fixtures and
equipment runs afoul of the basic proposition that "in eminent domain
actions, *1112 ' elements affecting value which, while possible,
are not reasonably probable, should be excluded.' " (Humphries
Investments, Inc. v. Walsh (1988) 202 Cal.App.3d 766, 772 [248 Cal.Rptr.
800], quoting People v. Ocean Shore Railroad (1948) 32 Cal.2d 406, 426
[196 P.2d 570, 6 A.L.R.2d 1179]; State of Cal. ex rel. State Pub. Wks. Bd.
v. Wherity (1969) 275 Cal.App.2d 241, 246 [79 Cal.Rptr. 591].) Thus, in
order to justify a finding in Elementis's favor-or submission of the issue to
the jury-there must be substantial evidence that a period of interim use was
not only possible, but probable-probable enough, at any rate, to support an
inference that a hypothetical buyer and seller on November 1, 1998, would have
added something to the price to reflect this supposed value. Neither the
evidence of record nor any offer of proof or argument of counsel contains a
sufficient basis for such a finding.
A finding of compensable "interim use" will ordinarily require concrete
evidence of circumstances that could reasonably cause a buyer of the particular
property at issue to view the presence of incompatible improvements as a
net economic benefit rather than a net cost. The facts on which Elementis
relied did not approach such a showing. Elementis never identified any concrete
physical, legal, or economic obstacle, or other particular cause, that would
have been reasonably likely to prevent or deter a developer from entering the
property on the day title transferred and commencing the physical process of
development. At most defense counsel and witnesses offered generic assertions
that the property's transition to its highest and best use could be
delayed by demolition and remediation and by routine steps in development such
as planning the project, obtaining "entitlements" (i.e., permits),
and financing. Thus when defense expert Gimmy was asked "how would one go
about" continuing the existing use while "still pursu[ing] a shopping
center," he replied, "[Y]ou have to get entitlements and get the
property clean." But in the absence of some showing to the contrary,
"getting the property clean" would be incompatible with the
continued presence of existing improvements. As for "entitlements,"
defendant made no attempt to show the actual duration or likelihood of any
regulatory delay that might reasonably be expected to attend a development of
this kind. Gimmy's testimony only established a maximum delay of three
years, with an equally possible minimum delay of one year, or
perhaps less. (See fn. 10, ante.) Defense expert Clevenger testified
that "[i]n a normal course of events, a developer would buy the property
and take two, three years to make the plans, get his plans in shape, to get
them approved" (italics added), but he said nothing about why (or for
how long) such a developer would delay in entering and clearing the property in
order to be ready to carry those plans into effect. Indeed he never explicitly
linked these generic periods of delay *1113 to the "interim
use" claim. His testimony elsewhere cast serious doubt on the substance of
that claim by seeming to contemplate a period of interim use intended, at least
in part, as an accommodation to the seller, i.e., to permit the orderly
shutdown of the existing operation. Nothing in this record supports a belief
that such a factor is something for which the buyer would be reasonably
likely to pay $1.6 million, or $466,000, or any amount.
Moreover, apart from the ultimate conclusion that a buyer would contemplate a
period of interim use, Clevenger like Gimmy failed to identify any reasonably
probable reason for the buyer of this property to do so. Indeed
none of his testimony asserted that a buyer would be likely to do so;
instead he spoke in terms of mere possibility.
Defense counsel argued to both the court and the jury that a finding of
"interim use" was supported by various periods of time preceding
the valuation date. These arguments appear facially unsound, if only because
during the cited periods the property was not in the possession of anyone with
the power and inclination to undertake immediate development. It would seem far
more telling that as soon as the Agency acquired the right to possession, it
set about the demolition and removal of all improvements and the radical remediation
of the soil, such that by the time of trial the property was apparently almost
clean and ready for construction. It is conceivable that some obstacle would
have prevented a hypothetical purchaser from proceeding with similar alacrity,
but we are directed to no evidence to that effect, and our review of the
record has discovered none.
We conclude that the vague generalities offered by defendant's experts did not
constitute substantial evidence on which to predicate a finding that it was reasonably
probable that the prospect of such use would have enhanced, rather than
diminished, the value of the land in the eyes of the hypothetical buyer and
seller.
We note other dubieties in the claim for interim use. As defendant's equipment
appraiser freely admitted, the figure he gave for the fixtures, and which was
adopted in the appraisals of the property as a whole, was predicated on the
supposed value of the fixtures "in place, in use"-the same measure
that would have applied if the "interim" operation were expected to
continue for the life of the fixtures. [FN11] Gimmy justified his
adoption of this figure only by stating that in his opinion, the equipment
appraiser's "average *1114 depreciation of 80 percent
represented the actual value of that property and its remaining
usability." (Italics added.) But the "interim value" of the
fixtures to the buyer of the property would be a reflection not of their
"remaining life" as fixtures, but of their remaining usefulness as a
source of income from the underlying real property. We see no evidence
from which the jury could have derived this latter value. It is therefore no
answer to plaintiff's objection to say that the jury reduced defendant's claim
by nearly three-quarters. There was no basis in this record for the jury to
calculate any "interim use" value for the fixtures and
equipment. On the evidence submitted, the verdict necessarily rested on sheer
guesswork.
FN11 "[Y]our in-place/in-use value assumed the continued
utilization of the equipment on an ongoing basis on subject property. [¶] A.
That is part of the definition of fair market value in place in use, and yes, I
did. [¶] Q. You never valued it, for example, the equipment for say an
interim use of, say, two years. [¶] A. No. The issue of an interim
use is a real estate issue and is not relevant to what my job description is
nor to the appraisal of the personal property." (Italics added.)
"The job description that was given to me was to do two
values: Price of cost new and fair market value in place in use."
If defendant's approach to "interim use" were sustained, such a claim
could apparently be submitted in every case where property with existing
business- related improvements is taken for redevelopment to a higher and
better use. After eliciting generalizations from its experts about possible
delays in development, a landowner could recover the value of the real estate
at a higher and better use than the one he has made, while adding in a claim
for fixtures and improvements which are incompatible with that use.
(14) At its core the concept of interim use is intended for situations where
property is in the process of transition from a less valuable to a more
valuable use, e.g., from agricultural to residential development. The property
is worth more because of its future use, but market forces may not yet
have reached the point where it is economical to make the transition. The
property is essentially held as an investment for eventual development
to the higher use. During this period the continuation of the past,
soon-to-be-displaced use is valuable for helping to defray the carrying costs
that would otherwise be incurred by the buyer. (See Matteoni & Veit,
Condemnation Practice in Cal., supra, § 4.18, p. 106 ["Although the
highest and best use may be reasonably near, development to that use may not be
immediate."]; id. at p. 107, ["Income generated by property
that is in a state of transition to a higher use is sometimes referred
to as carrying value because it permits a developer to pay his holding
costs (e.g., taxes, purchase loan, interest) during the interim
period" (italics added)]; In re Mocco (Bankr. D.N.J. 1998) 222 B.R.
440, 457-458 [under New Jersey law, interim use means period during which
property destined for higher use is "h[e]ld for future development"
until "demolition and re-development is economically feasible"
(italics added)]; Woods v. State (1971) 36 A.D.2d 572 [317 N.Y.S.2d 782,
783] [where *1115 condemned acreage was surrounded by developed
land and was served by utilities, agricultural use on which condemner's expert
based valuation was "properly rejected by the court except as an interim
use"]; Pascack Motel, Inc. v. State (1972) 40 A.D.2d 919, 920 [338
N.Y.S.2d 204, 206] [award for interim use allowed, though reduced to reflect
"income approach," where appraisers agreed that highest and best use
was "future development as a shopping center or modern high rise
motel" (italics added)].) [FN12] This policy would not be served by
permitting a landowner to assert a claim for "interim use" based on
the mere suggestion that development to a higher and better use might or
"could" be delayed by routine steps in the development process,
without a concrete showing that the delay would probably appear, to a
hypothetical buyer and seller, sufficiently likely and lengthy to support a
price enhancement based on "interim use."
FN12 The point is also made in the latest edition of the
appraisers' text on which both parties have relied here: "In many
instances, a property's highest and best use may change in the foreseeable
future. For example, the highest and best use of a farm in the path of urban
growth could be for interim use as a farm, with a future highest and best use
as a commercial subdivision .... If the land is ripe for development at the
time of the appraisal, there is no interim use." (Appraisal Institute,
The Appraisal of Real Estate, supra, p. 307, italics added; see id.
at p. 310 ["In some cases an appraiser may conclude that the highest and
best use of a parcel is to hold the land for investment purposes-i.e.,
to remain vacant or to be employed in some interim use until development is
justified by market demand." (italics added)].)
(12c) Defendant also asserts that an award for fixtures and equipment was
authorized by Redevelopment Agency v. First Christian Church (1983) 140
Cal.App.3d 690 [189 Cal.Rptr. 749], and City of Los Angeles v. Hughes
(1927) 202 Cal. 731 [262 P. 737]. Neither of these cases has any discernible
relevance to the issues before us. Nor do we perceive any inequity in rejecting
defendant's claim for the supposed value of fixtures. Defendant received
compensation in the form of a valuation predicated on higher and better use
than it had ever seen fit to make of the property. It was not entirely deprived
of the value of the fixtures; only of their value to a use which would
inevitably be discontinued because it was incompatible with the property's
economic destiny. Plaintiff's demolition contractor testified that he received
about $30,000 in salvage for electrical equipment, which was the only
salvageable equipment on the site, and about $138,000 for "scrap
material," the exact origins of which are unclear. On this record this was
all the value the improvements possessed, and all the value defendant was
entitled to claim.
VI. Goodwill
(15a) In
its cross-appeal, Elementis contends that the trial court erred by refusing to
permit it to present evidence of, and seek an award for, loss of *1116
goodwill. Elementis contends it presented evidence from which the jury could
have found that it sustained such losses. In response the Agency asks us to
adopt a rule under which the trial court determines threshold issues governing
the entitlement to goodwill, and only if it finds those conditions
present, submits to the jury questions of amount. The Agency further
argues that whether or not we prescribe such a rule, the trial court acted
properly in excluding the claim for goodwill. We hold that the trial court
properly withheld this element of compensation from the jury.
Prior to the enactment of Code of Civil Procedure section 1263.510, subdivision
(a) (section1263.510(a)), loss of goodwill was not recoverable in eminent
domain proceedings. (Chhour v. Community Redevelopment Agency (1996) 46
Cal.App.4th 273, 278 [53 Cal.Rptr.2d 585]; Community Development Com. v.
Asaro (1989) 212 Cal.App.3d 1297, 1301-1302 [261 Cal.Rptr. 231].) The
statute changed that rule to allow recovery, provided that the property owner
demonstrates the presence of four threshold conditions, including that
"[t]he loss is caused by the taking of the property or the injury to the
remainder" (§ 1263.510(a)(1)) and that "[c]ompensation for the loss
will not be duplicated in the compensation otherwise awarded to the owner"
(§ 1263.510(a)(4)). The court below concluded that defendant's claim satisfied
neither of these requirements, i.e., that any loss of goodwill was caused not
by the taking, but by the property's transition to a higher use, and that to
allow recovery for loss of goodwill would duplicate the valuation of the property
for such higher use.
The first question is whether the trial court properly determined defendant's
entitlement to goodwill rather than submitting that issue to the jury. (16) The
question arises because the general rule in eminent domain actions is that
" '[t]he right to a jury trial ... goes only to the amount
of compensation.' " (Redevelopment Agency v. Contra Costa Theatre, Inc.
(1982) 135 Cal.App.3d 73, 80 [185 Cal.Rptr. 159]; see Cal. Const., art. I, §
19; People v. Ricciardi (1943) 23 Cal.2d 390, 402 [144 P.2d 799] (Ricciardi).)
"All other questions of fact, or mixed fact and law, are to be tried ...
without reference to a jury." (Ricciardi, at p. 402; see Pacific
Gas & E. Co. v. Peterson (1969) 270 Cal.App.2d 434, 438 [75 Cal.Rptr.
673] ["the issue of the defendant's damages" goes to the jury, and
"all other issues of law or fact must be decided by the court"
(italics added)].)
Consistent with this rule, 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.
Perhaps most analogous for present purposes is the rule applicable to claims *1117
for "severance damages," i.e., harm caused to the landowner's remaining
property when only a part of the property is condemned. (City of San Diego
v. Neumann (1993) 6 Cal.4th 738, 741 [25 Cal.Rptr.2d 480, 863 P.2d 725] (Neumann).)
As codified in Code of Civil Procedure section 1263.410, subdivision (a), the
right to such damages is conditioned on a determination that "the property
taken is part of a larger parcel." The determination whether this
condition is present in a particular case is entrusted to the trial court. (Neumann,
supra, 6 Cal.4th at p. 745; People ex rel. Dept. Pub. Wks. v. L. A.
County Flood etc. Dist. (1967) 254 Cal.App.2d 470, 477 [62 Cal.Rptr. 287]; City
of Stockton v. Marengo (1934) 137 Cal.App. 760, 765 [31 P.2d 467] (Marengo).)
Although the question has often been described as one of "law" (see Neumann,
supra, 6 Cal.4th at p. 745; People ex rel. Dept. Pub. Wks. v. L. A.
County Flood etc. Dist., supra, 254 Cal.App.2d at p. 477; cf. Marengo,
supra, 137 Cal.App. at p. 765 ["essentially a question of
law"]), it is decided by the court even if it involves issues of fact (see
People ex rel. Dept. Pub. Wks. v. Nyrin (1967) 256 Cal.App.2d 288, 292
[63 Cal.Rptr. 905] ["What constitutes a single parcel of land in the
contemplation of section 1248 is essentially a question of law [citation] but
may involve issues of fact. [Citations.] .... Insofar as the evidence is
subject to opposing inferences, it must upon a review thereof, be regarded in
the light most favorable to the ruling of the trial court."]; People ex
rel. Dept. Pub. Wks. v. International Tel. & Tel. Corp. (1972) 22
Cal.App.3d 829, 833-834 [99 Cal.Rptr. 836] [trial court ruled "as matter
of law" that property taken and property remaining did not possess
"unity of use"; reviewing court found "ample evidence to support
the court's findings of fact with regard to the use of the property"]).
The same is true of at least some other issues touching on the threshold
entitlement to severance damages. Thus, where a landowner seeks compensation
for impairment of access to a remaining easement, "the question of whether
access rights are impaired is a question for the court." (People ex
rel. Dept. Pub. Wks. v. L. A. County Flood etc. Dist., supra, 254
Cal.App.2d at p. 477; Ricciardi, supra, 23 Cal.2d at pp. 402-
403; see Pacific Gas & E. Co. v. Peterson, supra, 270 Cal.App.2d 434
at pp. 437-438 [after finding on substantial evidence that landowner had no
prescriptive avigation easement over neighbor's fields, trial court properly
withheld claim from jury].)
(15b) Apparently seeking to counterbalance this weighty body of authority,
defendant cites Los Angeles County Metropolitan Transportation Authority v.
Continental Development Corp. (1997) 16 Cal.4th 694, 718 [66 Cal.Rptr.2d
630, 941 P.2d 809], for the proposition that "the question of whether a
property owner is entitled to compensation for severance damages
presents a question of fact for the jury." (Defendant's italics.) An
examination of that opinion reveals that it involved no issue of threshold
"entitlement" as considered here and in the cases cited above. Rather
it was solely *1118 concerned with the correct measure of
damages-in particular, the extent to which the condemnor was entitled to a setoff
against severance damages based on evidence that the taking would ultimately
enhance the value of the remaining property. (See id. at p. 702 et seq.)
It was in this context that the court issued its holding, a fragment of which
is quoted by defendant: "We hold that in determining a landowner's entitlement
to severance damages, the fact finder henceforth shall consider competent
evidence relevant to any conditions caused by the project that affect the
remainder property's fair market value, insofar as such evidence is neither
conjectural nor speculative." (Id. at p. 718, italics added.) It is
clear that this use of the term "entitlement" was less than precise,
and that the only issue actually considered was the amount of severance
damages when the statutory conditions for recovery are present.
Similarly, Elementis cites a number of decisions in which, it asserts, the
issue of entitlement to lost goodwill was submitted to the jury. (Redevelopment
Agency v. Thrifty Oil Co. (1992) 4 Cal.App.4th 469 [5 Cal.Rptr.2d 687] (Thrifty
Oil); People ex rel. Dept. of Transportation v. Salami (1991) 2
Cal.App.4th 37 [2 Cal.Rptr.2d 833] (Salami); People ex rel. Dept. of
Transportation v. Muller (1984) 36 Cal.3d 263 [203 Cal.Rptr. 772, 681 P.2d
1340] (Muller); Redevelopment Agency v. Arvey Corp. (1992) 3
Cal.App.4th 1357, 1364-1365 [5 Cal.Rptr.2d 161] (Arvey).) None of these
cases addressed, or even acknowledged the existence of, the issue before us. In
Thrifty Oil, supra, 4 Cal.App.4th at pages 476-477, the closest
question addressed was whether the evidence at trial required a larger award
than was made by the jury. The particular sentence quoted by defendant alludes
in passing to "entitlement," but is not even dictum on the
point in question because no question was raised or acknowledged as to whether
the jury should decide that issue. (Id. at p. 476.) [FN13] In Salami,
supra, 2 Cal.App.4th at pages 40-41, 45-46, the parties stipulated
that the statutory conditions for recovery of goodwill were present; the
question on appeal was whether the trial court erroneously placed upon the
landowner the burden of proving the amount of goodwill lost. In Muller,
supra, 36 Cal.3d at pages 269-271, the only question considered was
whether loss of excess income was a form (or *1119 proper
measure) of "goodwill" under section 1263.510. And in Arvey, supra,
3 Cal.App.4th at pages 1364-1365, the question was how to treat elements of
goodwill that were compensable under the Relocation Assistance Act (Gov. Code,
§ 7260 et seq.). We again note that cases are not authority on points they do
not consider. (City of Oakland v. Public Employees' Retirement System, supra,
95 Cal.App.4th at p. 57.)
FN13 The basic points of dispute in Thrifty Oil appeared to
be (1) whether the defendant possessed any goodwill in the business, and (2)
whether the method used to calculate it duplicated the method used to calculate
the value of the land. (See Thrifty Oil, supra, 4 Cal.App.4th at pp.
475-476.) The opinion does not clearly indicate who decided these questions.
Logically, a finding that the defendant had no goodwill to lose would preclude
a finding of the four statutory preconditions to recovery,
and if such a finding were supported by substantial evidence it
would presumably justify withholding the issue from the jury. We need not
address this point, however; nor need we consider the extent to which issues
decided in the landowner's favor on the questions of entitlement may be
resubmitted to the jury in the hope of obtaining a contrary determination.
Elementis also notes that BAJI No. 11.91 contemplates submission to the jury of
the issue of entitlement to goodwill, and that the instruction was cited
approvingly in Thrifty Oil, supra, 4 Cal.App.4th at page 478, and
Redevelopment Agency v. Metropolitan Theatres Corp. (1989) 215
Cal.App.3d 808, 810 [263 Cal.Rptr. 637]. But again, neither of those cases
presented any issue of whether the instruction accurately reflected the law.
The latter case, like Salami, supra, 2 Cal.App.4th 37, concerned
the allocation of the burden of proof on the question of the amount of
lost goodwill. (Redevelopment Agency v. Metropolitan Theatres Corp., supra,
215 Cal.App.3d at p. 811.)
Given that the conditions in section 1263.510(a) go to the entitlement to
recover a type of compensation, we see no reason to treat them
differently from the preconditions for the recovery of severance damages. We
therefore hold that where the presence of these conditions is disputed, the
determination of that dispute, including the resolution of any disputed factual
issues, is for the trial court. Only upon proving to the court's satisfaction
that the statutory conditions are satisfied may the landowner present evidence
of lost goodwill to the jury.
Here no error appears in the trial court's determination that the statutory
conditions were not present. Section 1263.510(a)(1) requires a finding that the
claimed loss of goodwill was "caused by the taking of the property."
Plaintiff contended below, and the trial court found, that any loss of goodwill
here was caused not by the taking but by the inevitable transition of the
property to the higher and better use to which both sides agreed it was
destined, and with which the continued operation of defendant's business was
incompatible. The court also found that since the defendant was being
compensated for the land at a value predicated on this higher and better use,
rather than at a lower value consistent with continued operation of its
business, any award of goodwill would be incompatible with the property
valuation, would amount to a windfall, and would duplicate "compensation
otherwise awarded to the owner." (§ 1263.510(a)(4).)
Defendant does not comprehensibly dispute the general soundness of this
reasoning but asserts that it was inapplicable here because there was evidence
to the effect that in a private sale, the business would have continued *1120
for some unspecified period as an "interim use" of the property while
defendant made an orderly transition to its new location. No authority is
offered for this theory, which we have already rejected in another context.
(See preceding pt.) We also note that any such negotiated temporary extension
would seem to constitute an accommodation to the seller which would presumably
be reflected in some corresponding shift of values in favor of the buyer. Since
defendant's appraisers made no attempt to include any such adjustment in their
valuation of the property, we agree with plaintiff and the trial court that
allowance of the goodwill claim, even if otherwise sound, would on its face
have effected a windfall incompatible with defendant's theory of value.
No error appears in the denial of damages for lost goodwill.
VII. Assessment Lien
(17)
Defendant's second contention on cross-appeal is that the trial court erred by
deducting $332,228 from the verdict on account of an unpaid special assessment
lien. Defendant's argument on this point is without merit. It rests largely on
the fact that the Agency failed to join the City, as lienholder, in this
action. This was undoubtedly a failure to comply with Code of Civil Procedure
section 1250.250, subdivision (b), which provides that "[t]he holder of a
lien that secures a special assessment or a bond representing the special
assessment shall be named as a defendant, regardless of the nature of the
special assessment and the manner of collection of the special
assessment." It hardly follows from this mandate, however, that if the
lienholder is not joined in the action, the balance of the lien goes to the
landowner. Such a result would violate a clear statutory mandate, as well
as basic principles of logic and fairness.
Code of Civil Procedure section 1265.250, subdivision (b) (section
1265.250(b)), provides, "If property acquired by eminent domain is
encumbered by the lien of a fixed lien special assessment or of a bond
representing the fixed lien special assessment. ¶] (1) The amount of the
lien shall be paid to the lienholder from the award or withheld from the award
for payment pursuant to Section 1265.220." (Italics added.) Code of
Civil Procedure section 1265.220 provides, "Where property acquired by
eminent domain is encumbered by a lien and the indebtedness secured thereby is
not due at the time of the entry of judgment, the amount of such *1121
indebtedness may be, at the option of the plaintiff, deducted from the judgment
and the lien shall be continued until such indebtedness is paid; but the
amount for which, as between the plaintiff and the defendant, the plaintiff is
liable under Article 5 (commencing with Section 1268.410) of Chapter 11 may not
be deducted from the judgment." [FN14]
FN14 The final clause concerns the proration of property taxes as
between
condemner and condemnee. (See Code Civ. Proc., § 1268.410, citing
Rev. & Tax. Code, § 5082.)
Defendant's only comment on section 1265.250(b) is that it cannot
"preempt" the requirement of Code of Civil Procedure section
1250.250, subdivision (b) that the lienholder be joined as a party. Of course
there is no issue of "preemption." Nor is there a statutory conflict
or ambiguity on which to predicate an exercise in interpretation. Code of Civil
Procedure section 1250.250 requires joinder of the lienholder, but it does not
remotely suggest that noncompliance is penalized by requiring the condemner to
pay the condemnee a windfall. Rather, the effect of noncompliance is that the
condemnor takes the property subject to the lien. (Cal. Law Revision Com. com.,
1980 Amendment, 19 West's Ann. Code Civ. Proc. (1982 ed.) foll. § 1250.50, p.
647 [failure to join lienholder "leaves the lien unimpaired"].) Since
the condemner or its transferee must thus eventually pay the lien (or suffer
its satisfaction by foreclosure), it would be irrational to require that the
condemner also pay the balance of the lien to the condemnee. This would amount
to the imposition of a forfeiture on the public fisc with no discernible basis
in statutory language, legal principle, or policy.
If Elementis is concerned about the nonjoinder of the lienholder, it is free to
seek appropriate relief based on that fact. (See Code Civ. Proc., § 389
[joinder of indispensable parties].) We also observe that on remand, the Agency
may seek to remedy its noncompliance with Code of Civil Procedure section
1250.250, subdivision (b) and that upon its failure to do so, the trial court
may be empowered to craft appropriate relief on its own motion, if necessary to
effect complete justice.
VIII. Archaeological Mitigation
(18) The Agency contends that the trial court erred by allowing
Elementis to challenge the measures adopted by the Agency to mitigate damage to
the archaeological resources on the property, which consist of a Native *1122
American shellmound and human remains. The Agency contends that these measures
cannot be challenged in this proceeding because they were adopted pursuant to
an environmental impact report (EIR) of which Elementis, or any other
interested party, could have sought judicial review under CEQA. We find this
objection unsound. The question before the jury was not whether the
environmental impact report complied with CEQA, but how much the hypothetical
buyer and seller would have deducted from the price on November 1, 1998, had they
known the facts available at trial. (See Mireiter, supra, 18
Cal.App.4th 1808, 1812.) Elementis's argument, as we understand it, was that
the Agency's treatment of archaeological resources exceeded the
requirements of CEQA-a point which could well have evaded judicial review had
the EIR been challenged. It also seems likely that the Agency itself had the
dominant role in formulating the EIR and approving its terms. The Agency's
argument could effectively empower it to adopt any measures it chose and then
seek de facto reimbursement from a condemnee while withholding from the jury
any question whether its expenditures actually reflect what a reasonable buyer
and seller would have anticipated.
We recognize that evidence of this kind poses an obvious risk of consuming
excessive time and judicial resources. The remedy for that risk must be sought
in such provisions as Evidence Code section 352.
IX. Other Issues
The Agency contends that the trial court abused its discretion by
refusing to assign this case to a single judge for all purposes. While we
believe that the size and complexity of this case make it a suitable candidate
for such treatment, we cannot say that the trial court abused its discretion in
concluding otherwise.
In case Nos. A091716 and A093126 the Agency contends that the trial court erred
by awarding attorneys fees and costs to Elementis. The Agency concedes that
reversal of the judgment renders these issues moot. Since they are unlikely to
recur in exactly the same way on remand, no purpose would be served by further
analysis.
Also moot is the Agency's contention that the trial court erred by excluding
evidence of the Agency's expenditures in "remediating" the
contaminated soil on the subject property, and by staying a portion of the
judgment *1123 pending disposition of a federal action by the
Agency to recover such costs from Elementis and others. We are far from
satisfied that this objection was preserved for appeal, but in any event it
cannot arise in the same form on remand because, as the parties have apprised
us, they have reached a settlement in the federal lawsuit on which the trial
court's ruling was predicated. The effect of this settlement and other
posttrial events on the determination of just compensation appears to depend,
at least potentially, on extrinsic evidence as well as legal questions of first
impression which have not been tried or briefed. These questions therefore
cannot be usefully addressed on this appeal.
Disposition
In case
No. A090932, the judgment is reversed for further proceedings consistent with
this opinion. Case Nos. A091716 and A093126 are dismissed as moot.
Kay, P. J., and Reardon, J., concurred. *1124
Cal.App.1.Dist.,2002.
EMERYVILLE REDEVELOPMENT AGENCY, Plaintiff and Appellant, v. HARCROS PIGMENTS,
INC., Defendant and Appellant. EMERYVILLE REDEVELOPMENT AGENCY, Plaintiff and
Appellant, v. ELEMENTIS PIGMENTS, INC., Defendant and Respondent.