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Reprinted with the permission of LexisNexis. CITY
OF SAN DIEGO, Plaintiff and Appellant, v. BARRATT AMERICAN INCORPORATED et al.,
Defendants and Respondents. D044079 COURT
OF APPEAL OF CALIFORNIA, FOURTH APPELLATE DISTRICT, DIVISION ONE 128
Cal. App. 4th 917; 27 Cal. Rptr. 3d 527; 2005 Cal. App. LEXIS 654; 2005 Cal.
Daily Op. Service 3498; 2005 Daily Journal DAR 4730 April
25, 2005, Filed SUBSEQUENT HISTORY: Rehearing denied by City of San Diego v.
Barratt American Incorporated, 2005 Cal. App. LEXIS 838 (Cal. App. 4th Dist.,
May 17, 2005) Time for Granting or Denying Review Extended City of San
Diego v. Barratt American Incorporated, 2005 Cal. LEXIS 8540 (Cal., July 27,
2005) Review denied by, Request denied by City of San Diego v.
Barratt American Incorporated, 2005 Cal. LEXIS 8751 (Cal., Aug. 10, 2005) PRIOR HISTORY: Superior Court of San Diego County, No.
GIC771344, William R. Nevitt, Jr., Judge. COUNSEL: Meyers, Nave, Riback, Silver & Wilson,
David W. Skinner, Robert C. Chojnacki; Casey Gwinn, City Attorney, Leslie A.
Fitzgerald and Claudia G. Silva, Deputy City Attorneys, for Plaintiff and
Appellant. Rutan & Tucker, Jeffrey M. Oderman, Douglas J.
Dennington; Luce, Forward, Hamilton & Scripps and Steven S. Wall for
Defendants and Respondents. JUDGES: McDonald, J., with Huffman, Acting P. J.,
and McIntyre, J., concurring. OPINIONBY: McDONALD
OPINION: McDONALD, J.--In this eminent domain action plaintiff
The City of San Diego (City) condemned 5.04 acres of real property (the taken
property) within the North City Future Urbanizing Area (NCFUA) to construct the
middle segment of the State Route 56 freeway (the Project), an east-west
freeway that traverses the NCFUA. The taken property was part of a 38.47-acre
parcel of property owned by defendants Barratt American Incorporated and others
(Owners). The central issue below was how to value the taken property
disregarding the influence of the Project on the value, as required by Code of
Civil Procedure section 1263.330. n1 - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n1 All statutory
references are to the Code of Civil Procedure unless otherwise specified. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - City asserted below
the taken property should be valued based on its "agricultural use"
zoning (the zoning in place at the time
it became probable the taken property would be acquired for the Project)
because the proper method for disregarding the influence of the Project on the
value of the taken property would assume the Project was abandoned on the
valuation date (the abandoned Project construct). City asserted that as of the
valuation date there was no probability the taken property would be upzoned in
the near future because on the abandonment of the Project there was no
transportation plan for the NCFUA; therefore the proper valuation for the taken
property is based on agricultural zoning. Owners moved in limine to preclude
City's appraisers from employing this hypothetical abandoned Project construct
to assess whether, absent the Project, it was reasonably probable the taken
property would have been upzoned prior to the valuation date. The trial court
granted Owners' motion in limine, and City asserts this was error. City also
asserts on appeal that one of Owners' methods of valuation, which disregarded
the influence of the Project on the value of the taken property by assuming the
Project had never been contemplated, and development pressures would have
resulted in a planning process for the NCFUA (including an alternative
transportation system) and upzoning by the valuation date, was too speculative
to support Owners' valuation of the taken property. City also asserts that
Owners' alternative method of valuation, purportedly premised on Merced
Irrigation Dist. v. Woolstenhulme (1971) 4 Cal.3d 478 [93 Cal. Rptr. 833,
483 P.2d 1] (Woolstenhulme), requires reversal of the judgment because
(1) the enactment of the California Environmental Quality Act (CEQA)
effectively eviscerated Woolstenhulme; (2) even if Woolstenhulme
survived CEQA, Owners' approach and the trial court's instruction were based on
a misreading of Woolstenhulme; and, (3) the court's instruction on the Woolstenhulme
issue was contradictory and confusing. We conclude the trial
court correctly precluded City from using the abandoned Project construct to
value the taken property, both of Owners' valuation methods were appropriate
under the facts of this case, and the trial court's instructions to the jury
were adequate. I FACTUAL BACKGROUND A. The Property and the NCFUA In late 1989 Owners
acquired an approximately 38-acre parcel of unimproved land in the City within
Subarea III of NCFUA (Owners' land). The NCFUA, which included approximately
12,000 acres, was composed predominately of undeveloped land, with some
scattered agricultural, nursery and low-density residential uses. The land
within the NCFUA, including Owners' land, was zoned by City as "A-1-10 agricultural,"
which permitted one dwelling per every 10 acres, or, under a clustering option,
one residence per every four acres. (City of San Diego v. Rancho Penasquitos
Partnership (2003) 105 Cal.App.4th 1013, 1019 [130 Cal. Rptr. 2d 108] (RPP).)
However, the NCFUA and the A-1-10 agricultural zoning were intended as interim
rather than permanent designations for the area. The NCFUA was established to
avoid premature urbanization, conserve open space, and avoid sprawl and
leapfrog urban development. (Id. at pp. 1019, 1023.) B. The SR-56 Freeway In 1959 the
California Legislature originally designated a proposed freeway that would
provide a regional east-west link between Interstate 5 and Interstate 15
(SR-56). (RPP, supra, 105 Cal.App.4th at p. 1020 [130 Cal.Rptr.2d 108].) By 1965 California
approved the so-called "Central Alignment" for the proposed freeway,
the middle portion of which is defined in this opinion as the Project. The
Central Alignment for this 17-mile freeway showed SR-56 traversing a route
considerably south of Owners' land. However, for many years thereafter, no
further steps were taken to implement the construction of SR-56. C. The 1992 NCFUA Framework Plan By 1990 the demand
for housing and the absence of available land caused City to consider releasing
the NCFUA from its holding zone status. In October 1992, responding to the
shortage of available land and the absence of an overall plan for the orderly
development of the NCFUA, City adopted the 1992 Framework Plan for the NCFUA,
which was incorporated into the City's general plan. "The framework plan
was designed to provide a blueprint for
the future urbanization of the NCFUA." (RPP, supra, 105 Cal.App.4th
at p. 1019.) It called for a significant
upzoning for the NCFUA, including Owners' land. The Framework Plan
continued to reflect only one proposed route for SR-56--the Central Alignment.
Although the precise footprint and configuration for SR-56 within the NCFUA had
not been finalized, n2 the Framework Plan contemplated that planning for higher
density development within Subarea III (in which Owners' land is located) and
Subarea IV could proceed as long as the plans accounted for the fact that SR-56
would traverse those areas. n3 - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n2 For example, the
Framework Plan recognized the NCFUA contained natural viewsheds, view corridors
and panoramic views that should be considered in planning the area's road
system because any "road system has the potential to disrupt natural
features and block public views of the landscape. The most significant issue is
the alignment of State Route 56. The alignment will be the subject of an
environmental document which will investigate a number of alternatives. The
relationship of the freeway to Santa Monica Ridge and Deer Canyon, both
important natural features and localized viewsheds, should be a major consideration
in selecting a final alignment" for SR-56. n3 For this reason,
the Framework Plan provided: " '2.6a Because of the importance of other
planning efforts to the future of several NCFUA subareas, the following
principles will govern timing of completion of subarea plans for individual
subareas: [P] ... [P] Subareas III and IV: The City will undertake an alignment
study for SR-56. Subarea Plans for these areas may be approved, provided
sufficient corridors are designated for alternative alignments for SR-56. However,
discretionary approval for development in these subareas shall not be approved
prior to the adoption of the City's final alignment for SR-56.' " (RPP,
supra, 105 Cal.App.4th at p. 1020 [italics added by RPP].) - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - D. Approval of Subarea IV Plan During the
mid-1990's, detailed planning to implement the Framework Plan began with
respect to Subarea IV, located east of Owners' land. At the time the Subarea IV
plan was being prepared for submission to City and the voters for approval,
City was also preparing a Draft Environmental Impact Report (DEIR) for SR-56 n4
that evaluated both the Central Alignment and an alternative alignment (the
Northern Alignment). In its December 1996 DEIR, City reiterated its preference
for the Central Alignment, because,
among other reasons, the Central Alignment was consistent with the Framework
Plan, was a superior community planning design, and provided a more direct
route. - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n4 The approvals for
and construction of the freeway from Interstate 5 to Interstate 15 was divided
into three segments. The eastern segment (running from Interstate 15 to Black
Mountain Road) and western segment (running from Interstate 5 to Carmel Country
Road) were completed by the end of 1995. The linking of these two ends was to
be accomplished by constructing the middle segment of SR-56, the Project at
issue in these proceedings. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - Although the Subarea
IV plan provided alternative land uses for some of the parcels
within the subplan area, depending on which alignment was ultimately selected, the Subarea IV plan
contemplated the same overall amount of residential and nonresidential
development would occur in Subarea IV regardless of whether SR-56 was built or
which alignment might be selected. In 1996 City approved the Subarea IV plan,
and in November 1996 voters approved the Subarea IV plan. As a result of these
approvals, authorized residential land uses in Subarea IV shifted from the
A-1-10 designation to densities as high as 10 dwelling units per acre. n5 (RPP,
supra, 105 Cal.App.4th at p. 1020.) - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n5 The Subarea IV
plan included a clause precluding discretionary development approvals for
parcels that could be affected by the final alignment of SR-56 but did not
similarly limit development of unaffected parcels. (RPP, supra, 105
Cal.App.4th at pp. 1020-1021.) The impact of these provisions on the valuation
of parcels within Subarea IV acquired for SR-56 were the subject of this
court's opinion in RPP, discussed below. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - E. Evolution of the Subarea III Plan Between 1997 and
1998, a similar planning process was undertaken for Subarea III. During this
time, the ultimate alignment for the
Project was still uncertain. n6 Accordingly, the Subarea III plan (like the Subarea
IV plan) was drafted to respond to four possible alignments for the Project.
However, it appears the plan permitted higher density development in Subarea
III, including Owners' land, under any of the four planned alignments. In the
fall of 1998 City and the voters approved the Subarea III plan. - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n6 The environmental
review process had produced an even murkier picture of the final alignment for
the Project. City responded to objections from various parties to the DEIR's
recommended Central Alignment by identifying at least six new alternative
alignments. Although City quickly eliminated four of those alternatives from
detailed consideration, it concluded two of those new alternatives (denominated
as Modified Northern Alignments "D" and "F") were
potentially viable and made those new routes the subject of a revised DEIR
released to the public in January 1998. The revised 1998 DEIR also contained a
change in City's recommended alignment: City changed its previously stated
preference for the Central Alignment and effectively became neutral on which of
the four alignments should be selected. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - F. Final Alignment for the Project By January 1998
City's DEIR identified four possible alignments for the Project. The footprint
for two of those alignments--the original Central Alignment and "Modified
Northern Alignment 'D' "--were outside the boundaries of Owners' land, and
the DEIR characterized Modified Northern Alignment "D" as the
"environmentally superior" alternative. However, when City certified
the final environmental impact report (FEIR) for the Project in June 1998, n7 it selected (subject to
concurrence by the California Transportation Commission n8) Modified Northern Alignment "F" as the final alignment
for the Project. - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n7 At trial, the
parties stipulated the June 1998 certification of the FEIR established the
latest "date of probable inclusion" of the taken property into the
Project within the meaning of Woolstenhulme, supra, 4 Cal.3d 478. n8 The California
Transportation Commission (CTC) is the state agency with exclusive jurisdiction
over approval of the routes for state freeways. (Sts. & Hy. Code, § § 70(a), 100.1, 100.2, 100.3.) In November
1999, the CTC approved the Modified Northern Alignment selected by City. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - This selected
alignment for the Project required City to condemn the taken property,
consisting of 5.04 acres of Owners' land. G. The March 2001 Upzoning of Owners' Land After City certified
the FEIR and selected the final alignment for the Project, City began approving
applications for upzoning in the affected areas. In March 2001 City approved an
application permitting Owners to develop the Owners' land at a density of
approximately six units per net developable acre, a density that conformed with
the Framework Plan and the Subarea III Plan. II THE PRESENT LITIGATION City filed this
action to condemn the taken property in November 2001 and apparently made the
deposit of probable just compensation on November 16, 2001, thereby fixing
November 16, 2001, as the valuation date for the taken property. (§ § 1263.110, 1255.010.) Both parties were
prepared to offer expert testimony valuing the taken property as of November
16, 2001, without considering the impact on value attributable to the Project,
as required by section 1263.330. However, the methodology employed by the
respective experts to disregard the impact of the Project on value was
significantly different. Additionally,
Owners proffered an alternative theory for valuing the taken property that proposed
to disregard the impact of the Project only after June 1998 asserting, under Woolstenhulme,
supra, 4 Cal.3d 478, any change in the taken property's value caused by the
Project that occurred before the June 1998 probable inclusion date n9 was compensable.
The trial court's rulings on these issues are the subject of this appeal, and
we therefore examine the respective approaches proffered by the parties. - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n9 See discussion of Woolstenhulme
at section III.B., post. City certified the FEIR for the Project in June
1998. (See fn. 7, ante.) - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - A. The Competing Alternative Reality Theories Owners' Methodology Owners' hypothetical
construct for disregarding the impact of the Project on the value of the taken
property was founded on the fiction that the Project had never been conceived
or planned (the no Project construct). They asserted that development pressures
and the need to implement a long list of City's land use priorities would have
caused City to remove the NCFUA and Subarea III from its agricultural holding
status to permit higher density development even without the Project, and the
traffic circulation needs for this higher density use would have been solved
through an alternative design of surface streets substituted for the absent
Project. Accordingly, Owners' experts believed it was reasonably probable the
taken property would have been upzoned by the valuation date even without the
Project. City's Methodology City's hypothetical
construct for factoring out the impact of the Project on the value of the taken
property, the abandoned Project construct, was founded on the fiction that the
Project was abruptly abandoned on the November 16, 2001 valuation date. City's
construct posited that the Project had
been a lynchpin in the NCFUA planning process because of its irreplaceable role
in handling the traffic that would accompany higher density development in the
NCFUA. City's experts asserted, because this was the actual before condition
of the taken property, an approach that would properly disregard the impact of
the Project on the value of the taken property as of the valuation date would
be to assume the Project, although planned for years, was canceled in November
2001. Without the Project, there would be no system to handle the traffic
created by higher density development in the NCFUA, and therefore City would
have to place a moratorium on all upzoning until a new traffic system was
developed. n10 City's experts were of the opinion it would be at least five
years after November 2001 before a transportation and circulation system to
replace the abandoned Project could be designed and implemented, and therefore
there was no reasonable probability that, without the Project, the taken
property would have been upzoned in the near future. - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n10 Although it is
not germane to our analysis, we note the hypothetical date of abandonment was
several months after City approved Owners' land for development at
peripheral residential densities, and there is no explanation of how the
hypothetical moratorium would impact the valuation of land with previously approved
development levels. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - Trial Court Ruling Owners moved in
limine to preclude City's experts from valuing the taken property using the
abandoned Project construct. The trial court granted Owners' motion. B. The Woolstenhulme Valuation Theory Although a landowner
is generally barred from obtaining the project-enhanced value of the property being
condemned, Owners' experts sought to invoke the Woolstenhulme exception
to this project enhancement rule as an alternative basis for valuing the taken
property. Owners argued Woolstenhulme applied because the Project had
been planned to traverse the Central Alignment (an alignment south of Owners'
land) for over 30 years and that alignment remained the only articulated
route until City released its December 1996 DEIR, after adoption of the
Framework Plan that established land within the NCFUA would be accorded higher
density development. Moreover, because City continued to support the Central
Alignment as the preferred route until it issued its January 1998 revised DEIR,
and because City's January 1998 revised DEIR still described the Modified
Northern Alignment "D" as the environmentally superior alternative,
Owners argued the taken property was enhanced in value by the proposed Project
up until the June 1998 probable inclusion date, when City adopted the Modified
Northern Alignment "F," which required condemning the taken property.
Owners' experts sought to testify that any appreciation in the value of the
taken property, insofar as it was attributable to probable upzoning facilitated
by the Project, had already attached before the Project was changed to include
the taken property, and that appreciated value was compensable under the Woolstenhulme
exception. City moved in limine
to preclude Owners' experts from invoking the Woolstenhulme exception as
part of their valuation analysis. City asserted the Woolstenhulme
exception did not (and as a matter of law could not) apply to a project that
requires compliance with CEQA because there can be no project until the environmental
review process is final; therefore in this case the taken property was
never outside of the Project. City also
argued, unless there was a reasonable expectation the taken property would be
outside the scope of the Project before it is included in the Project, the Woolstenhulme
exception cannot apply. The trial court
denied City's motion in limine. C. Trial Proceedings The parties offered
competing valuations for both the taken property and for severance damages. Owners' Valuation Evidence Owners' experts
testified that under the no Project construct, the taken property enjoyed a
reasonable probability of an upzoning to the higher densities permitted under
the Subarea III Plan. Owners' planning expert, Mr. DeLorenzo, testified that
upzoning in the NCFUA, including Owners' land, was not dependant on the
Project. He noted the A-1-10 zoning was not intended to be permanent, and the
need to provide housing (as well as other significant public policies furthered
by the Framework Plan) would have resulted in an upzoning of Owners' land
consistent with the Framework Plan even without the Project, and the traffic
generated by these increased densities would have been accommodated by
designing a surface street system connecting to the existing eastern and
western segments of SR-56. (See fn. 4, ante.) Because the policies and
goals of the Framework Plan would have been frustrated by keeping the NCFUA for
low density development, DeLorenzo testified that even without the Project "there
was not only a reasonable probability that this land would develop consistent
with the plans that we all prepared over time, but actually a very high degree
of probability." In addition to the no Project construct, DeLorenzo also
testified (under Woolstenhulme) that the taken property had a reasonable
probability of being upzoned to peripheral residential densities by the
November 2001 valuation date based on the planned Central Alignment for the
Project, although he disregarded any additional enhancement in the value of the
taken property that occurred after the June 1998 probable inclusion date. Owners' expert
appraiser, Mr. Waldron, reached the same conclusion to support his opinion the
taken property should be valued at its highest and best use at peripheral
residential (rather than agricultural) zoning densities. He cited several
examples of areas in San Diego County developed at similar densities without a
freeway serving the development, and he agreed with DeLorenzo's conclusion that
demand for housing, as well as numerous public policies reflected in the
Framework Plan (e.g., the need to meet housing demand and for affordable
housing, the desire to achieve clustered development and avoid piecemeal or
leapfrog development, and the need to have enough development to defray the
costs of the associated infrastructure) would have resulted in an upzoning of
the taken property to levels consistent with the Subarea III plan even without
the Project. Waldron's opinion
that the taken property should be valued at a peripheral residential zoning
density was alternatively founded on Woolstenhulme. He testified the
taken property was within the areas designated for peripheral residential
densities under the Framework Plan and the Subarea III plan, and both of those
plans originally showed the taken property to be outside of the Project.
Accordingly, to the extent the Project influenced the market value of the taken property, the value (including its
value as land prospectively developable at peripheral residential densities)
had attached to it prior to the June
1998 probable inclusion date, and that increase in value was properly
considered in valuing the taken property. However, he excluded from his
calculus any additional enhancement in the value of the taken property
resulting from the Project after the June 1998 probable inclusion date. Waldron testified the
fair market value of the taken property in the before condition, as developable
at peripheral residential densities of between 5 and 9 units per acre, was $
1.05 million per acre and therefore valued the taken property at $ 4,823,650.
He also testified that the Project resulted in severance damages of $ 851,350,
and there were no offsetting benefits to the remainder parcel. City's Valuation City, barred by the
in limine ruling from using the abandoned Project construct to value the taken
property, adopted the assumption that the Project had never been planned.
City's planning expert hypothesized, without the Project, the planning process
would have resulted in a plan limiting development in the NCFUA to an overall
average of one unit per two gross acres, in part because any higher density
build-out of the NCFUA without the Project would overburden traffic circulation
systems. n11 - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n11 City's traffic
expert, Mr. Halbert, explained that when SR-56 is completed it will handle
approximately 120,000 trips per day, approximately 40,000 of which would be
from the new developments within the upzoned NCFUA. He testified that, without
the Project, the surface streets within the NCFUA would be vastly over
capacity. However, on cross-examination, he seemed to concede that sufficiently
wide expressways and major roads would handle more trips per day than the
40,000 trips per day of locally-generated traffic the completed SR-56 was
expected to absorb. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - City's appraiser, Mr.
Roach, testified that without the Project the taken property would have been
developable at a density of one unit per two gross acres. Based on this
development density he valued the taken property at $ 400,000 per
net-developable acre in its before condition, valued the taken property at $
2,016,000, and testified that amount was the just compensation for the taken
property. On the issue of severance damages, Roach concluded the adverse impact
of the Project diminished the value of the remainder land by approximately $
130,000 per acre, for a total "loss" of nearly $ 1.5 million.
However, he also opined the offsetting benefits of the Project (e.g.,
permitting the land to be developed at higher densities) added over $ 6 million
in value to the remainder parcel, and therefore there were no net severance
damages. D. The Instructional Issue The court instructed
the jury, over City's objection, with a version of BAJI No. 11.77 modified to
accommodate the general rule against valuing the taken property based on
changes to the value caused by the Project, and the Woolstenhulme
exception to the general rule, which exception permits increased value of the
taken property that attached before the probable inclusion date. The court
instructed: "In determining
the fair market value of the property, do not include any change caused by the
proposed improvement, that is, the use which the plaintiff is to make of the
property. In this regard, once again, the proposed improvement consists only of
Unit 2 of the middle segment of State Route 56. ..." "However, in
determining the fair market value of the property you must include any increase
in the market value of the property, if any, caused by the proposed improvement
that occurred before [June 1998]. In
this regard, in determining the highest and best use of the property, you must
consider whether the improvements proposed or contemplated for the SR-56
freeway prior to [June 1998], including any alternative alignments previously
adopted or considered by the governing agencies, would have increased the
probability that the property's zoning would have been changed within the near
future as of the November 16, 2001 date of value." n12 (Italics
added.) - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n12 The court gave
the Woolstenhulme aspect of this instruction on two occasions. In
addition to giving the entire quoted instruction in its charge to the jury, the
court also gave the italicized portion of the instruction during the evidentiary
portion of the trial. During trial, Roach (City's expert appraiser) testified
on cross-examination that his appraisal was based on the assumption that the
Project was never planned, and he excluded from consideration any enhanced
value from the planned Central Alignment because he concluded there could be no
project enhancement until after the final alignment was approved in the June
1998 FEIR. Owners moved to strike Roach's testimony, arguing that by not
accounting for the Woolstenhulme-authorized pre-June 1998 appreciation,
he had not "performed his appraisal in compliance with the eminent domain
rules." The court denied the motion to strike, but instead concluded,
"in light of the testimony of Mr. Roach," it was appropriate to provide
immediate guidance to the jury on the applicable rules concerning project enhancement,
and therefore gave the italicized portion of the instruction during trial. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - City objected to the
italicized portion of the instruction, asserting it misstated the law on the Woolstenhulme
exception. City also asserted the instruction was hopelessly confusing because
it instructed the jury to ignore the Project's impact on value after June 1998,
but also instructed that the jury could consider whether any alternative
designs for the Project prior to June 1998 increased the likelihood of an
upzoning as of the November 2001 date of valuation. The court overruled City's
objections, and instructed the jury as quoted above. E. The Verdict and Posttrial Proceedings The jury concluded
the fair market value of the taken property was $ 3.5 million, a figure
approximately midway between the competing valuations proffered by the parties.
It also found severance damages were $ 851,350, with no offsetting Project
benefits, as urged by Owners. City moved for a new
trial, asserting the jury instruction was erroneous as a matter of law and was
inconsistent with the court's in limine rulings. The court denied the new trial
motion. III APPLICABLE PRINCIPLES A. Fair Market Value (1) The parties do not dispute the broad
outlines of the principles governing the determination of fair market value.
Eminent domain principles arise from the fundamental requirement that private
property shall not be taken for a public use without just compensation, which
must put the owner "in as good position pecuniarily as [the owner] would
have occupied if [the] property had not been taken. [Citations.]" (2) (Ventura
County Flood Control Dist. v. Campbell (1999) 71 Cal.App.4th 211, 218-219
[83 Cal. Rptr. 2d 725].) Section 1263.310 provides "[t]he measure of this
compensation is the fair market value of the property taken," and section
1263.320, subdivision (a) defines fair market value as "the highest price
on the date of valuation that would be agreed to by a seller, being willing to
sell but under no particular or urgent
necessity for so doing, nor obliged to sell, and a buyer, being ready,
willing, and able to buy but under no particular necessity for so doing, each
dealing with the other with full knowledge of all the uses and purposes for
which the property is reasonably adaptable and available." (3) The analysis of the fair market value of
a property being condemned in an eminent domain proceeding begins with a
determination "of the highest and best use to which the property being
condemned can be put." (San Diego Gas & Electric Co. v. Daley
(1988) 205 Cal. App. 3d 1334, 1344 [253 Cal. Rptr. 144], disapproved on other
grounds in Los Angeles County Metropolitan Transportation Authority v.
Continental Development Corp. (1997) 16 Cal.4th 694, 720 [66 Cal. Rptr. 2d
630, 941 P.2d 809].) Importantly, the "determination of the property's
highest and best use is not necessarily limited to the current zoning or land
use restrictions imposed on the property; the property owner 'is entitled to
show a reasonable probability of a zoning [or other change] in the near future
and thus to establish such use as the
highest and best use of the property. [Citations.]' [Citations.] The
property owner has the burden of showing a reasonable probability of a change
in the restrictions on the property." (County of San Diego v. Rancho
Vista Del Mar, Inc. (1993) 16 Cal.App.4th 1046, 1058 [20 Cal. Rptr. 2d
675].) B. Fair Market Value Impacts of the Project General Rule--Disregarding the Project's
Impact on Value (4) Although a property owner is entitled to
receive the fair market value of the property condemned, the owner is not
entitled to more. (City of Carlsbad v. Rudvalis (2003) 109 Cal.App.4th
667, 678 [135 Cal. Rptr. 2d 194].) Accordingly, when assessing fair market
value (including its highest and best use and the reasonable probability of a
zoning change), any increase or decrease in the property's value caused by
the project for which the property is condemned may not be considered.
Thus, to the extent the fair market value of the property condemned increases
or decreases because of the project for which it is condemned, or the eminent
domain proceeding in which the property is taken, or any preliminary actions of
the condemnor relating to the taking of the property, such project-caused
increases or decreases must be excluded from the just compensation calculus.
(§ 1263.330.) As this court recently
reaffirmed: " 'Simply stated, the rule is that any testimony of reasonable
probability of zone change may not take into account the proposed [project] or
any influence arising therefrom. [Citations.] The probability of rezoning or
even an actual change in zoning which results from the fact that the project
which is the basis for the taking was impending cannot be taken into account in
valuing the property in a condemnation proceeding. [Citations.] ... Therefore,
changes in land use, to the extent that they were influenced by the proposed
improvement, [are] properly excluded from consideration in evaluating the
property taken.' " (RPP, supra, 105 Cal.App.4th at pp. 1028-1029,
quoting People ex rel. Dept. Pub. Wks. v. Arthofer (1966) 245 Cal. App.
2d 454, 465 [54 Cal. Rptr. 878].) Woolstenhulme Exception--Appreciation
Before Probable Inclusion Date (5) In Woolstenhulme, supra, 4 Cal.3d
478, the court concluded that under limited circumstances, a property owner may
properly be compensated for the increase in value the property experienced in
anticipation of the benefits of a
proposed improvement, so long as it was not reasonably probable the property
being evaluated was anticipated to be taken for the improvement. In Woolstenhulme,
the condemnor for many years had been developing plans for a new water project
that would significantly increase the size of an artificial lake, the impact of
which would provide neighboring
properties with power, water, and increased recreational facilities. By
early 1963 the public learned of the general recreation plans and as a result
property values in the area began to increase, although the precise footprint
of the project was unknown. However, by January 1, 1965, the plans for the
project had progressed to a point at which it became "reasonably probable"
the defendant's property would be taken for the project. (Id. at pp.
484-485.) (6) The issue was whether the property owner
was entitled to be compensated for the project-caused enhancement in value that
accrued to the property before it was targeted for acquisition. n13 The court
concluded that "under our just compensation clause, an owner of the
condemned property should be compensated for the increase in value [that] his
land has experienced in anticipation of the benefits of a proposed improvement,
so long as it is not reasonably probable that the specific piece of property
being evaluated is to be taken for the improvement." (Woolstenhulme,
supra, 4 Cal.3d at p. 487.) The court, addressing the general rule that
increases in property values that frequently accompany the announcement of a
desirable public improvement constitute project enhanced value for which the
property owner is never entitled to be compensated, refined the concept by
distinguishing three different types of project enhanced value: "The value
of land can be said to increase 'by reason of the proposed improvement' (County
of Los Angeles v. Hoe (1955) 138 Cal. App. 2d 74, 78 [291 P.2d 98])
for at least three distinct reasons: (1) the worth of property known to be
within the project may rise when the land is valued as part of the
proposed improvement rather than as a separate tract of land; (2) the value of property
expected to be condemned may rise because of the anticipation that the
condemner will be required to pay an inflated price for the land at the time of
condemnation; and (3) the value of property expected to be outside of the
proposed improvement may rise because it is anticipated that the land will
reap the benefits resulting from proximity to the coming project."
(Id. at p. 490, original italics.) - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n13 Although City
suggests Woolstenhulme did not address the probability of zoning changes
in the near future, Woolstenhulme was addressing the issue of the value-enhancing
impact of a project on a property's highest and best use. In Woolstenhulme,
the highest and best use of the property before consideration of the project
was for cattle grazing, while the highest and best use of the property after
the project was built was for development, and the dispute was over which
highest-and-best-use value was the proper measure of just compensation. (Woolstenhulme,
supra, 4 Cal.3d at pp. 485-486.) - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - The court concluded
that although the general rule against compensating a property owner for the project
enhanced value applies to appreciating value attributable to the first two
scenarios, a property owner is entitled to be compensated for appreciating
property value under the third scenario. (Woolstenhulme, supra, 4 Cal.3d
at pp. 488-495.) The court synopsized the rationale for its holding by
explaining: "In the early stages of
a desirable project's development, land which is expected to be within the
vicinity of the project, but is not
expected to be taken for the project, will naturally increase in value, and a
landowner who chooses to sell such land at this time will gain the benefit of
this incremental value; similarly, one who buys such land at this time must pay
this incremental amount for his purchase. It is not until a particular piece of
property is reasonably expected to be condemned for the project that this
enhanced market value, attributable to the land's anticipated proximity to the
improvement, disappears. We have determined that it would be unfair, in
computing just compensation, to eliminate the appreciation in market value
which a specific piece of property in fact enjoyed before it was designated for
condemnation, since that would in effect deny to the owner the market value of
his property prior to the time it was pinpointed for taking." (Id.
at p. 484.) Thus, assuming Woolstenhulme
retains vitality after CEQA, it requires that when a prospective project causes
a general rise in property values for property benefited by the project, the
increase in value is compensable until it becomes reasonably probable the
property will be taken for the project. C. Standards of Review (7) We apply different standards of review to
the distinct issues raised by City on appeal. Insofar as City asserts the trial
court erred by either precluding City's experts from valuing the taken property
based on the abandoned Project hypothetical construct or permitting Owners'
experts to value the taken property under the no Project construct, we apply
the abuse of discretion standard. (RPP, supra, 105 Cal.App.4th at p.
1027.) In City of San Diego v. Sobke (1998) 65 Cal.App.4th 379 [76 Cal.
Rptr. 2d 9], this court ruled a trial court has discretion to rule on the
admissibility of valuation methods employed by experts in condemnation matters,
explaining: " ' " 'In condemnation proceedings, the trial court is
vested with considerable judicial discretion in admitting or rejecting evidence
of value.' " ' (County Sanitation Dist. v. Watson Land Co. (1993)
17 Cal.App.4th 1268, 1282 [22 Cal. Rptr. 2d 117].) Where, as here, 'an expert
in a condemnation action employs a methodology not sanctioned by California
law, his opinion may be excluded.' (Ibid.) Since Brinig's opinion
testimony on the existence and loss of goodwill lacked the necessary
foundation, the superior court acted within its discretion in excluding his testimony.
(Ibid.) As one appellate court has observed, 'There is a limit to
imaginative claims ... . To say that only the witness' valuation opinion has
probative value, that his "reasons" have none, ignores reality. His
reasons may influence the verdict more than his figures. To say that all
objections to his reasons go to weight, not admissibility, is to minimize
judicial responsibility for limiting the permissible arena in condemnation
trials. The responsibility for defining the extent of compensable rights is
that of the courts.' " (City of San Diego v. Sobke, at p. 396.) (Accord, City of Stockton v. Albert Brocchini Farms, Inc
(2001) 92 Cal.App.4th 193, 198 [111 Cal. Rptr. 2d 662], fns. omitted ["It
does not deny due process to cut off a litigant's right to present evidence
where the party fails to comply with established evidentiary standards for
appraisal methods. Thus, when a valuation expert employs an unsanctioned
methodology, the opinion may be excluded in part or in whole in the discretion of the trial
court."].) (8) Owners concede, however, that we must
apply a different standard of review insofar as City challenges the jury
instruction because the propriety of an instruction given to a jury is a matter
of law, which we review de novo. IV ANALYSIS A. The Ruling on the Hypothetical Constructs The issue under
section 1263.330 was how the appraisers and the jury were to disregard
project-caused increases or decreases in the value of the taken property. City
argues its abandoned Project construct was a valid hypothetical construct for
factoring out the influence of the Project on the core question of whether
there was a reasonable probability Owners' land would have been upzoned without
the Project. We conclude the trial court did not abuse its discretion by
excluding the City's abandoned Project construct because that construct did not
disregard the impact of the Project on the value of the taken property. To the
contrary, this construct posited that the Project's existence--e.g., its
presence up to November 16, 2001, and the consequences caused by its
abandonment (the five-to-seven year moratorium)--negatively impacted the
probable upzoning of Owners' land because the Project's existence preempted the
development of the alternative transportation plans essential to making it
reasonably probable the taken property would have been upzoned by (or shortly
after) the November 16, 2001 valuation date. The trial court's
exclusion of the abandoned Project construct preferred by City is consistent
with section 1263.330, as construed by our decision in RPP. In RPP,
the central issue was whether City could rely on its zoning restrictions for
purposes of valuing condemned property located in Subarea IV. The zoning restrictions
prohibited upzoning of land potentially affected by SR-56 until the final
alignment for SR-56 was approved and, under City's theory, the property did not
enjoy a reasonable probability of a zoning change in the near future because
its land use regulations prohibited rezonings until the final alignment of
SR-56 was approved. Accordingly, the property had to be valued based upon the
A-1-10 agricultural zoning in place on the date of value. In contrast, the landowner's valuation
expert testified the property did enjoy a reasonable probability of an upzoning
to the higher densities permitted under the Subarea IV Plan, and he disregarded
City's zoning restriction because it was predicated upon and expressly tied to
SR-56. The landowner's planning expert testified that even in the absence of SR-56,
the property enjoyed a reasonable probability of a zoning change because
development in Subarea IV would have proceeded in generally the same manner
allowed under the Framework Plan and Subarea Plan. In RPP, City
moved in limine to preclude the landowner's experts from testifying because
these experts improperly excluded from their consideration the zoning
restrictions that prohibited development until SR-56 was finalized. The
landowner in turn moved to exclude City's experts from rendering an opinion on
the reasonable possibility of a zoning change because their opinions were based
on the zoning restrictions predicated on the completion of SR-56. The trial
court ruled City's zoning restrictions banning upzoning and development of
properties targeted for acquisition for SR-56 could not be considered by the
jury for the purpose of assessing whether it was reasonably probable the land would be upzoned without SR-56, and
therefore precluded City's experts from basing their valuation testimony on
such project-predicated restrictions. The court also instructed the jury on the
effects of zoning in determining the value of the condemned property,
instructing the jury that it was not to consider any effects on value caused by
SR-56 or its final alignment, but instead must effectively value the land by
"pretend[ing] that State Route 56 does not exist." (RPP, supra,
105 Cal.App.4th at pp. 1019-1027, italics omitted.) (9) In RPP, we concluded the trial
court did not abuse its discretion when it barred City's experts from relying
on the value-depressing effect of project-predicated de jure restrictions when
assessing whether there was a reasonable probability RPP's property would have
been upzoned in the absence of SR-56. (RPP,
supra, 105 Cal.App.4th at pp. 1027-1040.) We reasoned that because
"established law [is] that a condemned property is to be valued as if the
project for which the land is taken did not exist" (id. at p. 1033),
developmental constraints "predicated on [the] very project" for
which the land was condemned were irrelevant to the valuation of the taken
property. (Id. at p. 1040.) Although in the instant case City does not
rely (as it did in RPP) on the value-depressing effect of
project-predicated de jure restrictions, the abandoned Project construct does
rely on the value-depressing effect of project-predicated de facto restrictions
on upzoning, because it posits the Project preempted the formulation of
alternative transportation plans through November 16, 2001, and then imposed a
development hiatus because of the vacuum created when the Project was
abandoned. We conclude this approach is inconsistent with section 1263.330, as
construed by RPP, and therefore
the trial court correctly barred City's experts from relying on that construct
when valuing the taken property. On appeal, City
appears to argue the trial court also erred by permitting Owners' experts to
rely on the no Project construct. City argues this construct substituted an
imagined planning process for the planning process that actually occurred to
permit opinion testimony that the imagined planning process would have solved
transportation issues to permit upzoning to have occurred by or shortly after
the valuation date, an approach violating the proscription against valuation
testimony that is speculative or conjectural. (Redevelopment Agency v.
Contra Costa Theatre, Inc. (1982) 135 Cal. App. 3d 73, 86 [185 Cal. Rptr.
159].) However, City apparently did not object below to the expert testimony
based on this construct, and therefore the claim is waived. (Leonardini v.
Shell Oil Co. (1989) 216 Cal. App. 3d 547, 584 [264 Cal. Rptr. 883].) Even
had the claim been preserved, we conclude the testimony was not purely
conjectural. Owners' planning expert was intimately involved in the planning
efforts that produced both the Framework Plan and the Subarea IV plan; he was
well versed in the pressures that impelled City to begin opening the NCFUA to
more intensive development and testified those pressures were independent of
the planning for the Project; and he testified many important planning policies
could only have been achieved by upzoning in the NCFUA. He also noted that,
although he was not a traffic engineer, the Project was primarily intended to
handle regional traffic needs, rather than locally-generated traffic, and
testified the surface street network in the NCFUA could have been supplemented
to handle the locally-generated traffic had the Project not been constructed.
Owners' expert appraiser also cited several examples of areas in San Diego County developed at
residential densities without a freeway serving the development. The experts
had a solid factual foundation for projecting that an alternative transportation
plan would have developed had the Project never been contemplated. B. The Woolstenhulme Rulings City claims the court
made numerous errors in connection with its rulings on the Woolstenhulme
issues. We evaluate City's claims seriatum. The CEQA Claim City argues the court
should have barred Owners from valuing the taken property under the Woolstenhulme
exception because CEQA's requirements, not considered by the Woolstenhulme court, have effectively vitiated the Woolstenhulme
exception. City argues Woolstenhulme's exception is rooted in the
concept that, when property is adjacent to a pending project and appreciates in
value because it is outside the project's probable boundaries, a subsequent change in or expansion of the
project that requires acquisition of the previously excluded property
requires the condemnor to pay any appreciation in the value of the property
that accrued before it became reasonably probable the property would be included
in the project. However, City argues that under CEQA there can be no project
at all until the environmental review process (including selection of the
specific project alternative) is final, and therefore there is never any
previously excluded property to which the Woolstenhulme exception can
apply. Accordingly, City urges the time is ripe for this court to declare the Woolstenhulme
exception to be a historical relic. (10) Even were this court empowered to
jettison Woolstenhulme, which it is not (Auto Equity Sales, Inc. v.
Superior Court (1962) 57 Cal.2d 450, 455 [20 Cal. Rptr. 321, 369 P.2d
937]), the policies and rationale underlying the Woolstenhulme exception
are not inconsistent with the CEQA process. Woolstenhulme was concerned
with the constitutional requirement of just compensation where property values
rise because the marketplace, having learned of a proposed improvement, places
a premium on a specific property. When that premium attaches because the
property is "known to be within the project [and values rise
because] the land is valued as part of the proposed improvement rather
than as a separate tract of land," or when "the value of property
expected to be condemned ... rise[s] because of the anticipation that the
condemner will be required to pay an inflated price for the land at the time of
condemnation" (Woolstenhulme, supra, 4 Cal.3d at p. 490), the
condemnee is not entitled to be compensated for that premium. However, when the
premium attaches because the property is "expected to be outside of the
proposed improvement [and values] rise because it is anticipated that the
land will reap the benefits resulting from proximity to the coming
project," a decision to include the property in the project after that
premium has attached requires the condemnor to pay for the enhanced value of
the property. (Ibid.) We recognize the CEQA
process introduces some degree of uncertainty as to the precise
boundaries of and requirements for a project, including the possibility
environmental concerns may require previously probable configurations to be
altered, or different or additional property be taken. However, we do not
believe the marketplace entirely ignores the probable configuration of a
project when evaluating whether to place a premium on specific property because
it is reasonably probable the property will be outside of, and hence be
benefited by, the project. The facts of
this case suggest the marketplace had every reason to place a premium on the
value of the taken property notwithstanding the uncertainty inherent in CEQA.
First, the marketplace was aware for nearly 30 years that the Central Alignment
of SR-56 was the only configuration for the Project. Moreover, even
after City's December 1996 DEIR first suggested there was a possibility
the taken property might not benefit by being adjacent to the Project, the
marketplace was also cognizant that City continued (for another two years) to
support the Central Alignment because of
its consistency with the Framework Plan, its superior design from a community
planning perspective, and because it provided a more direct route. At least
until late 1997 or early 1998, the marketplace could well have placed a premium
on the value of the taken property because it was expected not to be included
in the Project. (11) As we understand the Woolstenhulme
exception, the appreciation in value that attaches before it becomes probable
the property will be taken for a project is a proper measure of the just
compensation owed to the owner. Although a project may not be set in stone
before all regulatory requirements (including a final EIR under CEQA) have been
satisfied, the owner is nevertheless entitled to be compensated for the fair
market value of the property as of the time it became probable it would be
acquired for the project. Under this construction, CEQA does not vitiate the Woolstenhulme
exception. The Interpretation Claim City next argues,
even if the Woolstenhulme exception survives CEQA, the trial court erred
by interpreting Woolstenhulme to permit recovery for any appreciation in
market value until it became reasonably probable the taken property would be
within the Project (the probable inclusion date). City contends, although the
probable inclusion date may be the latest date for cutting off
project-caused appreciation, Woolstenhulme does not permit any
recovery of project-caused appreciation unless the owner shows, as a threshold
matter, there was a reasonable expectation the property would be outside
the project's boundaries. City asserts because there was no finding below of a
reasonable expectation the taken property would be outside the boundaries of
the Project, Owners were not entitled to value the taken property under the Woolstenhulme
exception. Even assuming this issue was preserved, n14 we conclude the trial court correctly utilized
the stipulated probable inclusion date to implement the Woolstenhulme
exception for the Project-caused appreciation to the taken property. - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n14 On appeal, City
cites only to its motion in limine, which sought to bar Owners' appraiser from
utilizing Woolstenhulme as a basis for valuing the taken property, to
support its claim that this theory was raised at trial. Although City's motion
in limine does refer to this theory, the thrust of the in limine motion was
that Woolstenhulme applies only to projects subsequently expanded to
include property reasonably expected to be outside the scope of the original
project, and here (1) there was no Project at all until City adopted the FEIR
and (2) there was never an expansion of the Project. City's current approach is
that Owners must make a threshold showing of a reasonable expectation the
property would be outside the Project's boundaries before Project-caused
appreciation (at least up to the probable inclusion date) may be recovered.
This approach does not appear to have been raised in any other context, such as
a request for a section 598 hearing to determine whether there was a
"reasonable expectation" the property would be outside the
Project's boundaries, or by a proposed jury instruction. We nevertheless reach
the issue on its merits. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - (12) The Woolstenhulme court addressed
two issues. The first issue was whether the just compensation clause ever
requires a condemnor to pay an increased
price based on the value added by the improvement for which the property is
taken. The second issue was, if there is such a requirement, how would a court
segregate those cases in which project enhancement was compensable from those
not compensable. On the first question, the court concluded property known
to be targeted for the project may not be valued at its project enhanced value,
but "increases in value attributable to a project but reflecting a
reasonable expectation that property will not be taken for the improvement
should properly be considered in determining 'just compensation.' " (Woolstenhulme,
supra, 4 Cal.3d at pp. 490-495.) On the second
question, the court recognized "that, in practice, the segregation of
those cases in which 'enhancement' should be compensable from those in which it
should not will often entail a difficult task." (Woolstenhulme, supra,
4 Cal.3d at p. 495.) To implement that segregation, the court began by noting:
"In some instances the public may know from the time of the first
announcement of the improvement that certain land will be included in the
project. In such cases, since the public knows that the land will not receive
the benefits of proximity to the project, the market value of the property will
experience no such enhancement; thus, when such property is condemned, the
landowner should not receive any 'project enhanced value.' ... [P] [Moreover,]
[e]ven when public information does not disclose definitely that a given
piece of property will be used for the project, however, the landowner may not
be properly entitled to 'project enhanced' value. Governmental bureaucratic
action is notoriously slow, and in many instances the public in general, and,
in particular, interested landowners and potential buyers, will be able to
determine accurately, well in advance of the formal acceptance of condemnation
plans, that a given tract of property will probably be taken for the
improvement. In such a case the market value of the land facing imminent
condemnation will not rise because, as in the instance of 'definite inclusion,'
potential purchasers and sellers can reasonably foresee that the property will
not enjoy the advantages of the coming improvement. As our earlier analysis
demonstrates, the inclusion of 'enhancement value' in compensation serves only
to preserve the reasonable market value of the property. We see no reason to
require the state to pay an incremental value if an informed individual could not reasonably expect that
the property would be outside of the project. As the United States Supreme
Court has stated in United States v. Miller (1943) 317 U.S. 369,
377 [87 L. Ed. 336, 63 S. Ct. 276], enhancement value should not be includable
in 'just compensation' whenever the condemned lands 'were probably within the
scope of the project from the time the Government was committed to it.' "
(Id. at pp. 496-497, fns. omitted.) (13) After articulating those circumstances
(definite inclusion and reasonably foreseeable inclusion) in which rising
property values are not recoverable, the court formulated a test to implement
its holding that rising value "attributable to a project but reflecting a
reasonable expectation that property will not be taken" (Woolstenhulme, supra, 4 Cal.3d at p.
495) may properly be considered in valuing the property. The court stated:
"If, on the other hand, when plans for the proposed project first became
public and when the consequent enhancement
of land values began, the probability was that the land in question
would not be taken for the public improvement, the landowner would be entitled
to compensation for some 'project enhancement.' During that period when it was
not likely that his land would be condemned, the fair market value of the property
may have appreciated because of anticipation that the land would partake in the
advantages of the proposed project. The owner would be entitled to such
increase in value. On the other hand, once it becomes reasonably foreseeable
that the land is likely to be condemned for the improvement, 'project enhancement,'
for all practical purposes, ceases. Thus, in computing 'just compensation' in
such a case, a jury should only consider the increase in value attributable to
the project up until the time when it became probable that the land would be
needed for the improvement. [Citations.]" (Woolstenhulme, supra, 4
Cal.3d at pp. 497-498, fn. omitted.) (14) Although Woolstenhulme recognized
the courts employed a variety of linguistic tests to articulate when project
enhanced value should be included or excluded from the valuation process, it
noted that "[d]espite this lack of uniformity or precision in terminology
... , most of the cases appear to exclude project enhancement whenever the
court concludes that an informed owner could reasonably anticipate that the
property might well be taken for the project. [Citations.] [P] In our view the
'probability of inclusion' standard, utilized by the federal courts, expresses
this concept adequately and in a readily comprehensible formula; the latter
quality is certainly a most important one in this area, where the factual
inquiries are invariably quite complex and frequently not susceptible to
precise resolution. Accordingly, we believe that this standard is the appropriate
one to be utilized in future cases." (Woolstenhulme, supra, 4
Cal.3d at p. 497, fn. 10; see also pp. 497-498, fn. 11 ["we believe that
the date of 'probable inclusion' constitutes the most appropriate 'cut-off'
date for project enhancement"].) (15) Thus, Woolstenhulme expressly
ruled the probable inclusion date constituted an adequate, comprehensible and
appropriate formula to implement its underlying holding distinguishing when
enhanced value is to be included in just compensation and when it is to be excluded.
Although City urges a two-step test would more properly conform to the Woolstenhulme
holding, we are not free to substitute a different formula for the test
approved in Woolstenhulme. (Auto Equity Sales, Inc. v. Superior
Court, supra, 57 Cal.2d at p. 455.) For the foregoing reasons, we conclude
the trial court did not err by permitting Owners' appraisers to include project-caused
appreciation of the taken property, up to the stipulated June 1998 probable
inclusion date, when valuing the taken property. (Woolstenhulme, supra,
4 Cal.3d at p. 499, fn. 14.) The Instructional Claim City finally argues
the jury instructions concerning valuation were so contradictory and confusing
that reversal is required. (Henderson v. Harnischfeger Corp. (1974) 12
Cal.3d 663, 670-674 [117 Cal. Rptr. 1, 527 P.2d 353].) The jury here was
instructed: "The subject
property may not be valued with reference to ... what it may be worth to the
plaintiff for the purpose for which it is being acquired. "In determining
the fair market value of the property,
do not include any change caused by the proposed improvement, that is,
the use which the plaintiff is to make of the property. In this regard, once
again, the proposed improvement consists only of Unit 2 of the middle segment
of Stature Route 56 ... . "However, in
determining the fair market value of the property you must include any increase
in the market value of the property, if any, caused by the proposed improvement
that occurred before [June 1998]. In this regard, in determining the highest
and best use of the property, you must consider whether the improvements
proposed or contemplated for the SR-56 freeway prior to [June 1998], including
any alternative alignments previously adopted or considered by the governing
agencies, would have increased the probability that the property's zoning would
have been changed within the near future as of the November 16, 2001 date of
value." City does not contend
the first or second paragraphs were inaccurate statements of the
valuation principles applicable to determining the just compensation for the taken property.
Moreover, the third paragraph also accurately describes the valuation
principles applicable to determining the just compensation for the taken property
because the Woolstenhulme exception has not been superseded and the
probable inclusion date remains the appropriate cut-off date for terminating an
owner's right to compensation for project-caused rising property values. Thus,
although the above-quoted instructions involve complex concepts, they are not
misleading or inaccurate statements of law. Instead, the cited instructions
explain, to the extent the jury found the taken property increased in value before
it became probable it would be acquired for the Project, n15 this appreciation
in value must be included in the jury's fair market value calculus (the third
paragraph). However, to the extent the jury found the taken property increased
in value after it was targeted for acquisition, the jury was instructed to not
include any change in value caused by the proposed Project (the first and
second paragraphs). - - - - - - - - - - - - - - Footnotes - - - - - - - - - - -
- - - - n15 City argues,
apparently for the first time in its reply brief, that the instruction
erroneously extended the Woolstenhulme exception by (1) permitting the
jury to consider whether the taken property's proximity to the Project
increased the probability for upzoning before June 1998 and (2) permitting such
probability to be carried forward to the November 2001 valuation date. We have
already rejected City's suggestion that a landowner may not invoke Woolstenhulme
to argue proximity to the project made upzoning reasonably probable. (See fn.
14, ante.) Although Woolstenhulme did not specifically state this
probability would carry forward to the valuation date, the fact eminent domain
proceedings in Woolstenhulme were commenced nearly three years after the
probable inclusion date (Woolstenhume, supra, 4 Cal.3d at p. 485) did
not preclude the landowner in Woolstenhulme from recovering the value
that attached to the land prior to the probable inclusion date. Because
land values can include a component that reflects its highest and best use may
change by upzoning (RPP, supra, 105 Cal.App.4th at pp. 1028-1029),
Owners were entitled to assert the value of the taken property as of November
2001 included a component reflecting probable upzoning that had attached to the
taken property prior to the probable inclusion date. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - -
- - City's argument
appears to be that the instruction was confusing because of the nature of the
evidence. Owners' expert valued the taken property using alternative methods,
one of which presumed the Project was never contemplated (the no Project
construct) and one of which (by utilizing the Central Alignment scenario in
reliance on the Woolstenhulme exception) presumed the Project had been
contemplated. This argument is not premised on
instructional error, but instead appears to assert that an expert in a
condemnation action cannot premise a valuation opinion on alternative
assumptions. However, the no Project construct appraisal method finds legal
support in section 1263.330, and the Central Alignment scenario is rooted in
the Woolstenhulme exception. We are cited no authority that an expert
may not simultaneously rely on all legally supported methods to support an
opinion on the value of condemned property. DISPOSITION The judgment is
affirmed. Owners are entitled to costs on appeal. Huffman, Acting P.
J., and McIntyre, J., concurred. Document URL: http://ceres.ca.gov/html_lib/footers/foot98.html Copyright © 1998-2003 California Resources Agency. All rights reserved. |