1 CALIFORNIA CONDEMNATION CASES-2012 Armageddon Can Wait IRWA Chapter 67 March 12, 2013 Presented by Michael D. Rubin, Esq. And David B. Cosgrove, Esq. Rutan & Tucker, LLP 611 Anton Blvd., Ste Costa Mesa, CA

2 The Evidence Trilogy: “Why is the Judge Keeping All of My Evidence From the Jury?”

3 The Evidence Trinity: Lessons from: City of Livermore v Baca (2012) 205 Cal App 4 th County of Glenn v Foley (2012) 212 Cal. App. 4 th 393. City of Corona v Liston Brick Company of Corona, 208 Cal. App. 4 th 536 (2012).

4 Discretion of Judge in Admitting or Excluding Evidence (Letting the Jury Hear/See Evidence). Trial Judge has wide discretion in admitting/excluding sales and in admitting/excluding expert opinions, and all inferences will be made to favor such determinations on appeal. Exception: When the trial judge excludes all of a party’s evidence on a claim, it effectively takes the claim away from the jury and the appellate court will view all inferences and conflicts in evidence in favor of the party whose evidence was excluded.

5 City of Livermore v Baca (2012) 205 Cal App 4 th 1460 Myth Exposed: Severance Damage does not require the “Substantial Impairment of a Property Right”.

6 City of Livermore v Baca (2012) 205 Cal App 4 th 1460

7 Severance Damage Claims Excluded from the Jury: Curb Appeal and View Reverse Slope and Effects on Drainage Depth of Utility Lines Traffic Hazards Temporary Severance Damages from Loss of Driveway Access for 4 mos., 1.4 Mile Detour of Traffic for 10 mos., Removal of Landscaping over 15,000 sf slope for 1 year

8 City of Livermore v Baca (2012) 205 Cal App 4 th 1460 Actual Permanent Severance Damage Evidence Rule: –Recovery may not be based on speculative, remote, imaginary, contingent, or merely possible events, –Substantial impairment of a property right is not the test, except for taking of access to/from a public street, –Proper Test: Whether some aspect of the project that naturally tends to and actually does decrease the market value of the remaining property.

9 City of Livermore v Baca (2012) 205 Cal App 4 th 1460 Temporary Severance Damage Rule: –Access: Substantial Impairment of Access to the Property –Taking interferes with the actual intended use of the property (annoyance from noise, dust, fumes, construction not sufficient). Interference with ability to rent to tenants sufficient - property included 4 commercial buildings to be rented to tenants.

10 City of Livermore v Baca (2012) 205 Cal App 4 th 1460 Definition of Project. Trial Court -3 separate contracts, including the one for the raised intersection adjacent to Baca’s property that required the take, a second City contract that extends the road from the I-580 freeway northward, and a third non- City contract (by the State) for I-580 freeway off-ramps and overpass. Court of Appeal reversed holding other 2 contracts did not “affect” Baca’s property and Baca’s property was not needed for those contracts so they were not part of the project. State Contract also not part of project because State is diff. entity from City. Since not part of the project, any benefits from the work on other contracts cannot offset severance damages.

11 County of Glenn v Foley (2012) 212 Cal. App. 4 th 393. SHEDDING LIGHT ON THE RULE AGAINST APPRAISING A COMPARABLE

12 County of Glenn v Foley (2012) 212 Cal. App. 4 th 393. THE RULES ON THE USE OF COMPARABLE SALES. Evid. C. § 816: sales “sufficiently alike in respect to character, size, situation, usability, and improvements’ so that the price “may fairly be considered as shedding light “ on the value of the condemned property

13 County of Glenn v Foley (2012) 212 Cal. App. 4 th 393 Matters inadmissible as evidence and not to be taken into account as a basis for an opinion as to the value of property: Evid. C. § 822 (a) (4): “An opinion as to the value of any property or property interest other than that being valued.” [Rule against appraising the Comparable.]

14 County of Glenn v Foley (2012) 212 Cal. App. 4 th 393 Property owner’s appraiser valued land as orchard land, though it was currently raw land used for grazing purposes and for a landfill. He used sales of improved orchard properties as comparables, and deducted from the sales price values he assigned to buildings, existing orchards and personal property located on the comparable sites. Trial Court excluded Property Owner’s appraisal testimony entirely on the grounds that (1) the sales he used were not sufficiently comparable, and (2) he made “quantitative” adjustments to the comparables to deduct what he believed were the values of improvements and existing orchards on the comparables.

15 County of Glenn v Foley (2012) 212 Cal. App. 4 th 393 Court of Appeal reversed holding: –“Substantial comparability” is not required, properties need only be sufficiently similar for the sales price to have “some bearing” (shed light) on the value of the subject. –As long as the quantitative value adjustments for improvements and existing orchards are not mere “best guesses” but are based on some objective criteria (e.g., university cost studies), such adjustments do not constitute an opinion of the value of the comparable in violation of Evid. Code Sec. 822 (a) (4). –But, mere consultations with other appraisers as to the value of the improvements as a means to adjust the comparables, would be “consultative guesswork” and render the testimony pure proscribed opinion of the value of the comparable.

16 City of Corona v Liston Brick Company of Corona (2012) 208 Cal. App. 4 th 536 Some Evidence You Just Can’t Get in No Matter How Hard You Try

17 City of Corona v Liston Brick Company of Corona (2012) 208 Cal. App. 4 th 536 When Can a Court Totally Exclude a Party’s Valuation Evidence on a Claim? –Answer: When it solely includes/ is based upon prohibited matters (such as the 6 matters in Evid. Code § 822 (a) upon which an opinion may not be based).

18 City of Corona v Liston Brick Company of Corona (2012) 208 Cal. App. 4 th 536 Scenario. 2005: City sought street widening easements over 1.45 acres of a acre property & valued the easements at less than $2/sf. 2006: RCTC entered into agreement w owner to buy rest of the acres for $20/sf and an option to buy the 1.45 acres for $21/sf if not taken by City (based upon RCTC’s appraised value of the acres).

19 City of Corona v Liston Brick Company of Corona (2012) 208 Cal. App. 4 th 536 Issues. Can the owner use the RCTC’s contract to buy the remainder at $20/sf as evidence of value in the City condemnation? –No. Enforceable contracts can be used as comparable sales, but Evid. Code § 822 (a) (1) prohibits use of evidence from acquisitions for a public use for which the comparable could have been condemned. Can the owner use the RCTC’s option to buy the 1.45 acres at $21/sf as evidence of value in the City condemnation? No. Evid. Code § 822 (a) (2) prohibits use as evidence of the price at which an offer or option to purchase or lease any property was made [except as an admission against the party who made the offer or option.]

20 City of Corona v Liston Brick Company of Corona (2012) 208 Cal. App. 4 th 536 Can the owner use the RCTC’s appraisal of the acres at $20/sf as evidence of value in the City condemnation? No. Evid. Code § 822 (a) (4) prohibits use as evidence, an opinion as to the value of any other property or property interest other than that being valued. [Here the RCTC appraisal was of the entire acres and the City was only acquiring 1.45 acres, thus a different interest.]

21 City of Corona v Liston Brick Company of Corona (2012) 208 Cal. App. 4 th 536 Can Clever Lawyers Use a “Back Door” to Introduce Prohibited Matters Under the Guise of Cross- Examination of the Opposing Expert? –Can the owner’s attorney use the $20/sf opinion of the RCTC’s appraiser to cross-examine the City’s appraiser at trial? –Answer: You cannot use cross-examination of the opposing appraiser as a means to “back door” into evidence another appraiser’s opinion of a comparable property. [Evid. Code § 822 (a) (4) prohibits use of an opinion as to the value of any property/property interest other than that being valued.]

22 City of Corona v Liston Brick Company of Corona (2012) 208 Cal. App. 4 th 536 What if the RCTC appraisal was prepared by the same appraiser that appraised the 1.45 acres for the City? Maybe. Court left open whether the second appraisal of “another” property could be used to cross-examine the same appraiser under these circumstances. What if the RCTC appraiser had appraised just the easements condemned by the City, could the owner cross-examine the City appraiser about the RCTC appraisal? Maybe. This would not violate Evid. Code § 822 (a) (4).

23 People ex rel. Dept., of Transportation v. Dry Creek Enterprises (2012) 211 Cal. App 4 th 486 Claim for loss of business goodwill from a Paso Robles winery Trial court judge held, as a matter of law, business had no goodwill to lose. Two methods advocated: 1) “Cost to Create” (cf. Inglewood Redevelopment Agency v. Aklilu (2007) 153 Cal. App. 4 th 1095); 2) Novel “Premium Pricing “ method. Cost to Create-sum total of all four-year costs divided by four (one fourth of root stock taken) – Premium Pricing: Estimated premium on cabernet bottles over Madera-grown wine, times expected yield lost over 15 years.

24 People ex rel. Dept., of Transportation v. Dry Creek Enterprises (2012) 211 Cal. App 4 th 486 (ctd.) Owner’s precise burden, and proper procedure for determination, left unspecified. Limited Aklilu “Cost to Create” method to where there is clear “before condition” goodwill and total loss (impossible to allocate specific costs to portions acquired on partial losses) No loss of future profits on a product line that has yet to be profitable.

25 People ex rel. Dept., of Transportation v. Dry Creek Enterprises (2012) 211 Cal. App 4 th 486 (ctd.) Issue of pre-taking existence of Goodwill is Not a jury Question Statutory interpretation issue-court held statute requires showing of pre- taking goodwill as a “qualifying condition” –precondition as a matter of law. No sense in a jury trial on amount of goodwill, if there is no goodwill to lose.

26 People ex rel. Dept., of Transportation v. Dry Creek Enterprises (2012) 211 Cal. App 4 th 486 (ctd.) The “Mirror Image” Effect of Dry Creek: -Case involves a total exclusion of evidence, but uses complete opposite rule of review-evidence not viewed most favorably to proponent, but instead abuse of discretion deference to judge. -Goodwill is statutory, other compensation is constitutional-is this distinction enough for such different rules? Writes into the Statute a “Fifth Column” finding under CCP sec —Profitability. Is this judicial legislation?

27 People ex rel. Dept., of Transportation v. Dry Creek Enterprises (2012) 211 Cal. App 4 th 486 (ctd.) The Take Away:

28 Council of San Benito County Governments v. Hollister Inn (2012) 209 Cal. App. 4 th 473 Issue re condemning entity’s responsibility to replace blocked access Owner prevailed in trial court on gross abuse challenge to resolution-because condemnor didn’t investigate taking adjacent owner’s property to replace acquired access.

29 Council of San Benito County Governments v. Hollister Inn (2012) 209 Cal. App. 4 th 473 Court reiterated quasi-legislative nature of resolution findings Statutory interpretation of CCP sec substitute condemnation permissible “to provide utility service to, or access to a public road from, any property that is not acquired for such public use but which is cut off from utility service or access to a public road...” Did “a public road” mean “the public road” or “all public roads?”

30 Council of San Benito County Governments v. Hollister Inn (2012) 209 Cal. App. 4 th 473 Answer: all public roads. Held: property must be rendered without public road access to invoke the substitute condemnation power. Public use is found in the savings of acquisition costs. In any event; no condemnor is required to invoke substitute condemnation, so no right to take challenge lies from failure to do so.

31 A Final Word: THANK YOU!!