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HomeMy WebLinkAboutAGENDA REPORT 1996 1204 CC REG ITEM 07FTO: FROM: DATE: AGENDA REPORT CITY OF MOORPARK The Honorable Cit Lillian E. Hare, November 21, 1996 y Council City Clerk (CC Meeting 12/04/96) SUBJECT: CONSIDER REQUEST FROM THE LEAGUE OF CALIFORNIA CITIES FOR AMICUS SUPPORT IN METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA V. FRANCIS N.DOMENIGONI - ISSUES RELATED TO THE VALUATION OF PROPERTY TAKEN BY EMINENT DOMAIN. The League of California Cities has approved the recommendation of the League's Legal Advocacy Committee to support the subject amicus. The issues pertaining to this case will affect the cost of property acquired through eminent domain proceedings. The City Attorney has indicated that the City might wish to support this amicus. The background material has been provided to the City Council under separate cover. STAFF RECOMMENDATION: Support Amicus. 1 � 1 ` H. L. (MIKE) McCORMICK' ARTHUR G. KIDMAN' RUSSELL G. SEHRENS" SUZANNE M. TAGUE* JANET R. MORNINGSTAR* KEITH E. McCULLOUGH" FRANK W. BATTAILE ALLISON C. HARGRAVE JOHN O. CLUNE *A PROFESSIONAL CORPORATION MCCORMICK, KIDMAN & BEHRENS, LLP LAWYERS IMPERIAL BANK BUILDING 695 TOWN CENTER DRIVE SUITE 1400 COSTA MESA, CALIFORNIA 92626 -1924 November 5, 1996 TO: LEAGUE OF CALIFORNIA CITIES CITY ATTORNEYS RECEIVED NOV 121996 CITY OF MOORPARK TELEPHONES (714) 755 -3100 (BOO) 755-3125 FAX (714) 755 -3110 #62000 -024 RE: Amicus Curiae Brief in Metropolitan Water District of Southern California v. Francis N. Domeniponi et al. At its recent meeting in Anaheim, the Board of Directors of the League of California Cities approved the recommendation of the League's Legal Advocacy Committee that League members participate as amicus curiae in the pending appeal in the case of Metropolitan Water District of Southern California v. Domenigoni (Fourth District Court of Appeal Division Two, No. E017416) in support of Metropolitan Water District of Southern California ( "Metropolitan "). Under the League's policy, the League itself does not sign on as an amicus as an organization, but encourages its individual city members to participate individually. The League's Legal Advocacy Committee has solicited Kirk Trost of the Sacramento firm Hyde, Miller & Owen to author the brief on behalf of League members. This request is, therefore, being made to each League member to consent to participate as an amicus curiae in this action. We feel that the greater the number of League members signing onto the amicus curiae brief, the greater the weight the brief will carry with the Court of Appeal. The issues involved in this appeal relate to the valuation of property taken by eminent domain. In Metropolitan v. Domeni oni, a number of incorrect evidentiary rulings by the trial court resulted in a jury verdict of $43 million for property valued at $8 million by Metropolitan's expert appraiser. The outcome of this appeal, because it raises issues of how property acquired for a public use shall be valued, affects each and every city, county, and other public entity. An adverse decision by the Court of Appeal could substantially increase the cost of acquiring property for public facilities and discourage voluntary sales. The issues to be addressed in the brief prepared for the League will address the following issues of particular concern to cities: WS RECEIVED +� U ! ( ENDARED Yk w-o- -t MCCORMICK, KIDMAN & BEHRENS, LLP LAWYERS A PARTNERSHIP OF PROFESSIONAL CORPORATIONS League of California Cities City Attorneys November 5, 1996 Page 2 1. Whether Severance Damages May be Recovered for a Non - Contiguous Parcel. Severance damages are generally recoverable for the diminution in value of the remaining portion of land when a public entity condemns only a portion of a larger parcel, or a contiguous parcel. In the Metroolitan v. Domenigoni case, the landowner was permitted to seek severance damages for property that was not contiguous, but was separated by half a mile from the property taken. The court found "constructive contiguity" based upon the use of both parcels for farming operations, then permitted the property owner to introduce evidence of damages based upon a prospective use of the property for residential development. The extension of severance damages to non - contiguous parcels is not supported by precedent and has the potential of allowing an unjustified windfall to some property owners who happen to own other parcels within the vicinity. The League brief will address the issue from a historical perspective to argue against allowing severance damages to non - contiguous parcels. 2. Whether A Pre -Trial Ruling by the Court That the Condemning Agency's Precondemnation Activities Were Not Improper, Precludes Introduction of Evidence by the Property Owner in Support of an Argument that Precondemnation Activity Prevented Development. If improper precondemnation activities, or unreasonable delays by a condemning agency, result in a decrease in value of the property taken by eminent domain, the court may determine an earlier date for purposes of valuation or allow proof of damages due to improper conduct to compensate the property owner. The determination of whether improper activity or unreasonable delay has occurred is an issue for the court, not the jury. After making a determination that Metropolitan had not engaged in any improper precondemnation activity or delay, the Court, in the Metropolitan v. Domenigoni case, nevertheless, allowed the property owner to introduce evidence of Metropolitan's precondemnation purchases of nearby property to show that Metropolitan deliberately prevented development which would have increased the value of the property owner's land. This was allowed notwithstanding the Court's earlier finding that it was a real estate recession which caused the failure of development to occur in the areas near the property owner's land. MCCORMICK, KIDMAN & BEHRENS, LLP LAWYERS A PARTNERSHIP OF PROFESSIONAL CORPORATIONS League of California Cities City Attorneys November 5, 1996 Page 3 The League's brief will address the right of the condemning agency to rely on the pretrial rulings of the trial court to preclude introduction of evidence on contrary theories at trial. 3. Whether Damages are Recoverable Based Upon Speculation or Public Perception that a Public Improvement Will Fail. The property acquired by Metropolitan is to be used for a reservoir behind three dams. Over Metropolitan's objections, the trial court allowed the property owner to present expert witness opinion testimony that the proposed method of construction of the dam was defective and that there was a substantial risk that it could or would fail. Case law generally holds that for purposes of eminent domain, severance damages must be based upon the assumption that the project will be constructed in the manner proposed and not in a defective manner. The trial court based its ruling allowing the opinion as to safety on the Appellate Court decision in San Diego Gas & Electric v. Daley ((1988) 205 Cal. App. 3d 1334) which allowed testimony that property values would be affected by public perception that power lines in close proximity to the landowners' property were unsafe. This summer, the Supreme Court held in San Diego Gas & Electric v. Superior Court ((1996) 13 Cal. 4th 893) that a property owner was not entitled to damages for alleged decreases in market value to adjacent land by reason of the existence of power lines. The Supreme Court recognized that the Daley case, on which the trial court relied, must be re- examined in the context of direct condemnation cases. This case presents an opportunity for public entities to urge the Court to question the Daley holding in light of the Supreme Court's holding in San Diego Gas & Electric. A more detailed summary of the issues to be addressed in the League brief is attached hereto as Exhibit "A ". These issues are of major importance to all public entities with eminent domain authority. The briefing schedule has been stayed by the Court of Appeal pending completion of a court- ordered settlement conference, which will be held December 19, 1996, however, a request will be filed with the Court in the interim for leave to file a brief to alert the Court of the interest of the League of California Cities in the issues of this case. The consent of individual League members to join as amici curiae is needed as soon as possible to be included in the request. Additional League members may join as amici in the brief if leave of the Court is granted. MCCOBMICK, KIDMAN & BEHRENS, LLP LAWYERS League of California Cities City Attorneys November 5, 1996 Page 4 If your city would like to participate as an amicus curiae in the League of California Cities' brief, please contact Mr. Kirk Trost at 916 - 447 -7933 or myself as soon as possible. Participation will not require any financial contribution by the League member. Your prompt response will be greatly appreciated. Very truly yours, McCORMICK, KIDMAN & BEHRENS, LLP w f Janet Morningstar JM:ggg Attachment c:\wp601docs\wd4wattyltr EXHIBIT "A" INTRODUCTION Metropolitan Water District of Southern California ( "MWD ") brought an eminent domain action to condemn three separate parcels owned by various members of the Domenigoni family ( "property owner ") which together comprise about 510 acres in the Domenigoni/Diamond Valley near Hemet, California. The acquisition was for the construction of a large dam as part of MWD's Eastside Reservoir project. The parcels taken, as well as other similar parcels owned by the property owner in the area, were all used for farm purposes. A jury verdict was rendered for $43,200,000 against MWD ($16,300,000 for the part taken plus $26,900,000 in severance damages), which was over 5 times MWD's appraised value. A trial court remittitur of $9,450,000 was accepted by the property owner, reducing the amount of the judgment to $33,750,000. Attorney fees and costs also were awarded in the sum of nearly $5,000,000. Interest continues to run in an amount close to $2,000,000 per year. MAID has appealed the trial court judgment. The appellate designation is Metropolitan Water District of Southern California, a public corporation vs. Francis N. Domenigoni and Jean Domenigoni, individually and as trustees of the Francis N. and Jean Domenigoni Family Trust, Domenigoni- Barton Properties, Fred Domenigoni, Domenigoni Brothers Ranch, Andy Domenigoni, and Francis Domenigoni, individually. (Fourth Appellate District, Division Two, Appeal No. E 017416.) While MWD has filed its Opening Brief, the appellate court has stayed further briefing pending a settlement conference. The vast differences between the parties' positions make settlement unlikely. 11/01/96 7 /c: /wp51 /League/ExhibitA.04 -1- MWD believes, and the League of California Cities has agreed, that several issues raised in this case are of critical importance to cities, counties, water districts and other public entities throughout the State. As discussed below, a decision against MWD on these issues could expose all public agencies to substantially greater compensation awards. The issues that will be addressed in the amicus curiae brief are as follows: 1. LARGER PARCEL ISSUE: In every eminent domain action in which only a part of a property is taken, the property owner may recover severance damages (i.e., damages to the larger parcel of which the property acquired is a part). The courts have required that for real property to be considered part of the larger parcel, three unities must exist: (1) unity of ownership; (2) physical contiguity; and (3) unity of use with the part taken. In this case, there was no physical contiguity between the property acquired and the other lands allegedly owned by the property owner. In fact, the property acquired is over 112 mile from the property owner's other farm property. However, relying upon City of Los Angeles v. Wolfe, (1971) 6 Ca1.3d 326, the trial court found "constructive contiguity." In Wolfe, the court found constructive contiguity based upon strong evidence of interdependent uses -- a non - contiguous parcel supplied the required parking for a commercial parcel. The loss of parking effectively precluded the pre- existing uses of the commercial property. None of the special factors in Wolfe exist in this case. While the property acquired and the alleged remainder both were used for farming, no evidence established that the acquisition prevented the continued use of the alleged remainder for that purpose. In fact, the trial court found constructive contiguity not based upon existing interdependent uses, but based upon a prospective unity of use of the non - contiguous parcels for a potential future use, residential development. Amicus support is urged in this case because erosion of the physical contiguity requirement 1 1/01/96 7 /c: /wp51/League/SxhibitA.04 -2- for severance would open the door to speculative claims of unified uses and potentially to excessive awards of severance damages. 2. PRECONDEMNATION ACTIVITIES ISSUE: On larger public projects, agencies often acquire numerous parcels at different times. Some properties are acquired by negotiation and some by eminent domain. This case raises the issue of whether and how a property owner can use such early acquisitions to enhance severance damages. More specifically, this case raises concerns about the prejudicial use of evidence of precondemnation activities in front of juries. The law is settled that claims of inverse condemnation and precondemnation blight are legal issues properly tried by the judge in a bifurcated trial before any jury proceedings on compensation. Generally, condemnation blight is the negative impact that a prospective condemnation action may have on value. Since such blight is to be disregarded, if a public agency takes improper actions to depress value or unreasonable delays the acquisition, the court has the power to determine that a "de facto" taking occurred on an earlier date. Compensation is then based upon the earlier date of value to avoid the influence of the proposed acquisition. In this case, the trial court conducted a legal issues trial to adjudicate the property owners claims of a "de facto" earlier taking and for Klopping damages. After the bench trial, the court rejected the property owner's claims, finding that MWD's precondemnation activities were not responsible for any decrease in the value of the condemned property. Having thus concluded during the bench trial phase that the public project did not impact value, no basis existed for the court to admit evidence during the jury trial phase of MWD's precondemnation acquisition program. However, the court not only admitted such evidence, the court went further, allowing the property owner to offer evidence and to argue that MWD, by its 11/01/96 7/c:/wp51/League/ExhibitA.04 -3- acquisition program, deliberately prevented development and infrastructure from occurring adjacent to the subject property. This was allowed, notwithstanding the fact that all such acquisitions were voluntary. The property owners had approached MWD to have their property acquired. The proposed amicus brief will argue that evidence of MWD's precondemnation acquisition activities should have been excluded from the jury since the court already had determined that MWD's activities had no impact on value. The brief will focus particular attention on the policies supporting bifurcation of condemnation proceedings -- avoiding the introduction of inflammatory evidence of the condemnor's precondemnation activities -- are ill- served when juries are permitted to hear evidence that such activities were intended to prevent development after the court already has found that such activities did not impact value. 3. SAFETY ISSUE: MWD produced evidence showing how the dam and reservoir were to be constructed as part of its case in chief. Consistent with the eminent domain law, MWD's testimony outlined the project as proposed. The eminent domain law provides that an improvement must be assumed to be improved or constructed in the manner proposed (People ex rel. Dept of Public Works v. Edgar (1963) 219 Cal.App.2d 381); that speculation that the project will not be carried out as proposed or is not the best method for implementation is not allowed (People ex rel. Dept of Public Works v. Ayon (1960) 54 Ca1.2d 217, 5 Cal.Rptr. 151; Sacramento & San Joaquin Drainage Dist. v. Reed (1963) 215 Cal.App.2d 60, 29 Cal.Rptr. 847; State ex rel. Dept of Public Works v. Wherity (1969) 275 Cal.App.2d 241, 79 Cal.Rptr. 592); that severance damages must be calculated on the assumption that the improvement is made in the manner proposed (Code Civ. Proc., §§ 1263.420 - 1263.450); that damages are to be assessed as if the improvement was completed on the date of valuation (People ex rel. Dept of Public Works v. Schultz, supra); and that the character of the improvements proposed to be constructed by the public entity is not subject to 11/01/96 7 /c: /wp51 /L- gue/ExhibitA.04 -4- impeachment or rebuttal (Evid. Code, § 813, subd. (b)). Notwithstanding these principles, the trial court allowed an expert witness to offer opinions that the proposed method of construction of the dam was defective and that there was substantial risk that it could or would fail. Moreover, while no evidence was offered that property values were, or would be, diminished because of safety concerns, the property owner's appraiser testified that he considered the dam safety testimony in arriving at his opinion of severance damage. The testimony as to dam safety, and the appraiser's reliance on that testimony, apparently was allowed by the trial court pursuant to the holding in San Diego Gas & Electric Co. v. Daley (1988) 205 Cal.App.3d 1334. That case, involving the construction of power lines, allowed a property owner to assert that the value of his remaining property was affected by a public perception that the proposed project may be unsafe. However, the property owner was not allowed to present evidence that the project was, in fact, unsafe. Evidence of actual safety was held immaterial because actual safety does not affect market value, only the public perception of safety affects market value. Here there was no evidence of any public perception that the dam was unsafe or that properties in close proximity to the base of a dam did not command the same market value as properties outside of the assumed area of damage. The proposed amicus brief will argue that good cause exists for the established rules requiring compensation to be based upon the project as proposed. An eminent domain trial should not also be a mini trial on the safety of public improvements, the fear of the failure of such improvements, or the truth or falsity of the condemnofs testimony on the public project. Indeed, the cases provide a remedy for property owners in the event public projects cause damages not contemplated in the initial condemnation action. A ruling in favor of the property owners in this case thus not only creates the potential of litigating the "safety" of every public project, but it also 11/01/96 7 /c:lwp51/League/ExhibitA.04 -5- creates the possibility of double recovery by property owners in connection with such safety issues -- once at the time of the direct condemnation action and a second time in the event the public property public project causes unforeseeable damages in the future. 11/01/96 7/c:/wp5 1/League/ExhibitA.04 '6-