The opinion of the court was delivered by: Hon. Dana M. Sabraw United States District Judge
ORDER: (1) DENYING DEFENDANT'S MOTION THAT VALUATION BE BASED ON PLAINTIFF BEING RESPONSIBLE FOR DEMOLITION; AND (2) GRANTING DEFENDANT'S MOTION TO EXCLUDE EVIDENCE OF PROPERTY TAX EFFECTS [Docs. 56 & 57]
Presently before the Court are two motions filed by Defendant San Diego Unified Port District ("Port"), in which the Port seeks a ruling: (1) that valuation of the condemned property be based on the Plaintiff United States being responsible for demolition of fixtures and structures affixed to the land; and (2) excluding evidence of property tax effects on the value of the subject property. For the reasons set forth below, the Court denies the Port's motion for an order that Plaintiff is responsible for demolition of fixtures and structures, and grants the Port's motion to exclude opinion testimony and evidence of property tax effects on the value of the subject property.
The United States has condemned 32.42 acres of tide and submerged lands located at the south side of North Harbor Drive at Nimitz Boulevard on the San Diego Bay. In 1949, as part of a comprehensive exchange agreement*fn1 between the United States and the City of San Diego, the Navy received a long-term lease of the property for 50 years with a right of renewal for an additional 50 years. (See Doc. 52, Ex. A.) The lease included several provisions, including: (1) the United States paid no rent; (2) the United States was given the right "to make alterations, attach fixtures, and erect additions, structures or signs in or upon the premises;" (3) the property could be used only for military purposes, and if there were a failure of that condition or if the property was abandoned, the property would revert to the City; and (4) the United States could not assign or sublet the leasehold. (Doc. 56, Ex. 1.)
In 1963, the City conveyed its interest in the property to the Port District. The Port remains the successor in interest to the property. On December 5, 1996, the Navy exercised its option to extend the lease for an additional 50 years. The Port and the California State Lands Commission ("Commission") opposed the extension on grounds that the lease was invalid. The United States then sought to condemn the Port and the Commission's interest in the subject property. Pursuant to the terms of a settlement in United States v. 32.38 Acres of Land, Case No. 99cv1622 (S.D.Cal. 2000), the United States was given a leasehold interest in the property through August 8, 2049.
On May 31, 2005, the United States filed the instant action to condemn the property, estimating just compensation at $237,500. In its declaration of taking, the United States asserts that it is condemning the Port's fee simple estate, including the State of California's tidelands trust rights and any subsurface or mineral rights, "but excluding the [leasehold] interest of the United States" and any public utility easements. (Doc. 2, Sched. C.) On January 6, 2006, the Port filed its objections to the United States' condemnation of the subject property. On January 9, 2006, the Commission filed a separate motion for summary judgment, challenging the United States' authority to extinguish the State's public trust rights in the land. This Court issued an order overruling the Port's objections and denying the Commission's motion on April 26, 2008. (Doc. 24.) The Commission's motion was denied on grounds that the taking by the United States extinguished California's public trust easement. (Id., at 5-8.)The Court found that: with respect to the 27.54 acres of lands which are filled and are not subject to the tidelands, the United States takes the lands free of any public trust restrictions. As to the remaining 4.88 acres which are within the bulkhead line but remain tidelands, the United States acquires the property subject to its own federal trust. (Id.)
Thereafter, on October 28, 2008, this Court issued an order determining that the land should be valued as burdened by California's tidelands trust, but that condemnation of the trust itself -- as a non-pecuniary sovereign attribute -- was not compensable. (Doc. 43, at 8.) On August 6, 2009, this Court determined that the interest being condemned is the Port's reversionary lease fee interest, not the leasehold interest. (Doc. 55, at 5-6.)
Federal Rule of Civil Procedure 71.1 (renamed from Rule 71A in 2007) governs procedural matters in a federal condemnation cases. Kirby Forest Indus., Inc. v. United States, 467 U.S. 1, 3-4 (1984). "In an action involving eminent domain under federal law, the court tries all issues, including compensation, except when compensation must be determined" by a specially constituted tribunal, jury, or court-appointed commission. Fed. R. Civ. P. 71.1(h). Rule 71.1 permits the jury to decide only the "precise issue of the amount of compensation to be awarded," a decision which is to be made "within ground rules established by the trial judge." United States v. Reynolds, 397 U.S. 14, 20 (1970) Consequently, the trial court is responsible for making preliminary determinations that affect the valuation of condemned property. See Scott Lumber Co. v. United States, 390 F.2d 388, 392 (9th Cir. 1968) (court determines legality of potential uses for condemned land prior to valuation).
"[J]ust compensation is the value of the interest taken." United States v. Petty Motor Co., 327 U.S. 372, 377 (U.S. 1946). It is measured by "the market value of the property at the time of the taking contemporaneously paid in money." Olson v. United States, 292 U.S. 246, 255 (1934). Market value is defined as "the price which a reasonable seller who desires to sell but is not required to sell would demand for the property and the price which a reasonable buyer who desired to buy but was not required to buy would pay for the same." United States v. 429.59 Acres of Land, 612 F.2d 459, 462 (9th Cir.1980). It is settled that just compensation is determined by the owner's loss, not the taker's gain. United States ex rel T.V.A. v. Powelson, 319 U.S. 266, 281 (1943). A property owner "is entitled to be put in as good a position pecuniarily as if his property had not been taken. He must be made whole but is not entitled to more." Olson, 292 U.S. at 255.
The United States has constructed buildings on the subject property, and the parties agree that the buildings must be demolished in order to convert the property to its highest and best use. At issue is which party will bear the cost of demolition under the terms of the lease. Although this Court already has held that the Port will be responsible ...