California Court of Appeals, Fourth District, Second Division
APPEAL from the Superior Court of Riverside County No. RIC524291..
Dallas Holmes, Judge. (Retired judge of the Riverside Super. Ct. assigned by
the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.)
Allen Matkins Leck Gamble Mallory & Natsis and K. Erik Friess for Defendants and Appellants.
Aleshire & Wynder, Eric L. Dunn, Sanaz K. Soltani, and Pam K. Lee for Plaintiff and Respondent.
Defendants and appellants, Richard C. Stamper, Donald D. Robinson, and Donald Dean Robinson, LLC (the owners), own a 9.1-acre parcel of land in Perris, California. The parcel (the Stamper Property) is vacant land zoned for light industrial use. In 2005, plaintiff and respondent, City of Perris (the City), designated certain truck routes in an amended circulation element of its general plan. To establish one such truck route, a section of Indian Avenue would need to be realigned and, as a result, pass through the Stamper Property. As shown in the circulation plan, Indian Avenue would be 94 feet in width comprising about 19 percent of the 9.2-acre parcel. In 2009, the City filed the underlying eminent domain action to acquire the portion of the Stamper Property needed for the Indian Avenue truck route project (the take).
The City appraised the take as undevelopable agricultural land. The City based this appraisal on the theory that it would not approve of any development plan for the Stamper Property unless the owners gave—or dedicated—the take to the City. Because of this dedication requirement, the City argued, the take would either be given to the City as a condition of development or remain vacant and usable only for growing crops, and as such should be valued on that basis. The owners argued that the dedication requirement should not be considered in determining the fair market value of the property because it was not reasonably probable the City would impose the dedication requirement and, if imposed, it would be unconstitutional. Because the dedication requirement should not be considered, the owners argued, the take should be valued at its highest and best use as light industrial property, the present zoning classification.
The court granted the City’s request to bifurcate the trial. In the first phase, the court would decide the “legal issues”; in the second phase, a jury would determine valuation. At the conclusion of the first phase, the court determined that the dedication requirement was reasonably probable and was constitutional. After these issues were decided in the City’s favor, the owners stipulated to the City’s appraisal, and the court entered judgment based thereon.
On appeal, the owners challenge the court’s substantive rulings in the first phase of the trial as well as the decision to have the court, not the jury, determine issues concerning the dedication requirement. They also challenge certain evidentiary rulings and the court’s ruling allowing the City to withdraw a statutorily required deposit.
We hold that the issues surrounding the dedication requirement are essential to the determination of “just compensation” and therefore must be “ascertained by a jury.” (See Cal. Const., art. I, § 19(a).) Accordingly, we will reverse the judgment.
The Stamper Property is a 9.1-acre roughly square-shaped parcel of land located on the southwest corner of Perry Street and Barrett Avenue in the City of Perris. Perry Street and Barrett Avenue are both 60 feet wide and unpaved. Perry Street runs east-west, parallel to, and north of the Ramona Expressway, a major thoroughfare. Barrett Avenue runs north-south and intersects the Ramona Expressway south of the Stamper Property. The Stamper Property is vacant and is used for agricultural purposes, but is zoned for light industrial uses. No proposal to develop the Stamper Property was pending at the time of trial.
Before 1999, the City planned another street, Indian Avenue, to run in a straight line, north and south of and intersecting the Ramona Expressway. The Stamper Property lies some distance to the east of this pre-1999 alignment of Indian Avenue.
In the mid or late 1990’s, Lowe’s, a home improvement retail business, proposed to build a distribution center in the City. As part of its development application, Lowe’s asked the City to amend the circulation element of its general plan to realign Indian Avenue south of the Ramona Expressway in order to make room for its distribution center. The City agreed, and in November 1999 it realigned a half-mile segment of Indian Avenue, south of the Ramona Expressway, as part of an amended circulation element of the City’s general plan. From a point south of the Ramona Expressway, Indian Avenue was to curve northeasterly and meet the Ramona Expressway where Barrett Avenue meets the Ramona Expressway from the north. As realigned in 1999, Indian Avenue would not intersect the Stamper Property.
In June 2005, the City adopted a new circulation element to its general plan. The new circulation element states: “The efficient movement of goods in and through the City of Perris is vital to the City and the Inland Empire’s economy and improves traveler safety. The ability of the County to compete domestically and internationally on an economic basis requires an efficient and cost-effective method for distributing and receiving products.” To address these concerns, the circulation element discusses the need to designate truck routes in the northern area of the City: “As healthy industrial growth is expected within the City, related truck traffic will continue to increase particularly in northern Perris. In addition, similar growth just north of Perris in Moreno Valley will exacerbate traffic conditions.... The designated truck routes are intended to indicate arterial streets, which may be used for truck movement in excess of the weight designated in the City Ordinance for movement through the City.”
As part of the June 2005 circulation element, the City designated Indian Avenue as a four-lane “secondary arterial truck route” and realigned Indian Avenue north of the Ramona Expressway. In its new configuration, Indian Avenue proceeds northward from the Ramona Expressway, curves northwesterly through the Stamper Property, and eventually connects to the preexisting northern segment of Indian Avenue. Indian Avenue will cut a curving, roughly diagonal 94-foot-wide swath through the Stamper Property, dividing it into two irregularly-shaped parcels, approximately 5.5 acres and 2.0 acres in size, one on either side of Indian Avenue. The size of the 94-foot-wide swath through the Stamper Property (the take) is 1.66 acres.
In October 2008, the City offered to buy the take from the owners for $54, 400, and increased its offer to $54, 800 in January 2009. The City’s offers valued the take as if it were limited to agricultural use, although the Stamper Property (including the take) was zoned for light industrial use. According to the City, the take should not have been appraised as developable industrial property because the City could and would require the owners to dedicate the take to the City as a condition of any industrial development.
In March 2009, the City adopted a resolution of necessity authorizing acquisition of the take through eminent domain. The express purpose of the resolution was “to carry out and make effective the principal purpose of the Project, ” which is defined as “Indian Avenue right-of-way improvements.” The City’s eminent domain action followed. Thereafter, the City deposited $54, 800 with the court as “the probable amount of the compensation” payable to the owners for the take. (Code Civ. Proc., § 1255.010.) The owners moved to increase the deposit on the ground the City’s claimed dedication requirement was unconstitutional and the take should be valued as industrial property, its current zoning classification and its highest and best use. The court granted the motion and ordered the City to increase its deposit to $511, 602. The City complied.
Thereafter, the matter proceeded to the trial on compensation. As indicated, the court bifurcated the trial and ruled on certain issues it deemed “legal issue[s] affecting the determination of compensation” before a jury was to determine the owners’ compensation. (§ 1260.040.)
Before we discuss the trial court’s rulings and analyze the parties’ claims, we review the legal principles governing compensation in eminent domain and the extant case law concerning the effect of dedication requirements on the value of property taken in eminent domain.
III. LEGAL PRINCIPLES/OVERVIEW
A. Just Compensation and Permissible Dedication Requirements
Private property shall not be taken for public use without just compensation. (U.S. Const., 5th & 14th Amends.; Cal. Const., art. I, § 19.) “Such compensation means the full and perfect equivalent in money of the property taken. The owner is to be put in as good position pecuniarily as he would have occupied if his property had not been taken.” (United States v. Miller (1943) 317 U.S. 369, 373, fns. omitted; see also Mt. San Jacinto Community College Dist. v. Superior Court (2007) 40 Cal.4th 648, 653.) Compensation is to be based on the loss to the owner, not the benefit received by the condemner. (City of Los Angeles v. Decker (1977) 18 Cal.3d 860, 866.)
Under California’s eminent domain law, the measure of compensation is the fair market value of the property. (§ 1263.310; Los Angeles County Metropolitan Transportation Authority v. Continental Development Corp. (1997) 16 Cal.4th 694, 698.) Fair market value is statutorily defined in section 1263.320, subdivision (a), 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.”
Governments may, of course, restrict the “uses and purposes” of private property without triggering the requirement of paying compensation. “[T]he authority of state and local governments to engage in land use planning has been sustained against constitutional challenge as long ago as [the] decision in Village of Euclid v. Ambler Realty Co. [(1926)] 272 U.S. 365.... ‘Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law.’ [Citation.]” (Dolan v. City of Tigard (1994) 512 U.S. 374, 384-385 (Dolan); see also Ayres v. City Council of Los Angeles (1949) 34 Cal.2d 31, 37-43 [dedication conditions are reasonable restrictions that do not constitute a taking].)
Property which use is known to be restricted will generally be valued less than property not so restricted. (See 1 Matteoni & Veit, Condemnation Practice in Cal. (Cont.Ed.Bar 3d ed. 2011) § 4.12, pp. 123-128.) As such, zoning restrictions on the use of property can affect the availability of the property for some purposes and thereby depress its fair market value. (See Long Beach City H.S. Dist. v. Stewart (1947) 30 Cal.2d 763, 766; People ex rel. Dept. Pub. Wks. v. Arthofer (1966) 245 Cal.App.2d 454, 467 [Fourth Dist., Div. Two].) Similarly, the condemner’s use of dedication requirements as conditions of development will likewise restrict the use of the property and affect the property’s fair market value. (See City of Fresno v. Cloud (1972) 26 Cal.App.3d 113, 123 (Fresno); City of Porterville v. Young (1987) 195 Cal.App.3d 1260, 1269 (Porterville); City of Hollister v. McCullough (1994) 26 Cal.App.4th 289, 296 (Hollister).)
B. The Fresno/Porterville Doctrine
In Fresno, the City of Fresno condemned 40-foot strips of land fronting two 10-acre parcels in order to widen two city streets in accordance with the city’s master plan. (Fresno, supra, 26 Cal.App.3d at pp. 115-116.) The parcels were zoned for residential and agricultural uses. (Id. at p. 115.) The city claimed that if development of any property required a zoning change and could generate increased volumes of traffic, then the city could require the property owners to make street dedications necessary to widen the affected streets in accordance with the master plan, as a condition of approving the zoning change and of issuing building permits. (Id. at pp. 115, 117, fn. 5.)
The owners waived severance damages and trial proceeded on the value of the 40-acre strips. (Fresno, supra, 26 Cal.App.3d at p. 116.) The owners’ appraiser valued the 40-foot strips based on his opinion there was a “reasonable probability” the parcels would be rezoned to more favorable uses in the near future, including multiple-unit residential. (Ibid.) The city’s appraiser valued the strips based on their current zoning (residential-agricultural), based on his assumption that the strips could never be used for any purpose given that the city would require their dedication for street widening purposes in the event of a more favorable zoning change. (Id. at p. 117.)
The court did not allow the city to present evidence of the dedication requirements. (Fresno, supra, 26 Cal.App.3d at p. 119.) The Court of Appeal held this was error. It explained: “[I]f upon retrial of the valuation issue, the court finds that the strips taken from [the parcels] are a part of the very frontage that the landowners would have had to dedicate to the city in order to secure the zoning changes needed to develop the remaining parcels to their highest and best uses, the court must not value the property taken on the basis of those highest and best uses; it must determine instead the value of the frontage strips taken on the basis of the highest and best uses permitted by the existing zoning, because this land could never be used for any other purpose.” (Id. at p. 123.)
Fresno was followed in Porterville, supra, 195 Cal.App.3d 1260. The defendant owned five acres abutting Prospect Street in Porterville. The parcel was zoned for commercial use and planned unit development. (Id. at pp. 1262-1263.) The City of Porterville condemned a 12-foot-wide strip of the parcel to widen Prospect Street as indicated in the city’s general plan. (Id. at p. 1263 & fn. 3.) The city argued that, under Fresno, the frontage strip should be valued as agricultural land. (Porterville, supra, at p. 1265.) The appellate court agreed. It explained: “Although the parcel was zoned for commercial purposes, it could not be adapted and developed for such purposes without a dedication of frontage to widen the east side of Prospect Street to its ultimate planned width of 42 feet—half of the total planned width of 84 feet. The take is the very frontage owner would have had to dedicate to city to secure the building permits or conditional use permit needed to develop the parcel to its highest and best commercial use. The trial court should have determined the value of the take on the basis of its agricultural use, because it could never be used for any other purpose. To paraphrase [Fresno]: if the take is so valued, and if the remainder of the parcel is not developed beyond its present agricultural use, owner will have been paid exactly what the take was worth; if the remainder of the parcel is developed for commercial purposes, owner will have been paid for the land he would have been required to dedicate to city to obtain the building permits or conditional use permit necessary for the commercial development.” (Id. at p. 1269, fn. omitted.)
Fresno and Porterville stand for the proposition that when condemned property would have to be dedicated as a condition of developing the larger parcel of which the condemned property is a part, the condemned property must be valued at its current use because it could never be used for any other purpose. Neither Fresno nor Porterville addressed whether the condemners’ claimed street dedication requirements could be constitutionally imposed as conditions of development, however.
Contra Costa County Flood Control etc. Dist. v. Lone Tree Investments (1992) 7 Cal.App.4th 930 (Lone Tree), involved the taking of a portion of the defendant’s land for a “major flood control project.” (Id. at pp. 931-932.) The condemning flood control district argued that any development of the defendant’s property would be conditioned on dedication of the take and should therefore be valued based on agricultural use. (Id. at p. 932.) Relying heavily on Fresno and Porterville, the Court of Appeal agreed: “When there is a reasonable probability that a public agency would require dedication of the take as a condition of development, the take should be valued based on the use that can be made of the property in its undeveloped state.” (Lone Tree, supra, at p. 937.) Like Fresno and Porterville, Lone Tree did not address whether the claimed dedication requirement for the flood control project could be constitutionally imposed on the owners of the condemned property.
Lone Tree was followed by Hollister, supra, 26 Cal.App.4th 289, which, like Fresno and Porterville, involved a city seeking to condemn a portion of the defendants’ property for purposes of a street. The condemning city asserted it did not have to pay severance damages because “it probably would have conditioned development of defendants’ property on ‘dedication’ of the [take].” (Hollister, supra, at p. 297, fn. omitted.) Citing Lone Tree, the court stated: “Where there is a reasonable probability that development of the property would have been conditioned on dedication of the property taken, compensation to the owner for the harm caused by the taking cannot be based on the property’s development potential.” (Hollister, supra, at p. 297.)
Hollister then connected the reasonable probability test to the requirement that the proposed dedication withstand constitutional scrutiny: “[P]roof that a conditional dedication is a ‘reasonable probability’ requires a showing not only that plaintiff would probably have imposed the dedication condition if defendants had sought to develop the property, but also that the proposed dedication requirement would have been constitutionally permissible. This is so because it is not a ‘reasonable probability’ that a governmental entity would actually succeed in imposing an unconstitutional dedication requirement.” (Hollister, supra, 26 Cal.App.4th at p. 297.) The court continued: “A conditional dedication is invalid if it deprives the owner of the property of constitutional protections. [Citation.] A requirement of a conditional dedication of property for street purposes does not offend the Constitution if ‘it is a condition reasonably related to increased traffic and other needs of the proposed subdivision....’ [Citation.] However, ‘[w]here the conditions imposed are not reasonably related to the landowner’s proposed use, but are imposed by a public entity to shift the burden of providing the cost of a public benefit to one not responsible, or only remotely or speculatively benefiting from it, there is an unreasonable exercise of police power.’ [Citation.]” (Id. at p. 298; see also Rohn v. City of Visalia (1989) 214 Cal.App.3d 1463, 1470, 1475-1476 [street dedication requirement imposed as condition of approving development of larger parcel held invalid because it was not reasonably related to the traffic and other impacts the larger parcel would have upon its development].)
C. The Essential Nexus and Rough Proportionality Tests
In 1987, before the decisions in Lone Tree, Hollister, and Rohn were issued, the United States Supreme Court held that a development condition violates the Fifth Amendment takings clause unless there is an “essential nexus” between the nature of the condition and the governmental interest to be served by its imposition. (Nollan v. California Coastal Com’n (1987) 483 U.S. 825, 839 [easement allowing public access across private beach to connect two public beaches lacked essential nexus to stated government interest in reducing blockage of public view of ocean].) Then in 1994, the high court addressed the issue left open in Nollan: “If we find that a nexus exists, we must then decide the required degree of connection between the exactions and the projected impact of the proposed development.” (Dolan, supra, 512 U.S. at p. 386.)
The property owner in Dolan applied to the city for a permit to replace an existing building that housed her plumbing and electrical supply store. She also sought to expand her store parking lot. The owner’s application was approved, conditioned upon her dedicating a portion of her property for a public greenway to improve storm drainage and another strip of property, adjacent to the greenway, for a pedestrian and bicycle pathway. (Dolan, supra, 512 U.S. at pp. 379-380.) In approving the application subject to the dedication condition, the city planning commission made generalized findings concerning the relationship between the permit conditions and the project’s impacts. (Id. at pp. 381-382.) The owner challenged the permit conditions on constitutional grounds. (Id. at p. 386.)
The Dolan court stated: “In evaluating petitioner’s claim, we must first determine whether the ‘essential nexus’ exists between the ‘legitimate state interest’ and the permit condition exacted by the city. [Citation.] If we find that a nexus exists, we must then decide the required degree of connection between the exactions and the projected impact of the proposed development.” (Dolan, supra, 512 U.S. at p. 386.) For purposes of the takings clause, the court explained there must be “rough proportionality” between the nature and extent of the required exaction and the impacts of the proposed development. (Id. at p. 391.) The city has the burden of establishing this rough proportionality. (Id. at p. 391 & fn. 8.) To meet this burden, “[n]o precise mathematical calculation is required, ...