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Property Reserve, Inc. v. Superior Court (Department of Water Resources)

Supreme Court of California

July 21, 2016

PROPERTY RESERVE, INC., Petitioner,
v.
THE SUPERIOR COURT OF SAN JOAQUIN COUNTY, Respondent; DEPARTMENT OF WATER RESOURCES, Real Party in Interest. CAROLYN A. NICHOLS, as Trustee, etc. et al., Petitioners, THE SUPERIOR COURT OF SAN JOAQUIN COUNTY, Respondent; DEPARTMENT OF WATER RESOURCES, Real Party in Interest DEPARTMENT OF WATER RESOURCES CASES

         San Joaquin County Super Ct. JCCP No. 4594 Ct.App. 3 C067758, 3 C067765, 3 C068469 John P. Farrell[*]

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         COUNSEL

         Matteoni, O’Laughlin & Hechtman, Norman E. Matteoni, Gerry Houlihan; Kirton & McConkie and Christopher S. Hill for Petitioner Property Reserve, Inc.

         Freeman, D’Aiuto, Pierce, Gurev, Keeling & Wolf, Thomas H. Keeling, Arnold J. Wolf; Nomellini, Grilli & McDaniel and Dante J. Nomelini, Jr., for Petitioners Mark G. Scribner, Jr., Randy J. Baranek, Siara Andrews, J.H. Jonson & Sons, Inc., Arnaudo Bros., Delta Wetlands Properties, The 2000 teVelde Family Trust, The Biagi Living Trust Agreement, The Carolyn Nichols Revocable Living Trust dated 12/09/1999, Carolyn A. Nichols as Trustee, Venice Island, Coney Island Farms, Inc., Robert A. DalPorto, Jr., Islands, Inc., Richard Brann as Trustee, S.S. & S.M. Oates Family Trust, Wilson Vineyard Properties, Eileen V. Nichols Revocable Living Trust dated 12/09/1999, Eileen V. Nichols as Trustee, Victoria Island, L.P., Lucille L. Christensen Family Trust dated 8/31/2004, Lucille J. Christensen as Trustee, Smith and Karen Cunningham, Zuckerman Mandeville, Inc., and Heritage Land Co., Inc.

         Downey Brand and Scott D. McElhern for Petitioners CCRC Farms, LLC and Tuscany Research Institute.

         Somach Simmons & Dunn, Stuart L. Somach and Daniel Kelly for Petitioners Sutter Home Winery, Inc., and Delta Ranch Partnership.

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         J. David Breemer and Jonathan Wood for Pacific Legal Foundation as Amicus Curiae on behalf of Petitioners.

         Luke A. Wake; Damon Key Leong Kupchak Hastert, Robert H. Thomas; Manatt, Phelps & Phillips and Edward G. Burg for Owners’ Counsel of America and National Federation of Independent Business Small Business Legal Center as Amici Curiae on behalf of Petitioners.

         Jenny & Jenny and Scott E. Jenny as Amici Curiae on behalf of Petitioners.

         Nancy N. McDonough and Kari E. Fisher for California Farm Bureau Federation as Amicus Curiae on behalf of Petitioners.

         No appearance for Respondent.

         Kamala D. Harris, Attorney General, Steven M. Gevercer and Kristin G. Hogue, Assistant Attorneys General, Alberto González, John M. Feser, Jr., Michael P. Cayaban, James C. Phillips, Neli N. Palma and Gregory D. Brown, Deputy Attorneys General, for Real Party in Interest.

         Jeanne Scherer, David Gossage and Lucille Y. Baca for California Department of Transportation as Amicus Curiae on behalf of Real Party in Interest.

         Meyers, Nave, Riback, Silver & Wilson and David W. Skinner for League of California Cities, California State Association of Counties and Association of California Water Agencies as Amici Curiae on behalf of Real Party in Interest.

         Woodruff, Spradlin & Smart, Gary C. Weisberg and Laura A. Morgan for Orange County Transportation Authority as Amicus Curiae on behalf of Real Party in Interest.

         Stephanie D. Morris for State Water Contractors as Amicus Curiae on behalf of Real Party in Interest.

         Best, Best & Krieger and Kendall H. MacVey for Riverside County Transportation Commission as Amicus Curiae on behalf of Real Party in Interest.

         OPINION

         CANTIL-SAKAUYE, C. J.

         In an effort to improve the reliability of the water supply system in California as well as to address environmental and ecological concerns, the Department of Water Resources (hereafter, the

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Department) undertook to investigate the feasibility of constructing a new tunnel or canal in the Sacramento-San Joaquin Delta as a means of delivering fresh water from Northern California to Central and Southern California. As part of the preliminary steps in going forward with the project, the Department sought to conduct environmental and geological studies and testing on more than 150 privately owned parcels of land that the state, in the future, might seek to acquire for the project through negotiation or eminent domain.

         In pursuing the proposed studies and testing, the Department proceeded through the specific statutory procedure established by the Eminent Domain Law (Code Civ. Proc., pt. 3, tit. 7, § 1230.010 et seq.) relating to precondemnation entry and testing. (Code Civ. Proc., §§ 1245.010-1245.060.)[1] The Department filed petitions in superior court relating to the privately owned properties, seeking a court order granting the Department authority to enter the properties and undertake various environmental and geological testing activities. The Department maintained that these activities were necessary to determine the suitability of each property for the project and to comply with the numerous state and federal environmental laws governing such a project.

         After a four-day hearing, the trial court issued a detailed and lengthy order authorizing the Department to enter all of the private properties and conduct various environmental studies and testing under specified limitations. After a separate hearing, the trial court denied the Department’s request to conduct geological testing—testing that contemplated the drilling and refilling of deep test holes on certain properties in question—on the ground that the Department’s authority to conduct that drilling could be obtained only through a classic condemnation action rather than through the statutory precondemnation procedure.[2]

         Both the landowners and the Department sought review of the trial court’s rulings in the Court of Appeal. The Court of Appeal, in a two-to-one decision, upheld the trial court’s denial of the Department’s request to enter and to

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conduct geological testing, but reversed the trial court’s grant of authority to conduct environmental testing. The majority in the Court of Appeal concluded (1) that the procedure established by the precondemnation entry and testing statutes does not satisfy the demands of the takings clause of the California Constitution with regard to any precondemnation entry and testing activity that would constitute a taking or damaging of property within the meaning of the state takings clause, and (2) that both the geological testing sought by the Department and the environmental activities authorized by the trial court fell within that category. The Court of Appeal majority held that in order to conduct such activities, the Department was required to proceed to condemn a temporary easement through a classic condemnation action, rather than proceeding by means of the procedure established by the precondemnation entry and testing statutes.

         The Department sought review of the Court of Appeal decision in this court. We granted review and posed three questions for briefing and argument: (1) Do the geological testing activities proposed by the Department constitute a taking? (2) Do the environmental testing activities authorized by the trial court’s order constitute a taking? (3) If so, do the precondemnation entry and testing statutes provide a constitutionally valid eminent domain proceeding for the activities?

         For the reasons set forth below, we conclude that there is no need to determine under the first two questions whether the authorized environmental testing activities or the proposed geological testing activities constitute a taking or damaging of property for purposes of the state constitutional takings clause. (Cal. Const., art. I, § 19, subd. (a).) Assuming, without deciding, that both the environmental and the geological activities in question amount to a taking or damaging of property for which just compensation must be paid under the California takings clause, we conclude that in answer to our third question the procedure established by the precondemnation entry and testing statutes satisfies the requirements of the California takings clause when the procedure is reformed to comply with the jury trial requirement of that clause. As we explain, the precondemnation entry and testing statutes (1) require a public entity, before undertaking such entry and testing, to seek and obtain a court order specifically authorizing the activities that are to be conducted on the property and to deposit in court an amount that the court determines is the probable compensation for the authorized activities, and (2) permit the property owner to obtain damages in the same proceeding for any actual damage and substantial interference with the possession or use of the property caused by the public entity’s entry and testing activities. This procedure satisfies the California takings clause when reformed to permit the property owner to obtain a jury determination of damages in the proceeding if the property owner so chooses.

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         Accordingly, we conclude that the Court of Appeal judgment should be reversed in its entirety, both insofar as the Court of Appeal affirmed the trial court’s denial of the Department’s proposed geological testing and insofar as it reversed the trial court’s authorization of environmental testing.

         I. Facts and Proceedings Below

         In this case, the Department proposed to enter more than 150 privately owned properties in the Sacramento-San Joaquin Delta area (Delta) in order to conduct environmental and geological studies and testing needed to investigate the feasibility of adding new water conveyance facilities - such as tunnels or additional canals - in the Delta and to determine the suitability of potential alternative routes for the contemplated project. The proposed new facilities would become part of the Bay Delta Conservation Plan and are intended to improve the reliability of the water supply statewide as well as to restore the Delta ecosystem and native fish populations.[3]

         Because the alternative potential locations for the new facilities cross or lie beneath privately owned lands, the Department sought to enter the private properties in question to ascertain preliminary environmental and geological information about the properties. The Department maintains that the proposed entries and testing are necessary for two reasons: (1) to determine the feasibility and best potential location for the contemplated conveyance system, and (2) to assess the potential effects of the project on biological, environmental, geological, and archeological resources within the properties in order to comply with numerous applicable state and federal environmental laws, including the California Environmental Quality Act (Pub. Resources Code, §21000 et seq.), the National Environmental Policy Act of 1969 (42 U.S.C. § 4321 et seq.), the California Endangered Species Act (Fish & G Code, § 2050 et seq.), the Federal Endangered Species Act of 1973 (16 U.S.C. § 1531 et seq.), the Federal Clean Water Act of 1977 (Pub.L. No. 95-217 (Dec, 27, 1977) 91 Stat. 1566), and the Porter-Cologne Water Qualitv Control Act (Wat. Code. § 13000 et seq.).

         Between 2008 and 2009, the Department filed more than 150 separate petitions in superior court pursuant to section 1245.030, seeking entry onto

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properties located in five separate counties - San Joaquin, Contra Costa, Solano, Yolo, and Sacramento. In June 2009, the Department filed a request to coordinate in a single proceeding the numerous entry petitions at issue here, and in March 2010, the superior court granted the request, coordinating the petitions in a single proceeding before the San Joaquin County Superior Court.

         In September 2010, the Department filed a “Master Amended Petition” in which it sought authority to conduct what the petition characterized collectively as “environmental activities” with respect to all properties and “geological activities” with respect to 35 properties. The proposed environmental activities consisted of mapping and surveys relating to plant and animal species, habitat, soil conditions, hydrology, cultural and archeological resources, utilities, and recreational uses. The proposed geological activities consisted of drilling deep holes or borings to determine subsoil conditions. The Master Amended Petition attached declarations from environmental managers, planners, and surveyors employed by the Department, describing the scope and purpose of the proposed testing activities.

         Thereafter, at a case management conference in October 2010, the trial court bifurcated the upcoming hearing on the Master Amended Petition, setting an initial hearing limited to the proposed environmental activities and a subsequent hearing for the proposed geological activities. The court indicated that it had reviewed the numerous declarations that had already been submitted on behalf of many landowners describing concerns with the Department’s proposed activities, and invited any property owner, prior to the upcoming hearings, to present additional evidence by declaration regarding any property-specific issues that could affect the scope of any order the court might ultimately issue. The court also directed the Department to be prepared to produce witnesses at the hearings who would testify in person with regard to the nature and scope of the proposed entries and activities and who would be subject to cross-examination by the court and landowners.

         A. Environmental activities hearing and order

         In December 2010, and January and February 2011, the trial court held a hearing on the proposed environmental activities. It considered the declarations filed on behalf of the Department and the landowners, and the in-person testimony of a number of Department employees, as well as suggestions, concerns and objections raised by the landowners and the Department to a series of tentative orders drafted by the court. On February 22, 2011, the trial court issued a detailed 33-page order granting the Department limited authority to enter each of the parcels at issue to conduct the various types of environmental testing sought by the Department. The order stated that “[t]he

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court has determined the nature and scope of the activities reasonably necessary to accomplish the purposes identified, taking due consideration of constitutional limitations and statutory procedures required for a taking of property. The court has provided suitable limitations to strike the best possible balance between the needs of [the Department] and the interests of the property owners.”

         In brief summary, the order authorized Department employees to enter each property[4] for a maximum of 25 to 66 days (depending on property size) over a one-year period in order to conduct the designated environmental survey, sampling, and testing activities (recreational, botanical, hydrolic, general, habitat, vernal pool, archeological and utility surveys, and mapping activities) under specific conditions and limitations set forth in the order with regard to each type of activity.[5] The authorized environmental activities generally would be conducted by walking, visual observation, minor soil and plant sampling and testing, photography, and trapping and releasing small animals. The entries would be on foot where practicable, and any vehicle use would be restricted to existing roads.

         The order required the Department to give a landowner 72-hour advance notice before each entry, prohibited any entry on agricultural land during harvest season or on hunting land during hunting season, limited the number of persons per entry (two-to-eight persons) by property size, specified the time of day the activities could be conducted (generally between 7:00 a.m. and 7:00 p.m.), and provided that most of the authorized activities were to be conducted concurrently in order to reduce the total number of days Department employees would be on the property. No equipment could be left on the property between entries with the exception of small traps that could be left for 14 days and small cloth targets for aerial mapping that could remain on

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the property for between 30 and 38 days (depending on property size).[6] The order prohibited any inspection of or entry within 100 feet of an inhabited dwelling, as well as any entry into any other structures that are not open to the public. The order also contained a schedule of general conditions, relating to indemnification, confidentiality, disclosure of gathered information to landowner, and other matters.

         Finally, the order set forth a schedule designating by property size the amount of probable compensation that the Department was required to deposit prior to entering any property to conduct the authorized environmental activities. Under the order, the amount of probable compensation to be deposited ranged from $1, 000 per property for properties of 100 acres or fewer to $6, 000 per property for properties of 3, 501 to 8, 500 acres.

         B. Geological activities hearing and order

         After issuing its order relating to the environmental activities, the trial court held a hearing over a number of days in February, March, and April 2011, concerning the proposed geological testing. In declarations and testimony, Department employees explained that geological tests were needed on 35 properties in order to determine the suitability of the subsurface of those properties for several alternative potential alignments of surface canals or underground water conveyance tunnels.

         Two engineering geologists employed by the Department testified in some detail with regard to the testing protocol. For each property, the process would generally begin with a two- or three-day entry to determine, in consultation with the property owner and utility and reclamation district personnel, the best location for the drilling operations, taking into account existing uses of the property and the location of underground utilities. The geologists testified that the sites of the drilling initially suggested by the Department could be adjusted within the proposed alignment of the project, and that the goal would be to find locations for the drilling along existing roads and turnouts in order to minimize any damage or interference with the landowner’s ongoing uses of the property.

         Once the optimal sites for drilling were determined, the Department would first conduct “cone penetrometer testing” (CPT) on each of the 35 properties. CPT involves pushing into the ground a long rod that emits signals to determine the subsurface composition of the tested land. The CPT creates a hole that is one and one-half inches in diameter and up to 205 feet in depth,

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and that is refilled after the rod is withdrawn. The CPT process generally requires four persons and up to four vehicles (including a five-ton or 25-ton CPT truck) and a portable toilet, and is generally completed in a single day. Thus, on properties that the Department proposed to conduct only CPT, the Department’s proposed geological activities generally would be completed in a total of no more than four working days, including the preliminary identification of the site location.

         With respect to 28 of the 35 properties, the Department geologists indicated that, in addition to the CPT process, the Department would need to drill additional, larger “soil borings” or “drill holes” that would generally be located within five feet of the CPT hole. The soil borings or drill holes would range from three and seven-tenths to eight inches in diameter, would reach up to 205 feet in depth, and would be refilled once the drilling and retraction of soil for sampling was completed. The geologists testified that the drilling of drill holes generally requires a five-person crew and larger and more equipment than the CPT (generally including a drilling rig, forklift, support trucks, 55-gallon storage drums, a mudbox, and a portable toilet). They further testified that in undertaking this type of drilling the Department would need to use an area of approximately 100 feet by 100 feet as a worksite[7] for a period of between five and 10 days (depending upon the depth of the drilling), a period that would include the time for setting up and taking down the drilling rig as well as the actual drilling. Accordingly, with regard to the 28 properties on which both the CTP and drill holes would be conducted, the geological testing activities generally would require the Department to be engaged on each property for no more than a total of 14 working days.

         The geologists further testified that, with respect to both the CPT and drill holes, the top two to five feet of the holes would be refilled with native topsoil, to restore the surface area as closely as possible to its original condition. In accordance with current California regulations, the lower depths of the CPT holes and the drill holes would be refilled with bentonite grout. As described by the geologists, bentonite grout hardens into a type of cement, but because it lacks the aggregate materials (sand and gravel) found in concrete, bentonite grout when hardened is similar in texture to the native subsurface material that it would replace, is soft enough to be shaved with a pen knife, would not interfere with or damage farm machinery, and would not adversely affect the filled land for agricultural or other purposes. The geologists explained that bentonite grout is used in order to provide stability and avoid groundwater contamination. An expert witness testifying on behalf of landowners raised no objection to the Department’s proposed use of bentonite grout and described such use as “textbook sealing.”

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         After considering the evidence regarding the factual nature and scope of the proposed geological activities as well as briefing by all parties regarding the constitutional issues raised by those proposed activities, the trial court issued an order denying the Department’s petition as it related to the proposed geological activities. The trial court’s order relied heavily upon this court’s 1923 decision in Jacobsen v. Superior Court (1923) 192 Cal. 319 [219 P. 986] (Jacobsen), which denied a public entity’s request to conduct somewhat similar drilling activities under an earlier precondemnation entry statute. (We discuss the Jacobsen decision in detail below, post, pp. 178-181.) The trial court acknowledged that the current precondemnation entry and testing statutes were enacted by the Legislature after the Jacobsen decision and include boring among the precondemnation activities explicitly covered by those statutes. Nonetheless, the court denied the order for the following reasons: the current statute does not explicitly state that it is intended to apply to the type of deep drilling involved in Jacobsen and the present case; Jacobsen concluded that such drilling activity would constitute a taking or damaging of property for purposes of the California taking clause; and because the precondemnation entry and testing statutes do not satisfy the requirements of the state takings clause, the precondemnation entry and testing statutes should not be interpreted to authorize this type of drilling activity.

         C. Court of Appeal Proceedings

         Prior to the entry of the trial court’s geological testing order, the landowners initially filed two petitions for writs of mandate, prohibition, or other appropriate relief in the Court of Appeal, challenging the trial court’s environmental testing order and seeking a stay of that order. The appellate court initially summarily denied the writ petitions, but this court granted review and directed the Court of Appeal to order the Department to show cause why the writs should not issue.

         In the meantime, after the entry of the trial court’s geological testing order, the Department appealed the trial court judgment insofar as it denied entry to conduct the proposed geological activities and the landowners appealed the judgment insofar as it authorized entry to conduct the environmental activities. The Court of Appeal stayed the environmental testing order and consolidated the writ petitions and appeals for hearing and decision.

         After briefing and argument, the Court of Appeal, in a two-to-one decision, affirmed the trial court order insofar as it denied the Department’s petition to conduct geological activities, but reversed the trial court order insofar as it granted the Department authority to conduct the environmental activities. The majority in the Court of Appeal, relying heavily on this court’s 1923 decision

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in Jacobsen, supra, 192 Cal. 319, concluded that the current precondemnation entry and testing statutes would be constitutionally valid if the statutes were interpreted to authorize only those precondemnation entry and testing activities that are sufficiently “innocuous” and “superficial” that they do not constitute a taking or damaging of property within the meaning of the California takings clause. Because, in the majority’s view, the proposed geological activities “will result in permanent structures being placed in the ground on the affected landowners’ properties, ” the majority concluded that such activities constituted a per se taking of property for purposes of both the federal and state takings clauses. And in light of the duration and scope of the environmental activities authorized by the trial court order—permitting entry and surveying throughout each property for between 25 to 66 days in a one-year period—the majority concluded that the environmental order effectively granted the Department “a temporary blanket easement for one year.” Such an easement, the Court of Appeal concluded, constituted a compensable property interest for purposes of the federal and state Constitutions’ takings clauses. The majority rejected the Department’s contention that even if the geological and environmental activities constitute a taking or damaging of property for purposes of the California takings clause, the procedural requirements established by the current precondemnation entry and testing statutes satisfy the demands of the state takings clause. The majority found the statutory procedure constitutionally deficient in several respects. It determined that the Department was required to institute a classic condemnation proceeding for a temporary easement in order to obtain the authority to undertake the precondemnation environmental and geological testing activities at issue here.

         One Court of Appeal justice dissented, concluding that neither the environmental activities authorized by the trial court nor the geological activities proposed by the Department - because of their temporary nature and very limited economic impact - constituted a taking or damaging of property for purposes of the California takings clause. Furthermore, the dissenting justice concluded that, in any event, the procedure embodied in the precondemnation entry and testing statutes satisfies the requirements of the state takings clause.

         The Department sought review of the Court of Appeal decision in this court. We granted review to decide the significant issues posed by this case.

         II. Current Precondemnation Entry and Testing Statutes

         Before discussing the specific issues raised in this case, we begin with an overview of the precondemnation entry and testing statutes contained in Eminent Domain Law. (§§ 1245.010-1245.060.)

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         Section 1245.010 sets forth the general authority granted to public entities by the precondemnation entry and testing statutes. It provides: “Subject to requirements of this article, any person authorized to acquire property for a particular use by eminent domain may enter upon property to make photographs, studies, surveys, examinations, tests, soundings, borings, samplings, or appraisals or to engage in similar activities reasonably related to acquisition or use of the property for that use.” (Ibid.)

         Section 1245.020 establishes the circumstances under which the property owner’s consent or, alternatively, a court order is required before a public entity can enter property to conduct precondemnation testing. The section provides: “In any case in which the entry and activities mentioned in Section 1245.010 will subject the person having the power of eminent domain to liability under Section 1245.060, before making such entry and undertaking such activities, the person shall secure: [¶] (a) The written consent of the owner to enter upon his property and to undertake such activities; or [¶] (b) An order for entry from the superior court in accordance with Section 1245.030.” (Ibid.) In this case, the Department has acknowledged that either the consent of the property owner or a court order is required under this provision before it may enter and conduct the proposed activities at issue here.

         Section 1245.030 sets forth the procedure governing an order for entry. The section provides: “(a) The person seeking to enter upon the property may petition the court for an order permitting the entry and shall give such prior notice to the owner of the property as the court determines is appropriate under the circumstances of the particular case. [¶] (b) Upon such petition and after such notice has been given, the court shall determine the purpose for the entry, the nature and scope of the activities reasonably necessary to accomplish such purpose, and the probable amount of compensation to be paid to the owner of the property for the actual damage to the property and interference with its possession and use. [¶] (c) After such determination, the court may issue its order permitting the entry. The order ...


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