Eminent Domain Report

One of the issues often disputed between public agencies and property owners in eminent domain actions is the assessment of severance damages, and in particular, whether damages should be based upon (i) the terms of the resolution of necessity, or (ii) construction of the project in the manner proposed.  This dispute grows from a seeming conflict between a court of appeal decision, County of San Diego v. Bressi (1986) 184 Cal.App.3d 112, and Code of Civil Procedure section 1263.420.  Specifically:

• Bressi held that in a condemnation action, (1) the jury must determine damages caused by the construction of the project, and in doing so, it must consider the most injurious use of the property reasonably possible, taking into consideration the entire range of uses permitted under the resolution of necessity, and (2) that the condemning agency may not introduce any evidence that contradicts the resolution.
• Section 1263.420 provides that severance damages include damages caused by construction and use of the project for which the property is taken in the manner proposed by the [agency] . . . .

Property owners routinely rely upon Bressi to argue that the most injurious use permitted under the resolution of necessity must be considered for purposes of assessing damages.  Public agencies counter by relying on section 1263.420 to argue that damages should be based upon the construction of the project in the manner proposed – not some hypothetical project or use that has never been considered.

It is practically impossible for public agencies to narrowly tailor their resolutions of necessity to specifically spell out in detail how every aspect of the project will be constructed.  Thus, appraisers often base their opinions on wildly different assumptions about the project, leading to a wide disparity in appraisal opinions.

A recent Court of Appeal opinion, Sacramento Area Flood Control Agency v. Dhaliwal (April 21, 2015) provides some guidance as to how these issues should interplay.  In Dhaliwal, the property owner filed a motion in limine to exclude any evidence of possible access to the property by a particular road on the grounds that such evidence contradicts the resolution of necessity and would require future permits.  The agency countered that there was no contradiction, and it was entitled to introduce post-project plans to provide access to the property.  The court allowed all evidence to go to the jury.

On appeal, the Court explained that the jury is entitled to consider any factor affecting market value so long as it is not speculative and does not contradict the scope of the taking defined by the resolution of necessity.  The Court held that it was proper for the jury to hear evidence regarding the owner’s potentially obtaining post-project access, as it was not speculative and did not contradict the resolution.  The Court clarified that Bressi

stands for the unremarkable proposition that the condemning agency may not introduce evidence pertaining to a proposed, intended, or future use which contradicts the scope of the taking as set forth in the resolution of necessity.

In Dhaliwal, while the agency’s resolution did not specify that the owner reserved certain access rights, the resolution also did not prohibit the owner from securing such rights in the future, meaning there was no conflict.  The Court held that absent a contradiction, the agency’s failure to carve out an exception or provide the owner with access rights is of no consequence.

The Dhaliwal opinion is an important one for public agencies.  It supports the proposition that an agency need not spell out every precise detail of the project, and that as long as the project in the manner proposed does not conflict with the resolution of necessity, it is appropriate to introduce such evidence to the jury.  Until a published, citable, decision exists on this point, however, the tension between Bressi and section 1263.420 will likely continue to manifest itself in wildly divergent appraisal opinions.

[UPDATE:  The Dhaliwal opinion was recently ordered published by the Court of Appeal, so it can now be relied upon as precedent.]