Eminent Domain Report

While inverse condemnation liability in California originates from the California Constitution, determining when it applies -- and under what circumstances -- is based on a lengthy morass of case law that has been described by one court as “seemingly inconsistent and irreconcilable.”  If you’re interested in learning more about the subject, and how it applies to public agencies and utilities, I hope you’ll join us at Nossaman’s upcoming eminent domain seminars, where I’ll cover the issue in detail.  But as a preview to that discussion, a recent unpublished California Court of Appeal decision, McChesney v. People ex rel. Department of Transportation (2020), provides one of the best summaries I’ve seen.

Background

In McChesney, the plaintiffs owned four single-family residences adjacent to the I-5 Freeway in Los Angeles.  The properties originally were set back 40 feet from the freeway and that buffer included a sound wall and large trees.  As part of the I-5 freeway widening project, Caltrans added a high-occupancy vehicle (HOV) lane, which resulted in the freeway being 20 feet closer to plaintiffs’ properties.  The sound wall was also moved 20 feet closer to plaintiffs’ properties, and the large trees were replaced with younger, smaller trees.  The freeway widening project all took place within Caltrans’ existing right-of-way, so the plaintiffs experienced no physical taking of property.  However, after the widening, plaintiffs’ tenants complained of vibration, dust, the proximity of the sound wall, the loss of trees, and increased noise.  The tenants eventually left and the units remained vacant for months until the owner was able to rent the residences at lower rates.  The property owners sued Caltrans for inverse condemnation. 

The trial court found Caltrans liable for inverse condemnation because the freeway expansion resulted in increased noise, vibration, and dust causing a diminution in value of plaintiffs’ properties.  The jury subsequently awarded the owners $1.2 million in compensation, and the court thereafter awarded nearly $500,000 in prejudgment interest, over $800,000 in attorneys’ fees, and nearly $200,000 in costs, for a total recovery of about $2.7 million.  Caltrans appealed. 

The Appeal

On appeal, the Court explained that inverse condemnation liability is based on the constitutional requirement that the government must pay “just compensation” when it takes or damages private property for a public use.  Such a taking can fall into one of three categories:

1. the property has been physically invaded in a tangible manner;
2. no physical invasionhas occurred, but the property has been physically damaged; or
3. an intangible intrusion onto the property has occurred which has caused no damage to the property but places a burdenon the property that is direct, substantial, and peculiar to the property itself.

The Court summarized existing case law and explained:

“It is established that when a public improvement is made on property adjoining that of one who claims to be damaged by such general factors as change of neighborhood, noise, dust, [and] change of view, . . . there can be no recovery where there has been no actual taking or severance of the claimant's property.” 

The reason for non-liability in this situation is because “[m]odern transportation requirements necessitate continual improvements of streets and relocation of traffic. The property owner has no constitutional right to compensation simply because the streets upon which his property abuts are improved so as to affect the traffic flow on such streets. If loss of business or of value of the property results, that is noncompensable. It is simply a risk the property owner assumes when he lives in modern society under modern traffic conditions.”

Despite this general rule of non-compensability when there is no physical taking or physical damage, the Court explained there was one exception where the plaintiff’s property suffers a direct and peculiar injury that is unique to that property as compared to the surrounding neighborhood.  The Court provided an example where the Supreme Court allowed recovery for inverse condemnation where a city’s sewage plant created a direct, substantial, and peculiar burden by the presence of odors on an adjoining property -- in essence, the property owner had been “singled out” to suffer the detrimental effects of the sewage treatment plant and it would be unfair and unconstitutional to burden a single owner with the effects of breathing noxious sewage fumes.  The Court explained that this third alternative “has been successfully applied rarely.” 

In McChesney, the parties conceded that the first two scenarios did not apply, as there had not been a physical invasion or physical damage.  With respect to the third category, the Court found that the damages to plaintiffs’ properties were not direct and peculiar but rather felt generally by all property owners in the area.  Therefore, there was no taking.  The Court explained there was nothing demonstrating the plaintiffs were “singled out” by Caltrans’ freeway widening project or were subjected to any more noise, dust, and vibrations than others residing next to the freeway.  Because there was no taking, the judgment in plaintiffs’ favor was reversed, and they were entitled to no recovery whatsoever. 

Conclusion 

The case serves as an important reminder that a diminution in property value, in and of itself, is not a taking or damaging of property, but an element of the measure of just compensation when such a taking or damaging is first proved.  While items like noise, dust, fumes and vibration may reduce a property’s value, absent a physical taking or damaging of property, or a direct, substantial and peculiar impact, such factors are non-compensable.  There are still a number of questions left unanswered, such as whether the direct and peculiar impact can be based on the property’s unique, sensitive use (such as a recording studio or medical laboratory with sensitive equipment), or whether all impacts become compensable -- even those occurring from work taking place in the public right-of-way -- once a taking is established.  

While the decision is unpublished, the opinion does a good job of aligning a long body of case law that is usually difficult to decipher and piece together.  If you have specific questions, please feel free to reach out or attend our upcoming seminar.