Eminent Domain Report

Every year or so, a new appellate court decision comes out addressing the proper role of the judge versus the jury on some certain eminent domain issue. Most recently, a trial court, appellate court and the California Supreme Court all grappled with this question:  Does the judge determine whether a dedication requirement is constitutional, or does the jury?  Yesterday, the Supreme Court issued its decision in City of Perris v. Stamper, No. S213468 (Aug. 15, 2016) holding that it is the role of the judge to determine whether a dedication requirement is constitutional.  The Court also answered a second question, whether the project effect rule (or project influence rule) applies to dedication requirements.  The Court held that, while it depends on the timing and circumstances, a dedication requirement can be a project effect to be considered when determining just compensation.  Below is a short summary of the ruling and a longer, more detailed discussion will follow in our upcoming e-alert.

Background

The property owned by the Stampers was vacant land zoned to allow light industrial development. In 2005, the City of Perris amended its general plan and revised circulation elements in the plan to allow for certain truck routes.  Then in 2009, City sought to acquire a strip of the Stamper property for a street realignment project to accommodate one of the truck routes, bisecting the property.  The City valued the vacant property sought as undevelopable agricultural land because it would not have approved any development of the property unless the Stampers dedicated the property needed for the street realignment to the City, and the property should be valued on that basis.  The Stampers argued that dedication requirement should not be considered in determining compensation because it was not reasonably probably the City would impose the requirement, and even if it did, it would be unconstitutional.

The trial court held that it was reasonably likely that the dedication requirement would have been imposed, and that the dedication requirement would have been constitutional. Though the Stampers argued that both issues should have been determined by a jury, because they directly relate to compensation, the conclusions were reached by the judge.  The Stampers also argued that the dedication requirement was a project impact and thus should not have been taken into account in valuing the property.  The Court of Appeal reversed, holding that the jury should have considered the dedication requirement issues but disagreed with the Stampers by holding that the dedication requirement was not a project impact because it existed independent of any specific project.

Supreme Court Ruling

The Supreme Court held that it is for the judge to decide whether a dedication requirement is constitutional. The judge must consider whether the dedication requirement has an essential nexus to the public purpose for denying any application to develop the property, as set forth in Nollan v. Cal. Coastal Comm. (1987) 483 U.S. 825, and whether the dedication requirement is roughly proportional to the impact of the proposed development, as set forth in Dolan v. City of Tigard (1994) 512 U.S. 374.  The Court found that these inquiries are mixed questions of law and fact, but are predominantly legal issues that must be determined before considering whether the dedication would have been imposed, and the judge should make the decision.

The Court also held that the Porterville doctrine, whereby the partial acquisition of vacant property that would have been subject to a lawful dedication requirement should be valued as undeveloped rather than highest and best use, is not applicable in situations where it was probable at the time the dedication requirement was put into place that the property designated for public use was to be included in the project to which the property is being condemned.  The Court further held that a dedication requirement can be a project effect and the applicability of the project effect rule is to be determined by the judge because it is a preliminary question of fact.

The case was remanded to the trial court to analyze whether the acquisition of the property was probable when the dedication requirement was put into place and whether the dedication requirement is constitutional.

Conclusion

At the end of the day, it appears both the City and the Stampers won. But of the issues addressed by the Court, it seems the more important ruling is the one regarding project effect, and the Court's establishing new law on when a dedication requirement should and should not be taken into account when determining just compensation.  However, I think its application will be messy and complicated (and expensive) because a public agency may have to present evidence on the timing of imposing dedication requirements, the decision-making that went into the imposition and essentially prove that the purpose of the dedication is not to avoid paying just compensation.  I anticipate this will cause more than a few headaches.

Most interestingly, though the Court stated it was not asked to determine whether the dedication requirement was constitutional, both the majority opinion and the dissenting opinion seemed to imply that requiring a property owner to dedicate 20% of its property right through the middle of the parcel would not pass muster.   The trial court is left to make that decision, and presumably, the hint will be taken.