Eminent Domain Report

A few weeks ago, the California Court of Appeal issued an interesting unpublished decision detailing a long, drawn-out eminent domain battle in Riverside County.  I haven't blogged about it yet because, well to be honest, it feels like such a crazy story I couldn't figure out where to start or what to cover.  But here we go.

Background

The case, Elsinore Valley Municipal Water District v. O'Doherty, starts off rather dull.  In order to serve a residential development, the Water District planned to construct a pump station in a public right of way.  Because it was believed the planned station location (the street) was owned by the City of Lake Elsinore, a "friendly" condemnation action was filed.  The City and the Water District stipulated to possession, and the pump station was constructed.  Then, things became a bit more complicated.

The owner of property adjacent to the street claimed that he owned the underlying street in fee, and the City only had an easement for street purposes in the area planned for the pump station.  The owner challenged the Water District's right to take on a number of grounds, including that he did not receive the proper statutory notice of the resolution of necessity.  (See Code of Civil Procedure section 1245.235.)  The parties proceeded to a right to take trial, at which it was determined the adjacent property owner held fee ownership in the underlying street, but that the City held a public road easement across the property.  Moving on to the right to take challenge, the court found the Water District's resolution of necessity was invalid because the District failed to give proper notice to O'Doherty before adopting the resolution.

The trial court then issued a conditional dismissal of the eminent domain action (see Code of Civil Procedure section 1260.120), but allowed the Water District to essentially go back in time and hold a new hearing, this time giving proper notice and making the required offer of compensation to the owner.  In adopting a new resolution of necessity, the Water District was to pretend that the pump station had not already been constructed.  As part of the dismissal, the Water District was also ordered to pay the owner's reasonable attorneys' fees associated with the lack of proper notice.  However, the owner's attorney was working on a contingency basis, and because no fees were due with respect to winning a right to take challenge (fees were only payable upon a result of obtaining monetary compensation), the owner had not incurred any attorneys' fees.

The Water District started over, obtaining an appraisal, making an offer, sending out proper notice, and adopting a new resolution of necessity.  The owner once again challenged the District's right to take on a whole host of grounds, including that the resolution was a sham and the agency was precommitted to the result since the project had already been built.  The court walked through each of the required factors of a resolution of necessity (i.e., the project is in the public interest, compatible with the greatest public good and least private injury, and the property is necessary for the project).  After spending an inordinate amount of time on these factors, the court finally determined the resolution was valid and rejected the owner's right to take challenges. 

The court then moved on to phase 2 of the trial, dealing with compensation.  The Water District asserted the owner was not entitled to compensation because the scope of the existing street easement permitted the installation of a pump station.  The court concluded the pump station was consistent with the purpose of a street as it promoted the flow of people or goods for a public benefit.  The court then moved on to whether the pump station caused other damages to the owner's property, such as increased storm water discharge, visual impairments, and a substantial impairment of access.  Despite the owner's appraiser's finding of about $450,000 in severance damages, the court found the owner was not entitled to any compensation for these various damages. 

The Appeal

The owner then appealed the decision.  On appeal, the Court denied the owner's right to take challenges (on mootness grounds, since the owner's request for relief in the appeal did not mention overturning the agency's right to take, but instead only discussed receiving fair compensation).  The Court also upheld the trial court's decision on the non-compensability of the various severance damages components.  However, the Court concluded that the pump station was not consistent with a public street, and therefore the owner was entitled to compensation for the taking.  The Court also upheld the trial court's decision on refusing to award the owner his non-incurred contingent-fee-arrangement attorneys' fees based on the successful right to take challenge.  The Court directed a new trial on the one successful component of the owner's appeal -- the value of the underlying property, burdened by a street easement, where the pump station was located.  

Lessons

Whew -- we made it!  (Are you still reading?)  Well, if you're still with me, we might as well quickly summarize.  A few lessons:

• For public agencies, before adopting a resolution of necessity, make sure you provide notice to all potential owners of the impacted property.  It's better to be safe than sorry, so if there's any doubt, err on the side of caution and send out the notice.
• For property owners and attorneys, make sure you set up your engagement letters correctly if you're on a contingency fee basis and challenging a public agency's right to take the property.  Having a simple contingency fee arrangement which does not discuss the outcome if there's a successful challenge may mean no attorneys' fees recovery.
• If you're going to appeal a decision and still challenge right to take, make sure you remember to ask the court to overturn the agency's right to take (as opposed to solely seeking compensation).
• The Norm's Slauson "irrevocably committed" argument used to challenge resolution of necessity findings seems to have less teeth as time passes.  I mean, if an agency is not precommitted even when its project is already built, it's going to be hard to find such a situation.

For more details on the Court's findings, the reasoning and background, please feel free to read the long, long decision yourself.  There's actually some very interesting pieces, it's just hard to summarize it all here.  Good luck!