Eminent Domain Report

You may recall that last year in Ridgewater Associates LLC v. Dublin San Ramon Services District, the California Court of Appeal held that a subsequent purchaser cannot recover for inverse condemnation where (1) it knowingly purchases property impacted by a government taking, and (2) the purchase price reflects the property's condition in light of the government impacts.  See Buyer Beware: Improper Sale Documentation Results in Waiver of Inverse Condemnation Claim by Brad Kuhn and Rick Rayl.  While the decision was originally published at 184 Cal.App.4th 629, the California Supreme Court subsequently ordered the opinion depublished when it denied a petition for review.  On September 22, 2011, in an unpublished decision, the California Court of Appeal not only reaffirmed the Ridgewater holding, but took it one step further.  See Gurrola v. City of Los Angeles (Sept. 22, 2011) Case No. B229756. 

In Ridgewater, the Court of Appeal found that the purchase price of the property at issue was reduced as a direct result of the property's allegedly degraded condition.  This finding was supported by affirmative record evidence.  In Gurrola, however, the Court simply presumed that because Gurrola knew of the damage allegedly caused by the City's conduct prior to purchasing the property, "the amount Gurrola paid for the lots . . . reflected his opinion of the value of the land in its degraded condition."  Thus, in Gurrola , the Court of Appeal appears to have refined the Ridgewater test to a single factor:  did the subsequent purchaser knowingly purchase property potentially impacted by a government taking? 

In Gurrola, the answer to this single question was clearly yes.  As a result, the Court held that Gurrola did not have standing to pursue an inverse condemnation claim, and granted the City's motion for judgment on the pleadings.   

While the Gurrola decision is unpublished, and therefore generally not citable as precedent, it is a stark reminder of the potential pitfalls awaiting an unwary buyer.  For a simple way to avoid this problem, see the E-Alert authored by Brad Kuhn and Rick Rayl.