PEOPLE DEPARTMENT OF TRANSPORTATION v. ALLIED INVESTMENTS LTD

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Court of Appeal, Fourth District, Division 2, California.

PEOPLE of the State of California, ex rel. DEPARTMENT OF TRANSPORTATION, Plaintiff and Respondent, v. ALLIED INVESTMENTS LTD., et al., Defendants and Appellants.

No. E011664.

Decided: March 16, 1995

Philip F. Lanzafame, Pasadena, for defendants and appellants. William M. McMillan, Chief Counsel, Anthony J. Ruffolo, Robert W. Vidor, Larry R. Danielson, Linda C. Harrel, and Glenn B. Mueller, Los Angeles, for plaintiff and respondent.

OPINION AFTER RECALL OF REMITTITUR

Property owners Allied Investments, Ltd., and Lynda Ward, Trustee of the Lynda Ward 1975 Family Trust (defendants), have appealed from a post-judgment order in a real property condemnation case.   That order denied defendants' motion for so-called litigation expenses which are available to condemnees, under certain conditions, pursuant to section 1250.410 of the Code of Civil Procedure.1

Plaintiff State's final offer was $1,900,000;  defendants' final demand was $2,600,000.   The jury's verdict came in at $2,800,000.   The litigation expenses sought by defendants' post-verdict motion included $33,350.10 for appraisal and engineering fees and $471,225 for attorney's fees.

Each side employed two appraisers.   Plaintiff's appraisers fixed the value of the property to be taken at $1,875,000 and $1,833,000, respectively.   Defendants' appraisers fixed such value at $2,916,342 and $2,692,794, respectively.

In denying the motion, the trial court stated that “[t]he court finds that the difference between the final offer of $1,900,000 and the jury verdict for $2,800,000, while considerable, does not show that plaintiff's offer was unreasonable.  [¶] Further, the issues involved in evaluation were unusually complex, including but not limited to, the moratorium issues and the Federal statutes regarding wet lands.  [¶] The court finds that the plaintiff acted in good faith and with care and accuracy in its method of determination.”

In light of the well-established standard of review applicable in cases of this kind, it is our view that substantial evidence supports the trial court's finding that plaintiff's offer of $1,900,000 was reasonable and hence that the trial court did not abuse its discretion in denying defendants' motion.   We shall affirm the order appealed from accordingly.

FACTUAL AND PROCEDURAL BACKGROUND

The property condemned in the underlying action is in the vicinity of the Alessandro Boulevard crossing of the I–215 freeway, near March AFB in Riverside County.   Under procedures which authorize it, plaintiff took possession of the property several years before the judgment in condemnation;  at that time defendants were paid the $1,794,500 which had been deposited by plaintiff with the State Treasurer as a condition of the order for immediate possession.

Sections 1258.210 through 1258.300 of the Code of Civil Procedure provide for the exchange of valuation data between the parties to condemnation actions.   These procedures were followed in this case.   Plaintiff provided the data developed by its two appraisers;  initially defendants had relied on only one appraiser, James J. Reid.   Because of the substantial disparity between the appraisers' valuations submitted by the two sides, defendants were afforded a continuance of the mandatory settlement conference to enable them to obtain the data from a second appraiser, Verne Cox.

Because defendants acceded to plaintiff's taking of the subject property, the only issue to be resolved at the jury trial was the fair market value of the several parcels to be condemned.

One of plaintiff's appraisers was Frances Wolfe (Wolfe), an MIA-certified appraiser.   She estimated the fair market value of the subject parcels at $1,875,000.   She based her appraisal on nine comparable sales, both north and south of nearby March AFB.   Based upon her detailed inspection of the subject parcels, she noted there was an elevation differential of 40 feet from one end of the parcels to the other.   She also identified an “intermittent blue line stream” which ran through the parcels.   These streams come under the purview of the U.S. Army Corps of Engineers.   Specific federal permits are required to develop wetlands surrounding such blue line streams.   Also, the particular blue line stream in question is part of a study area for an endangered species, the Stephen's Kangaroo Rat;  according to Wolfe, development on these parcels would require significant habitat mitigation fees to be paid.   Wolfe further testified it would be necessary to install sewage pumping stations on the parcels in order to connect any development with adjacent municipal gravity-driven sewer systems.   She also indicated construction of a street would be necessary in order to provide vehicular traffic access to the parcels.

Further, according to Wolfe, as of March 28, 1990, the parcels were zoned as “MP”-manufacturing park.   She also noted the parcels were within March AFB's Accident Potential Zone (APZ) 2, indicating that the Air Force had determined there was a higher likelihood of aircraft-related accidents on the subject parcels than in areas farther removed from March AFB.

Wolfe also analyzed and commented otherwise upon the subject parcels' topography, size, zoning, wetlands impact considerations, access to arterial roadway, time since sales, ease of municipal utility access, visibility from I–215, distance to other developments, time required to actually develop the raw parcels, community facility bond obligations (Mello Roos Community Facilities Act, Gov.Code, § 53311 et seq.) tied to the property, traffic flow patterns, aircraft noise levels, current income patterns, general access to capital financing, and the ability of the surrounding community's economies to absorb commercial development with nine other recently sold properties in the adjacent area.

The other of plaintiff's appraisers was Thomas Pike, also an MIA-certified appraiser.   He estimated the fair market value of the subject parcels at $1,833,000.   He considered many of the same factors which Wolfe had, as above described;  he also used several different comparable sales to arrive at his valuation.   Otherwise, he relied upon a mathematical technique known as a multiple regression analysis to determine the statistical accuracy of his appraisal.   Pike stated he had given defendants' parcels the benefit of the doubt in every instance where a question arose.

Reid, one of defendants' appraisers, above identified, estimated the fair market value of the subject parcels at $2,916,342.   He based his conclusion on four comparable sales in the area, making adjustments to account for differences such as frontage area, municipal utilities access, soil quality, recent development, topography, general availability of financing, March AFB APZs, and zoning.

Cox, the other of defendants' appraisers, also above identified, estimated the fair market value of the subject parcels at $2,692,2794, arriving at this figure by multiplying a factor of $6.00 per square foot by 448,799 square feet.   Cox used five comparable sales to determine the value of the subject parcels, four of which were identical to Reid's four, plus one additional comparable sale situated in Moreno Valley.   Cox did not feel that sales south of March AFB would be useful in determining the value of the subject parcels, which were located north of March AFB.

After hearing this expert testimony, the arguments of counsel and the court's instructions, the jury brought in a verdict of $2,800,000.   Thereafter, defendants' motion for an order awarding litigation expenses was denied.   This appeal followed.

DISCUSSION

In pursuing their appeal, defendants characterize “the issue on appeal” in somewhat obtuse terms.   As stated in their opening brief, “[w]here there are significant issues relevant to determining the fair market value of property to be acquired by eminent domain, is the failure of the condemning agency to consider the landowner's expert appraisal opinions in determining its offer of compromise under Code of Civil Procedure § 1250.410 unreasonableness on the part of the condemning agency, as a matter of law, such as to require an award of litigation expenses to the landowners[?]”  The problem with this convoluted statement of the issue is that it makes an initial assumption which has no support in the extrinsic evidence.   In other words, defendants have not directed us to anywhere in the record where the evidence shows that the condemning agency failed to consider the landowner's expert appraisal opinion in determining its offer of compromise.

In our view, the issue on appeal is whether there is substantial evidence in the record to support the trial court's finding that plaintiff's offer of $1,900,000 was reasonable.  (See Glendale Redevelopment Agency v. Parks (1993) 18 Cal.App.4th 1409, 1415, 23 Cal.Rptr.2d 14, citing City of Commerce v. National Starch & Chemical Corp. (1981) 118 Cal.App.3d 1, 20, 173 Cal.Rptr. 176.)

Well-established authorities provide the guidelines for evaluating evidence which is probative on the issue of the reasonableness of plaintiff's offer.

In County of San Diego v. Woodward (1986) 186 Cal.App.3d 82, 230 Cal.Rptr. 406, the court observed, “[a] purely mathematical examination of the offer, demand and award may be useful where the condemner is unwilling to compromise despite the condemnee's reasonable position.  [Citation.]   However, such is not the case here.   This is not a case where the condemner's offer ignored a landowner's expert appraisal.  [Citation.]   This is not a case where the condemner engaged in ‘unyielding adherence’ to its appraisal incompatible with the spirit of compromise.  [Citation.]”  (Id. at p. 91, 230 Cal.Rptr. 406.)

The second “citation” above bracketed was to County of Los Angeles v. Kranz (1977) 65 Cal.App.3d 656, 135 Cal.Rptr. 473, where the facts showed that the offer of the condemning agency “ignored landowners' expert's appraisal of $96,750.”  (Id. at p. 660, 135 Cal.Rptr. 473.)   There is no evidence to show that that is what happened in the case now before us.   Thus, defendants' substantial reliance on Kranz, and cases which in turn cite Kranz as controlling, is misplaced.  Kranz is inapposite here.

Actually, on the significance of disproportionate appraisals, the Kranz rationale was questioned by the court in Lake County Sanitation Dist. v. Schultz (1978) 85 Cal.App.3d 658, 149 Cal.Rptr. 717.   That case stated, “Schultz rel[ied] on City [County] of Los Angeles v. Kranz, supra, 65 Cal.App.3d p. 659, 135 Cal.Rptr. 473, which held that under the facts of that case, a settlement offer that was less than 80 percent of the verdict was so ‘significantly disproportionate to the adjudicated value of the property’ that the offer was unreasonable as a matter of law.   As both former section 1249.3 and its replacement, section 1250.410, lack specific guidelines, we conclude that the Legislature has rejected a formulaic or otherwise arbitrary approach in favor of a discretionary one based on the factors developed by the courts, set forth above.   In view of the statute, we cannot read Kranz [sic ] as establishing arbitrary schedules divorced from other factors.   Accordingly, we hold that the question is one of fact in the instant case [Citation.].”  (Id. at p. 667, 149 Cal.Rptr. 717.)

 The well-established guidelines, above noted, include measuring the good faith, care and accuracy practiced by the condemning agency in determining the amount of its offer.  (State of California Ex Rel. State Pub. Works Bd. v. Turner (1979) 90 Cal.App.3d 33, 37, 153 Cal.Rptr. 156.)   In Turner, a case similar on its facts to the one before us, the reviewing court affirmed an order denying a motion for litigation expenses under section 1250.410.   In rationalizing the result it reached in a case where the agency's first offer was substantially less than the landowner's final demand and less than the verdict, Turner said, “Were we to look solely at the amount of difference between the offer ($462,300) and the compensation awarded ($587,000), we would acknowledge the $124,700 differential might compel a finding the offer was unreasonably low.   Similarly, the percentage differential (22 percent) would cast considerable doubt on the reasonableness of the state's offer.   Here, however, there is an additional element which cannot be ignored and which provides substantial evidence supporting the trial court's conclusion the state's offer was reasonable.   The amount of the offer was clearly determined by the state with good faith, care and accuracy.  [¶] It was not disputed by the property owners the state used a very well qualified appraiser who used proper comparables to determine the value of this property.   There was no evidence he had tried to keep the values low or otherwise mistreat the property owners․  [¶]․  This constitutes a substantial element in the reasonableness of the state's belief its offer was good.   This also supports the state's care and accuracy in asserting its original offer was good and provides a reason for not raising the offer after learning the property owners' demand.”  (Id. at pp. 37–38, 153 Cal.Rptr. 156)  So it was here.

 The trial court was obviously impressed by the good faith of plaintiff here, as are we.   More particularly, because of the highly professional quality of the work of plaintiffs' two appraisers, whose independent appraisals based on different factors were remarkably close (a difference of only $42,000), plaintiff clearly acted in good faith and was fully justified in placing its trust and confidence in its appraisers.   On the other hand, defendants' two appraisers, relying on the same factors, arrived at appraisals which differed by over $223,000.   Such differential operated further to reinforce plaintiff's confidence in its own appraisers which, in turn, demonstrated the care, good faith and accuracy exhibited by plaintiff in its efforts to negotiate a pretrial settlement.

At oral argument, counsel for defendants vigorously insisted that plaintiff had not made a good faith effort to settle the case before trial.   Under persistent questioning from the panel, counsel's repeated answer was that the disparity between the $2,800,000 verdict and plaintiff's statutory offer of $1,900,000 demonstrated per se an obdurate refusal to negotiate and hence constituted a lack of good faith.   We reject any such “split-the-difference,” arithmetic test for measuring good faith.   In our view, the language above quoted from Turner (State of California Ex Rel. State Pub. Works Bd. v. Turner, supra, 90 Cal.App.3d 33, 37–38, 153 Cal.Rptr. 156) is the appropriate response to defendants' position at oral argument.   In other words, such position was contrary to controlling authority.

Based upon the foregoing analysis, we hold that substantial evidence supports the trial court's finding that plaintiff's last offer of compromise was reasonable as contemplated by section 1250.410 of the Code of Civil Procedure.

That leaves remaining for disposition the award of costs on appeal as contemplated by section 1268.720 of the Code of Civil Procedure.2  Under this provision, an appealing defendant, even though not (as here) the prevailing party, is entitled to costs on appeal unless the court “otherwise orders.”

In the initial opinion, assuming that the word “proceeding” used in the statute includes a post-judgment proceeding, we improvidently failed to apply section 1268.720.   Thus, no award of costs was announced in the disposition;  as a result, when the remittitur went out, the clerk, following the dictates of rule 26(b), California Rules of Court, awarded costs on appeal to plaintiff-respondent because we had affirmed a post-judgment order entered in the trial court in plaintiff's favor on an issue arising under section 1250.410 of the Code of Civil Procedure (ante ).

Defendants moved for an order recalling the remittitur, correctly pointing out that the award of costs on appeal in matters such as this cannot properly be dealt with by reliance upon rule 26(b).   We recalled the remittitur accordingly.

 We now address the matter of costs on appeal.   It is of course fundamental, as a constitutional principle, that the award of just compensation for a taking in eminent domain cannot be diminished by the costs incurred in the process of obtaining an award;  however, that is not what we have here.   Defendant chose to challenge a post-judgment order;  thus, defendant, in pursuing the appeal, was not challenging the process of obtaining an award.   This being the case, in our view, defendant's choice to appeal here should be treated no differently than any other appeal.   The party initiating the appeal always runs the risk of losing.   Attending that risk is responsibility for the respondent's costs on appeal.   Because defendant's challenge of the post-judgment order was unsuccessful, costs on appeal properly should be awarded plaintiff.

DISPOSITION

The order appealed from is affirmed.   Pursuant to section 1268.720 of the Code of Civil Procedure, costs on appeal are awarded to plaintiff.

FOOTNOTES

FOOTNOTE.  

1.   In pertinent part, section 1250.410 provides, “If the court, on motion of the defendant ․ finds that the offer of the plaintiff was unreasonable and that the demand of the defendant was reasonable viewed in the light of the evidence admitted and the compensation awarded in the proceedings, the costs allowed ․ shall include the defendant's litigation expenses.”

2.   Section 1268.720 provides, “[u]nless the court otherwise orders, whether or not he is the prevailing party, the defendant in the proceeding shall be allowed his costs on appeal.   This section does not apply to an appeal involving issues between defendants.”

McDANIEL, Associate Justice.** FN** Retired Associate Justice of the Court of Appeal, Fourth District, senior judge status (Gov.Code, § 75028.1), sitting under assignment by the Chairperson of the Judicial Council.

RAMIREZ, P.J., and McKINSTER, J., concur.