ELLIS v. STATE DEPARTMENT OF TRANSPORTATION

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Court of Appeal, Second District, Division 7, California.

William and Jacqueline ELLIS, Plaintiffs, Respondents and Cross–Appellants, v. The STATE of California ex rel. DEPARTMENT OF TRANSPORTATION, Defendant, Appellant and Cross–Respondent.

No. B087165.

Decided: March 06, 1996

William M. McMillan, Chief Counsel, Anthony J. Ruffolo, Deputy Chief Counsel, Robert W. Vidor, Larry R. Danielson, Linda Cohen Harrel, Los Angeles and David R. Simmes, Northridge, for Defendant, Appellant and Cross–Respondent. Berger & Norton, Michael M. Berger and David J. Weinman, Santa Monica, for Plaintiffs, Respondents and Cross–Appellants.

The State of California by and through the Department of Transportation (Caltrans, Appellant) appeals from a judgment entered finding it and the City of Los Angeles (City) jointly and severally liable to William and Jacqueline Ellis (the Ellises, Cross–Appellants) for inverse condemnation and for dangerous condition of public property.   Caltrans contends the imposition of post judgment interest at 10% was error, joint and several liability does not apply to inverse condemnation, settlement by the City must be applied to tort calculation, and attorneys fees are not recoverable for prejudgment interest.   The Ellises filed a cross-appeal contending the trial court erred in applying the tort theory of contributory fault to reduce their compensation for inverse condemnation.

STATEMENT OF CASE AND PROCEDURAL HISTORY

The Ellises' home was located at 17912 Castellammare Drive in Pacific Palisades.   The original structure was built in 1949, purchased in 1986 by the Ellises and remodeled in 1987.   On December 26, 1988, a sudden landslide movement caused the street in front of the Ellises' home to crack and break.   Cracks also appeared in the driveway and front entry.   The landslide continued to move after December 1988, and on January 18, 1993, the landslide moved several feet, destroying the Ellises' home.   The landslide was caused in part by road cuts made by Caltrans to build and widen Pacific Coast Highway, located at the bottom of the Ellises' hillside.   It was also caused in part by road cuts made by the City farther up the Ellises' hillside and the City's failure to prevent incursion of water into the landslide mass.

The jury returned a special verdict that both Caltrans and the City caused the landslide which damaged the Ellises' property and both were responsible under the law of dangerous condition of public property.   The jury also rendered an advisory verdict that Caltrans and the City were jointly and severally liable in inverse condemnation for the Ellises' loss.   The jury determined that Caltrans was 27% responsible for the Ellises' damages, the City was 38% responsible, the Ellises were 32% responsible 1 and all other persons were 3% responsible.

The court agreed with the allocation of responsibility and applied comparative fault to the inverse condemnation recovery.   After reduction for the Ellises' 32% share of fault, the Ellises were awarded $663,000 for lost property value and $37,400 for repair costs.   The court ruled Caltrans was 41.5% responsible for the damage and the City was 58.5% responsible.

Thereafter the Ellises moved for reimbursement of attorneys' fees.   After reduction for the comparative fault finding, the Ellises were awarded $1,719,051.25, which included prejudgment interest, attorneys' fees and litigation costs.   The Ellises settled with the City for $1,000,000.00.   The trial court entered judgment against Caltrans for $734,051.25 after giving Caltrans an offset based on the City settlement.   The court determined that post judgment interest would accrue at the rate of 10%.

I.

JOINT AND SEVERAL LIABILITY

Caltrans contends “joint and several liability” does not apply to inverse condemnation and cites Locklin v. City of Lafayette (1994) 7 Cal.4th 327, 372, 27 Cal.Rptr.2d 613, 867 P.2d 724 and Mehl v. People ex rel. Dept. Pub. Wks. (1975) 13 Cal.3d 710, 119 Cal.Rptr. 625, 532 P.2d 489 for this proposition.

 “An action for inverse condemnation ‘is an eminent domain proceeding initiated by the property owner rather than the condemner.   The principles which affect the parties' rights in an inverse condemnation suit are the same as those in an eminent domain action.  [Citations.]’  [Citation.]   ‘The authority for prosecution of an inverse condemnation proceeding derives from article I, section 19, of the California Constitution.’  [Citation.]   The doctrine has been summarized as follows:  ‘Article I, section 19 ․ of the California Constitution requires that just compensation be paid when private property is taken or damaged for public use.   Therefore, a public entity may be liable in an inverse condemnation action for any physical injury to real property proximately caused by a public improvement as deliberately designed and constructed, whether or not injury was foreseeable, and in the absence of fault by the public entity.  [Citations.]’  [Citation.]  [¶]․  [¶]  In order to establish an actionable ‘taking,’ the plaintiff must demonstrate a causal relationship between governmental activity and the property loss complained of.  [Citation.]   Typically, this element is referred to as ‘proximate cause.’   Unlike the corresponding element in negligence cases, however, foreseeability is not a consideration for inverse condemnation.   Instead, a governmental entity may be held strictly liable, irrespective of fault, where a public improvement constitutes a substantial cause of the plaintiff's damages even if only one of several concurrent causes.  [Citation.]”  (Marshall v. Department of Water & Power (1990) 219 Cal.App.3d 1124, 1138–1139, 268 Cal.Rptr. 559, fn. omitted.)

 In Locklin v. City of Lafayette, supra, 7 Cal.4th 327, 372, 27 Cal.Rptr.2d 613, 867 P.2d 724, the court stated that in Mehl, it had held that “with respect to apportionment of liability for damage caused by drainage of surface waters” defendants were not subject to joint and several liability.  “[W]e held that a plaintiff in inverse condemnation must establish the proportion of damage attributable to the public entity from which recovery was sought.   Because the plaintiff did not differentiate the damage allegedly caused by runoff from a state freeway, from that caused by natural flow and by the county's efforts to deal with increased flow, we reversed the judgment stating:  ‘In these circumstances, it [is] essential to differentiate between the responsibility of the state and the county for the overall damage.’ ”  (Locklin v. City of Lafayette, supra, 7 Cal.4th 327, 372, 27 Cal.Rptr.2d 613, 867 P.2d 724.)   The holding of Mehl as further explained in Locklin was limited to circumstances involving “apportionment of liability for damage caused by drainage of surface waters.”  (7 Cal.4th at p. 372, 27 Cal.Rptr.2d 613, 867 P.2d 724.)   These two cases are exceptions to the general principles involving inverse condemnation.   As the court noted in Locklin, “This is not to say that public entities incur absolute liability for any damage caused by the runoff of surface water from improvements on its property into a natural watercourse or from public improvements constructed in or on a watercourse.   Again as we held in Belair v. Riverside County Flood Control Dist. [1988] 47 Cal.3d 550, 253 Cal.Rptr. 693, 764 P.2d 1070, with respect to flood control projects, the public agency is liable only if its conduct posed an unreasonable risk of harm to the plaintiffs, and that unreasonable conduct is a substantial cause of the damage to plaintiff's property.   The rule of strict liability generally followed in inverse condemnation [citation] is not applicable in this context.”  (7 Cal.4th at p. 367, 27 Cal.Rptr.2d 613, 867 P.2d 724.)

 The concept of apportioning fault between governmental entities both responsible for a taking is inconsistent with the fact that a governmental entity may be held strictly liable in inverse condemnation irrespective of fault.  Mehl and Lafayette cited by appellant to support its claim is an exception involving damage caused by drainage of surface waters and does not establish a rule applicable to the present case.

POST JUDGMENT INTEREST

Appellant contends the trial court's imposition of post judgment interest at 10% was error.   Appellant asserts that a tort cause of action (dangerous condition) was involved and that the legal rate of interest on tort judgments was applied to the combined inverse condemnation and dangerous condition verdict.

 “The legal principles which inform the awarding of interest in condemnation actions were carefully considered and fully articulated by our Supreme Court in Redevelopment Agency v. Gilmore (1985) 38 Cal.3d 790, [at pages 796–807, 214 Cal.Rptr. 904, 700 P.2d 794].  In general terms, those principles are as follows:  [¶] “(1) An owner whose land (or interest(s) therein) has been ‘taken’ is entitled under both the federal and state Constitutions to receive the full measure of ‘just compensation’ for that land.  [Citation.]  [¶] (2) The full measure of ‘just compensation’ includes the payment of interest at a fair and reasonable rate ‘as reimbursement for lost use and money due as compensation for the property, but not paid contemporaneously with the taking.’  [Citation.]  [¶] (3) The payment of interest, and the determination of the rate of interest to be applied, in a ‘taking’ case is a judicial function that cannot be constrained by state statutory provisions.  [Citations.]  [¶] (4) It is the duty of the trial court, in each instance, to determine the appropriate ‘prevailing market rate’ of interest to be applied in a ‘taking’ case.  [Citation.]  [¶] These same general principles of law apply equally in ‘de facto taking’ cases such as this one.  [Citation.]   The interest in such cases runs from the date of the ‘taking.’  [Citation.]”  (People ex rel. Department of Transportation v. Diversified Properties Co. III (1993) 14 Cal.App.4th 429, 447–448, 17 Cal.Rptr.2d 676, fn. omitted.)

 Pursuant to Code of Civil Procedure section 1268.310, the compensation awarded in condemnation proceedings shall draw interest computed as prescribed by Code of Civil Procedure section 1268.350.  Section 1268.350 provides the “apportionment rate” shall be calculated “as the rate of earnings by the Surplus Money Investment Fund for each six-month period.”

In San Bernardino County Flood Control Dist. v. Grabowski (1988) 205 Cal.App.3d 885, 252 Cal.Rptr. 676, the court noted “that the Legislature had amended section 1268.310 et seq., effective January 1, 1987, to set forth a ‘floating’ apportionment interest rate formula, tied to the (regularly updated) rate of return earned by the State in its Surplus Money Investment Fund, whereby the trial court could determine the rate of post judgment interest to be applied to the compensation awarded in condemnation cases.”   (People ex rel. Department of Transportation v. Diversified Properties Co. III, supra, 14 Cal.App.4th at p. 450, 17 Cal.Rptr.2d 676.)   This legislative change “established a new ‘floor’ for postjudgment interest in condemnation cases—a ‘floor’ set by the ‘floating’ apportionment rate of interest defined and established in section 1268.350 of the Code of Civil Procedure.   In each condemnation case, the trial court is to independently determine the extant market rate of interest and then apply the higher of (i) that market rate of interest, or (ii) the legislatively created apportionment rate of interest set forth in section 1268.350 of the Code of Civil Procedure.”  (14 Cal.App.4th at pp. 450–451, 17 Cal.Rptr.2d 676.)

As the parties seem to agree, the trial court imposed postjudgment interest at 10% pursuant to Code of Civil Procedure section 685.010.   It appears that the court in determining the rate of interest did not make a determination of what was just compensation for the inverse condemnation award.   The matter should be remanded to determine the amount of postjudgment interest due as a part of the overall just compensation to be awarded for the inverse condemnation award.

Additionally, the rate of interest applicable to the judgment imposing liability against the state of California for dangerous condition of public property is 7%.  (See California Fed. Savings & Loan Assn. v. City of Los Angeles (1995) 11 Cal.4th 342, 352–353, 45 Cal.Rptr.2d 279, 902 P.2d 297) and the matter should be remanded to determine the amount of post judgment interest due at the rate of 7%.

III

SETTLEMENT BY CITY

Appellant next contends that if it is correct that joint and several liability does not apply in inverse condemnation, “it follows that the City's settlement with plaintiffs must be applied only to the tort side of the ledger.”   As we have concluded that joint and several liability does apply, by appellant's own admission, this contention need not be addressed.

IV.

ATTORNEYS FEES

 Appellant asserts that the court erred in awarding attorneys fees on prejudgment interest.   The record does not support that contention.   The court in its minute order following the motion for reimbursement of attorneys' fees outlined Ellises' position regarding attorneys' fees, that it was entitled to such fees computed at one third of the apportioned value of the lost property, prejudgment interest and repair costs.   The court however stated it was “aware of no authority that would impose a contingent fee contract on an unwilling defendant” and instead computed attorneys' fees “in the normal fashion of hourly rate times hours expended” producing the “so-called ‘lodestar.’ ”   The court noted that Ellises' counsel had “produced an analysis of the value of time expended by them on this case, which amounts in total to 3,390.45 hours, having value at the billing rates set forth of $600,746.75.”   The court found that while plaintiffs had not prevailed on all claims, all claims were closely related and claims on which plaintiffs prevailed could not reasonably be separated from time devoted to claims upon which plaintiffs did prevail;  counsel demonstrated skill and experience in this complex litigation, many other attorneys would have been reluctant to institute and continue to prosecute this action, the number of hours expended was fair and reasonable and the evidence went back in excess of 80 years, that while lead counsel had assistance at trial and hours of assistants were reflected in the total, those assistants were necessary to manage the voluminous exhibits and resulted in a time saving, while results obtained by plaintiffs' counsel must be viewed as disappointing because of the ruling made by the court concerning comparative fault and the striking of emotional distress damages, the issues were well briefed and to the extent they were novel required extra expenditure of time, counsel served the public interest by vindicating an important constitutional right, the billing rates set forth in the moving papers were fair and reasonable.   The court found that “ ‘billing judgment’ ” when exercised in light of the hours expended did not require any reduction of the fee below the contingent fee rate and that no lodestar adjustment was requested or appropriate.   The court awarded $358,541.50 as reasonable attorneys' fees.

Code of Civil Procedure section 1036 provides in relevant part:  “In any inverse condemnation proceeding, the court rendering judgment for the plaintiff by awarding compensation ․ shall determine and award or allow to the plaintiff, as a part of that judgment ․ a sum that will, in the opinion of the court, reimburse that plaintiff's reasonable costs, disbursements, and expenses, including reasonable attorney, appraisal, and engineering fees, actually incurred because of that proceeding in the trial court․”

 “While the amount to be awarded as attorney fees is a matter committed to the court's discretion [citation], courts have developed general rules to guide the exercise of that discretion in determining a reasonable fee.  [Citation.]”  (People ex rel. Dept. of Transportation v. Yuki (1995) 31 Cal.App.4th 1754, 1767, 37 Cal.Rptr.2d 616.)  “A trial court may not determine a ‘reasonable’ attorney fee solely by reference to the amount due under a contingency agreement.  [Citations.]   However, the court may consider the contingent nature of the fee agreement as one factor in determining a reasonable fee.   Other factors to be considered by the court, where appropriate, include:  the novelty and difficulty of the questions involved and the skill required to perform the legal services properly;  the likelihood that the acceptance of this particular employment would preclude other employment by the attorneys;  the amount involved and the results obtained;  the time limitations imposed by the clients or by the circumstances of the case;  the nature and length of the professional relationship with the client;  the experience, reputation, and ability of the attorneys who performed the services;  the time and labor required of the attorneys;  and the informed consent of the client to the fee agreement.  [Citations.]”  (Id. at pp. 1770–1771, 37 Cal.Rptr.2d 616, italics in original.)   Based on the record, we cannot say the trial court abused its discretion in its award of attorneys' fees.

CROSS–APPEAL

 The Ellises contend by way of cross-appeal that the trial court erred in reducing the inverse condemnation award by applying the tort doctrine of comparative fault.   We agree.

 Tort law and inverse condemnation are not the same.   Inverse condemnation is constitutionally based.   In Albers v. County of Los Angeles (1965) 62 Cal.2d 250, 42 Cal.Rptr. 89, 398 P.2d 129, our Supreme Court “reaffirmed the vitality of earlier precedent which stated that ‘the right assured to the owner by [Article I, section 14, now section 19,] of the constitution is not restricted to the case where he is entitled to recover as for a tort at common law.   If he is consequently damaged by the work done, whether it is done carefully and with skill or not, he is still entitled to compensation under this provision.’  [Citations.]  ․  [¶] As the Albers opinion carefully made clear, its general rule of compensability did not derive from statutory or common law tort doctrine, but instead rested on the construction, ‘as a matter of interpretation and policy’ [citation], of our constitutional provision.”  (Holtz v. Superior Court (1970) 3 Cal.3d 296, 303, 90 Cal.Rptr. 345, 475 P.2d 441.)  “[A]ny actual physical injury to real property proximately caused by the improvement as deliberately designed and constructed is compensable ․ whether foreseeable or not.”  (Albers v. County of Los Angeles, supra, 62 Cal.2d at pp. 263–264, 42 Cal.Rptr. 89, 398 P.2d 129;  see also Belair v. Riverside County Flood Control Dist., supra, 47 Cal.3d at pp. 558–560, 253 Cal.Rptr. 693, 764 P.2d 1070.)   There may be more than one substantial factor operating to produce the property damage but proximate causation is satisfied if the action of the government is one of several important causal elements.  (See Blau v. City of Los Angeles (1973) 32 Cal.App.3d 77, 84–85, 107 Cal.Rptr. 727.)

County of San Mateo v. Berney (1988) 199 CalApp.3d 1489, 245 Cal.Rptr. 738 does not support the conclusion that comparative fault applies to inverse condemnation cases.   In that case, the court determined that after a public entity had been sued for inverse condemnation, the public entity could seek “indemnification from third parties whose negligent or fraudulent acts were causative factors in the damaging or taking of private property.”   (Id. at p. 1494, 245 Cal.Rptr. 738.)   This holding had no impact on the property owner who was entitled to recover the full loss from the public entity.

DISPOSITION

That portion of the judgment finding Caltrans and the City jointly and severally liable in inverse condemnation is affirmed.   That portion of the judgment reducing compensation owed to the Ellises on their inverse condemnation claim by reason of comparative fault of the Ellises is reversed with directions to the trial court to enter judgment unaffected by any comparative fault.   That portion of the judgment awarding postjudgment interest is reversed with directions to compute interest consistent with the views expressed in this opinion.   In all other respects the judgment is affirmed.   Each party to bear its own costs on appeal.

FOOTNOTES

1.   Ellis had purchased their home after being told by the seller that the neighbor across the street was suing the City for landsliding and that the foundation of the Ellis home had sunk.   No geological investigation was ever made and Ellis invested another $400,000 in rebuilding the damaged and distressed home.   A cursory geological investigation would have revealed the problems that subsequently destroyed the home.

LILLIE, Presiding Judge.

JOHNSON and FRED WOODS, JJ., concur.