Irval W. CARTER et al., Plaintiffs and Appellants, v. CITY OF PORTERVILLE, Defendant and Appellant.
FACTUAL AND PROCEDURAL SUMMARY
The City of Porterville (hereafter the City) built an earthen dam as part of a surface water control project designed to minimize flooding of residential properties farther down the watershed. The dam was built directly up against the property line of the next downstream property; the owners of that downstream property, Irval W. Carter and Florence Carter (the Carters), are the plaintiffs in this action.
The Carters' property is undeveloped pasture land. Before the dam was built, their property was subjected to sheetflow flooding from waters coming through and from the City's property.1 This sheetflow flooding reached a depth of about a foot, and expanded its area of coverage to accommodate increased volumes of water during heavier rains.
The dam was built with three 36–inch concrete outlet pipes at the lowest point of the dam. If opened all the way, these pipes would permit all of the reasonably anticipated flow of runoff to pass onto the downstream property as it had in the past. However, the City planned to regulate the flow of the water so as to maintain an acceptable level of waterflow through a residential development farther downstream. As a result, it was anticipated water would be stored behind the dam for certain periods of time. When one gate was open two inches and the other two were closed, the outflow was sufficiently reduced to prevent flooding of downstream homes. In addition, if the dam already held water when new rains came, the dam could reach its capacity. In that case, the spillway at the top of the dam could produce a short-term flow of water in a different area than would occur naturally.
The trial court found that the dam was negligently constructed and the danger from potential failure of the dam rendered the Carters' property unsuitable for its previous highest and best use, namely, single-family residential development. The court found that the property had a fair market value of $10,000 per acre before the dam was built, and pursuant to the parties' stipulation 2 the court awarded inverse condemnation damages to the Carters in the amount of $374,400, together with costs and attorney fees.
I. Framing of Issues
The City first contends that inverse condemnation liability cannot exist without “an interference with the present use of the property.” Second, the City says governmental entities attempting to control flood waters are liable in inverse condemnation only if they have acted unreasonably, which the City says it has not done in this instance. Third, the City claims that it was entitled to a reasonable time to fix the dam after the court determined the dam was unsafe. Finally, the City contends various aspects of the judgment are unsupported by the evidence or are in direct conflict with the evidence.3
The Carters counter that the evidence clearly establishes the dam caused a substantial diminution of the value of their property and that such a showing entitles them to an award of damages under the “taken or damaged” provision of the California Constitution, article I, section 19.4 The Carters also cross-appeal on the basis the court should have awarded prejudgment interest on the damages award.
Unfortunately, both in the court below and in the briefs filed herein, neither party has adequately analyzed the liability and damages issues. While some features of each party's arguments have merit, the parties' analyses are insufficient to properly resolve this complex case of inverse condemnation. We further conclude the trial court's resolution of this case awards damages on an incorrect basis and fails to make certain necessary findings. As will be discussed below, any action or inaction of the City in the course of creating and maintaining the dam must be analyzed from the perspective of both physical and regulatory takings of the Carters' property.5
In order to determine what has been taken or damaged 6 by the City, we must begin by looking at what the Carters had before the dam was built. (See Lucas v. South Carolina Coastal Council (1992) 505 U.S. 1003, ––––, 112 S.Ct. 2886, 2899, 120 L.Ed.2d 798). Ownership of property really consists of a collection of numerous rights, some of which are present and some of which are absent in any given instance of ownership. A taking may affect all or only some of these rights, and the property owner may be left with some rights of ownership after the governmental action. (See Andrus v. Allard (1979) 444 U.S. 51, 65–66, 100 S.Ct. 318, 326–27, 62 L.Ed.2d 210.) 7
Because the Carters' property was historically subject to discharge of surface waters 8 through and from the City's property, it is significant to bear in mind that the Carters' property rights in the land in question were subservient to the water rights of the City's land even before the dam in question was ever built. (Compare Yue v. City of Auburn, supra, 3 Cal.App.4th at p. 761, 4 Cal.Rptr.2d 653 [lower property owner's inverse condemnation action may be defeated by showing of reasonableness in discharging surface water by upstream owner, city]; see Lucas v. South Carolina Coastal Council, supra, 505 U.S. at p. ––––, 112 S.Ct. at p. 2900.)
In inverse condemnation cases and, even more particularly, in regulatory taking cases discussed below, the issues often include, first, whether valuable rights have been taken (see Andrus v. Allard, supra, 444 U.S. at pp. 65–66, 100 S.Ct. at pp. 326–27) and, second, whether the aggregate value of remaining property rights—including permissible uses of the property—has been sufficiently diminished by the taking (cf. Blue Jeans Equities West v. City and County of San Francisco (1992) 3 Cal.App.4th 164, 168, 4 Cal.Rptr.2d 114). Resolution of these issues is very fact-specific, requiring examination of both what has been taken and what has been left behind. (See ibid.) The nature of the rights taken and left behind not only determines the nature of compensation that is constitutionally “just,” but also may determine whether there is a taking in the first place. (See ibid.)
In the present case, the court looked at the overall effect of the governmental action and determined that it deprived the Carters of the right to develop their property to its highest and best use. The court determined that the rights left with the Carters (essentially, agricultural use) were significantly less valuable than their previous property rights.
By contrast, we see three distinguishable, potential deprivations or infringements in this matter. Two of these deprivations are constitutionally compensable upon a showing of actual loss, though they do not result in the compensation calculated by the trial court. The third deprivation is less clear; further factfinding, described below, needs to occur on remand in order to determine whether there has been a compensable taking.
The three potential deprivations in this case are based on the following three aspects of the dam. First, even if the dam were safe, there would be a waterflow across the Carters' property (particularly from the spillway) that may be different in character and quantity from the natural waterflow. Second, there is a danger of an unplanned, catastrophic release of water due to the negligent design and construction of the outlet pipes. Third, there is the simple fact that the dam, even if rendered safe, looms over the property in a way that may reduce the development potential of the property.
III. Physical and Regulatory Takings
Before examining these three factors, we must properly characterize the taking that may be involved. (See generally Blue Jeans Equities West v. City and County of San Francisco, supra, 3 Cal.App.4th at p. 169, 4 Cal.Rptr.2d 114.) The field of compensable takings traditionally has been divided into two general categories, physical takings and regulatory takings.
In the context of inverse condemnation actions, physical takings generally occur when a public entity uses nearby property in such a manner as to interfere with a property owner's reasonable use of his or her property. The governmental action is a de facto physical taking of the adjoining property. Normally, an inverse condemnation physical taking exists by virtue of interference with current uses of the property. (See Smart v. City of Los Angeles (1980) 112 Cal.App.3d 232, 238–239, 169 Cal.Rptr. 174; Condemnation Practice in Cal. (Cont.Ed.Bar, Feb. 1993 update) Inverse Condemnation § 13.10, at pp. 268–269.) 9
The City views the present case purely as a physical taking case. Accordingly, it argues that two fundamental elements of a taking are missing from this record. First, the City says there has been no present physical interference with the Carters' use of the property, and second, even the threatened future physical invasion of the property does not interfere with the Carters' use of the property for cow pasture, its present use. We will conclude that the “physical taking” label applies only to the first taking listed above, namely, intentional waterflow across the property.
The other two takings are of a different character. The Carters do not expressly characterize these other takings as “regulatory takings” in the traditional classification scheme. Instead, they desire that we create a new species of inverse condemnation liability based on the California Constitution. In essence, they say that whenever governmental action substantially reduces the value of an owner's property, the government must pay compensation.
The broad liability described by the Carters does not reflect the current state of the law,10 nor is it a desirable expansion of the law of inverse condemnation, for many of the reasons suggested by the City. We will conclude, instead, that the second and third takings listed above, based on the unsafe outlet structure and the physical presence of the dam on the property line, are best analyzed as possible “de facto” regulatory takings, subject to traditional requirements and limitations of regulatory taking cases.
Regulatory takings normally occur when a governmental entity acts, by zoning or otherwise, to restrict all economically viable use of the property. (Twain Harte Associates, Ltd. v. County of Tuolumne (1990) 217 Cal.App.3d 71, 80–81, 265 Cal.Rptr. 737.) Because the existence of viable alternative uses of the property may result in a conclusion that no regulatory taking has occurred at all, this type of taking looks beyond present use of the property to other potentially viable uses of the property.
In ordinary regulatory-taking circumstances, the governmental entity enacts land-use regulations of one sort or another, thereby interfering with an owner's present use or reasonably foreseeable use of the property. Such regulation is permissible without compensation to the affected owner if the regulation advances a legitimate governmental interest and does not deprive the owner of all economically viable use of the property. (See Long Beach Equities, Inc. v. County of Ventura (1991) 231 Cal.App.3d 1016, 1029, 282 Cal.Rptr. 877; see also Lucas v. South Carolina Coastal Council, supra, 505 U.S. 1003, 112 S.Ct. 2886.) Such regulation can be directed toward health and safety goals pursuant to the police power, or it can be part of reasonable land-use planning. (Id. at p. –––– – ––––, 112 S.Ct. at pp. 2897–2898.)
For example, a governmental entity may use the power of eminent domain to obtain land to preserve open space in an area of increasing development. But if the government does not exercise the power of condemnation and simply enacts an open space requirement as part of a general plan or a conditional use permit, the land owner may contend in an inverse condemnation action that his property has been taken by the open space regulation. (See Lucas v. South Carolina Coastal Council, supra, 505 U.S. 1003, 112 S.Ct. 2886, 120 L.Ed.2d 798.) Even where the regulation is clearly for the public good, compensation is required when a particular landowner is forced to pay a disproportionate share of the true “cost” of the benefit to the community at large, which cost should be shared by the entire community. (See Belair v. Riverside County Flood Control Dist. (1988) 47 Cal.3d 550, 558, 253 Cal.Rptr. 693, 764 P.2d 1070.)
The present case presents a slightly different scenario than the previously published regulatory-taking inverse condemnation cases. (See generally Condemnation Practice in Cal., op. cit. supra, § 13.13, at pp. 348–349; id. (Feb. 1993 update) § 13.13 at pp. 271–272.) The City built its dam and, without question, by annexation and land-use regulation 11 it formally could have restricted development on the Carters' property as a matter of public safety. The regulatory taking would have been clear. (Compare Turner v. County of Del Norte (1972) 24 Cal.App.3d 311, 315, 101 Cal.Rptr. 93 [“The government may not actually take an easement in a person's lands by designating that taking as a zoning ordinance, ․”].) Instead, the City elected not to affirmatively address the impact of the dam in any way, which somewhat obscures the nature of the governmental intrusion resulting from the dam.
Thus, viewed in terms of traditional regulatory-taking law instead of the Carters' novel formulation, the Carters sought a judicial determination that the City's failure to prevent development on the Carters' property was unreasonable and that the court should require the City to restrict development in accordance with the demands of public safety. In effect, the Carters would contend that the construction of the dam in fact restricted development below the dam, even though the City failed to formally restrict such development. As a corollary, the Carters would seek to prove, in effect, that the public-safety/land-use regulation the City should have undertaken would result in deprivation of all economically viable uses of their property, thus requiring compensation.
We thus find it necessary and appropriate to analyze the second and third potential deprivations under the category of “de facto regulatory taking.” While this specific terminology has not previously been used in the legal literature, the present case demonstrates the validity of this approach. We find this de facto regulatory-taking theory is compatible in law and common sense with traditional regulatory-taking cases.12 Before analyzing these two potential deprivations stemming from the construction of the dam itself, we examine waterflow as a physical taking.
A. Waterflow 13
The City contends the potential invasion by water from the spillway is not a present injury to the Carters, and that it is entitled to defer this cost of the dam project until such invasion actually happens. The City relies on McMahan's of Santa Monica v. City of Santa Monica (1983) 146 Cal.App.3d 683, 194 Cal.Rptr. 582 in support of this argument.
McMahan's, however, dealt with the difference between a tort claim and a constitutional taking. It simply held that when the city elected to replace drainpipes as they broke, a known cost of that replacement program was the cost of damage to property in the area of the breaking pipes. Thus, the cost of such damage should be shared by the whole community and is the legitimate subject of an inverse condemnation action. The case had nothing to do with the constitutional compensability of anticipated versus present injury.14
Here, the flow of water from the spillway across the Carters' property clearly constitutes a physical intrusion on that property. Case law suggests two bases upon which liability for that intrusion may be premised.
First, the trial court found, on substantial evidence, that the spillway portion of the dam would divert the waterflow from its natural watercourse. Cases uniformly have held that where such diversion results in intrusion of water on the downstream property, just compensation must be paid. (See Bunch v. Coachella Valley Water Dist. (1989) 214 Cal.App.3d 203, 214–215, 262 Cal.Rptr. 513; Imperial Cattle Co. v. Imperial Irrigation Dist. (1985) 167 Cal.App.3d 263, 269–270, 213 Cal.Rptr. 622; see generally, concerning compensability of taking an easement, Nollan v. California Coastal Comm'n, supra, 483 U.S. at p. 831, 107 S.Ct. at p. 3145.) 15 As such, the design and placement of the spillway provide a sufficient basis for inverse condemnation of the flowage easement.
Second, even where the water-control project does not divert the natural watercourse, and even where the project functions as planned, compensation may be required if the government has acted “unreasonably” and such action substantially contributed to injury of the downstream property. (Belair v. Riverside County Flood Control Dist., supra, 47 Cal.3d at pp. 565–566, 253 Cal.Rptr. 693, 764 P.2d 1070.)
The trial court found that the City had acted unreasonably because the spillway directed water toward the place where the house in which Mr. Carter was born had previously stood. The issue of reasonableness, however, “must be determined on the facts of each individual case, taking into consideration the public benefit and the private damages in each instance.” (Belair v. Riverside County Flood Control Dist., supra, 47 Cal.3d at p. 566, 253 Cal.Rptr. 693, 764 P.2d 1070.)
In this case there was no evidence that would indicate why periodic flooding of the former home site makes any difference at all, much less that it constitutes cognizable injury. On the other side of the balance was the uncontradicted testimony that safety considerations required placement of the spillway on natural ground, so as to inhibit erosion that could cause failure of the spillway. The evidence indicated that the present location was the only point where natural ground was at the right height, and that this consideration dictated placement of the spillway. The benefit both to the public and to respondents of a safe spillway clearly and as a matter of law outweighs the countervailing contention of sentimental injury.
Nevertheless, even though the City did not act unreasonably in constructing the spillway, as noted above, redirection of the water from its natural watercourse is sufficient to render the City liable for a physical taking of a flowage easement across the Carters' property.
Because the trial court concluded that the entire property was affected by the dam as negligently constructed, it did not determine the actual area that would be taken by the spillway flowage easement, nor did the court place a separate value on that easement. In remanding this matter for determination of spillway damages, we note two possibilities. First, the City might desire to condemn a fee interest for an appropriate canal to return spillway water to the natural watercourse. While this might raise issues involving severance damages, it seems unlikely in the extreme that such a canal would destroy the entire value of the Carters' remaining acreage. (Compare Tilem v. City of Los Angeles, supra, 142 Cal.App.3d at p. 704, 191 Cal.Rptr. 229.)
Second, there was clear evidence that anyone who had tried to develop the property as a residential subdivision before the dam was built would have been required to undertake extensive site modification to accommodate the natural waterflow across the property. It might be feasible and desirable to establish spillway damages based on a projection of the increased cost of such modifications by reason of the dam's diversion of water to the spillway side of the property. (Compare Albers v. County of Los Angeles (1965) 62 Cal.2d 250, 272–273, 42 Cal.Rptr. 89, 398 P.2d 129; Sheffet v. County of Los Angeles (1970) 3 Cal.App.3d 720, 730–731, 84 Cal.Rptr. 11.)
In summary, with regard to the physical taking here by virtue of waterflow alteration, we conclude that, by its design and intended use, the dam results in a limited physical taking of a flowage easement across some portion of the Carters' property. The size and value of the easement should be determined on remand.
B. The Negligently Constructed Outlets
Three 36–inch culverts located at the lowpoint of the natural valley across which the dam is built provide the primary means of releasing water through the dam. The culverts are each fitted with a gate that can be adjusted between fully open and fully closed positions to control the amount of water discharged onto the Carters' property.
When the gates are fully open, the waterflow would approximate the natural waterflow in an extremely heavy rainstorm. By the same token, the natural waterflow in an extremely heavy storm consistently flooded the downhill properties, particularly a residential subdivision just below the Carters' property. Accordingly, the City's intention is that under most conditions the gates are to be opened only enough to permit a more limited waterflow that will not flood the residences downhill.
The evidence, however, disclosed a significant problem that lies between the City's intentions and the actual operation of the dam during heavy rains. The problem is that, as the trial court found on substantial evidence, the outlet pipes were negligently constructed and the dam may consequently fail, permitting a catastrophic release of water.16
In all earthen dams, water soaks into the dam after a period of time. This is expected and does not normally undermine the integrity of the dam. However, the earth along the outside pipe running through the dam is subject to “piping,” that is, erosion caused by action of the water against the pipe. If piping results in a cleared channel for water to run along the outside of the pipe all the way through the dam, the problem will soon result in failure of the dam.
Substantial evidence established that piping is inhibited in three standard ways in earthen dams. First, the pipes should be seated in concrete cradles to minimize uneven settling of the pipes, which settling could cause leaks and air pockets where piping can begin. Second, the pipes should be fitted with concrete collars, which would increase the distance the water has to travel in order to penetrate the entire dam. Third, the earth around the pipes should be compressed, in order to inhibit dislocation of the dirt through piping. The uncontradicted evidence showed that the pipes in this dam were seated in dirt cradles, there were no concrete collars on the pipes, and the earth around the pipes was not sufficiently compacted. As a result, the trial court concluded, the outlet pipes were dangerous and would cause failure of the dam under appropriate, foreseeable circumstances.
This situation, as found by the trial court, is dangerous to life and property, particularly if residential development were permitted just below the dam. Clearly, it would be within the police power of appellant, through its general plan, to designate the property as open space. Although such action is within the City's power, it still may constitute a regulatory taking and may result in a requirement for compensation, depending on other factors. (See Lucas v. South Carolina Coastal Council, supra, 505 U.S. 1003, 112 S.Ct. 2886; compare First English Evangelical Lutheran Church v. County of Los Angeles (1989) 210 Cal.App.3d 1353, 1370, 258 Cal.Rptr. 893.)
The anomaly in the present case is that the City has heretofore declined to admit that the dam is dangerous, and hence the City has not perceived the propriety of such open-space land-use regulation. At trial, city planning officials testified they still would issue permits for construction of houses on the property if there were provision for handling ordinary waterflow across the property.
Accordingly, these circumstances present a dangerous condition over which the City has failed to exercise its regulatory powers to minimize the danger. Credible evidence established that lenders and developers would be unlikely to share the City's myopia: the property probably will become, de facto, permanent open space because of the dangerous condition of the outlet pipes, the very condition that would require a rational governing entity to restrict development in the first place. Thus the circumstances created by the City's conduct indirectly accomplish the open-space regulation that the City, in the proper discharge of its police powers, should have accomplished forthrightly. And the creation of a de facto open-space requirement for the property through negligent construction of the outlets raises exactly the same compensation issues that would have been raised had the City acted to formally prohibit development, since in a similar manner the negligent construction operates de facto to prevent (as the trial court found) all economically viable uses of the property.17
Given the premise of negligent construction as de facto regulation of downstream land, we must then apply the two-pronged test for the noncompensability of regulatory takings: regulation is not a compensable taking if it substantially advances an important governmental interest and if the regulation does not impair all economically viable uses of the property.
In this case, if we characterize the indirect regulatory action as “construction of a dangerous dam,” then obviously, the regulatory mechanism—the dangerousness of the dam—does not advance any legitimate governmental interest. Thus the indirect regulation would amount to a compensable taking. (Nollan v. California Coastal Comm'n, supra, 483 U.S. at pp. 836–837, 107 S.Ct. at pp. 3148–3149.) On the other hand, if we conceive of the regulation as “preventing development in a dangerous locale,” then the regulation does advance a substantial governmental interest—public safety—and the regulation meets the first test for noncompensability.
We need not finally resolve that issue, however, since the trial court concluded that the second test for noncompensability was not met. In this regard, the court concluded that no development whatsoever of the property could be permitted in light of the dangerous nature of the outlet pipes. That conclusion is supported by substantial evidence. Accordingly, we conclude that the indirect de facto restriction on development of the property constitutes a compensable taking.
We now turn to the question of the measure of “just compensation” for such a regulatory taking. California courts have been extremely reluctant to permit inverse condemnation actions in regulatory-taking cases, because such liability may impede proper government functioning by creating high unforeseen costs for every governmental land-use decision. (Belair v. Riverside County Flood Control Dist., supra, 47 Cal.3d at p. 558, 253 Cal.Rptr. 693, 764 P.2d 1070.)
Thus in Agins v. City of Tiburon (1979) 24 Cal.3d 266, 273–275, 157 Cal.Rptr. 372, 598 P.2d 25, the Supreme Court held that no constitutional compensation was required in regulatory-taking cases until a court has determined that the governmental action was a “taking,” and the government decided to implement the regulation notwithstanding that conclusion. The landowner's first step under Agins was to seek a declaratory judgment that the regulation does not further a substantial governmental interest or does preclude all economically viable use of the property. If the landowner won on that issue, and the municipality then withdrew the regulation, the owner was not entitled to any compensation. Compensation was required only if the regulation was maintained in place after it was judicially declared a “taking.” (See id. 24 Cal.3d at p. 274, 157 Cal.Rptr. 372, 598 P.2d 25.)
In First Lutheran Church v. Los Angeles County (1987) 482 U.S. 304, 319, 107 S.Ct. 2378, 2388, 96 L.Ed.2d 250, the United States Supreme Court held that the Agins procedure in part violated the Fifth and Fourteenth Amendments. The court held that the owner was entitled to compensation for the temporary deprivation, even if the city withdrew its regulation after a court found it was a regulatory taking. (Id. at p. 321, 107 S.Ct. at 2389.) First Lutheran Church did not change the test for determining whether there was a regulatory taking, nor did it change the right of the municipality to avoid a permanent taking by withdrawal of the regulation after the initial adjudication that the regulation is a taking. (Ibid.)
To return to the present case, the trial court effectively precluded the City from “withdrawing” its “regulation” as the City has a right to do under Agins: when the court concluded there had been a permanent taking and that it would not oversee remediation of the dangerous condition of the dam, the court did exactly that which the Agins court feared. It put the landowner, not the municipality, in charge of determining whether the power of eminent domain will be exercised. We conclude that under Agins the City is entitled to an opportunity to withdraw its de facto regulatory taking by rendering the dam safe.
Next, we examine the question of compensation for the temporary de facto deprivation that exists while the dam remains in its defective condition. Compensation for a temporary taking differs from the measure of damages for a permanent regulatory taking; the latter must be based on the reasonably likely highest and best use of the property as that use translates into actual market value of the property. (Condemnation Practice in Cal., op. cit. supra (Feb. 1993 update) §§ 4.1–4.2, 4.8–4.12, at pp. 41–42, 47–49.) For example, in this case the city is growing in the direction of the Carters' property; property all around the Carters' is being developed into subdivisions; and the City already has provided sewer and water service up to the property line. Accordingly, even though the property is not in the city limits and is zoned for agricultural use, the market value of the property is reasonably based on the evidence that the property can be annexed, rezoned and developed.
By contrast, compensation for temporary regulatory taking is based on the owner's actual losses and loss of use during the hiatus before the court declares the regulation amounts to a taking. (Jones v. People ex rel. Dept. of Transportation (1978) 22 Cal.3d 144, 154–155, 148 Cal.Rptr. 640, 583 P.2d 165, discussing City of Los Angeles v. Ricards (1973) 10 Cal.3d 385, 110 Cal.Rptr. 489, 515 P.2d 585.)
In the present case, Mr. Carter testified he had no plans to develop the land or sell it for development. He continued to use the property as he always had, renting out a small house on the property and leasing the rest for pasture. Accordingly, even though the negligent outlet pipes constituted (and possibly still constitute, if they have not been repaired) a temporary regulatory taking, the Carters have suffered no compensable injury as a result of that temporary taking. (See Tilem v. City of Los Angeles, supra, 142 Cal.App.3d at p. 704, 191 Cal.Rptr. 229.) 18
Under Agins v. City of Tiburon, supra, 24 Cal.3d at page 275, 157 Cal.Rptr. 372, 598 P.2d 25, the ball is now in the City's court. It must decide whether it will make the dam safe or not. If it will not do so, then the regulatory taking is permanent, and the City must pay just compensation, namely, the value of the property, adjusted in accordance with the parties' stipulation for transfer of a fee simple interest. If the City does undertake to repair the dam,19 then it will continue to be obligated to pay just compensation for injury to the Carters until repair is completed—for example, if the dam does fail and cattle drown.
On remand, the court may consider what reasonable time would be permitted for the remedial construction and may determine when failure to complete the remedial construction may be deemed a permanent regulatory taking.
C. The Safe Dam as a Regulatory Taking
As a final consideration, does the City's construction of a safe dam just across the Carters' property line constitute a compensable de facto regulatory taking? 20 If it does, then the trial court's award of damages in this case was essentially correct, even though based upon an incomplete evaluation of the factual issues.21
Resolution of this issue requires the same two-factor analysis as did the previous permanent-regulatory-taking issue, namely, whether the regulation advances a substantial public interest and whether it deprives the owner of all viable uses of the property. We may readily conclude that the dam, if made safe, would substantially advance an important governmental interest. The flooding that occurred in the absence of the dam does not appear to have been life threatening, but it was recurrent, caused loss to residents of the affected subdivision, and cost the City significant sums to repeatedly sandbag the area. Construction of the dam served to mitigate the flooding and advanced a substantial public interest.
Far less clear is whether a safe dam would preclude all economically viable uses of the property 22 . The evidence in the record now before us indicates that reasonable minds might differ about the propriety of allowing such development.
On the one hand, the city planner testified that the dam brought the previously existing surface waters under control. He said this made the property more suitable for development and said the City would permit residential development on the property. The City's appraisal expert said that the dam would not preclude development of the property. On the other hand, the Carters' appraisal expert testified that, even if the dam were safe, no financing or insurance would be available for the property, and development would be precluded as a practical matter.
Unfortunately, the parties and the court below did not fully develop the de facto regulatory-taking issues. In light of our rulings here, we suspect that the parties have more evidence to present on the issues involving development below a safe dam. Accordingly, we remand on this issue for a further evidentiary hearing and appropriate factfinding by the trial court.
The court will need to determine whether it is an abuse of discretion, in the reasonable exercise of the governing body's planning and zoning function, to permit some economically viable uses of all or part of the property. (Compare Cormier v. County of San Luis Obispo (1984) 161 Cal.App.3d 850, 858–859, 207 Cal.Rptr. 880.) 23 If so, the Carters are entitled to compensation for the portion rendered unusable.24 If reasonable regulations could still permit viable uses of all or part of the property, then no permanent de facto regulatory taking of the usable portion has been accomplished by construction of the dam, once it is made safe.
V. Williamson Act
The Carters' property is under a land conservation contract pursuant to the Williamson Act, Government Code section 51200 et seq. Owners canceling such a contract are required to pay a fee based on the value of the property. (Gov.Code, § 51283.) This cancellation fee may be waived by a city upon annexation of the property under certain circumstances, and the undisputed evidence at trial showed that the City had traditionally waived the fee. The ability to waive the fee was conditioned on a requirement that the City had protested the conservation contract at the time it was approved by the county.
Effective January 1, 1991, the ability of cities to waive the fee was terminated. (Legis. Counsel's Dig., Assem. Bill No. 2764 (1989–1990 Reg. Sess.), No. 10 West's Cal.Legis. Service, p. 3189.) However, the power to waive the fee was retained as to “any executed contract for which a valid protest was filed in accordance with applicable requirements prior to January 1, 1991.” (Ibid.) Further, the amendments “require a conclusive presumption that no protest was filed by the city unless there is a record of the filing of the protest and the protest identifies the affected contract and the subject parcel, ․” (Ibid.) 25
The City contends there was no specific protest filed by it as to the Carters' property, that the waiver is therefore unavailable, and the cancellation fee should be deducted from the valuation of the property. The trial court concluded a sufficient protest was filed, and we review that finding under the substantial evidence test.
There is no evidence in the record that indicates the City filed a specific protest as required by Government Code section 51243.5. The testimonial evidence was that cities habitually filed blanket protests for all areas within a mile of their borders, and plaintiff's exhibit No. 71 received in evidence contains only a blanket protest. Local Agency Formation Commission resolution No. 77–105, contained in exhibit 71, recites that a protest has been filed for the contract “affecting land owned by” the Carters. However, neither the resolution nor any other document in evidence purports to identify the contract or the parcel in any legally sufficient manner to satisfy the requirements of Government Code section 51243.5. Thus, if the trial court is called upon on remand to calculate the full value of the parcel, the court must consider the Williamson Act cancellation fee as a cost of development that may alter the value of the property.26
The judgment and orders incident thereto are reversed 27 and the matter is remanded for further proceedings in accordance with this opinion. The parties shall bear their own costs on this appeal.
1. The City took the upstream property by condemnation specifically to build this dam.
2. The parties stipulated that the court should determine the full fair market value of the property, and should award a fee simple interest to the City instead of merely determining the amount by which the property value had been reduced if it remained in the Carters' hands as agricultural property.
3. In the two appeals consolidated with F016777, namely, F017555 and F018190, the City contests the award of costs and attorneys fees to the Carters as prevailing parties below.
4. Article I, section 19 of the California Constitution provides:“Private property may be taken or damaged for public use only when just compensation ․ has first been paid․” “The protection of private property rights is [also] guaranteed by the Fifth Amendment to the United States Constitution: ‘No person shall be ․ deprived of ․ property, without due process of law; nor shall private property be taken for public use, without just compensation.’ The Fifth Amendment is made applicable to the states by the due process clause of the Fourteenth Amendment.” (Casella v. City of Morgan Hill (1991) 230 Cal.App.3d 43, 49, 280 Cal.Rptr. 876.)
5. By letter sent to the parties prior to oral argument, we suggested that the parties focus on whether a de facto regulatory taking has occurred here and, if so, whether such taking is compensable and permanent.
6. Hereafter, the word “taking” will be used to refer to any action of a governmental entity that has an effect on an owner's property rights. As respondents point out, the amendment of the California Constitution to include “damage” to property as well as traditional “takings” of property expanded the range of compensable events. However, in modern usage, “taking” no longer has the traditional connotation of actual physical taking, and the term subsumes both taking and damage. (See Tilem v. City of Los Angeles (1983) 142 Cal.App.3d 694, 701–702, 191 Cal.Rptr. 229.) “Compensable taking” is used to refer to an interference with property rights that requires compensation under the state or federal Constitution.
7. Because this case deals with a right to compensation based directly on the Constitution, the statutory design-immunity statute is inapplicable. (Baldwin v. State of California (1972) 6 Cal.3d 424, 438, 99 Cal.Rptr. 145, 491 P.2d 1121.) Accordingly, the City's attempt to assert Government Code section 830.6 in the trial court and on appeal is meritless.
8. The cases have made some rather fine distinctions in both pleadings requirements and substantive law between cases dealing with the flow of surface waters and those dealing with flood waters. (See Yue v. City of Auburn (1992) 3 Cal.App.4th 751, 760, 4 Cal.Rptr.2d 653.) In the present case, the water has some characteristics of both types of water, but classification was not undertaken by the trial court and is not necessary for our purposes. On the issue of whether there has been a complete, permanent taking of the Carters' property, the cause of the taking, if any, is the dam, not the water.
9. In both eminent domain and inverse condemnation cases the measure of damages is based upon fair market value. (City of Porterville v. Young (1987) 195 Cal.App.3d 1260, 1265, 241 Cal.Rptr. 349.) Since market value is based in part upon investors' judgments concerning the permissible uses to which the property may be put, such value must take account of the highest and best use of the property, regardless of its current use or zoning designation. (See City of Fresno v. Cloud (1972) 26 Cal.App.3d 113, 118, 102 Cal.Rptr. 874.) At the liability stage of inverse condemnation physical taking cases, however, the plaintiff must prove a present interference with his use of the property. Thus, in Smart v. City of Los Angeles, supra, 112 Cal.App.3d 232, 169 Cal.Rptr. 174, plaintiff owned vacant property in the overflight zone of the airport. Even though noise levels had been stabilized for more than five years (the applicable statute of limitations), the court held that plaintiff's cause of action arose only when the noise interfered with his ability to sell or develop the property.
10. Cases expanding governmental liability for diminution of property values near public improvements require some form of physical invasion, even if the invasion is only of gases and noise. (See Varjabedian v. City of Madera (1977) 20 Cal.3d 285, 142 Cal.Rptr. 429, 572 P.2d 43; Harding v. State of California ex rel. Dept. of Transportation (1984) 159 Cal.App.3d 359, 364–365, 205 Cal.Rptr. 561.) The law continues to be that mere proximity to a public improvement does not give rise to a right to compensation for reduction of property values. (See Varjabedian v. City of Madera, supra, at pp. 297–299 and fn. 13, 142 Cal.Rptr. 429, 572 P.2d 43.)
11. The Carters' property has not been formally annexed into the city, but areas around it have been annexed as a part of the development process. If annexation were impossible, that does not change the legal analysis of the City's actions in building the dam; it may, however, mean that condemnation, rather than regulation by zoning, would have been the necessary course of action if the City had recognized the impact of the dam on the Carters' property.
12. There is a body of analogous law, requiring compensation where governmental authorization of a nuisance operated by a private party results in substantial deprivation of use of neighboring property. “What would be a nuisance, unless authorized by the legislature, may, if the general welfare is thereby enhanced, be required or permitted, and for the commission of the act thereafter no liability to the injured land owner arises. But if the nuisance so authorized creates such severe injury to neighboring land as to render it useless and so constitute a taking, the constitution protects the injured parties and the nuisance may be abated unless compensation is provided. In other words, ‘The legislature may authorize small nuisances without compensation, but not great ones.’ ” (2 Nichols on Eminent Domain (1978 rev. 3d ed.) § 6.12, at pp. 6–82, 6–83, fns. omitted.)
13. We deal here with the properly functioning dam. The negligent construction of the dam and the consequences thereof are discussed below at IV B. The trial court found on substantial evidence that waterflow from the outlet pipes, if they functioned properly, would be in the same quantity and location as before the dam was built.
14. In Holtz v. Superior Court (1970) 3 Cal.3d 296, 310, 90 Cal.Rptr. 345, 475 P.2d 441, the Supreme Court held that if a risk of future damage is so sufficiently remote that accepting the risk is not negligent, the public entity may decide to take the risk and pay compensation if the injury occurs.However, where future injury is foreseeable and severe, case law does not bar present liability and compensation based upon the future injury. Thus in cases like Varjabedian v. City of Madera, supra, 20 Cal.3d 285, 142 Cal.Rptr. 429, 572 P.2d 43, where the offending intrusion is reasonably likely to continue into the future, the owners did not simply sue for the past invasions by the stench of the sewer plant, and past loss was not the basis for the award of the full value of the property as damages. (See also Nollan v. California Coastal Comm'n (1987) 483 U.S. 825, 832, 107 S.Ct. 3141, 3146, 97 L.Ed.2d 677 [“We think a ‘permanent physical occupation’ has occurred, for [compensation] purposes ․, where individuals are given a permanent and continuous right to pass to and fro, so that the real property may continuously be traversed, even though no particular individual is permitted to station himself permanently upon the premises.” (Fn. omitted.) ].)The City has suggested no reason why ordinary rules concerning certainty of damages should not apply in this situation. The damage claimed by the Carters is not so speculative or uncertain as to defy quantification. (See generally 6 Witkin, Summary of Cal. Law (9th ed. 1988) Torts § 1326 at pp. 783–784 and § 1472 at pp. 941–943.) Although one cannot predict the particular time when water will flow over the spillway, when such water does flow, it is reasonably possible to know where it will go and what it will do. Ordinary principles of mitigation would seem to require the Carters to forego development in the area of such overflow or to prepare in other ways for the potentiality of the overflow when the property is developed. (See id. at § 1382, pp. 852–853.)
15. The City contends in its reply brief that no spillway drainage easement is being taken because the spillway will only be used in a “1100–year storm” that would wash away everything else in the county. Even if frequency of the intrusion were an issue in determining liability (but see fn. 14, above), City's contention is based on a faulty statement of the facts as well: the spillway could also come into use during a prolonged period of heavy, but not millennial, rainfall.
16. Because this issue involves negligent design and construction and the potential for damages from a failure of the dam while operating within its design capacity, the requirement of unreasonable government activity established in Belair v. Riverside County Flood Control Dist., supra, 47 Cal.3d 550, 253 Cal.Rptr. 693, 764 P.2d 1070, is inapplicable. (Id. at p. 558, 253 Cal.Rptr. 693, 764 P.2d 1070.) The point of the Belair opinion is that the government is not to be held strictly liable for the failure of flood control projects; there must be at least unreasonable conduct, but that conduct can be something short of traditional negligence. (Id. at pp. 562–563, 253 Cal.Rptr. 693, 764 P.2d 1070.) Appellant misses this point in contending that Belair establishes unreasonableness as an element of governmental liability in addition to, rather than instead of, negligence. (See id. at p. 565, 253 Cal.Rptr. 693, 764 P.2d 1070.)
17. Total rental for the small farmhouse on the property and the land as cattle pasture was $3,800 per year. The record does not disclose whether the Carters continued to permit occupancy of the house after the dam was found unsafe.
18. If such damages had been incurred, the Carters would be entitled to prejudgment interest on the temporary taking damages, beginning on the date of the taking. (Holtz v. San Francisco Bay Area Rapid Transit Dist. (1976) 17 Cal.3d 648, 657, 131 Cal.Rptr. 646, 552 P.2d 430.) Similarly, if the taking becomes permanent, interest accrues from the date of the taking. (See People ex rel. Dept. of Transportation v. Gardella Square (1988) 200 Cal.App.3d 559, 573–574, 246 Cal.Rptr. 139.) Because of our reversal of the judgment and remand for further proceedings, the Carters' cross-appeal concerning prejudgment interest is moot.
19. During repair of the dam, the City can determine the extent of any encroachment by the outlet pipes. The City can then remove the encroachment or condemn sufficient land to obviate the encroachment.
20. The trial court specifically declined to rule on the issue of diminution in value of the property were the dam safe.
21. See section V, below, concerning an additional adjustment to the purchase price calculated by the trial court.
22. The trial court's finding that before construction of the dam the property was suitable for development as single-family homes is not contested on this appeal.
23. Thus, on the one hand, the issue is not whether it would be reasonable to prohibit all development on the property, but whether it would be unreasonable to permit it. On the other hand, the issue at the liability stage is not whether the dam prevents rational development of the property for its highest and best use, but instead whether the dam de facto prevents all economically viable use of the property. Thus the parties' evidence on remand might also address the propriety and desirability of commercial or other development of the property, not just single-family residential development.
24. The City argues the trial court compensated the Carters for portions of the property that would have to be dedicated to the City in any event if the property were developed as a residential subdivision. The trial court indicated that it had considered the requirement for streets and such in determining the gross value of the property. The City has not shown the court abused its discretion in doing so.
25. As amended, Government Code section 51243.5 provides: “For property which was within one mile of a city boundary when a contract was executed pursuant to this article and for which the contract was executed prior to January 1, 1991, it shall be conclusively presumed that no protest was filed by the city unless there is a record of the filing of the protest and the protest identifies the affected contract and the subject parcel. It shall be conclusively presumed that required notice was given before the execution of the contract.”
26. The Carters do not rely upon Government Code section 51295, which provides in part: “When any action in eminent domain for the condemnation of the fee title of an entire parcel of land subject to a [conservation] contract or when that land is acquired in lieu of eminent domain ․ the contract shall be deemed null and void ․ and for the purposes of establishing the value of the land, the contract shall be deemed never to have existed.”
27. Because the underlying judgment is reversed, the orders for fees and costs are reversed as well.
VARTABEDIAN, Associate Justice.
MARTIN, Acting P.J., and MOFFAT, J.*, concur.