LOS ANGELES COUNTY METROPOLITAN TRANSPORTATION AUTHORITY, Plaintiff, Appellant and Cross–Respondent, v. CONTINENTAL DEVELOPMENT CORPORATION, Defendant, Respondent and Cross–Appellant.
This is an action in eminent domain. Plaintiff, appellant and cross-respondent, the Los Angeles County Metropolitan Transportation Authority (MTA) brought suit to condemn a narrow strip of land along one side of a parcel of land owned by defendant, respondent and cross-appellant Continental Development Corporation (Continental). The MTA took the land and related air and construction easements to construct a portion of the Norwalk–El Segundo Rail Transit Project, an elevated light rail line commonly known as the “Green Line.”
The MTA's primary attack on the judgment is its claim the trial court erred in finding Continental's property had not been “specially benefited” by being within walking distance of a Green Line station, thereby denying it an offset against Continental's severance damages. In addition, the MTA claims the amount awarded for visual impairment caused by the proximity of the Green Line to Continental's building is not supported by the evidence.
Continental cross-appeals from the judgment claiming it was entitled to its litigation costs as the MTA's final offer of $200,000 was unreasonable in light of the evidence presented at trial and the jury's award of $1,122,149 in damages.
We conclude the trial court correctly ruled that being within walking distance to a Green Line station was not a benefit peculiar to Continental's property and therefore the MTA was not entitled to an offset against severance damages. However, we find the trial court abused its discretion in denying Continental its litigation costs. Therefore we reverse the trial court's order and remand the matter for a finding of Continental's litigation costs.
FACTS AND PROCEEDINGS BELOW
The property owned by Continental was originally 14 acres in size. This parcel was then divided into three lots. One of these lots is the subject of the eminent domain proceeding in this case. This lot is approximately 4.43 acres in size and triangular in shape. The lot is located on Rosecrans Avenue near Aviation Boulevard in the city of El Segundo. The property extends for approximately 655 feet along Rosecrans Avenue on the south and for approximately 785 feet along a railroad right of way on the northeast side. The third side of the triangle connects these two legs and borders on other properties in an 86 acre corporate development known as Continental Park.
On September 4, 1990, the Los Angeles County Transportation Commission, as predecessor of the MTA, brought an eminent domain action to acquire a strip of Continental's property in order to construct the Green Line. The Green Line is similar to the Long Beach–Los Angeles Blue Line except the Blue Line light rail line runs at ground level over most of its length and the Green Line is designed to run on an elevated concrete guideway supported by columns. In its suit the MTA sought to acquire three different interests in the Continental property. The interests consisted of (1) an area in fee of 373 square feet; (2) a permanent air rights easement of 197,745 cubic feet for the elevated concrete structure supporting the rails over which the Green Line cars run; and (3) a temporary construction easement of 3,868 square feet covering approximately the same land area as the permanent air rights easement. The easements extend about five feet into, and along the entire 785 feet of, the northeasterly side of Continental's property.
At the time the MTA filed suit the property was still unimproved although Continental had plans to build a commercial office building. By the time of trial Continental had built a four-story class A office building on the site. However, Continental incurred $23,123 in additional expenses to have its building plans redrawn to resite its building farther from the elevated line. The building had to be moved over to provide space for a fire line the required distance away from the Green Line right of way. The northeast side of Continental's building is approximately 30 feet away from the Green Line rails.
A Green Line station is approximately 1,613 feet away, and apparently within walking distance of the Continental property. The MTA claimed this proximity to a Green Line station was a “special benefit” worth millions of dollars which should be offset against Continental's claimed severance damages. After extensive briefing and argument the trial court ruled the nearby Green Line station was not a “special benefit” peculiar to Continental's property within the meaning of eminent domain law. Thus, the trial court precluded the MTA from presenting evidence at trial how or to what extent the project had a beneficial economic effect on Continental's remaining property.
Continental claimed severance damages for (1) the cost of having to revise its building plans ($23,123); (2) costs already incurred in an attempt to sound proof the building on the side abutting the Green Line, as well as future costs to redesign, manufacture and install double pane windows to reduce actual noise levels ($416,604); and (3) lost rents on the Green Line side of the building due to view and light impairment caused by its proximity to the rail lines ($1,038,300). Including the value of the fee and easements taken ($141,666), Continental claimed total damages of $1,619,693.
The MTA valued the fee and easements taken at $76,500. The parties' primary dispute, however, centered on the existence and amount of Continental's claimed severance damages. The MTA presented studies of other cities which indicated properties situated near light rail lines suffered no negative impact on either rent or vacancy rates.1 In addition, the MTA's acoustical expert found the initial efforts at soundproofing were more than adequate to abate the noise produced by the passing trains. Based on these studies and the findings of its expert witnesses, the MTA concluded the project had no negative impact on the remaining portion of Continental's land and valued severance damages at zero.
Continental's initial final demand was $400,000. After the trial court ruled its proximity to a metro line station was not a “special benefit,” Continental raised its final demand to $500,000. The MTA kept its final offer unchanged at $200,000.
At trial the MTA conceded Continental was entitled to whatever costs it had incurred to cure specific problems. Specifically, the MTA conceded the $23,123 it cost Continental to prepare new building plans, and the $82,500 to $125,000 it spent to sound proof the side of the building closest to the rail lines. In addition, at trial the MTA's expert appraiser admitted making a mathematical error in calculating the present value of the temporary construction easement, and adjusted its value upward from $9,500 to $32,500.
The jury found: (1) the value of the land taken in fee was $11,936; (2) the value of the air easement and temporary construction easement taken was $94,420; and (3) the remainder of Continental's property suffered severance damages of $1,015,793, for a total damage award of $1,122,149.
The MTA appeals from the judgment. Continental cross-appeals from the judgment to challenge the trial court's denial of its litigation costs.
I. THE TRIAL COURT DID NOT ERR IN FINDING PROXIMITY TO THE GREEN LINE STATION WAS NOT A SPECIAL BENEFIT IN THIS CASE.
“The constitution demands the condemnee receive just compensation for the taking of his property. (Cal. Const., art. 1, § 19.) The term ‘just compensation’ includes the fair market value of the property taken ( [Code Civ.Proc.,] § 1263.310) and the injury if any to the remainder of the condemnee's property. ( [Code Civ.Proc.,] § 1263.410, subd. (a).) To determine just compensation there must be a determination of the highest and best use to which the property being condemned can be put. Thus the fair market value is fixed at its most advantageous and potentially profitable use. (Redevelopment Agency v. Contra Costa Theatre, Inc. (1982) 135 Cal.App.3d 73, 83, 185 Cal.Rptr. 159.) Compensation for any injury to the remainder is determined by assessing the damage caused by (1) the severance of the remainder of the property taken and (2) the construction and use of the project for which the property taken was condemned. (Code Civ.Proc., § 1263.420.) These collectively are severance damages.
“In determining severance damage, the jury must assume ‘the most serious damage’ which will be caused to the remainder by the taking of the easement and construction of the property. (L.A. County Flood Control Dist. v. Jan (1957) 154 Cal.App.2d 389, 393 [316 P.2d 25] disapproved on another point in People v. Chevalier (1959) 52 Cal.2d 299, 305–307 [340 P.2d 598].) The value of the remainder after the condemnation has occurred is referred to as the ‘after’ value of the property. The diminution in fair market value is determined by comparing the before and after values. This is the amount of the severance damage. (County of Santa Clara v. Curtner (1966) 245 Cal.App.2d 730, 743 [54 Cal.Rptr. 257].)” (San Diego Gas & Electric Company v. Daley (1988) 205 Cal.App.3d 1334, 1344–1345 [253 Cal.Rptr. 144].)
In the event the remaining land receives a special benefit as a direct result of the public project, Code of Civil Procedure section 1263.410, subdivision (b) authorizes the value of such special benefit to be offset against any severance damages suffered by the taking.2
The principal issue in this appeal is whether being within walking distance of a urban rail transit station is a “special benefit” in this case.
To constitute a special benefit, and thus be an offset against severance damages, the enhancement in value as a result of the public project must be “special,” or peculiar to the condemnee's remaining property. (Beveridge v. Lewis (1902) 137 Cal. 619, 70 P. 1083.) A special benefit can arise from the peculiar relation of the land in question to the public project together with the effect the project has, or probably will have, on the condemnee's remaining property. (See 1 Matteoni & Veit, Condemnation Practice in California (2d ed.) § 5.31, p. 221.) On the other hand, if all properties in the vicinity of the project receive the same or similar benefit as does the condemnee's land, the benefit is a general benefit and its value cannot be used by the condemnor as an offset against severance damages. (Pierpont Inn, Inc. v. State (1969) 70 Cal.2d 282, 296, 74 Cal.Rptr. 521, 449 P.2d 737.)
One of the first decisions in California to explain these principles was the Supreme Court decision in Beveridge v. Lewis, supra, 137 Cal. 619, 70 P. 1083 involving the taking of land for a railroad right-of-way. There, the court explained in eminent domain actions, “[b]enefits are said to be of two kinds, general and special. General benefits consist in an increase in the value of land common to the community generally, from advantages which will accrue to the community from the improvement. [Citation.] They are conjectural, and incapable of estimation. They may never be realized, and in such case the property owner has not been compensated, save by the sanguine promise of the promoter. Special benefits are such as result from the mere construction of the improvement, and are peculiar to the land in question. The trend of decision is very decidedly to the conclusion that general benefits shall not be allowed as a set-off to damages, even when no statute prescribes a contrary rule. ․ [T]he reason[s] usually given for the disallowance of credit for such [general] benefits by the courts ․ are as follows: The chance that land will increase in value as population increases and new facilities for transportation and new markets are created is an element of value quite generally taken into consideration in the purchase of land in estimating its present market value. This chance for gain is the property of the landowner. If a part of his property is taken for the construction of the railway, he stands, in reference to the other property not taken, like similar property owners in the neighborhood. His neighbors are not required to surrender this prospective enhancement of value in order to secure the increased facilities which the railroad will afford. If he is compelled to contribute all that he could possibly gain by the improvement, while others in all respects similarly affected by it are not required to do so, he does not receive the equal protection of the law. The work is not being done for his benefit, but for the pecuniary advantage of those who are constructing it. The law will not imply a promise on his part to pay anything toward it. His property will be similarly benefited by many of the improvements in the vicinity,․ This expected enhancement of value through the general improvement of the country is a legitimate motive for investing in property or for building a railroad. The improvements made by each one adds to the value of all the property in the vicinity. The right to share in the general prosperity cannot be taken from any one for the advantage of others. ․ Special benefits, ․ are such as are peculiar to the property which it is alleged has been damaged, such as are reasonably certain to result from the construction of the work. Illustrations are afforded where a marsh will be drained, or levee built which will protect the land from floods. It is generally thought that different considerations must be applied to such benefits. They are not involved here. Often special benefits, which afford protection to the land, or will at once render it more productive, are taken into consideration in determining how much land not taken will be damaged․” (Beveridge v. Lewis, supra, 137 Cal. at pp. 623–626, 70 P. 1083, italics added.) The Supreme Court found the trial court erred in allowing as an offset the value of the benefit from construction of the railroad against damages to the defendant's remaining property and reversed for new trial. (137 Cal. at p. 626, 70 P. 1083.)
The Supreme Court revisited the issue of the distinction between general and special benefits in eminent domain actions 67 years later in Pierpont Inn, Inc. v. State, supra, 70 Cal.2d 282, 74 Cal.Rptr. 521, 449 P.2d 737. In Pierpont Inn, the property owner brought an action in inverse condemnation for the portion of his land the state took to construct a freeway. He owned a 7.37–acre parcel in Ventura which overlooked the Pacific Ocean. The land was improved with a hotel and several guest cottages. The property was divided by San Jon Road which ran north-south over the property to the public beach below. An embankment for the freeway was constructed immediately in front of the Pierpont Inn. The nearest off-ramp was not constructed on his property but was located somewhere in the vicinity.
The State appealed from an adverse judgment. Among other things, the State claimed the trial court erred in permitting the jury to consider the property's loss of view and relatively unrestricted access to the beach in determining severance damages. The Supreme Court rejected this claim. “Where the property taken constitutes only a part of a larger parcel, the owner is entitled to recover, inter alia, the difference in the fair market value of his property in its ‘before’ condition and the fair market value of the remaining portion thereof after the construction of the improvement on the portion taken. Items such as view, access to beach property, freedom from noise, etc. are unquestionably matters which a willing buyer in the open market would consider in determining the price he would pay for any given piece of real property․” (70 Cal.2d at p. 295, 74 Cal.Rptr. 521, 449 P.2d 737.)
The State also claimed the trial court erred in ruling the remaining property received no special benefits despite a witness's testimony the remaining property increased in value $33,481 from construction of the freeway and the placement of an off-ramp in the vicinity. The Supreme Court, relying on the above cited portion of Beveridge v. Lewis, supra, 137 Cal. 619, 70 P. 1083, rejected this claim as well. “Contrary to appellant's assertions, it is clear that the court did not base its holding upon the fact that the off-ramp itself was not located upon respondent's property. Rather, it was founded upon the proper recognition that this witness did not understand the technical meaning of ‘special benefits' because he acknowledged that the same benefit which accrued to respondent's property was received by ‘all the properties in the vicinity’ and that it was not ‘special or peculiar only to Pierpont Inn.’ It has long been the rule in California that severance damages are not to be diminished by general benefits resulting from a given public improvement.” (70 Cal.2d at pp. 295–296, 74 Cal.Rptr. 521, 449 P.2d 737, italics in original; see also Dunbar v. Humboldt Bay Municipal Water Dist. (1967) 254 Cal.App.2d 480, 62 Cal.Rptr. 358 [increased protection from floods and improved swimming and fishing created by new dam upstream was general benefit shared with all landowners within 100 miles downstream].)
Similarly in the case at bar, the MTA acknowledged Continental shared the benefit of being within walking distance to the Green Line station with as many as hundreds of other properties in the vicinity.3 Other properties which have not been condemned are at least as close to the Green Line station as is Continental's property, and many are in fact closer. In other words, the advantage from the improvement of being “within walking distance” to a Green Line station is by no means peculiar to Continental's property. The station is not directly adjacent to Continental's property. Nor does the property directly abut an entrance to the station. Instead, like hundreds of other properties in the area, Continental's property is located less than 1,700 feet away from the station. Because Continental shares this benefit with numerous properties, and in fact enjoys it to a lesser extent than many others, the benefit of access from being in relatively close proximity to a Green Line station cannot be considered a “special benefit” peculiar to Continental's property for purposes of an offset against severance damages.
In an attempt to avoid this conclusion the MTA refers this court to numerous decisions finding a special benefit from a public improvement. However, a close reading of these decisions reveals each is factually distinguishable from the case at bar. It is true a benefit need not be unique to the condemnee's land in the sense the condemnee's is the only property to derive any benefit from the improvement. (See, e.g., People ex rel. Dept. of Public Works v. Giumarra Farms, Inc. (1971) 22 Cal.App.3d 98, 104, 99 Cal.Rptr. 272.) However, in each case where a special benefit was found, the property either directly abutted the improvement, or was traversed by the project, and this immediate proximity directly impacted the remaining property through new or improved access specific to the remaining property, or better visibility and prominence creating a new potential for commercial development.
For example, in Los Angeles County v. Marblehead Land Co. (1928) 95 Cal.App. 602, 273 P. 131 the defendants owned Malibu Ranch. The County of Los Angeles sought to condemn a right of way for a portion of a state highway running between Oxnard in Ventura County and San Juan Capistrano in Orange County. The right of way started at the ranch's eastern boundary and continued through the ranch property to where it ended at the Ventura County line. A finding of special benefits from the highway project was upheld on evidence the remaining property would have access to transportation where none existed before, and on evidence of enhanced value from newly created frontage along the highway providing visibility and increased commercial potential. (95 Cal.App. at pp. 614–615, 273 P. 131.)
In City of Hayward v. Unger (1961) 194 Cal.App.2d 516, 15 Cal.Rptr. 301 the city condemned land to widen a single block of a commercial street. The appellate court upheld a finding of special benefits to the owner of a retail business on the street from the increased flow of traffic past his store. (194 Cal.App.2d at p. 518, 15 Cal.Rptr. 301.)
In People ex rel. Dept. of Public Works v. Hurd (1962) 205 Cal.App.2d 16, 23 Cal.Rptr. 67, defendants owned a 993 acre parcel of land in the Santa Monica mountains. The property extended to Mulholland Drive on the north to nearly Sunset Boulevard on the south and was bisected by Sepulveda Boulevard. Part of the defendants' property was taken to construct a portion of the San Diego Freeway and to relocate Mulholland Drive and Sepulveda Boulevard. A finding two remaining parcels were uniquely benefited from the public improvement was upheld on appeal. As to one parcel the court found special benefits from the reasonable probability of rezoning from single family dwellings to multi-unit apartment houses, leveling of the area and 2,100 feet of frontage on the newly created Mulholland Drive. (205 Cal.App.2d at pp. 20–21, 23 Cal.Rptr. 67.) The other parcel derived special benefits from the probability of rezoning, the land being leveled, filled and compacted, and the creation of frontage along the new Sepulveda Boulevard, as well as freeway access from Sepulveda Boulevard. (205 Cal.App.2d at p. 21, 23 Cal.Rptr. 67.)
In People ex rel. Dept. of Public Works v. Edgar (1963) 219 Cal.App.2d 381, 32 Cal.Rptr. 892, the defendants owned a 19.78–acre parcel in Kern County which fronted on a major highway. In constructing a new highway the state condemned a portion of their land to build a frontage road diagonally through their property. In its “after” condition the remaining land was divided on either side of a new highway which intersected the major highway. The improvement provided each remaining parcel with over 1,200 feet of direct access on the new frontage road and an entrance from the frontage road to the major highway. In addition, both remaining parcels became corner properties suited for service stations and related commercial businesses. (219 Cal.App.2d at pp. 383–384, 32 Cal.Rptr. 892.) The appellate court found these benefits were peculiar to the defendants' property and upheld the lower court's finding the value of the special benefits exceeded the value of the defendants' severance damages. (219 Cal.App.2d at p. 386, 32 Cal.Rptr. 892.)
In People ex rel. Dept. of Public Works v. Home Trust Investment Co. (1970) 8 Cal.App.3d 1022, 87 Cal.Rptr. 722, the defendants owned two large tracts of land in Long Beach which had been subdivided in preparation for building a luxury class residential community. A portion of the defendants' land bordering Seventh Street was condemned to build a freeway. The lower court found the remaining property specially benefited from improved access to the planned residential community. “The basis of the improved access was that the volume of traffic on Seventh Street would be reduced and the hazards of driving would be lessened by the freeway which in turn would lead a reasonable buyer to pay more for lots in the subdivision.” (8 Cal.App.3d at p. 1028, 87 Cal.Rptr. 722.)
Finally, in People ex rel. Dept. of Public Works v. Giumarra Farms, Inc., supra, 22 Cal.App.3d 98, 99 Cal.Rptr. 272, the defendant owned 145.362 acres of farm land in Kern County. A new complex of freeway on-ramps and off-ramps divided the property into two new quadrants. Although the improvement did not provide new access to the remaining property, a finding of special benefits was upheld based on a reasonable probability of rezoning of the remainder to a higher use. Portions of the property became suited to “service, rest and food facilities.” (22 Cal.App.3d at p. 105, 99 Cal.Rptr. 272.) The defendant's property was one of the few areas where travelers could enter and depart the freeway due to the complex of ramps. The court found the defendant's property would become a magnet to traffic passing the area, and traffic related commercial activity, with measurable financial value and profit to defendants. (Ibid.) 4
In each of these cases the court found a special benefit because it was able to articulate a specific benefit flowing directly to the remaining property from the public improvement due to the peculiar location or configuration of the land in conjunction with the improvement. In each case the benefit allowed the land to be put to a higher use, or enhanced its existing commercial potential from its shared border with the public improvement in question. In this case by contrast, the benefit Continental will enjoy from being within walking distance to a Green Line station is not peculiar to Continental's remaining property but is a benefit jointly shared by all the properties located within the general area.5
The MTA cites the decision in Orpheum Building Co. v. San Francisco Bay Area Rapid Transit District (1978) 80 Cal.App.3d 863, 146 Cal.Rptr. 5 for the proposition proximity to a metro rail line station is a special benefit. In that case the operator of a theater located on Market Street sought damages in inverse condemnation for impaired access during the one-year period of constructing the BART Civic Center station. The jury awarded no damages for the temporarily impaired access. In analyzing the propriety of awarding costs the appellate court simply stated the benefits from the project offset any damages suffered. (80 Cal.App.3d at p. 877, 146 Cal.Rptr. 5.) However, the decision does not discuss the precise location of the new station. Nor does it analyze how or why the plaintiff benefited from the improvement. Thus, the decision does not appear to support the proposition a metro line station 1,700 feet away constitutes a special benefit in an eminent domain action.
In sum, we conclude the trial court properly found that being within walking distance to the Green Line station was a special benefit which accrued to Continental's remaining property.6
II. SUBSTANTIAL EVIDENCE SUPPORTS THE DAMAGE AWARD FOR VISUAL DAMAGES.
The MTA claims the damage award for visual impact on the remaining property from the metro rail line is not supported by substantial evidence. Because urban rail lines are a relatively recent phenomena in the Los Angeles area there was no evidence available on the effect of elevated rail lines on rents in nearby office buildings in Los Angeles County. Instead the MTA presented testimony from several experts to the effect properties in other cities across the nation had suffered no demonstrable reduction in rents or vacancy rates from their proximity to metro rail lines. Because Continental's appraiser did not consider the studies, or the experience of properties located in other cites near metro rail lines, the MTA claims his testimony and evidence is inadequate to support any finding Continental's remaining property suffered damages from impaired light and views.7
This may be a valid basis on which to challenge the basis for an expert's opinion on cross-examination. (See, e.g., Evid.Code, §§ 801, 814, 823.) But to say an expert's testimony may be subject to impeachment is not the equivalent of a finding such testimony constitutes insufficient evidence to support a jury's verdict. In this case Continental's expert's testified to comparable rental values for office space where outside views and light were not significant, i.e., rental rates for offices used for research and development. Comparable rental rates is a type of evidence reasonably relied on by experts in forming an opinion on the value of property. (Evid.Code, § 814.) Accordingly, the testimony of Continental's appraiser constituted substantial evidence of the value of the visual impairment suffered by Continental's building to support the jury's award.
Joseph Hennessey, Continental's appraiser, determined the value of the property in its before condition by analyzing the land and building cost, by analyzing comparable market values of similar properties improved with class A office buildings, as well as by analyzing incomes derived from these types of buildings in the El Segundo area. In its before condition, Hennessey appraised the value of the property at approximately $30 million.
To arrive at an opinion of the property in its after condition, Hennessey visited the property, took pictures of, and analyzed the views from each of the floors. The east side of the building is within 30 feet of the Green Line and its concrete embankment. From the ground floor one sees the concrete embankment 30 feet away. The presence of the embankment prevents much light from entering the first floor. From the second and third floors one sees the Green Line cars and rails. The Green Line is designed to have trains run at a rate of one per minute during peak hours, and one every three minutes during off-peak hours. The passing cars will give the effect of daylight flickering on and off every minute to three minutes. In the before condition the view from the fourth floor included the nearby Santa Fe rail lines, as well as power lines 100 feet or so away from the building. However, in the before condition there was also a view of downtown framed by mountains, and the benefit of northerly light. After construction of the Green Line, from the fourth floor one saw the electric catenary lines suspended over the metro line guiderail. Apparently, the electricity in these lines tends to spark on occasion. Pictures of these respective views were introduced into evidence.
Hennessey opined those portions of the building affected by blocked views and impaired lighting, as well as the distraction caused by the flickering lights from the passing trains, could no longer command premium rents as offices or executive suites. It was Hennessey's opinion these sections of the property would be more suited to tenants to whom views were not important, specifically tenants involved in research and development. Hennessey then made a study of comparable rents in the immediate vicinity of facilities used for research and development. He learned office space for research and development rented for between $.75 to $1 per square foot. He opined rental values for unaffected portions of Continental's building would have a net effective rate of approximately $1.60 per square foot. However, due to its superior amenities, Hennessey believed Continental could still rent the affected portions to tenants interested in research and development from $1.20 to $1.40 per square foot rent, or for 10 to 25 percent less than for prime office space in the El Segundo area.
Based on mathematical calculations and an analysis of the square footage of Continental's building actually affected by the light and view impairment, Hennessey concluded the reduction in rent from those floors would cause a buyer of the building to pay $1,038,000 less for the remainder in its after condition.
Hennessey's testimony constitutes reasonable, credible and substantial evidence from which a rational juror could have found construction of the Green Line had enough of a negative visual impact on Continental's property to justify the award of damages in this case.8 (People v. Ricciardi (1943) 23 Cal.2d 390, 404, 144 P.2d 799.) 9
III. IT WAS AN ABUSE OF DISCRETION TO DENY CONTINENTAL ITS LITIGATION COSTS.
Continental cross-appeals from the judgment. It contends the trial court abused its discretion in denying its request for litigation expenses under Code of Civil Procedure section 1250.410. Subdivision (b) of this section provides: “If the court, on motion of the defendant made within 30 days after entry of judgment, 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 proceeding, the costs allowed pursuant to Section 1268.710 shall include the defendant's litigation expenses․”
The trial court's determination of reasonableness is a question of fact which will not be disturbed on appeal if supported by substantial evidence. (Redevelopment Agency of the City of Burbank v. Gilmore (1985) 38 Cal.3d 790, 808, 214 Cal.Rptr. 904, 700 P.2d 794.) “General guidelines have been developed to aid trial courts in determining the reasonableness or unreasonableness of the offer. (See Community Redevelopment Agency of the City of Santa Ana v. Krause (1984) 162 Cal.App.3d 860, 866, [209 Cal.Rptr. 1].) They are (1) the difference between the offer and the compensation awarded, (2) the percentage of difference between the offer and award, and (3) the good faith, care and accuracy in how the amount of offer and amount of demand respectively were determined. (See State of California ex rel. State Pub. Works Bd. v. Turner (1979) 90 Cal.App.3d 33, 37 [153 Cal.Rptr. 156].)” (San Diego Gas & Electric Company v. Daley, supra, 205 Cal.App.3d 1334, 1352, 253 Cal.Rptr. 144.) This assessment is based on “all the evidence admitted, and not just the numerical amounts of the offer, demand and award.” (County of San Diego v. Woodward (1986) 186 Cal.App.3d 82, 90, 230 Cal.Rptr. 406.) “While the question of reasonableness is typically one of fact, as with any finding by a trial court, ‘if the uncontradicted evidence permits only one conclusion, the issue is legal, not factual [citation].’ (Lake County Sanitation Dist. v. Schultz (1978) 85 Cal.App.3d 658, 667 [149 Cal.Rptr. 717].)” (County of Contra Costa v. Pinole Point Properties, Inc. (1994) 27 Cal.App.4th 1105, 1115, 33 Cal.Rptr.2d 38.)
According to the MTA's experts Continental suffered no severance damages and the value of the land and easements taken was $76,500. According to Continental's experts, it suffered severance damages of $1,478,027 and the value of the land and easements taken was $141,666, for total damages of $1,619,693.
The MTA's final offer was $200,000. Continental made a demand for $400,000 which increased to $500,000 after the court resolved the special benefits issue adversely to the MTA.
At trial the MTA conceded Continental suffered severance damages of up to $149,000 in costs to install special glazing to sound proof the windows and to prepare new building plans. At trial the MTA also revised its valuation of the taking upward to $99,532 to account for its expert's computation error. Thus the MTA's evidence at trial consisted of damages of up to $249,500, or considerably more than its offer. Continental's evidence at trial of damages remained unchanged at $1,619,693. The jury awarded $1,122,149 in total damages.
The trial court denied Continental its litigation costs. It reasoned the MTA's offer of $200,000 was not unreasonable because the amount exceeded its own expert's determination of just compensation, indicating the MTA may have considered Continental's evidence of severance damages; Continental's final demand of $500,000 must have ignored its own experts' determinations; the MTA's concessions at trial Continental in fact suffered some severance damages did not warrant a finding of unreasonableness; the expert testimony on noise abatement was equally plausible and highly technical; and Continental's expert testimony regarding visual impact was “not particularly impressive” because the expert failed to consider data from other markets. Based on these various factors the trial court was unable to conclude the MTA's offer was unreasonable.10
In this case the MTA's offer amounted to less than a sixth, or less than 18 percent, of Continental's damages as determined by the jury. In absolute terms the MTA's offer was substantially lower as well—$922,149 lower than the award. Offers closer to the ultimate jury verdict than this—as a ratio or in absolute terms—have been held unreasonable as a matter of law. (See San Diego Gas & Electric Company v. Daley, supra, 205 Cal.App.3d 1334, 1352, 253 Cal.Rptr. 144.)
Indeed, we are not aware of any decision in which the disparity has been so large and the offer still held to be reasonable. Recently it was observed final offers 60 percent or less of the jury's verdict are found to be unreasonable while offers which are above 85 percent have been considered reasonable per se. (See, e.g., People ex rel. Dept. of Transportation v. Yuki (1995) 31 Cal.App.4th 1754, 1764, 37 Cal.Rptr.2d 616 [77.28 percent, or $1,469,840 less than jury award, unreasonable]; see also, County of Contra Costa v. Pinole Point Properties, Inc., supra, 27 Cal.App.4th 1105, 33 Cal.Rptr.2d 38 [20 percent, or $800,000 more than award, unreasonable demand]; Glendale Redevelopment Agency v. Parks (1993) 18 Cal.App.4th 1409, 1417–1418, 23 Cal.Rptr.2d 14 [89 percent, or within $200,000 of jury award, reasonable]; San Diego Gas & Electric Co. v. Daley, supra, 205 Cal.App.3d 1334, 1352, 253 Cal.Rptr. 144 [29.4 percent, or $1.2 million less than jury award, unreasonable as a matter of law]; Redevelopment Agency of the City of Long Beach v. First Christian Church (1983) 140 Cal.App.3d 690, 707, 189 Cal.Rptr. 749 [50 percent, or $1,500,000 less, unreasonable]; City of Commerce v. National Starch & Chemical Corp. (1981) 118 Cal.App.3d 1, 20, 173 Cal.Rptr. 176 [32 percent, or $163,000 less than award, unreasonable]; Los Angeles Unified Sch. Dist. v. C.F. Bolster Co. (1978) 81 Cal.App.3d 906, 916, 146 Cal.Rptr. 789 [87 percent, or within $39,000, per se reasonable]; City of Gardena v. Camp (1977) 70 Cal.App.3d 252, 257, 138 Cal.Rptr. 656 [52 percent, or $22,000 less, unreasonable]; County of Los Angeles v. Kranz (1977) 65 Cal.App.3d 656, 659, 135 Cal.Rptr. 473 [79 percent, or $16,078 less than award, unreasonable as a matter of law]; City of Los Angeles v. Cannon (1976) 57 Cal.App.3d 559, 562, 127 Cal.Rptr. 709 [91 percent of jury award reasonable].)
Here the trial court discounted the disparities in percentage and dollar terms observing Continental must have ignored its own experts' evidence of damages as well because its final demand was only for $500,000. However, the MTA's final offer of $200,000 was still only 40 percent of Continental's $500,000 demand, even assuming both sides discounted Continental's experts' determination of severance damages. There is nothing in the court's ruling to indicate it gave this wide disparity the consideration it deserved, especially where the MTA's own evidence of Continental's damages at trial exceeded its offer by as much as $50,000.11
In analyzing the third factor—the good faith, care and accuracy in determining the amount of the offer—the evidence also tends to demonstrate the MTA's offer was unreasonable.
Prior to trial the MTA took the position Continental had suffered no severance damages. It based its view primarily on studies of properties near metro rail lines in other cities which suffered no negative impact on rents or vacancy rates because their access to transportation provided an overall net benefit. The MTA's opinion of no severance damages was also based on its erroneous interpretation of the law, Continental's proximity to a Green Line station was a special benefit whose value would more than offset Continental's severance damages. After the trial court ruled Continental's proximity to a Green Line station was not a special benefit, and the value of this potential enhancement could not be used as an offset against severance damages, the MTA nevertheless continued to assert Continental suffered no severance damages but instead benefited from its proximity to the station. Such unyielding adherence to a position properly ruled erroneous by the trial court is “incompatible with the spirit of compromise one would expect of a reasonable condemnor.” (City of Gardena v. Camp, supra, 70 Cal.App.3d at p. 257, 138 Cal.Rptr. 656.) Having erroneously interpreted the legal significance of “special benefits” as they pertained to condemnation proceedings in California, a reasonable condemnor under these circumstances would have given “weight to the opinion of other qualified experts, acknowledge the position of the other side and recognize the possible consequences of an adverse decision at trial.” (People ex rel. Dept. of Transportation v. Yuki, supra, 31 Cal.App.4th at p. 1767, 37 Cal.Rptr.2d 616.)
Moreover, errors in calculating the value of the land and easements taken and in valuing Continental's severance damages cast doubt on the care and accuracy with which the MTA prepared its final offer. For example, the MTA allotted no amount for severance damages for the negative impact from noise. This position was based on the opinion of the MTA's acoustical expert. This expert conducted a test at Continental's building and found the current noise levels were adequate for office space. It was the acoustical expert's opinion no additional soundproofing measures were necessary. However, the MTA's position arguing Continental had suffered no severance damages for noise abatement failed to take into consideration special laminate glazing had already been installed in Continental's building at the time of its expert's test, and at a cost of between $82,500 to $125,000. Thus, at trial the MTA's appraiser changed his opinion to allow as severance damages whatever costs Continental had already incurred to reduce noise generated from the passing Green Line cars. In denying Continental its litigation costs, the trial court's ruling does not mention the MTA's failure to note this discrepancy.
In addition, the MTA's appraiser acknowledged he had made an arithmetic error which increased the value of the taking an additional $32,000. The MTA's appraiser further admitted the propriety of awarding Continental as severance damages the $23,123 it cost to prepare new building plans.
In sum, reliance on an appraisal which was incorrect in its valuation of the acquired interests, incorrect in its evaluation of both severance damages and special benefits, and materially lower than its own evidence at trial indicates a lack of care and accuracy by the MTA in preparing its offer. (People ex rel. Dept. of Transportation v. Yuki, supra, 31 Cal.App.4th at pp. 1766–1767, 37 Cal.Rptr.2d 616.)
Where the parties hold such disparate views of just compensation, the parties, to be reasonable, are obligated to consider the appraisals of the other and failure to do so warrants a determination good faith was not shown. (See San Diego Gas & Electric Company v. Daley, supra, 205 Cal.App.3d 1334, 1352, 253 Cal.Rptr. 144.) Here the MTA completely discounted Continental's evidence of visual impact because studies of properties near metro rail lines in other cities showed no negative impact on rents or vacancy rates. The MTA studies did not analyze whether the view and light from these buildings had been impacted by the rail lines, but instead determined rents were not adversely affected as proximity to the rail lines resulted in a net benefit. Nevertheless, the trial court essentially concluded the MTA was justified in ignoring the visual impact evidence by finding Continental's expert's testimony “was not particularly impressive.” 12 The jury obviously concluded to the contrary. Nevertheless, despite the relative strength of Hennessey's testimony, the MTA, as the condemning entity, was not free to completely disregard Continental's evidence of visual impact damages simply because it disagreed with it. (County of Los Angeles v. Kranz, supra, 65 Cal.App.3d at p. 660, 135 Cal.Rptr. 473.) A reasonable offer would have taken into consideration the jury might give some weight to the evidence of visual impact. (Ibid.) Apparently, the jury was more impressed with this evidence than was the trial court.
In sum, the record evidence does not support the trial court's finding the MTA's final offer of $200,000 was reasonable, in view of the jury's award of $1,122,149, the evidence it offered at trial of up to $249,000 in damages, its errors and omissions in calculating its offer, and its failure to consider any amount for visual impact damages. Accordingly, Continental was entitled to its litigation costs. Therefore, we remand to the trial court for a determination of Continental's reasonable litigation costs.
The judgment is affirmed. The order denying Continental its litigation costs pursuant to Code of Civil Procedure section 1250.410, subdivision (b) is reversed and remanded to the trial court for a determination of Continental's reasonable litigation costs. Continental is awarded its costs on appeal.
1. The cities studied included Washington D.C., Vancouver and the San Francisco East Bay areas.
2. Code of Civil Procedure section 1263.410, subdivision (b) provides:“(b) Compensation for injury to the remainder is the amount of the damage to the remainder reduced by the amount of the benefit to the remainder. If the amount of the benefit to the remainder equals or exceeds the amount of the damage to the remainder, no compensation shall be awarded under this article․”“Benefit” is defined in Code of Civil Procedure section 1263.430 as follows:“Benefit to the remainder is the benefit, if any, caused by the construction and use of the project for which the property is taken in the manner proposed by the plaintiff whether or not the benefit is caused by a portion of the project located on the part taken.”
3. Continental's appraiser did an analysis of the surrounding properties and learned there are 97 parcels located within a 1,000 foot radius of the Douglas Street Green Line station which were not condemned. Within a 1,700 foot radius of the station there are 565 separate properties of which some portion of 7, including Continental's property, have been condemned.
4. The MTA also cites the decision in People ex rel. Dept. of Public Works v. Lillard (1963) 219 Cal.App.2d 368, 33 Cal.Rptr. 189 but the case did not discuss the distinction between general versus special benefits.
5. The MTA claims the distinction between being within walking distance and being beyond walking distance to a metro line station is a valid demarcation for distinguishing between general and special benefits for purposes of reducing severance damages in eminent domain actions. To support its theory the MTA points out special benefit assessment districts have routinely been upheld by the courts as a valid method to surcharge property owners whose property is affected by or benefited by a certain public improvement as deemed by the Legislature or designated governmental agency. (See, e.g., Pub.Utilities Code, §§ 33000, 33001 [authorizing the Southern California Rapid Transit District to levy assessments on properties which benefit from public rail facilities and services]; Southern California Rapid Transit District v. Bolen (1992) 1 Cal.4th 654, 3 Cal.Rptr.2d 843, 822 P.2d 875 [upholding validity of special assessment district for RTD]; City of Baldwin Park v. Stoskus (1972) 8 Cal.3d 563, 105 Cal.Rptr. 325, 503 P.2d 1333 [upholding special assessment district for construction of public street and storm drain].) Here the MTA claims, and Continental agrees, Continental's property is affected by, and will benefit from being within walking distance to a Green Line station. However, the analogy the MTA attempts to draw between special benefits for special assessment districts and special benefits for eminent domain purposes must fail.The technical definition of “special benefits” for purposes of eminent domain differs materially from what is considered to be a special benefit in order to invoke the power of taxation. “The compulsory acquisition of property for streets or other public purposes involves the exercise of two different and high prerogative or sovereign powers, namely, that of eminent domain, so called, by which the property is taken, and that of taxation (which includes assessments upon the property specially benefited, or perhaps upon such as is legislatively deemed to be thus benefited), by which compensation is made to those whose property has been thus appropriated.” (Clute v. Turner (1909) 157 Cal. 73, 79–80, 106 P. 240.) These sovereign powers of eminent domain and taxation, however, are separate and distinct from each other. (157 Cal. at p. 79, 106 P. 240.) Indeed, evidence of the existence or nonexistence of a special assessment on remaining land, is irrelevant to, and therefore inadmissible in a typical eminent domain action as an element of severance damages. Evidence of a special assessment is only relevant when used as an offset against the value of a special benefit as defined by eminent domain law. (City of Baldwin Park v. Stoskus, supra, 8 Cal.3d at p. 569, 105 Cal.Rptr. 325, 503 P.2d 1333.) Thus, a “special benefit” for purposes of a special assessment tax is more akin to a general benefit flowing from the planned improvement, evidence of which is irrelevant to, and generally inadmissible, in an action in eminent domain.Accordingly, we are not persuaded what may be considered a special benefit for taxation purposes is applicable in analyzing whether a remaining parcel of land has been “specially benefited” for purposes of determining whether there should be an offset against severance damages, given that phrase's “technical meaning” in eminent domain actions. (Pierpont Inn, Inc. v. State, supra, 70 Cal.2d at p. 295, 74 Cal.Rptr. 521, 449 P.2d 737.)
6. Similarly it was not error for the trial court to reject the MTA's request to cross-examine Continental's expert appraiser on the enhanced value of the remaining property from its proximity to the Green Line station. If evidence of general benefits may not be considered in determining severance damages to remaining property (Pierpont Inn, Inc. v. State, supra, 70 Cal.2d 282, 296, 74 Cal.Rptr. 521, 449 P.2d 737) then just as obviously, the same evidence is irrelevant and inadmissible to impeach a witness's testimony on severance damages. We find no error.
7. In this case there was no question both sides' experts on valuation and damages were eminently qualified in their respective fields.
8. The jury's award of $1,015,793 in severance damages did not specify the amount for noise abatement damages as distinguished from damages for visual impact.
9. The MTA claims the award of $23,123 for costs Continental incurred for new building plans is not a compensable item of damages in an eminent domain action. We need not decide the merit of the MTA's argument as the MTA conceded the validity of this item of cost, not only through its own expert appraiser's testimony but in argument to the jury as well.
10. The trial court ruled as follows: “Plaintiff's expert determined that just compensation totaled $76,500 and found no severance damages. Plaintiff's offer of $200,000 clearly did not ignore defendant's expert's opinion in its entirety.“Two compensation issues separated the parties: loss due to noise and visual impact. Defendant's final demand apparently gave no weight to its own experts' opinion regarding loss due to visual impact. This conclusion follows from the fact that defendant's demand of $500,000 could not have included any amount for visual impact since, according to defendant's expert, the taking of the fee interest, the easements and the noise damage together exceeded $500,000. Since defendants gave no credence to its own expert's opinion regarding visual impact, it would be unfair to hold that plaintiff's failure to give any weight to that opinion was unreasonable.“Continental also asserts that, in light of the evidence presented at trial, plaintiff's offer was unreasonable. Continental points out that plaintiff conceded severance damages of $25,000 for new architectural drawings and $85,000 for special window glazing to mitigate noise. Under cross examination, plaintiff's expert also admitted that he incorrectly discounted sums in his valuation of the temporary easement by $23,000. Since these sums, when added to those for the fee and the permanent easement as calculated by the plaintiff total $209,500, defendant argues that plaintiff's offer of $200,000 on its face was unreasonable. The court finds this difference to be insufficient to base a finding of unreasonableness against the plaintiff.“It is clear plaintiff's offer and defendant's demand were so far apart because of the different manner in which their respective experts valued the noise and visual impact issues. As to the noise experts, each made highly technical presentations which the court found equally plausible in so far as it was able to understand the opinions. The court believes it would be unfair to determine that plaintiff acted unreasonably by relying on its own noise expert in light of the exceedingly technical nature of the testimony presented.“With respect to the visual impact issue, the court observes that, in ruling on the motion for new trial, it had occasion to carefully review Mr. Hennessey's testimony. Although the court found Hennessey's testimony sufficient to defeat the motion, the court would be less than candid if it did not indicate that such testimony was not particularly impressive. Moreover, Hennessey refused to consider data from other markets, although he admitted that this evidence might be relevant. Plaintiff's appraisers, who made in-depth studies of other markets, concluded that the overwhelming evidence showed that there were no severance damages. Under these circumstances, the court is unable to conclude that the plaintiff acted unreasonably.” (Italics in original.)
11. The MTA's appraiser testified Continental was entitled as severance damages to whatever it cost to install the special laminate windows, whether that cost was $82,500 as testified to by the installer, or whether the amount was $125,000 as testified to by Continental's principal.
12. In support of its finding on credibility, the court relied on the decision in County of San Diego v. Woodward, supra, 186 Cal.App.3d 82, 230 Cal.Rptr. 406. In Woodward the county presented expert testimony based on appraisals the defendant's property was worth $65,000. The expert conducted a study of similar properties and comparable sales in the community and analyzed the income potential from the property. The defendant owner had no expert appraisal for the property and no experience in real estate appraisals. Nevertheless he gave his opinion his land was worth variously $538,000, $380,000 and $670,555 without providing supporting data for any of these amounts. A jury awarded $299,901, but the trial court denied the owner his litigation costs.The appellate court found the trial court did not err in resolving the issue of reasonableness on the basis of credibility of the witnesses under the circumstances. (186 Cal.App.3d at p. 90, 230 Cal.Rptr. 406.) The court found it was not a case where the condemnor's offer ignored a landowner's expert appraisal. Nor was it a case where the condemnor adamantly adhered to its initial appraisal in the face of conflicting expert opinions on value. (Id. at p. 91, 230 Cal.Rptr. 406.)Whether the decision in Woodward should have any application in a case such a this is questionable at best. In Woodward the defendant's credibility was called into question because, not only had he failed to have a professional appraise his property, but he was inconsistent in his own view of his property's worth and provided no basis to substantiate any of his valuations. Here by contrast, expert opinions on value and damages were supported by technical and empirical data and market research. Both sides' experts were well qualified. None could be rejected out of hand as having no experience or background regarding the subject to which his opinion pertained as occurred in the Woodward case.
JOHNSON, Associate Justice.
LILLIE, P.J., and FRED WOODS, J., concur.