CITY OF LOS ANGELES v. HALL

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Court of Appeal, Second District, Division 5, California.

CITY OF LOS ANGELES, Plaintiff and Respondent, v. Esther F. HALL et al., Defendants and Appellants.

Civ. 45591.

Decided: February 27, 1976

Burt Pines, City Atty., Milton N. Sherman, Chief Asst. City Atty., and James H. Pearson, Asst. City Atty., Los Angeles, for plaintiff and respondent. Fadem, Berger & McIntire, Beverly Hills, for defendants and appellants Decker and Gast.

In September, 1967, the Board of Airport Commissioners passed a resolution authorizing the acquisition of property in the east Westchester area of Los Angeles and requesting the Los Angeles City Council to enact an ordinance of condemnation. On March 1, 1971, the City Council passed the ordinance authorizing condemnation of the property for airport purposes, or, more specifically, ‘for the expansion and enlargement of Los Angeles International Airport.’

A condemnation trial involving 4 of the parcels to be taken, each separately owned, commenced on August 24, 1973. Robert W. Beeney, an appraiser, testified on behalf of the property owners.1 Mr. Beeney first noted that the property was part of a project area which included approximately 1200 parcels. He further observed that his task was to value the parcels and that ‘[i]n making these appraisals, I and the appraisers for the City have to consider the subject properties as they would have existed as of [the dates of valuation], absent any effect that might be caused by the project.’

The first step undertaken by Beeney in appraising the value of each parcel was a determination of the property's highest and best use. Beeney initially considered the existing uses and zoning of the subject property and the general area in which it was located. He noted that in 1967 the area was primarily used for single-family residences except for a parking lot operated by Valet Auto Park. However, between 1967 and the date of valuation of the property (November 1, 1972), hotels were constructed and the airport was expanded; greater use was made of the northern runway complex located near appellant's home.

With respect to zoning, Beeney indicated that the parcels were all zoned R1, permitting only residential, single family use of the property. However, Beeney had discovered that application had been made in 1967 to change the zone from residential use to industrial (‘M’ zone) or commercial (‘C’ zone) use. The petition originated with the homeowners in the area who had formed the Greater Westchester Homeowners Association. The application was denied by the City Planning Commission; however, the appeal which followed was granted by the Planning Committee of the City Council. In 1970 the Committee issued its report which read in part:

‘The southerly portion of the subject area is directly in the approach pattern for [runways 24R and 24L] which are located only 1500 feet to the west. The present R1 zone and R1 development of this area is contrary to all principles of good zoning practice which dictates that such areas not be utilized for noise sensitive uses or for concentrations of people. The public health, safety and general welfare of this area and community would be best served by permitting the redevelopment of this area for those types of commercial and industrial use which are compatible with the environmental problems associated with the airport.’

The Committee recommended a procedure for implementing a zone change to (Q)M2, ‘Q’ standing for qualified. This procedure required that prior to the approval of any plan of redevelopment for the area, which included the subject property, a plan of traffic circulation would have to be submitted to and approved by the City's Traffic Department. As Beeney noted, the existing system of streets was designed for access to residential homes, but ‘[t]he system of streets . . . required for an industrial use . . . would be generally very different [and] a replatting of the streets would be required.’ Beeney stated that ‘[t]he City also recommended that final tract maps be restricted to two tentative tract maps and that no final map should be for an area less than five acres or a complete block, whichever is smaller, i. e., redevelopment of this area should take place on an orderly basis and not smaller units than one block or five acres at a time.’

Beeney further testified that although the entire area, except for a school, had been privately owned at the time of the homeowners' application (November, 1967), by the time of the Committee's recommendation (June, 1970), ‘the Department of Airports had acquired a greater number of houses in this area making it extremely difficult, if not impossible, to find an area within the project where the complete block or the five acres could in fact have been assembled.’ Even though the necessary assemblage did not occur in the project area, Beeney noted that McCulloch Corporation and United Savings and Loan Association had assembled property in the manner required ‘on the fringe of the project area.’

Beeney also considered a tentative plan, which had yet to be adopted by the City Council, that would permit the area to be used for ‘parking, rent-a-car lots, industrial warehouse buildings, [and] air freight units, . . .’ Additionally, Beeney indicated that the trend of development in the area had been toward hotel and industrial use rather than residential use. He also found a need in the area for airport parking, a use to which the subject property could be put. He based this finding on ‘the interim copy of the airport plan published by the City Planning Commission and the Development Research Associates' analysis of the area.’ Beeney testified that the plan provided that ‘[a]dequate parking shall be provided to meet expected demands both within the terminal complex and at peripheral locations outside the airport complex.’ Mr. Beeney stated that ‘[i]n the area of the subject property, one of the closest areas to the airport, this would be described as a peripheral location.’ He also indicated that according to the plan, ‘[a]bout 30,000 parking spaces for air passengers and airport employees will be needed by 1985.’

Beeney finally concluded that in his opinion ‘the highest and best use of the subject properties in the project area, absent the condemnation projection as of the date of value, would be to redevelopment to airport related use in conformity with the requirements set down under City Planning case 21071, the one that was granted by the City Council on an appeal.’ After making this determination, Beeney then proceeded to value the property, primarily based on what he considered to be comparable sales, which included the sales to McCulloch. Valuing the property as of November 1, 1972 (the date of valuation) Beeney concluded that the Decker parcel had a fair market value of $65,000. He stated that his opinion of the value of each parcel ‘was very much tied to the highest and best use of the property.’

After Beeney concluded his testimony, the City called its appraiser, Richard Sparks. Mr. Sparks noted that since the 1940's the parcels has been continuously zoned R1. He also reiterated the Planning Commission's requirements for the zone to be changed to (Q)M2, i. e., meeting the subdivision requirements of the City and filing a tentative tract map; assembling at least 5 acres or one complete block, thus preventing one individual lot from qualifying for the zone change; and prohibiting piecemeal development. He noted that the zone, (Q)M2, was a highly restrictive M2 use. Since a change to a (Q)M2 zone would require the purchase of some 900 homes, at probably inconsistent prices and for a limited industrial use, Sparks thought it ‘highly improbable’ that a subdivider would undertake the project and that, in turn, an zone change would be effected. Sparks concluded that in his opinion the highest and best use of the subject property, ‘[i]n the absence of any reasonable probability of obtaining a zone change, . . . would be R1 single-family.’ In valuing the property, Sparks did not consider the sales to McCulloch as being comparable because ‘the [McCulloch-acquired] properties abut M property, manufacturing property, industrial property to the south. . . . They were acquired by the owners [McCulloch], owner of this [industrial] property, for use in conjunction with this property and the subject property, there's no M property around it.’

Another appraiser, Davis Brabant, was called by the City. He also concluded that ‘the highest and best use of the property, considering all of the difficulties that would be encountered by an individual to try to make any change in it, would be single [family] residential use . . ..’ He valued the Decker property at $27,000 as of the date of value.

On August 31, 1973, the jury found that the fair market value of the Decker property was $29,012. Judgment was entered in that amount. Appellant's notion for a new trial was denied. This appeal followed.

CONTENTIONS

Appellant contends

(1) That she was deprived of a fair trial because of the City's concealment of the actual use to which the subject property would be put and the City's misrepresentation of the property's highest and best use, and

(2) That it was unconstitutional and violative of Evidence Code section 600 to instruct the jury that the property owner has the burden of proof as to value in eminent domain cases.

DISCUSSION

Appellant's first contention stems from facts first presented in a declaration by her counsel included within appellant's memorandum of points and authorities in support of the motion for a new trial. In that declaration, appellant's counsel stated that on November 15, 1973, two and a half weeks after judgment was entered (October 29, 1973), a Final Environmental Impact Report was presented for adoption to the Airport Commission. The report, item 5 of the Commission's agenda, dealt with the impact on the environment of ‘the construction of a 4,000 space airport parking lot’ located in the area of which the subject property was a part. It was also indicated that the Commission had previously considered the report on October 25, 1973. The report noted that ‘[c]onsistent with all applicable City plans, this project, when constructed, will provide a remote parking lot accommodating 4,000 spaces for persons using the Los Angeles International Airport. . . .’ Adoption of the report was recommended. Appellant contends that the City knew of this activity and the preparation for it and that it deliberately concealed and omitted these ‘material facts' at trial. Since the City's concealment and misrepresentation were brought to the trial court's attention, appellant asserts that it was prejudicial error for the trial court to deny her motion for a new trial.

In a letter filed in lieu of a supplemental brief, appellant also requests us to take judicial notice, pursuant to Evidence Code sections 452 and 459, of the following documents: Notice of Completion of a ‘Draft Environmental Impact Report,’ dealing with the 4,000 car parking lot, filed on May 24, 1973; Notice of Determination approving the parking lot by the Board of Airport Commissioners, dated November 20, 1973; and the title of the Final E.I.R. for the East-Westchester Parking Lot adopted by the Board and dated November 15, 1973.

To determine whether the trial court erred in denying appellant's motion for a new trial, we must first resolve whether appellant was entitled, at trial, to present or to have presented any of the ‘concealed’ facts. In Merced Irrigation Dist. v. Woolstenhulme, 4 Cal.3d 478, 93 Cal.Rptr. 833, 483 P.2d 1, the Calfornia Supreme Court re-examined and clarified the rules governing the admissibility of ‘project enhancement’ evidence to show the fair market value of the property. The court concluded that where ‘the worth of property known to be within the project may rise when the land is valued as part of the proposed improvement rather than as a separate tract of land; . . .’, ‘[i]t is clear, of course, that this incremental value is one which could never be considered in determining ‘just compensation’ under the established definition of ‘market value’ . . ..' (Id. at 490–491, 93 Cal.Rptr. at 840, 483 P.2d at 8; emphasis original.) Thus, a jury is precluded from including in an eminent domain award any increase in value to property, known to be within a public project, which is attributable to the proposed improvement. (City of Ontario v. Kelber, 24 Cal.App.3d 959, 965, 101 Cal.Rptr. 428.)

‘The law is likewise clear that in forming an opinion as to reasonable probability of zone change, a witness must exclude all consideration of the effect of the proposed improvement, and knowledge of the pending improvement may not be considered as a factor in determining the fair market value. [Citations.]’ (People ex rel. Dept. Pub. Wks. v. Arthofer, 245 Cal.App.2d 454, 465, 54 Cal.Rptr. 878, 885.)

Although appellant is concerned with the admission of the ‘concealed’ facts to establish the highest and best use of the property, rather than to specifically show enhancement of its value, the effect of admission in either case would be the same—enabling appellant to have her parcel appraised at a higher value as a result of the proposed use of the property. The relation between the concept of ‘highest and best use’ and the determination of fair market value has been summarized in 5 Witkin, Summary of California Law (8th Ed., 1975), Constitutional Law, § 587, at p. 3884, as follows:

‘In People v. Ocean Shore Railroad (1948) 32 C.2d 406, 425, 196 P.2d 570, the court said that the following elements should be considered in determining market value: (a) All uses to which the property is adapted or available. (b) The highest and most profitable use to which the property might be put ‘in the reasonably near future,’ to the extent that such a probability affects the market value. In other words, the highest use is not a specific measure of value, but a factor in fixing market value. [Citations.]' (Emphasis original.)

As stated in 4 Nichols on Eminent Domain (Revised 3d Ed., 1975), § 12.314, at pp. 189, 205–206: ‘In determining the market value of a piece of real property for the purposes of a taking by eminent domain, . . ..’, ‘[i]ts value for the use to which men of prudence and wisdom and having adequate means would devote the property if owned by them must be taken as the ultimate test. . . . Where it is not shown that a suggested use would be profitable, or where it appears that the operation cannot be carried on except at a loss, the prospect of use for such a purpose is not a proper element of value.’

Obviously, in the present case, evidence of the airport's proposed use of the subject property was inadmissible for purposes of determining the property's highest and best use where it was known that the land would be included within the project area. The jury's findings were sufficiently supported by evidence showing that redevelopment of the area was impractical, making re-zoning improbable; that such action was not being undertaken either by homeowners or developers; and that any need for airport related use, according to the plan to which Mr. Beeney referred, was remote (1985).

In her reply brief, however, appellant urges that ‘[t]he issue at hand is the misrepresentation of the Airport's attorney, not a possible zoning change, nor use of the property by the condemnor.’ (Emphasis original.) According to appellant, this impermissible conduct arose when the City's attorney, knowing of the airport's activity, indicated in his statements at trial that there was no ‘need’ for airport parking and that such airport-related use was not possible to accomplish. The attorney's reference to the need for airport parking was in response to Mr. Beeney's discussion of the terms of the airport plan.

Since the City's attorney could only base his conclusions on the situation as it existed, absent any effect of the proposed project, he was under no duty to disclose any knowledge which he had of the proposed use of the subject property and would not in fact have been permitted to introduce or rely upon any evidence of that use. In light of the evidence on which they could be based, the attorney's conclusions were neither misrepresentative nor misleading. We find, therefore, that the trial court acted properly in denying appellant's motion for a new trial.

Appellant also contends, however, that the trial court erred by instructing the jury that the property owner (appellant) had the burden of proof with respect to the valuation of the subject property. The questioned instruction was a modified version of BAJI 11.98 (1971 version) which read as follows;

‘In this action the defendant[s] has [have] the burden of proving, by a preponderance of the evidence, the market value of the property to be acquired.

‘By a preponderance of the evidence is meant such evidence as, when weighed with that opposed to it, has more convincing force and the greater probability of truth.

‘In determining whether the market value of the property to be acquired, [has] been proved by a preponderance of the evidence, you should consider all of the evidence bearing upon such market value regardless of who produced it.’

Appellant asserts that this instruction ‘is contrary to the Evidence Code and conflicts with the Constitutional guarantees of just compensation.’ However, the established and approved rule in eminent domain proceedings is that the burden of proving value is on the defendant property owner. (San Francisco v. Tillman Estate Co., 205 Cal. 651, 653, 272 P. 585; People ex rel. Dept. of Pub. Wks. v. Younger, 5 Cal.App.3d 575, 579, 86 Cal.Rptr. 237; City of Santa Cruz v. Younger, 223 Cal.App.2d 818, 822, 36 Cal.Rptr. 253.) Nevertheless, appellant states that this burden of proof rule, originating in Monterey County v. Cushing, 83 Cal. 507, 510, 23 P. 700, 701, was based on the following rationale: ‘To say that the burden of proof is upon a party is equivalent to saying that the presumption is against him. A presumption is indirect evidence . . ..’ (Id. at 510, 23 p. at 701.) Appellant argues that since presumptions are no longer considered evidence (Evid.Code § 600), ‘[t]he reason for the Cushing rule which is the foundation of BAJI 11.98 is no more. With it falls the force of Cushing. Necessarily, BAJI 11.98 likewise is incorrect.’

We find, however, that appellant's argument does not withstand analysis. The presumption and the burden of proof referred to in Cushing are not necessarily dependent concepts. The decision suggests that the presumption does not give rise to the burden of proof, but rather that an effect of the particular burden of proof may be the creation of a presumption.

Regardless, the holding in Cushing certainly does not turn on the presumption analysis, but rather on the court's construction of section 1244 of the Code of Civil Procedure, a statute which has remained virtually unchanged since its enactment in 1872.2 (See California S. R. R. Co. v. Southern Pac. R. R Co., 67 Cal. 59, 64, 7 P. 123; Atchison, Topeka and Santa Fe Ry. R. Co. v. Southern Pacific Co., 13 Cal.App.2d 505, 512, 57 P.2d 575 (disapproved on other grounds in County of Los Angeles v. Faus, 48 Cal.2d 672, 680, 312 P.2d 680, and Klopping v. City of Whittier, 8 Cal.3d 39, 49–50, 104 Cal.Rptr. 1, 500 P.2d 1345.) When the power of condemnation is properly exercised, the person from whom the parcel is taken is only entitled to the reasonable value of his property as compensation. Since the fiction of willing seller and a willing buyer necessarily exists in such a taking, there is no reason not to require the ‘seller’ to state the value of such parcel. The fact that there is considered to be a willing buyer makes the parcel of some value. When there is a difference of opinion between the ‘seller’ and the ‘buyer’ as to value, the determination of the property's value is for the jury. In arriving at such value, the legislature has not seen fit to vary the judicial construction of section 1244 which imposes the burden of proof upon the ‘seller.’ The determination of this rule was made by the California Supreme Court in the cases previously cited even though it was recognized that different theories were applied in other states. We follow the dictates of that court.

There is also no merit to appellant's contention that the giving of BAJI 11.98 resulted in ‘confusion and prejudice to the property owner whose just compensation is the whole purpose of a condemnation case.’ Appellant urges that such confusion results when ‘[o]n the one hand the jury is under a duty to find objectively the value of the land taken, . . . and on the other hand the jury is told that the property owner has the ‘burden of proof’ or in effect that the condemnor is presumed to be right.' Appellant argues that the jury is placed in the following dilemma: ‘Is the verdict to be the jury's independently determined value, or is it to be a finding against the owner, i. e., for the condemnor's opinion testimony?’

‘From the rule that an aware is vacated by appeal and cannot be considered by the jury in determining damages, it follows that the burden of proof of establishing his right to substantial compensation is upon the owner, even if he is defendant or respondent in the proceedings, since it is clear [subject to certain exceptions] that if no evidence were introduced by either party, the jury would have no basis upon which to fix the compensation and would be bound to award nominal damages only.’ (5 Nichols on Eminent Domain (Revised 3d Ed., 1975), § 18.5 at pp. 249–255.) This rationale for the burden of proof requirement indicates that the defendant must come forward with evidence of his property's value; however, the condemnor is not precluded from introducing not is the jury prevented from considering other evidence of value. Any prejudice to appellant or confusion to the jurors was obviated by the trial court also instructing the jury that they were to determine just compensation, that they were to apply the established definition of fair market value, and that their verdict did not necessarily have to coincide exactly with the opinion of any witness or witnesses.

The judgment is affirmed.

FOOTNOTES

1.  Although the notice of appeal included the names of all four defendants, opening and reply briefs in this appeal were filed by defendants Mahria Lamar Decker and Irene M. Gast alone. As defendant Gast subsequently withdrew from the appeal, we will only refer herein to the date of value and the fair market value of the Decker parcel.

2.  Section 1244 of the Code of Civil Procedure provides:‘The complaint must contain:‘1. The name of the corporation, association, commission, or person tn charge of the public use for which the property is sought, who must be styled the plaintiff;‘2. The names of all owners and claimants, of the property, if known, or a statement that they are unknown, who must be styled defendants;‘3. A statement of the right of the plaintiff;‘4. If a right of way be sought, the complaint must be accompanied by a map showing the location, general route, and termini of said right of way, so far as the same is involved in the action or proceedings;‘5. A description of each piece of land, or other property or interest in or to property, sought to be taken, and whether the same includes the whole or only a part of an entire parcel or tract or piece of property, or interest in or to property, but the nature or extent of the interests of the defendants in such land need not be set forth. All parcels of land, or other property or interest in or to property, lying in the county, and required for the same public use, may be included in the same or separate proceeding, at the option of the plaintiff, but the court may consolidate or separate them to suit the convenience of the parties. When application for the condemnation of a right of way for the purpose of sewerage is made on behalf of a settlement, or of an incorporated village or town, the board of supervisors of the county may be named as plaintiff.’

STEPHENS, Associate Justice.

KAUS, P. J., and HASTINGS, J., concur.