CITY OF LOS ANGELES v. RETLAW ENTERPRISES INC

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Court of Appeal, Second District, Division 4, California.

CITY OF LOS ANGELES, Plaintiff and Appellant, v. RETLAW ENTERPRISES, INC., Defendant and Respondent.

Civ. 44679.

Decided: May 20, 1975

Burt Pines, City Atty., Milton N. Sherman, Chief Asst. City Atty., James H. Pearson and Ronald J. Einboden, Deputy City Attys., for plaintiff and appellant. Hill, Farrer & Burrill, John N. McLaurin and William M. Bitting, Los Angeles, for defendant and respondent.

The City of Los Angeles (hereinafter ‘L.A.’ or ‘city’) by its first amended complaint sought to condemn property in the Antelope Valley (Palmdale area) in order to expand its Los Angeles International Airport. Retlaw Enterprises, Inc., the fee owner of one parcel sought to be condemned, answered and, after a jury trial, received judgment in the sum of $14,350,000.00. L.A. appeals.

At a separate hearing preceding the actual trial, pursuant to the suggestion contained in footnote 12 of Merced Irrigation Dist. v. Woolstenhulme, 4 Cal.3d 478, 498, 93 Cal.Rptr. 833, 483 P.2d 1 (1971), it was established that November 10, 1967, was the date upon which the property probably was included within city's public project. There is no claim that this date of probable inclusion was erroneous nor is there any contention that the date of value (Code Civ.Proc. § 1249), i. e., January 7, 1974, was erroneous. The city's contentions chiefly center around claimed errors in the admission and exclusion of evidence during the trial in chief and the trial court's giving and refusal to give certain instructions.

Defendant's two expert appraisers testified to a fair market value of the property, based upon a highest and best use, of $21,535,000.00 and $20,777,000.00, respectively, whereas, L.A.'s two appraisers gave their opinions of worth as $4,836,000.00 and $3,865,000.00. In reaching their conclusions of value, defendant's experts testified to the purchase price paid by defendant for the property in 1968—which is after the November 1967 date upon which the property probably was included within the city's project. Relying upon Merced, supra, 4 Cal.3d 478, 93 Cal.Rptr. 833, 483 P.2d 1, city contends the admission of this evidence was error, being admitted over its objections, including objections that such evidence was without foundation, was irrelevant and was prejudicial under Evid.Code § 352. We are here concerned with whether the evidence was relevant and, if not, whether its admission was prejudicially erroneous. Ample foundation was laid for the testimony and opinions of the experts. The trial court necessarily determined, under Evid.Code § 352, that the probative value of the evidence was not outweighed by: the necessity for undue time consumption or would it be likely to create undue prejudice, confuse the issues or mislead the jury. We disagree with the latter determination and conclude admission of this evidence was erroneous and prejudicially so, resulting in a miscarriage of justice. (Cal.Const. art. VI, § 13; Evid.Code § 353.)

As noted, another hearing had determined that November 10, 1967, was the date upon which the property probably was included within the city's project. While a witness ordinarily may take into consideration sale price of the subject property, if relevant, whether that sale occurred ‘before or after the date of valuation,’ (Evid.Code § 815), he may not do so if that earlier sale price may have been increased by the property's inclusion within the proposed public project. This type of enhanced value is not a legitimate element of just compensation (Evid.Code § 822, subd. (e); Merced, supra, 4 Cal.3d at pp. 491–492, 93 Cal.Rptr. 833, 483 P.2d 1), reflecting, as it does, speculation that the condemnor may be required to pay more for the property than otherwise. Accordingly,, the judgment must be, and is, reversed.

City also objects to the testimony of one of defendant's two experts regarding price increases (market trends) of noncomparable property sales in the Palmdale area. This expert did not testify to prices paid or received for there properties but did testify the properties were not comparable to the subject property, and the sales would not shed any light upon the subject property's fair market value; no sales of comparable properties were found. L.A. objected, in writing and orally, that such testimony was irrelevant, and prejudicial under Evid.Code § 352; the trial court overruled the objections and admitted the evidence on the ground, stated before the jury, that the testimony was not received as evidence of comparable sales but for the limited purpose of showing the basis for the expert's opinion regarding the trend of project enhancement.1

It is the rule that an expert may testify to his opinion of value and may explain that opinion on a number of bases, including the purchase and sale of comparable properties. (Evid.Code §§ 814, 816.) Here, no sales of comparable properties were discovered. Defendant contends price trend evidence thus became admissible and that, in any event, the trend of prices was merely one of many factors, (i. e., size of the subject property, zoning, etc.), testified to by its expert in support of his opinion. While we conclude the expert's opinion regarding ultimate value was based upon many factors, as claimed, we do not conclude that the expert's testimony of price trends was admissible.

City contends the so-called price trend approach constituted merely a device to get before the jury evidence otherwise inadmissible (People v. La Macchia, 41 Cal.2d 738, 745–746, 264 P.2d 15 [1953], disapproved on other grounds in County of Los Angeles v. Faus, 48 Cal.2d 672, 679, 312 P.2d 680 [1957]), arguing that any trend must relate to properties whose sales have ability to shed some light on the market price of the subject property; thus, the trend of sales of beachfront property is irrelevant ‘to show the trend of industrial property. . . . The trend of gas station property clearly is irrelevant to show the trend of nearby residential properties. The inescapable conclusion is that the trend on noncomparable property is useless and irrelevant to the question of value of the subject property.’ We agree.

This is not to say we hold that only those methods traditionally employed (State of Cal. ex rel. State Pub. Wks. Bd. v. Covich, 260 Cal.App.2d 663, 665–666, 67 Cal.Rptr. 280 [1968]) may be used in evaluating property (see: Evid.Code §§ 816–820; Napa Union High School Dist. v. Lewis, 158 Cal.App.2d 69, 73, 322 P.2d 39 [1958]) or that the same degree of proof of comparability is required in all instances. (5 Nichols on Eminent Domain, § 21.3[3].) Neither do we intend to limit the ingenuity of counsel. We hold merely that, in the present case, the evidence was improperly admitted over proper objection.

Respondent argues in effect that, since prices were not testified to, the evidence was admissible. We disagree. The evidence was inadmissible but we may judge its effect, as being prejudicial or nonprejudicial, by the lack of price evidence. It is true that defendant's expert did not testify to the prices given or received for the noncomparable sales. He did, however, testify to an opinion that these noncomparable sales indicated a price trend increase of a certain percentage. This evidence was inadmissible.

Since the remaining points raised by the city in its briefs may, or may not, arise again on any retrial, we need not, and do not, discuss them.

The judgment is reversed.

FOOTNOTES

1.  The court's statement was: ‘It is not being received as comparable sales or any survey of comparable sales. [¶] It is being received for the limited purpose of the witness' opinion of a trend of project enhancement. [¶] Because of the witness' testimony of the difficulty of finding comparable sales, and this being the basis for his ultimate opinion as to value, and to understand why his opinion is as it is, it is for that purpose, and I will overrule the objection. It may be received for that purpose only.’ The expert, however, specifically testified that any project enhancement was excluded from his opinion regarding the trend of prices.

DUNN, Associate Justice.

JEFFERSON, Acting P. J., and KINGSLEY, J., concur.