CITY OF BALDWIN PARK v. STOSKUS (1972)

The sole issue on this appeal by defendant property owner in this eminent domain proceeding is whether the existence of a special assessment lien in the amount of $8,413.74 upon her property and resulting from the making by the City of the improvement involved herein, should have been considered in determining her right to severance damages. The parties are agreed that the award of $1,584 for the property taken is correct.

The only testimony as to severance damages sustained by defendant as a result of the City's taking of a strip of land 30 by 132 feet along one side of her residential property for a street and storm drain was offered by the City. Its expert valuation witness testified that the fair market value of defendant's property prior to the taking was $16,250 and that after the taking and the construction of the improvement, such value was $16,800. He stated that in arriving at this conclusion of no severance damages he did not consider the existence of the aforementioned assessment lien upon her property.

Prior to the taking herein defendant's property was unencumbered. Thus, with respect to it, we have apparently a special assessment of $8,413.74 and a possible special benefit of $550.¹

Under article I, section 14 of the California Constitution private property may not be damaged for public use without just compensation being paid to the property owner. All of eminent domain law, procedure and practice is but a means to this end of just compensation for the property owner. Generally speaking, the involuntary seller, the property owner, must be made monetarily whole for the loss he suffers by reason of the involuntary sale of his property to the condemner. (See People ex. rel. Dept. of Pub. Wks. v. Lynbar, Inc., 253 Cal.App.2d 870, 879–880, 62 Cal.Rptr. 320.)

According to Code of Civil Procedure section 1248(2) severance damages are those ‘damages which will accrue to the portion not sought to be condemned, by reason of its severance from the portion sought to be condemned, and the construction of the improvement in the manner proposed by the . . . [condemner].’ The City contends that pursuant to this statute severance damages in this state are confined to those damages arising either from the severance or from the construction of the improvement. Under this view the assessment lien before us could not be considered in determining severance damages because it arose solely by reason of the method the City chose to finance the improvement rather than from its construction.

We do not believe, however, that this narrow and literal construction of the statute is correct. An award of damages in eminent domain must once and for all fix the damages, present and prospective, that will accrue reasonably from the making of the improvement. (People ex rel. Dept. of Pub. Wks. v. Silveira, 236 Cal.App.2d 604, 621–622, 46 Cal.Rptr. 260, hg. den.) Therefore, severance damages resulting from the condemner's use of the improvement are allowed, although such use is not expressly mentioned in section 1248(2). (See City of Oakland v. Nutter, 13 Cal.App.3d 752, 759, 760, 764, 765, 92 Cal.Rptr. 347.)

Financing the making of a public improvement (including its construction) by means of special assessments upon the benefited property is but an incident of the making of the improvement. Without this incident there would be no taking and no construction of the improvement. The incident follows the principal. (See Civ.Code, § 3540.) Accordingly, we hold that since the imposition of the assessment by lien upon the subject property was incident to the construction of the improvement, such assessment must be considered as an clement of severance damages accruing from the construction of the improvement.²

Where the property taken constitutes only a part of a larger parcel, as here, the property owner is entitled to recover as severance damages the difference between the fair market value of the remainder before the taking and that value after the taking. (See Pierpont Inn, Inc. v. State of California, 70 Cal.2d 282, 295, 74 Cal.Rptr. 521, 449 P.2d 737.) In arriving at the fair market value of the remainder left to the property owner after the taking, consideration must be given to all those things upon which well informed persons dealing in the open market would reasonably rely. (Lynbar, Inc., supra, 253 Cal.App.2d 870, 881, 62 Cal.Rptr. 320; cf. Evid.Code, § 814.) One of these things in this case would be the existence of the special assessment lien upon the remaining portion of defendant's property.

In so ruling we are well aware that we are going against the weight of the authority and the prevailing law elsewhere. This law generally renders inadmissible evidence of the existence of a special assessment and likewise prohibits its set off against special benefits. (See 4A Nichols on Eminent Domain (rev. 3d ed. 1971) § 14.248[1]; City of Tucson v. Rickles, 15 Ariz.App. 244, 488 P.2d 180, 181; Ann., Eminent Domain: Deduction of Special Benefits, 13 A.L.R.3d 1149, 1202.) But in California special benefits must be set off against severance damages.

In California ordinarily, however, special benefits must be set off against severance damages. (See City of Hayward v. Unger, 194 Cal.App.2d 516, 518, 15 Cal.Rptr. 301.) This is not done though in the case of public improvements financed by special assessment proceedings. (Sts. & Hy.Code, § 4206(c); Oro Loma Sanitary Dist v. Valley, 86 Cal.App.2d 875, 882–884, 195 P.2d 913, hg. den.)³

We think that it is both more realistic and just to take into account both the existence of the related special assessment lien and the special benefits accruing to the property in determining the fair market value of the portion of defendant's property remaining after the taking then to ignore both of these factors as the prevailing law elsewhere does. As indicated earlier, the concept of fair market value is but a means to the constitutional end of just compensation and this legal concept should accord with the practices of the market place which it is supposed to reflect. No well informed buyer and seller in the market place would ignore these things and we believe that the law likewise should not blind itself to their existence.

We do not think that this rule of law dooms special assessment financing of public improvements, as the City contends. Normally and properly a special assessment against a property arising from the related improvement is but an insignificant fraction of the special benefits conferred upon the property by reason of the improvement.

The judgment is reversed for retrial of the issues of severance damages and special benefits in accordance with the views expressed in this opinion.

FOOTNOTES

1.  Since the expert valuation witness found no severance damages, he did not consider the existence of special benefits to defendant's property by reason of the improvement because special benefits may be deducted only from severance damages. (See Code Civ.Proc., § 1248 (3).)The validity and the amount of the special assessment against defendant's property are not in issue in this case. We note, though, that under the applicable statute, the Improvement Act of 1911, (Sts. & Hy.Code, §§ 5000–6794) defendant could not have prevented the formation of the special assessment district (see § 5222) and any appeal to the City Council regarding the assessment against her property would have reached only the ‘correctness' of the special assessment against it (see §§ 5366–5369) or in other words whether the special assessment against her property (her share of the cost of making the improvement) reflected accurately the proportionate benefit her property received from the improvement. (See § 5343.)We note further that since the asseessment against her property apparently exceeded the benefit to it, a possible basis existed for attacking the constitutionality of the assessment, notwithstanding its apparent regularity. (See Norwood v. Baker, 172 U.S. 269, 279, 19 S.Ct. 187, 43 L.Ed. 443; City of Plymouth v. Superior Court, 8 Cal.App.3d 454, 464, 96 Cal.Rptr. 636, hg. den.). We do not, of course, decide whether such an attack would have been successful.

2.  Presumably part of this assessment reflects the property owner's share of the City's cost of acquisition of the land. To avoid double payment to the property owner, this share should be deducted in considering the assessment as an element of severance damages. In other words, having been paid for her land by the taking damages ($1,584), she should not again be paid for it in severance damages. The one sure way to avoid this result in this case would be to deduct for this purpose $1,584 from $8,413.74.

3.  The Oro Loma decision states and follows the general rule that special benefits may not be set off against severance damages where the improvement is financed by special assessment proceedings because this would be double taxation since the property owner would twice pay for special benefits. This occurs, however, only if the special assessment against the subject property is ignored. What is spread over the benefited land by special assessment proceedings are not the benefits of an improvement but rather its total cost.

COBEY, Associate Justice.

SCHWEITZER, Acting P. J., and ALLPORT, J., concur.