A Jury in an Eminent Domain Action Must Decide if “Reasonable Probability” Exists that Government Will Require Dedication of Land as Development Condition and if the Dedication is “Roughly Proportionate” to Potential Impacts of Remaining Development

A city planned to realign a truck route and offered the landowners compensation that valued the property as undevelopable agricultural land instead of its current zoning of light industrial.  The city reasoned that the condemned portion of the property was undevelopable because if the landowners attempted to develop the whole parcel, the city would require the condemned portion to be dedicated to the city as a development condition.  The landowners refused the offer, and the city began an eminent domain action.  The trial court found that the dedication requirement was constitutional and reasonably probable to occur.  The court of appeal reversed the trial court decision, finding that a jury, not the trial judge, must determine underlying factual issues regarding the propriety and likelihood of the dedication.  (City of Perris v. Stamper (--- Cal.Rptr.3d ----, Cal.App. 4 Dist., August 9, 2013).

Facts

Richard C. Stamper, Donald D. Robinson, and Donald Dean Robinson, LLC (“owners”), owned a 9.1-acre piece of land in the City of Perris (“City”).  The property (“Stamper Property”) was vacant land zoned for light industrial use.  The City determined it required a 1.66 acre swath (“the take”) out of the Stamper Property to realign a truck route along Indian Avenue.

The City offered to buy the take for $54,800, and valued the take as if the property was zoned for agricultural use rather than its actual zoning of light industrial use.  The City reasoned that, despite the zoning, the take was not developable for light industrial use, because if the Stamper Property were developed for industrial use, the City would require the owners to dedicate the take to the City as a condition of development.

The City filed an eminent domain action after the parties failed to agree on a purchase price.  At the City’s request, the trial court bifurcated the trial into two parts.  In the first part, the trial court would decide legal issues, and in the second part a jury would decide the valuation of the take.  During the first part, the trial court found that the dedication requirement was constitutional and reasonably probable to occur.  The owners then agreed to the City’s appraisal, bypassing the second part of the trial but preserving their right to appeal.

Decision

The Fourth District Court of Appeal reversed the trial court decision, finding that a jury trial was required to decide whether a reasonable probability existed that the City would require the take to be a dedicated development condition on the Stamper Property; whether the take was roughly proportionate to the Stamper Property's potential impacts on area traffic if the Property were developed; and finally the full amount of all present and future compensation due for the take, including damages.

The likelihood of whether a property dedication would be required as a condition of development affects the calculation of compensation in an eminent domain action.  If there is a reasonable probability that development of a larger property would be conditioned on dedication of a portion of it, then the compensation for that portion cannot be based on the property’s development potential because the portion subject to dedication cannot be developed like the rest of the property.  Instead, the compensation for “the condemned property must generally be valued at its current use because it could never be used for any other purpose.”  Additionally, a property dedication is constitutional only if it is “reasonably related to increased traffic and other needs” of the proposed development. To satisfy constitutional requirements, dedication conditions must be “roughly proportionate in both nature and extent to the impacts” of development.

Turning to the case at hand, the court of appeal agreed with the Stamper Property owners’ argument that they had a right to a jury trial on questions relating to fair market value of their condemned property.  The court noted that “issues surrounding the dedication requirement are essential to the determination of ‘just compensation’ and therefore must be ‘ascertained by a jury.’”  These issues included whether a reasonable probability existed that the City would require dedication of the take as a condition of developing the remaining Stamper Property, and whether the dedication’s extent was roughly proportional to the Stamper Property's impacts on traffic if the property were developed for light industrial use.

The appellate court noted that the trial court’s only role in determining factual issues on just compensation was to “to act as an evidentiary gatekeeper” by deciding whether there was sufficient evidence “to allow reasonable jurors to conclude the City would not require dedication of the take as a development condition.”  If the evidence was sufficient, then the trial court should allow the jury to decide this issue.

The appellate court also instructed that the jury decide to what extent the dedication of the take would be roughly proportional to the Stamper Property’s development impacts on traffic.  If the jury decided that only part of the take could be subject to dedication under constitutional requirements, then the jury should value that part as vacant, undevelopable land.  The rest of the take should then be valued according to the more valuable measurement of its current zoning, light industrial use.  On the other hand, if the jury determined that no dedication requirement at all could be constitutionally imposed on the take, then the jury should value the entire take according to its current light industrial zoning.

The appellate court also directed that the jury must “once and for all” set the amount of present and future damages resulting from condemnation of the take.  This determination should include the fair market value of the take, severance damages, “and all other reasonably foreseeable damages.”  The court stated that it disagreed with the case State Route 4 Bypass Authority v. Superior Court (2007) 153 Cal.App.4th 1546, which held that the constitutional rough proportionality test could take into account potential governmental promises of future development concessions.  The court acknowledged that it would be difficult for a jury to estimate “a hypothetical development project's impacts when no specific development proposal has been made.” However, the court emphasized that the estimate should not be deferred because to do so “based on nonspecific and unenforceable promises of future development concessions risks depriving the owner of his right to just compensation for the fair market value of the property taken in the condemnation proceeding.”

Finally, the appellate court disagreed with the owners that the dedication of the take should not be considered in assessing its fair market value under state law requiring that the fair market value of property not include any decrease attributable to the “project for which the property is taken.”  In other words, the owners argued that the take should be valued according to its current zoning of light industrial use, not its use under the take as undevelopable land dedicated to a future roadway.  The court stated that government dedication requirements in general are a valid exercise of governmental power, and that the decrease in the take’s value was attributable not to the truck route realignment project, but to a “free-standing dedication requirement.”

Topics:  Condemnation, Eminent Domain, Jury Trial, Land Developers, Redevelopment, Rough Proportionality Test

Published In: Civil Procedure Updates, Civil Remedies Updates, Constitutional Law Updates, Commercial Real Estate Updates, Zoning, Planning & Land Use Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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