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CALIFORNIA EMINENT DOMAIN LAW BLOG

Pre-Condemnation Entry: Procedure Can Be Unconstitutional, 4/25/14

The Third Appellate District Court of Appeals has ruled that pre-condemnation entry on to the property an agency is seeking to condemn may be unconstitutional. If upheld, it will ultimately create significant obstacles for agencies to overcome in attempts to progress with eminent domain actions.
Historically, California law entitled agencies to enter properties “to make photographs, studies, surveys, examinations, tests, soundings, borings, samplings, or appraisals.” The pre-condemnation entry statutes were enacted in 1976 and have allowed agencies to obtain a court order allowing testing of the property prior to condemnation.

The case that turned the tables, Property Reserve, Inc. v. Super. Ct. of San Joaquin County, challenged the agency’s entry stating that the testing and investigations planned by the agency constituted a taking. In this case, the State of California was seeking to construct a tunnel to transport water. In order to do so the State needed to conduct specific environmental and geological testing. Such testing included drilling myriad borings up to 200 feet deep on the properties and inspecting the properties over a one year period. The property owners argued that they were entitled to just compensation for the investigations because they constituted a taking. The State of California petitioned for an order for entry but the courts ruled that the proposed geological investigations and environmental testing constituted a taking which compensation must be provided to the property owners. The court evaluated the environmental testing based on four criteria:

(1) Degree to which the invasion is intended;
(2) The character of the invasions;
(3) The amount of time the invasions will last;
(4) The invasions’ economic impact on the landowners and interference with their distinct investment-backed expectations.

All in all, the Appellate court held that pre-condemnation entry without just compensation may be unconstitutional. If upheld or allowed to stand, the decision will allow invasive testing on property only through an eminent domain action to allow testing or after the property is condemned. Given what is at stake, it would seem reasonable for the California Supreme Court to review the Appellate Court’s decision.

If the Supreme Court denies review or upholds the decision, this will create great obstacles for agencies to overcome; it may also have a negative impact for property owners. Property owners may see increases in the cost and the time it takes to defend against eminent domain actions instead of simply defending against entry before a decision is made to acquire the property. It must be noted that the decision does not preclude voluntary agreement between public agencies and property owners to allow the agency access to the owner’s property. However, there may be some additional procedural hurdles to seeking such agreements.

The court decision did leave a significant unanswered question as to where the line is to be drawn between an invasive entry and one which is not a significant invasion. The court did not offer any clear answer; it simply suggested that the Legislature can modify the right-of-entry statutes to insure the Constitutional rights of property owners.

If the Supreme Court does not grant review or efforts to depublish the Appellate decision fail, the next step will most likely take place in the Legislature. Stay tuned as this progresses.

Eminent Domain Appeal Denied: Sacramento On Track For Kings’ New Arena, 4/21/14

After months of deliberation, negotiation and court appearances, the city of Sacramento won its appeal for possession of the former Macy’s building. The last piece of the puzzle completes the needed land for the new $448 million Kings arena scheduled to open in 2016.

But the battle for the ex-Macy’s building remains fierce. The City made an offer to the owners of the building, CalPERS and some mortgage certificate holders, for $4.35 million for the property. However, the ex-Macy’s owners believed the property is worth more than $10 million.

The disagreements during negotiations led the City to file an eminent domain lawsuit in January of this year. CalPERS was not against the City’s plans to acquire the property. However, the certificate holders were objecting to the plan. Their attorney, George Speir, raised the issue that the owners were not given a proper chance to object to the taking. He also argued that the City had incorrectly handled the eminent domain lawsuit. Ultimately, those arguments failed with the court holding that they City could proceed and the owners’ remedy was to challenge the amount of the compensation.

As the scheduled opening of the arena is in 2016, the Kings are wasting no time. The Kings future arena will be underway soon as demolitions begin in June. Sticking to a strict timeline, the NBA has stated that should the construction of the arena go beyond 2017, they have the right to buy the Kings from the City and move them out of town. Although Sacramento has acquired the property for the $448 million arena, it will be paid for by the Kings. The Kings have already spent $36 million on the Downtown Plaza for the rest of the needed property for the arena.

“Just compensation” for the property will be determined in trial and will include expert testimony on appraisal of the property. Meanwhile, the City still needs to complete its environmental review, create a financing package and develop an agreement with the Kings in regards to payment and development of the new arena. The development agreement will be introduced to the City Council late April or early May. The City has also indicated that it will be contributing a $258 million subsidy towards the project. Stay tuned for more updates on the new Sacramento King’s arena.

Author: A.J. Hazarabedian
To learn more about A.J. Hazarabedian, please visit http://www.eminentdomainlaw.net/aboutAJH.php.

Kelo, Landmark Eminent Domain Case: The Aftermath, 4/1/14

Nine years have passed since the controversial 5-4 decision of the United States Supreme Court in the eminent domain case of Kelo v. City of New London. What the advocates for economic development argued, fought for and supported has resulted in a 90 acre vacant wasteland where the homes of 7 small town residents once flourished.

Seizing the private property of the 7 Fort Trumbull residents would allow the City of New London to turn the property over to private developers to build luxury apartments, office buildings, retail space, restaurants and many more recreational hot spots. Pfizer, a leading pharmaceutical company, was also on board with the intent to build a research facility to generate new jobs and tax revenue for New London. The City seemed ecstatic about saving their “distressed municipality” which faced high rates of unemployment and economic decline and the Supreme Court ate up their sob story. To the Supreme Court, the idea of economic rejuvenation apparently outweighed the cost of the owners’ property rights and all American’s Constitutional liberties.

The 7 residents, including Susette Kelo, argued that taking private property and turning it over to a private company such as Pfizer “does not qualify as… public use.” However, the Supreme Court held otherwise stating that “the City’s development plan was not adopted ‘to benefit a particular class of identifiable individuals.’”

The Supreme Court, agreeing with the trial court, concluded that the City was rebuilding for growth and prosperity to benefit its citizens and that Pfizer “was not ‘the primary motivation or effect of this development plan’; instead, ‘the primary motivation … was to take advantage of Pfizer’s presence.’”

Pfizer was offered an 80-percent, 10-year property tax abatement for a $300 million research facility which the Supreme Court did not find suspicious.

So the residents were forced to take the compensation for the parcels they called home and the City was allowed to acquire the properties to turn them over to the developers to build their Pfizer project. If only this was a happily-ever-after story. Today the lots of those residents are filled with overgrown grass instead of high-rise buildings and upscale pedestrian “riverwalks.” In 2009, Pfizer backed out of its plan to build the research facility and redevelopment plans seized just as abruptly as they began.

The waters were a little murky; what does it matter? Possibly, those murky waters would have been forgotten if there was some type of redevelopment and economic growth in Fort Trumbull. But there wasn’t. The whole plan turned to nothing and the Supreme Court’s decision spiraled into a disaster. It shocked and scared many because it set precedent for private companies to take interest of citizen owned lands for their own economic interests. It caused many states, including California, to pass laws banning or restricting use of eminent domain for the purposes of economic rejuvenation. Indeed, in the wake of the backlash at Kelo, California did away with redevelopment agencies altogether.

In the end, all that is left are the memories of the once flourishing Fort Trumbull. Although there were no high-rise luxury apartments or gourmet restaurants, the residents of Fort Trumbull were happy with their home town. They fought a hard battle to save what was theirs; they pursued their rights to life, liberty and property. However, where there is no security for rights to property there is, consequently, no liberty.

On a somewhat brighter note for the future, dissenting Justice Antonin Scalia later predicted that the decision in Kelo would be overturned. He reportedly stated, “My court has, by my lights, made many mistakes of law…but it has made very few mistakes of political judgment, of estimating how far… it could stretch beyond the text of the Constitution without provoking overwhelming public criticism and resistance. Dred Scott was one mistake…Roe v. Wade was another… And Kelo, I think, was a third.”

Author: A.J. Hazarabedian
To learn more about A.J. Hazarabedian, please visit http://www.eminentdomainlaw.net/aboutAJH.php.

Rancho Cucamonga Moves Forward with Eminent Domain for New Shelby Place North Road, 7/12/12

By A.J. Hazarabedian

The city of Rancho Cucamonga began eminent domain proceedings to acquire a private dirt road from the Viramontez family, as reported by the Daily Bulletin.  The city plans on widening the road to 210 feet by 30 feet from Base Line to “connect the already developed Shelby Place, south of Base Line.”

According to the article, “Rancho Cucamonga proceeding with eminent domain for road,” the city offered $14,000 for the rights to the road and the Viramontez family made a counter-offer of $30,500, based on an appraisal obtained by the family’s hired appraiser.

Plans call for widening and paving the road, which as stated by the city’s director of engineering, Mark Steuer, would “provide better access to the subdivision tract, enhance traffic flow and provide access to public safety.”

For the Viramontez family, this private road has sentimental value as they have owned the land since the early 1940s and currently live on a 2.7 acre parcel near Baseline Road and Shelby Place.

It is important to note that a property owner is not required to accept the condemning agency’s offer. Instead, the property owner may make a counter-offer, as the Viramontez family did in this case, or may assert a higher value for his or her property if and when an eminent domain action is filed in court.

Often times property owners, tenants and business owners receive higher, and in some cases much higher, compensation than the amount of the condemning agency’s offer by asserting a claim for greater compensation.  An experienced eminent domain attorney should be contacted to evaluate each case on its own merits and assist in determining the appropriate course of action to the particular case.

At this point, if the City of Rancho Cucamonga rejects the Viramontez family’s counter-offer, the Viramontez family and the City will have to fight it out in the Superior Court – a prospect which given the relatively limited amounts involved, will probably not make much sense for either side.

Modesto Considers Using Eminent Domain for Pelandale Freeway Project, 5/23/12

By A.J. Hazarabedian

The City of Modesto will consider acquiring properties by eminent domain for the Pelandale Avenue freeway interchange project at tonight’s city council meeting.  According to the Modesto Bee’s article, “Modesto considers seizing sites for Pelandale freeway project,” the City has been negotiating with affected property and business owners since March, yet an agreement has been made with only one of the eight parcels required for the project.

The Pelandale Avenue project plans to “replace an inadequate three-lane span with a seven-lane crossing at a better angle for traffic, with new southbound ramps,” as reported by the Modesto Bee.  The interchange was not built for the amount of traffic it now receives due to the popular businesses in the area.

A few businesses will be affected by this project, including a Quik Stop gas station and convenience store, Dolphin Spas & Stoves, as well as a vacant commercial property.  Temporary construction easements for up to one year are needed from neighboring properties, of which one has agreed to an offer of $4,800.

Under California’s Eminent Domain law, the government is required to pay the “fair market value” of the property.  The fair market value of the property taken is the highest price on the date of valuation that would be agreed to by the seller, being willing to sell under no particular or urgent necessity for doing, nor obliged to sell, and a buyer, being ready, willing and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available.

This is a bit different from the definition of market value used in the marketplace.  Put simply, owners in eminent domain proceedings are entitled to the “highest” price that might reasonably be expected.  This is determined by appraisal opinion, and the government’s and owners’ appraisers often differ substantially in their opinions of what the “highest” price should be.  The owners involved in this project are apparently dissatisfied with the City’s appraisals, so the City’s options are to either agree to pay the owners an amount that satisfies the owners, force the sales through eminent domain, or drop the project.

If the City decides to pursue eminent domain after tonight’s council meeting, these matters will then move into the hands of the Superior Court, and the owners will be entitled to a jury trial to determine the amount of compensation.  Stay tuned…

Cathedral City May Use Eminent Domain to Acquire Angel View Thrift Mart, 8/22/11

By A.J. Hazarabedian

A thrift mart in Cathedral City is facing eminent domain to make way for future downtown development, reports The Desert SunAngel View Thrift Mart has been operating at the East Palm Canyon Drive location since before the city was incorporated.  And now, if the city gets their way, the store will be forced to relocate.

The article, “Cathedral City plans to push Angel View move” quotes the store’s General Manager Tracy Powers stating, “[they] don’t want to stand in the way of the city accomplishing their goal [but they're] distressed in that the city is not more forthcoming in details on what they can do for [them].”

The thrift mart was offered $750,000 for their property but Powers says he is less concerned with the money and more interested in finding a suitable place to relocate the business which will maintain the store’s revenue.

As for a possible relocation site?  The city had offered Angel View another building on East Palm Canyon Drive over a year ago.  However according to the article, Powers and the city weren’t able to come to an agreement regarding the necessary repairs the building would have required.  Now, Powers has learned that this same proposed relocation site is slated for demolition.

Where does this leave the Angel View Thrift Mart?  For now, they’ll have to wait for Cathedral City’s council meeting on September 14th when the issue is expected to be discussed.

California Farmers Fear High-Speed Rail, 1/17/11

By A.J. Hazarabedian

California farmers are once again voicing their concerns about the potential high-speed rail project which has been a hot topic recently.  A route has yet to be determined, but one of the alternatives could displace 1,900 acres of property – of which 1,460 acres is farmland.

This morning’s Sacramento Bee featured an article, “Path of high-speed rail worries California farmers,” where both the farmers and the rail authority gave their arguments for and against the project.  Some of the farmers feel they are not being heard and that the rail authority is not giving them enough answers.  The authority’s deputy executive director, Jeff Barker, recognizes their fears however, and states “the authority cannot provide more specific answers until environmental reviews are completed on the route options.”  This February a draft environmental document is expected, which should discuss alternatives and provide some explanations of the plans.

The article explains the fears of the farmers.  It indicates that not only will their crops be disrupted, but they will have more challenges getting around, as the speed of the proposed train will prevent at-grade crossings.  This would mean the farmers would have to rely on new undercrossings or overpasses which may add inconvenience.

As an eminent domain attorney, I am interested in the issue of just compensation.  With farmers, taking land often means taking crops.  Valuing these crops and the loss of future business could be tricky.  The article briefly mentions the issue of compensation, addressing farmers concerns about whether they’ll be compensated only for the value of the land acquired, or “for future lost income from permanent crops like grapes, nuts or fruit crops.”  This particular issue is a prime example of why hiring an experienced eminent domain attorney is so important.  Eminent domain is an unusual area of the law and when dealing with your property and/or business, you want someone representing you who has extensive knowledge of the specific rules of eminent domain law.

Eminent Domain Okayed in Newport Beach, 6/10/10

By A.J. Hazarabedian

Newport Beach city council members voted to adopt a resolution of necessity this week to acquire a portion of Back Bay Court Property Co.’s property on Jamboree Road.

According to the Orange County Register article, “City OKs using eminent domain on mini-mall,” the sliver of land is needed for the Jamboree Road Bridge widening over State Route 73 project.  The property is located at 3601 Jamboree Road, which is a mini-mall right off the 73 freeway.

The article states, “Newport Beach offered $452,000 for the property along Jamboree Road at the 73 freeway, a figure that also includes compensation for temporary use of additional land during construction.”

The property owner said “a fair price hasn’t yet been established but that the city’s offer is insufficient.”  The article also mentions that the attorney for the property owner claims “the widening would result in removal of shopping center signs and construction of a retaining wall, resulting in ‘significantly less visibility’ for retail tenants.”

As we discuss in our “California Eminent Domain Handbook,” often times the government only needs a portion of a particular property, much like this situation in Newport Beach.  In these cases, just compensation is determined not only by the value of the part taken, but also by the damage to the remaining property.  Such damages are called “severance damages,” i.e., damages caused by severance of the remainder from the part taken.  Severance damages is one of those areas which is highly specific to eminent domain cases.  As such, it is imperative that only an appraiser experienced in eminent domain be retained to evaluate these damages.  Experienced eminent domain counsel, such as California Eminent Domain Law Group, can and do recommend to their clients such appraisers with whom the attorneys work on a regular basis.

Is There Eminent Domain in Cyberspace?, 4/30/10

By Glenn Block

We came across an interesting column in the Los Angeles Times today regarding what appears to be the first case of eminent domain – sort of – in cyberspace.  How is that possible?  A San Francisco company called Linden Lab has created a virtual world known as Second Life.  Their website purports, “a free 3D virtual world where users can socialize, connect and create using free voice and text chat.”

The “world” may be free; however, property (including islands, or other virtual real property) is purchased by users using real-world dollars.  A user then becomes the property owner and may develop it as he or she wishes.  That is, until Linden Lab changed their terms.

Originally, per the Los Angeles Times column, “A real-world battle over virtual-property rights,” citing a lawsuit filed in Pittsburgh, PA this month, Linden Lab, “repeatedly emphasiz[ed] that users would have indefinite ownership of any property purchased online.”  Users paid hundreds of real-world dollars, or more, to own property in this virtual world, with the promise it would be theirs and theirs alone for life.  This was what Linden Lab had claimed until the company, “quietly changed its contract terms to remove the concept of ownership and has confiscated the property of some users without compensation.”

Is this the taking of private property without payment of just compensation?  In situations involving real property (pun intended), the Fifth Amendment of the United States Constitution protects private property rights.  The government can only take private property for a “public use” and only upon payment of “just compensation.”  But does the Fifth Amendment extend to the virtual world?

In the virtual world of Second Life, if Linden Lab is the “government” do they need a “public use” to take virtual property?  Not likely.  Even though Linden Lab may be the “government” of its virtual world, it is not the government in reality and therefore not bound by the federal or state Constitutions.  As we point out in our “California Eminent Domain Handbook,” traditional examples of “public uses” for which the government might exercise its power of eminent domain include such things as schools, roads, libraries, police stations, fire stations, etc.  How about payment of “just compensation”? Again, they are not bound by the constitutional requirement of “just compensation.”  They may however, have a contractual obligation to pay compensation or damages.

According to the Los Angeles Times, “[t]he lawsuit seeks more than $5 million in damages for what it says was fraud and violations of California consumer protection laws,” as well as, “a judge’s determination that Second Life users do indeed own the property they purchase online, and as such they enjoy the same right as real-world property owners.”

Second Life property owners may want to consider hiring virtual eminent domain attorneys.

VISTA: Member breaks rank with Vista redevelopment panel; The North County Times, 3/17/10

By Cigi Ross

A member of a Vista redevelopment committee is being chastised by his colleagues for distributing a letter to downtown merchants and homeowners that warns their property may be in danger of being seized by the city.

Jerome Hymes, a member of the Project Area Committee, recently distributed the letter to about 35 downtown businesses alleging the city is trying to “seize private property from unwilling sellers” by using eminent domain.  It also states that the city has “no intentions to treat property owners as partners” in the redevelopment process.

Eminent domain is a process that allows a government agency to take private land for public use or development, as long as it pays fair market value as determined by a court.

The letter, dated Feb. 1, is addressed to Vista’s Director of Redevelopment and Housing Bill Rawlings, though Rawlings said in a Feb. 4 response that he had never received a copy of the letter until he learned of it through a newspaper reporter.

Rawlings said Hymes misunderstands redevelopment laws and the processes the redevelopment agency must follow.

During a meeting of the committee Monday, Hymes told fellow panel members he was dissatisfied with Rawlings’ response and decided to hand out copies of the complaint letter as a way to provide information to downtown property and business owners.

“Sometimes it takes a public to get government or cities to listen,” Hymes said.  “If other people are asking, maybe you’ll see it as important.”

Other committee members promptly took Hymes to task for distributing the letter and said it was full of inaccuracies.

“It’s a total laundry list of all the urban myths of redevelopment,” member David Nilson said.

Janet Puckett, a committee member and executive director of the Vista Village Business Association, called the letter a “scare tactic.”

“Going out and scaring these people with information that is incomplete or inaccurate is not what I (as a PAC member) should be doing,” she said.

In the letter, Hymes cites the agency’s attempt to purchase the Vista Riviera Motel and lease the property to a nearby car dealership, North County Ford.  Redevelopment officials are currently negotiating a purchase with the motel owners, who have said they don’t want to sell the property, and the City Council authorized the agency to proceed with eminent domain if an agreement isn’t reached.

Hymes also said other committee members have an insensitive attitude to property owners who might not want to sell their properties to the agency — citing a remark Nilson made at a Jan. 11 meeting to “bulldoze” a property.

“I have a rude sense of humor,” Nilson said on Monday.  “I didn’t really mean it.”

“We all understand David was just making a flip comment,” Puckett said.

Rawlings said last month that the assertions Hymes is making about redevelopment are simply not correct.  He said Vista’s redevelopment plan has language that prohibits residentially zoned property from being taken through eminent domain and that the redevelopment agency is required by law to go through several steps, including negotiations with owners and City Council approval, before acquiring a property through eminent domain.

Rawlings said city officials would meet with individual property owners if the city becomes interested in their property.

“This effort has not been surreptitious, but has been very open and transparent,” Rawlings wrote in his response letter.

But Hymes said Rawlings’ and other members’ comments had not eased his concerns.

“I won’t accept your statements that (the letter was) inaccurate.  I won’t say I won’t write another letter,” Hymes said.

Rawlings said the city will begin unrolling a communication plan in May or June that will give property and business owners more information about redevelopment in the Paseo Santa Fe Corridor.

The redevelopment agency last month sold $36 million in bonds to begin purchasing property in the corridor, which stretches along South Santa Fe Avenue from Monte Vista Drive in the south to Orange Avenue in the north.

The redevelopment agency plans to purchase parcels it can bunch together, then sell them to private developers who will construct mixed-use buildings with ground-floor retail topped by offices and condos.

The North County Times: http://www.nctimes.com

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COPYRIGHT © 2010 Arthur J. Hazarabedian, Esq.