The dramatic moment of the day during last Thursday's California Supreme Court oral arguments in City of Perris v. Stamper, No. S213468 (which we previewed here: "Cal Supreme Court Oral Argument Preview: In Just Comp Trial, Does Jury Determine Reasonable Probability Of Exaction?"), occurred during the rebuttal arguments by the city's lawyer. The case involves whether the city can avoid paying just compensation by showing that it would, in the future, exact from the owners the very same property which the city is condemning. The only way the city wouldn't require dedication of this property is if the owner continued to use it for agricultural purposes.
Counsel for the city had opened her initial argument time with this:
May it please the court...The project effect doctrine, Your Honors, categorically does not apply to dedication. The city can validly get a piece of land for free because it is roughly proportional to the harms and the burdens that it will impose on society at the time of its development. If we can get it for free, then we don't have to pay 1.3 million dollars for it here.
She continued to repeat the phrase "get it for free" during her argument, and when she came back for rebuttal, Justice Corrigan (pictured above) seemingly had had enough. This colloquy resulted:
A: ...it was a circumstance where we would have imposed the dedication, it would have become effective at that time, whether we were ... we could have sat and waited for the property owner to come in, so that's an additional argument, but you're right in identifying the windfall. I also want to address --JUSTICE CORRIGAN: It says here there is no possibility of windfall. And your answer is --A: But but there is Your Honor, because if they -- they will give -- we will pay them 1.3 million dollars for this property that we should get for free because their development would impose that much burden --JUSTICE CORRIGAN: It always bothers me when I hear you say "we should get this for free."A: Your Honor --JUSTICE CORRIGAN: -- because you're picking up a very --A: Because, I --JUSTICE CORRIGAN: -- you're picking up a very challenging position for yourself when the government comes in and says "you own it, but we should get it for free."A: But Your Honor, the point is that that would be to offset the burdens the development of the property would generate on the society --JUSTICE CORRIGAN: If they're applying to develop the property --A: Thank you, Your Honor. If they don't want to -- if they want to take the stance that they have no intention of developing this property, then under the definition of highest and best use, they're limiting themselves to an agricultural use.JUSTICE CORRIGAN: They're -- they own it. They don't have to, at your convenience, make a decision about whether or when they want to develop their property, do they? Is there a law that dictates that result?A: Your Honor, there is a hundred years of law that would be overturned if the project effect doctrine would be applied to the Porterville doctrine. Because, as Your Honor pointed out correctly, on some level, every time that a city is constructing a road it relates back to some circulation element update -- and all the cases, if you go back, they did. And therefore -- and the statute has been clear, just because projects are related, that doesn't make it project effect.
Remember, this is a hypothetical dedication because this is all in the context of highest and best use. So the city's position is that it can take it "for free" because, hey, if the owners ever came in for permission to develop it, we'd just demand that they give us this exact same property as a condition.
There's more, of course, and you can listen to the entire argument below.
The court is presented with two big questions. First, in a just compensation trial, whether the judge or the jury determines if it is reasonably likely that the city would and could impose an exaction that would allow the city, in the words of the city's lawyer, "get for free" the property it is taking. Second, whether evidence of an exaction is admissible, or must be disregarded as a project effect.
Here's the full argument recording (or download here).
The questioning from the bench was active -- though not, in our view, as engaged as it was during the other eminent domain case recently argued. But like that case, Justice Goodwin Liu seemed to have the most interest in the case and the most questions.
This case is a tough read, and we don't have any firm predictions. But we will say this:
- Juries are usually tasked with resolving whether something is "reasonably likely" to occur, and we don't see why that's not true here, even if the question can be phrased as one of constitutional law. The city's counsel kept reiterating that the property owners were trying to get the exaction declared unconstitutional, and that is a task for the court, not a jury. But recall that this issue arose in the course of determining whether it was reasonably likely the city would be able to exact the taken property, and not an actual challenge to the validity of any exaction. This, after all, is a hypothetical, like all highest and best use questions where there is an argument that something is reasonably likely to occur in the future, and thus the market would assign it value. The city, however, argues that it absolutely would require a dedication; the owner, on the other hand, claims that there might be several reasons why the city would not or could not do so. It might be politically unwise, the exaction might not have the required nexus and proportionality, for example.
- In our view, it would make the most sense for the court to resolve the project effect issue first, because if it concludes that the potential exaction is a project effect and thus cannot be considered, it can avoid wading into the judge-or-jury question entirely.
- We view the critical question regarding the project effect issue is definition of "the project." The city argues that the exaction requirement is a product of its general plan, and although related (obviously), it isn't part of the actual project for which the property is being taken. The court seemed to be trying to find where the line might be between general requirements and things which are a result of the project, and appeared to be focusing more on a rule for future cases, than resolving the present one. Whether that is some indication of how the court might rule here, we can't be sure.
- Responding to those concerns, the owner argued for "but for" linkage, and a "substantial" factor type of test.
- Several justices seemed concerned about the "windfall" question. That is, whether by allowing the owners to recover the full compensation by excluding evidence of the futue hypothetical exaction as a project effect, the court would be awarding them more than they are entitled to (in other words, the monetary equivalent of property free of the exaction regime). We thought the property owner's counsel had a compelling answer to this one, when he argued that there is no windfall to the owners because the city could always recapture any extras when and if the owners actually came in with a development proposal in the future. If the owners never sought to develop their land, there would be no windfall either, because there's no development.
- Should the court accept the city's argument, however, and if there is no future development proposed, that value would be lost to the owners forever. The danger of present undercompensation outweights any risk of future windfall.
We're eager to hear what others think about the arguments. Listen yourself to see what you think.
Update: "City of Perris v. Stamper oral argument recap" from Pacific Legal Foundation's Julio Colomba.