One from the California Court of Appeal that may be interesting even though it is about municipal law, and not eminent domain or takings.
We present to you San Diegans for Open Gov’t v. City of San Diego, No. D067578 (Mar. 3, 2016, published Mar. 16, 2016), because the court concluded that an appraiser, hired by a tenant to value property leased from the city, was an “independent fee appraiser” as required by the city’s municipal code.
The code requires that when the city leases property it owns, an “independent fee appraiser” must value the property. BH, which owns and operates the Bahia Resort Hotel on city-owned land, wanted to extend its lease for another 40 years. The city council approved, and BH hired an appraiser to value the property. The city didn’t do its own appraisal, but the director of the city’s real estate assets division stated that BH’s appraiser’s methodology was sound. The city renewed the lease.
SDOG filed a lawsuit, arguing that the appraiser wasn’t “independent” because “because he was retained or otherwise compensated by one of the real parties in interest and the city council’s resolution approving the lease did not contain a statement of the market value of the property as appraised by an independent fee appraiser or City staff.” Slip op. at 3.
The trial court disagreed, and the court of appeal affirmed. Yes, BH paid the appraiser, but didn’t tell him how to do his work, didn’t tell him what to conclude, and didn’t tie his fee to his result. The appraiser’s credentials were pretty good: he had worked on most of the hotel development in San Diego for the last decade. The city’s director of real estate assets confirmed that the methodology he employed was “sound,” and that the appraiser “did a very diligent research in arriving at his numbers, did a discounted cash flow, which I believe is a very reasonable way to value this property.” Slip op. at 8. The appraiser himself said he was not dependent, and that he had a reputation to protect.
Thus, the court of appeal concluded that there was enough evidence to support the city’s conclusion that the appraiser was independent. “The evidence summarized above provides adequate support for a finding by the city council that Goodwin was not subject to the control or influence of BH or anyone else and was therefore an independent fee appraiser.” Slip op. at 11.
The court rejected the argument that the burden was on the city to show he was unbiased. In the court’s words, “[c]ontrary to SDOG’s argument, the purported lack of ‘unbiased’ evidence does not show there is insufficient evidence for that finding by the city council.” Slip op. at 11. That’s a lot of double-negatives. The court also contrasted the code’s requirement for an “independent fee appraiser” with another provision in the code which requires a “qualified professional independent real estate appraiser” to value the future rent payments. The latter section, the court concluded, was more specific since it required that the city and the tenant mutually agree to select an appraiser from a list of appraisers approved by the city. That section is a different ballgame when it comes to defining “independent,” and no such limitations apply to the “fee appraiser” requirement.
Oh, and to be “independent” under the city code provision at issue, an appraiser does not need to be a member of the Appraisal Institute (MAI). Nothing in the code or case law imposes such a requirement.
San Diegans for Open Gov’t v. City of San Diego, No. D067578 (Cal. App. published Mar. 16, 2016)