Here’s an opinion from the California Court of Appeal, issued last month but unpublished, which was recently ordered published by the court. It’s a lengthy (38 pages) and somewhat detailed opinion, but for those of you who do eminent domain, it’s a worthy read because it covers many bases, and covers them well.
First, the bottom line of San Diego Gas & Elec.Co. v. Schmidt, No. D062671 (July 21, 2014, published Aug. 13, 2014). Condemnor’s just compensation deposit: $712,200. The jury’s award: $8,034,000. That’s over an eleven-fold difference. Lowball Watch alert!
The case involved the taking of an easement for power lines, and the issues revolved around the highest and best use of the property (the jury agreed with the owner that mining was the highest and best use, and rejected SDG&E’s claim that residential development or habitat mitigation was the highest and best use), the method of valuation once the highest and best use was determined, and whether SDG&E’s position was unreasonable enough to merit an award of litigation expenses to the property ownwers.
The court of appeal came down on all questions on the side of the owners, and its analysis is a good read, a primer on how to approach these issues. The oddest argument put forth by SDG&E was that “the developer’s rule precluded defendants’ experts from testifying that the highest and best use of the property was a mining operation because such an operation did not currently exist on the property.” Slip op. at 13. But as we all know,highest and best use is not limited to current uses, but is “[t]he highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future is to be considered, not necessarily as the measure of value, but to the full extent that the prospect of demand for such use affects the market value while the property is privately held.” Slip op. at 7. Not surpringly, the court rejected the argument.
As for litigation expenses, the court of appeal reversed the trial court’s denial:
[W]e focus our analysis on whether SDG&E’s final $829,000 settlement offer (later increased to $954,000) was reasonable in light of the evidence admitted at trial and the compensation awarded. SDG&E’s final offers were about $7.1 million less than the verdict and amounted to about 11 percent of the verdict. Additionally, SDG&E’s final offers were mere token increases from its ultimate valuation of $712,200. Based on pure mathematics, SDG&E’s final offers were seemingly unreasonable.
We turn to the good faith, care and accuracy in how SDG&E determined the amount of its final offer. On this issue, defendants argue that SDG&E’s appraiser never investigated mining as a highest and best use or seriously analyzed the mining use issue. Instead it chose to adhere to its appraisal of the property as a residential development. SDG&E asserts it acted in good faith because a fundamental disagreement existed between the parties over what was to be valued and, as the trial court found, it did not act unreasonably when it stuck to its legal theory regarding the highest and best use of the property. We cannot uphold the trial court’s determination that SDG&E’s offer was reasonable as the undisputed facts show only one conclusion was possible.
Slip op. at 33-34.
More here (“Court Provides Guidelines on Valuing Natural Resources in Eminent Domain Proceedings“) from the California Eminent Domain Report.
San Diego Gas & Electric Co. v. Schmidt, No. D062671 (Cal. App. July 21, 2014)