A hypothetical or speculative use of property is not a proper basis for determining damages caused by a city's temporary construction easement, the First District Court of Appeal has ruled.

The unanimous three-judge appellate panel overturned a jury's decision to award a Fremont homeowner $195,000 in temporary severance damages. The First District ruled that the trial court judge improperly permitted the jury to consider compensation for hypothetical — rather than actual — injuries.

Although the First District appeared simply to uphold the decades-old principle that property owners are not entitled to damages for hypothetical loses, the Fremont homeowner has asked the state Supreme Court to overturn the appellate panel.

The property owners, George and Elizabeth Fisher, have owned a single-family house on Washington Boulevard for 20 years. In 2004, the City of Fremont offered the Fisher's $14,250 for a temporary construction easement (TCE) on 1,873 square feet of the Fisher's 6,846-square foot lot. The city needed the temporary easement for construction of the Washington Boulevard/Paseo Padre Parkway grade separation project.

The city and the Fishers could not reach agreement, so the city filed an eminent domain lawsuit later that year and sought immediate possession of the property rights, which the Alameda County Superior Court granted in January 2005. In July 2006, the city amended its eminent domain suit to seek a small permanent slope easement and extend the temporary construction easement until the end of 2009. Both sides made offers but they could not reach agreement. The Fishers demanded $320,000; the city offered $100,500, plus $1,334 a month from August 31, 2007 until completion of the project.

At the trial to determine the value of the taking, Superior Court Judge Harry Sheppard permitted the Fishers' real estate appraiser, Kurt Reitman, to testify that because a temporary construction easement encumbered the property, it could be sold only at a deep discount. Reitman testified that the highest and best use of the property was to demolish the current house and build a new one, which would not be possible with the temporary construction easement in place. Reitman pegged damages from the temporary easement at $207,664.

The city's appraiser said the temporary construction easement caused no damage and would actually be used for only a short period at the end of the project so the city could connect the Fishers' driveway to the newly elevated Washington Boulevard.

Ultimately, the jury awarded the Fishers $403,513 — $84,352 as fair market value of the temporary construction easement, $195,413 for temporary severance damages caused by the temporary easement, $15,500 as fair market value of the permanent slope easement, and $108,248 for permanent severance damages. Judge Sheppard went on to award the Fishers $125,400 in attorney's fees, $61,696 in expert witness fees and $39,927 for prevailing against the city's motions for either a new trial or a reversal of the verdict on temporary severance damages.

On the city's appeal, the case went to the First District, Division Two. In its opinion reversing the lower court, the First District thoroughly reviewed the state Supreme Court's holding in Metropolitan Water Dist. of So. California v. Campus Crusade for Christ, Inc., (2007) 41 Cal.4th 954. In that case, Campus Crusade sought compensation for seven years of construction by the water district on a pipeline crossing Campus Crusade's property. The court ruled that Campus Crusade was entitled to compensation for the construction period only if Campus Crusade could identify a specific loss (see CP&DR Legal Digest, September 2007).

In the Fremont case, the property owners presented no evidence that the temporary construction easement would interfere with their planned or intended use of the property. Reitman said that he had no information indicating the Fishers wanted to sell or develop their property, and the Fishers in fact argued that their intentions did not matter. They were wrong, the First District ruled.

"[T]he Supreme Court in Metropolitan Water makes clear that the property owner must establish a substantial impairment to the property owner's actual intended use of the property during the period of the temporary encumbrance," Justice James Lambden wrote. "Otherwise, there is no specific loss attributable to the temporary encumbrance."

The Fishers, however, "completely failed to identify any actual loss attributable to the delay caused by the TCE because they produced no evidence that they tried to or planned to sell the property during the five years the property was burdened by the TCE. They produced no evidence that the TCE interfered with their actual use of their current single-family home," Lambden wrote.

The court reversed the $195,413 award for temporary severance damages, and directed the trial court judge to reconsider the award of litigation expenses to the Fishers. The state Supreme Court has not yet decided whether to accept the case.

The Case:
City of Fremont v. Fisher, No. A116935, 08 C.D.O.S. 2438, 2008 DJDAR 3032. Filed February 28, 2008.
The Lawyers:
For the city: John H. Erickson, Erickson, Beasley & Hewitt, (510) 839-3448.
For Fisher: Heidi Timken, Timken, Johnson & Hwang, (925) 945-6211.