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Defendant In Eminent Domain Case Sells, Still Wins Litigation Expenses

An appellate court has ruled that a property owner that sold its property to a third party after the Temple City Redevelopment Agency had commenced eminent domain proceedings is entitled to litigation expenses.

A trial court judge had refused the request of Bayside Drive Limited Partnership for $43,000 in litigation expenses incurred while defending the city's condemnation lawsuit. The trial court said the property owner was not eligible for reimbursement because the eminent domain proceeding was dismissed due to Bayside's voluntary sale of the property to someone else.

But a three-judge panel of the Second District Court of Appeal, Division One, ruled otherwise. The court cited Code of Civil Procedure § 1268.610, subdivision (a)(1), which states in part: "[T]he court shall award the defendant his or her litigation expenses whenever … the proceeding is wholly or partly dismissed for any reason."

"We find nothing ambiguous about the statute and conclude it must be given its plain meaning," Justice Miriam Vogel wrote for the court

The Temple City Redevelopment Agency in late 2004 filed two eminent domain complaints to acquire property — one against Bayside and one against Pi Yun Hou Wang. The agency deposited $1.25 million as the probable amount of compensation for Bayside's property. While an October 2005 trial date was pending, Bayside sold its property to Wang for $2 million. The agency then dismissed both eminent domain actions because Bayside was no longer a property owner, and because Wang agreed to develop the property according to the city's redevelopment plan.

Bayside then requested $43,000 in litigation expenses, including $35,000 for attorney fees. Bruce Mitchell, a temporary judge of the Los Angeles County Superior Court, initially disallowed $20,000 of the request. After additional briefing, Mitchell awarded Bayside $592 in "ordinary costs" but refused the remaining $22,500, which he said would be a windfall for the property owner. Bayside then turned to the appellate court for the $22,500.

The Second District panel said the law supports Bayside's request. It does not matter why the eminent domain lawsuit was dropped, the court said in its short opinion, which repeatedly cites the phrase "for any reason" contained in the statute.

"[T]he purpose of the statute is plain — to compensate a defendant who has been put to the task of defending a condemnation action when, for whatever reason, the action is dismissed. That the defendant might fortuitously be able to extricate itself from an expensive condemnation action by selling the property to a willing buyer may or may not mean the defendant has thereby recouped the litigation expenses incurred up to the time of sale," Vogel wrote.

The court rejected the city's argument, and the trail court's finding, that this reading of the law permits potential abuses. "[W]e do not see a market developing for the purchase of properties in the midst of pending condemnation proceedings simply to permit the seller to recoup a portion of the fees and costs incurred in defending the property up to the time of the sale — and we therefore refuse to adopt the agency's ‘don't open the floodgates' argument where there is no chance of a flood," Vogel wrote.

The court further ruled that Bayside is eligible for fees and costs — including attorney fees — incurred during the appeal. The Second District sent the case back to the Superior Court for a determination of reasonable appellate litigation expenses and a determination on whether any of the requested $22,500 should not be paid by the redevelopment agency.

The Case:

Temple City Redevelopment Agency v. Bayside Drive Limited Partnership, Nos. B198736, B189737, 07 C.D.O.S. 970, 2007 DJDAR 1207. Filed January 25, 2007.

The Lawyers; For Temple City: Dean Dennis, Hill, Farrar & Burrill, (213) 620-0460.

For Bayside: Christopher Sutton, (626) 683-2500.

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