Past Action By City Not Part Of Fair Market Value Equation, Court Holds
An appellate court has overturned a jury's verdict on the fair market value of property that the City of Ripon took through eminent domain. The appellate panel ruled that the trial judge allowed the jury to hear inadmissible evidence about how the city allegedly blocked development of the property to diminish its value.
"We conclude it is reasonably probable the City would have obtained a more favorable result in the absence of the challenged evidence, and the erroneous admission of the evidence constitutes a miscarriage of justice that requires reversal of the judgment," Justice Richard Sims wrote for the unanimous three judge panel of the Third District.
In November 1998, the city filed an eminent domain complain to acquire 0.6 acres along Highway 99 owned by Marshall and Billie Sweetin, who lived on the property and operated an auto repair business there. The city said it needed the property for construction of a new interchange at Jack Tone Road. The Sweetins answered the eminent domain lawsuit by alleging that the city's "unreasonable and oppressive conduct and activities" had impaired their property value.
In June 2000, the city sought to bifurcate the questions of precondemnation damages and fair market value. Precondemnation damages are commonly known as Klopping damages, in reference to the state Supreme Court decision in Klopping v. City of Whittier, (1972) 8 Cal.3d 39. In Klopping, the court ruled that a property owner must receive the chance to argue that a public agency that is taking property via eminent domain has acted improperly or has unreasonably delayed, causing a decrease of property value.
At a hearing in August 2000, however, the Sweetins stipulated that they were not seeking Klopping damages. Instead, they argued that the city's activity was relevant to the question of their property's valuation, and that they should be allowed to show a jury the effect of that activity on the "highest and best use" of the property.
The city objected, but San Joaquin County Superior Court Judge K. Peter Saiers agreed with the Sweetins. During the trial, the landowners argued that the value of their property should be based on highway commercial uses. A defense expert presented testimony that the city had known since 1988 that it would take the property for the interchange. If it were not for the interchange project, the expert testified, the city would have extended sewer, water and storm drain services to the Sweetins' property during a 1994 infrastructure project, allowing them to pursue development of a fast-food restaurant.
The city argued that the property value should be based on light industrial uses. The property was zoned light industrial and nearby uses on that side of the freeway were light industrial. The city set a value of $190,000. The Sweetins' expert said the property was worth $365,000. The jury accepted the Sweetins' value, and Judge Saiers also awarded them $56,000 in attorneys' and other legal costs.
The city appealed, arguing that the verdict was based on inadmissible evidence. The appellate panel agreed.
The Sweetins' claim was "a classic Klopping claim," Sims wrote. "The appropriate procedure is to bifurcate the trial of the action so that the question of the liability of the public entity is first adjudicated by the court without a jury."
"[T]he evidence of the City's alleged unreasonable precondemnation conduct was not relevant to show the ‘highest and best use' of the property as that term is properly understood," Sims continued. Rather, highest and best use reflects the use to which the property would reasonably be put in the near future.
"[E]vidence of the City's past alleged unreasonable conduct did not tend to show that future use of the property for ‘highway commercial' purposes was reasonably likely in the reasonably near future," Sims wrote. "Admission of the evidence was in error. The erroneous admission of this evidence allowed the jury to adjudicate a question that should have been adjudicated by the court …" However, because the Sweetins stipulated they were not seeking Klopping damages, there was nothing for the court to adjudicate.
Allowing this testimony into the jury trial "doubtless affected the jury's computation of the fair market value," the appellate court held.
City of Ripon v. Sweetin, Nos. C036592, C037212, 02 C.D.O.S. 6855, 2002 DJDAR 8585. Filed July 30, 2002.
For Ripon: Thomas Terpstra, Herum, Crabtree, Dyer, Zolezzi & Terpstra, (209) 472-7700.
For Sweetin: Joseph Fagundes, Cassel, Malm Fagundes, (209) 870-7900.