People Ex Rel. Department of Public Works v. Dunn , 46 Cal. 2d 639 ( 1956 )

GIBSON, C. J.

Defendant owners have appealed from a judgment condemning two parcels of land for highway purposes. Parcel 1 consisted of several lots at the end of an unimproved block owned by defendants, and Parcel 2 consisted of two lots separated from Parcel 1 by an intervening street. The owners commenced construction of a garage on Parcel 2 about August 1, 1953, and assertedly spent some $12,000 on the building prior to commencement of this action. On August 19 the Highway Commission adopted a resolution determining that public interest and necessity required the condemnation of the two parcels, and on August 25 this action was brought.

The People and the owners each produced two expert witnesses who gave conflicting opinions as to damages. With reference to Parcel 1, the estimates of value ran from $8,340 to $32,000, the severance damage from nil to $4,000, and the benefit to the remainder of the property from nil to $5,000. As to Parcel 2, the values ranged from $15,000 to $46,550. The jury, which viewed the premises, found that the value of Parcel 1 was $11,000, the severance damage was $500, and the special benefit to the remainder was $2,000, and that the value of Parcel 2 was $15,000. Judgment was thereafter entered awarding $11,000 for Parcel 1 and $15,000 for Parcel 2.

The principal question is whether the court erred in rejecting evidence concerning a lease on Parcel 2. The lease, dated July 31, 1953, was for a term of 25 years, and it provided that the owners should construct a building for garage purposes and that the lessees should pay any increase in real property taxes after the first levy against the improvements. The lease was first mentioned during the direct examination of the owners’ witness, Harrington, who testified that he had the lease in mind in appraising the value of the property. On cross-examination Harrington was asked to give a breakdown of the value of $46,550 which he placed on Parcel 2. He said he arrived at that figure by allowing $18,970 for the land, $12,580 for the partially completed building and $15,000 for the “bonus value” of the lease. The court granted a motion to strike the valuation testimony of Harrington and instructed the jury, “The witness Harrington further testified among other things in substance that in assessing the value of Parcel Number 2, he took into consideration a so-called bonus value of $15,000 on a lease on that property. You will disregard all of the testimony of the witness Harrington as to that lease to the same extent as though you never heard it.” Later, when objection was made to a question asked on the direct examination of one of the lessees, the court ruled that, by analogy to cases holding that evidence of the net profit from property is not admissible, the lease would not be received in evidence.

Where it appears on cross-examination that thé witness’ testimony as to market value is based upon improper considerations, it may be stricken from the record. (City of Stockton v. Ellingwood, 96 Cal.App. 708, 716, 722 [248 P. 272]; City of Redding v. Diestelhorst, 15 Cal.App.2d 184, 193 et seq. [59 P.2d 177]; see Rose v. State, 19 Cal.2d 713, 742-744 [123 P.2d 505].)

It is settled that evidence of profits derived from a business conducted on the land is too speculative, uncertain and remote to be considered as a basis for ascertaining market value. (Stockton & Copperopolis R. Co. v. Galgiani, 49 Cal. 139 [vineyard]; de Freitas v. Town of Suisun City, 170 Cal. 263, 265-266 [149 P. 553] [agricultural land]; City of Los Angeles v. Deacon, 119 Cal.App. 491, 494 [7 P.2d 378] [rock quarry]; 7 A.L.R. 163, 164; 16 A.L.R.2d 1113.) On the other hand, it is the general rule that income from property in the way of rents is a proper element to be considered in arriving at the measure of compensation to be paid for the taking of property. (See 1 Orgel on Valuation under Eminent Domain (2d ed., 1953), pp. 703-704, 708-712; 5 Nichols on Eminent Domain (3d ed., 1952), pp. 212, 215-219; Jahr, Law of Eminent Domain (1953), pp. 226-228; 18 Am.Jur. § 344, p. 988; 65 A.L.R. 455; 16 A.L.R.2d 1113.) The court erred in striking the evidence of Harrington and instructing the jury to disregard all his testimony with respect to the lease.

. It is argued that the error was not prejudicial because the essential terms of the lease were before the jury and because there was evidence that the lease was entered into for the purpose of increasing the amount of the award. The evidence with respect to whether the lease was made in good faith was conflicting, and the jury was not instructed on the subject. Although plaintiff’s witnesses gave some testimony concerning the terms of the lease, the jury was precluded by the instructions from considering the lease as a factor in fixing the value of the property. We are satisfied that, in view of the entire record, the error was prejudicial.

As to Parcel 1 it is contended that, in fixing the amount of severance damages, it was error to admit evidence of the probability of a change of zoning of the remainder of the block from which Parcel 1 was taken. Where the land is not presently available for a particular use by reason of a zoning ordinance or other restriction imposed by law, but the evidence tends to show a “reasonable probability” of a change in the near future, the effect of such probability upon the minds of purchasers generally may be taken into consideration in fixing present market value. (Long Beach City H. S. Dist. v. Stewart, 30 Cal.2d 763, 768-769 [185 P.2d 585, 173 A.L.R. 249], quoting with approval from 1 Nichols on Eminent Domain (2d ed.) § 219, p. 669.) Here the People’s experts testified that they had made investigations and that as a result they were of the opinion that a change of zoning was reasonably or highly probable. There was no error in the admission of such testimony.

The judgment is affirmed as to Parcel 1 and reversed as to Parcel 2.

Traynor, J., Spence, J., and McComb, J., concurred.