DocketNumber： No. S051436
Judges： Baxter, Kennard, Werdegar
Filed Date： 8/25/1997
Status： Precedential
Modified Date： 11/2/2024
Opinion
The taking of private property in eminent domain is constrained by the California Constitution, which provides in relevant part that “[p]rivate property may be taken or damaged for public use only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner.” (Cal. Const., art. I, § 19; see also U.S. Const., Amends. V, XIV.) By statute, the owner of property acquired by eminent domain is entitled to the fair market value of the property taken. (Code Civ. Proc., §§ 1263.010, 1263.310.)
In the early eminent domain case of Beveridge v. Lewis (1902) 137 Cal. 619 [70 P. 1083] (Beveridge), this court distinguished between different types of benefits to remainder property. We stated: “Benefits are said to be of two kinds, general and special. General benefits consist in an increase in the value of land common to the community generally, from advantages which will accrue to the community from the improvement. . . . [TD Special benefits are such as result from the mere construction of the improvement, and are peculiar to the land in question.” (Id. at pp. 623-624.) Only special benefits, we concluded, may be set off against severance damages. (Id. at p. 624.) Later cases have reiterated the distinction. (See, e.g., Pierpont Inn, Inc. v. State of California (1969) 70 Cal.2d 282 [74 Cal.Rptr. 521, 449 P.2d 737] (Pierpont Inn).)
Here, the Los Angeles County Metropolitan Transportation Authority (the MTA) brought a condemnation action to acquire a narrow strip of land for an easement along one side of a parcel owned by Continental Development Corporation (Continental) for the construction of a portion of an elevated
In pretrial proceedings relating to Continental’s severance damages claim, the MTA proffered evidence that the value of office buildings in other localities increased as a result of their proximity to public transit stations, as well as expert testimony that the value of Continental’s property would increase by several million dollars as a result of the operation of the line. The trial court ruled the evidence inadmissible; the court reasoned that proximity to the transit station was not a special benefit because it was shared by numerous properties in the vicinity and, therefore, was not a feature peculiar or special to Continental’s property. At the conclusion of the trial, the jury returned a verdict awarding Continental compensation for the property taken and for severance damages. On the MTA’s appeal from the ensuing judgment, the Court of Appeal affirmed.
The MTA sought review, contending the lower courts had erred in concluding no special benefit existed here and arguing that the very distinction between general and special benefits is unworkable, produces inconsistent results when applied in different cases, and should be abolished.
For the reasons discussed below, we conclude the distinction between general and special benefits no longer finds support in the reasons articulated at its inception. We further conclude this lack of support and the difficulties inherent in courts’ efforts consistently to apply the distinction warrant overruling this aspect of Beveridge and its progeny. We therefore reverse the judgment and remand the case for a new trial on severance damages. For guidance on retrial, we further explain that the Court of Appeal erred in finding the trial court abused its discretion in denying Continental’s motion for litigation expenses.
Facts
Continental owned a 14-acre parcel of land that was divided into 3 lots. One of the lots, the subject of these proceedings, is triangular in shape and approximately 4.43 acres in size. The lot is located on Rosecrans Avenue near Aviation Boulevard in the City of El Segundo. The property extends for some 655 feet along Rosecrans Avenue on the south and for some 785 feet along a railroad right-of-way on the northeast side. The third side of the triangle borders on other properties in an 86-acre corporate development known as Continental Park.
On September 4, 1990, the Los Angeles County Transportation Commission, the predecessor of the MTA, brought an eminent domain proceeding to
Prior to trial, the court conducted a hearing to determine whether the MTA would be permitted to present evidence on the issue of severance damages that proximity to the Douglas Street Station was a special benefit that enhanced the value of Continental’s remaining property. The question was decided on the parties’ memoranda and declarations; no testimony was taken. Continental’s appraiser, Joseph A. Hennessey, averred there were 565 separate parcels of property located within 1,700 feet of the Douglas Street Station, of which 7 were being condemned for the construction of the Green Line. Attached to the Hennessey declaration were two reports prepared for the MTA by consultants SGM Group and Desmond, Marcello & Amster. The SGM report sets forth its analysis of the effect on rents and property values of modem elevated rail lines in other cities. SGM found that buildings within walking distance of San Francisco Bay Area Rapid Transit (BART) stations enjoyed, on average, 11 percent lower vacancy rates and 20 percent higher rents than comparable buildings located beyond walking distance from BART stations. SGM concluded that location of the Douglas Street Station within walking distance of Continental’s property enhanced its value by $4.1 million. The Desmond report concluded the value of Continental’s property was enhanced by $3,760,000 due to proximity to the station.
The trial court ruled, however, that “[t]he benefit of being within walking distance of a rail transit station is merely the benefit of access. As such it confers no peculiar or unique benefit upon defendant’s property.” Accordingly, the court declined to permit introduction of evidence or cross-examination on the subject of enhancement in value to Continental’s property resulting from such proximity. The MTA moved for reconsideration of the court’s ruling, arguing that it would be mere speculation to attempt to predict future rents for Continental’s property without taking into account all circumstances affecting future rent and future value, including the effect of proximity to a transit station. The court denied the motion, and the case proceeded to trial before a jury.
On the issue of severance damages, Continental sought recovery based on three factors: building redesign, noise mitigation, and visual impact.
Continental presented evidence it spent $23,123 to have plans redrawn to resite the building farther from the elevated line. The MTA essentially did not dispute that claim. Continental also presented evidence that, to soundproof the portion of the building facing the elevated line, Continental laminated the windows on the northeast side and incurred related expenses. The parties disputed whether further soundproofing would ultimately be needed; the MTA contended the existing lamination would suffice, but Continental introduced evidence it would need to install double windowpanes at a cost of over $400,000.
The major contested issue at trial was Continental’s claimed damages stemming from the effect of the elevated line on views from offices on the northeast side of the building. Hennessey, Continental’s appraiser, testified he believed those offices would command lower rents; he capitalized the projected lower rents to arrive at an opinion the property would lose $1,038,300 in value from the visual impact of the Green Line. The MTA presented the testimony of Lawrence Goldstein, who had studied the economic effects of urban transit lines on real estate values. Goldstein testified he compared rents for properties within 90 feet of elevated rail lines in Washington, D.C., and in areas served by the BART system in the San Francisco Bay Area, with rents of comparable properties located substantially farther from the lines. He concluded commercial office buildings located next to modem elevated rail lines suffered no decrease in rents.
The jury’s total severance damages award was $1,015,793. Because the trial court denied the MTA’s request for a special verdict form that would have required the jury to state separately the amounts awarded for different elements of severance damages, no such allocation was made. Nevertheless, assuming the jury awarded Continental the full amount it sought for noise mitigation ($416,604), it is clear a substantial part of the award represented damages for visual impact.
The MTA moved for a new trial, contending (1) the award of severance damages for visual impact was not supported by substantial evidence, (2) the trial court erred in refusing to allow the MTA, during its cross-examination
Discussion
Just Compensation: Offset of Benefits Against Severance Damages
“Just” compensation for severance damages has been defined in different ways during different periods in California history. The original formula for calculating just compensation in the case of a partial taking was articulated in the context of condemnation by a private railroad company. With the Railroad Act of 1861 (Stats. 1861, ch. DXXXII, § 30, p. 621 (the Railroad Act)), the Legislature had authorized private railroad companies to exercise the power of eminent domain, taking the view that in providing a means of transportation to isolated areas of the state, the railroads performed a public service. In S. F., A. & S. R. R. Co. v. Caldwell (1866) 31 Cal. 367 (Caldwell), a private railroad company condemned several tracts of land for the construction of a railroad. As prescribed by the Railroad Act, commissioners were appointed to take evidence and assess the compensation to be paid for the lands. The railroad company took exception to the assessment, arguing the commissioners erroneously failed to consider the benefits or advantages accruing to the landowners by reason of the construction of the railroad, despite the Railroad Act’s express directive to do so. The lower courts denied relief, and the railroad company appealed to this court.
The Railroad Act directed that the value of any benefits accruing to the landowner’s remaining property, as a result of the railway, be set off in full or partial satisfaction of the compensation owing for the property taken.
This court revisited the setoff issue in California P.R.R. Co. v. Armstrong (1873) 46 Cal. 85 (Armstrong). In Armstrong, the railroad company condemned a tract of land and obtained a court order for possession pending determination of just compensation. After construction of the railway, the commissioners estimated the value of the condemned land prior to the taking
The Armstrong court lost no time in rejecting the landowner’s first proposition, that he was entitled to the cost of building the railroad on his land, noting: “Neither the Constitution nor the statute contemplates that a person, whose land is taken in the exercise of the right of eminent domain, shall be entitled to anything beyond a ‘just compensation.’ He is to be paid the damage he actually suffers, and nothing more.” (46 Cal. at p. 90.)
The Armstrong court also rejected the landowner’s second argument, that only special benefits should be set off against severance damages: “[T]here is no valid reason for this distinction. The theory of the statute is, that the land owner shall receive a fair, just compensation for the damage he suffers, and if that portion of his tract which is not taken will be enhanced in value by the construction of a railroad, his damages will be diminished to the extent of the enhancement, and hence the statute contemplates that by deducting this benefit from the damages, the sum which remains will constitute a ‘just compensation’ in the sense of the Constitution. This was the view of the question announced in the case of the San Francisco, Alameda, and Stockton Railroad Company v. Caldwell, 31 Cal. 367, which is decisive of this point.” (Armstrong, supra, 46 Cal. at p. 91.)
The decisions in Caldwell, supra, 31 Cal. 367, and Armstrong, supra, 46 Cal. 85, thus endorse the principle that just compensation consists in no more and no less than making the landowner whole for the loss sustained as a result of the taking. That is, the landowner is to be “put in as good position pecuniarily as he would have occupied if his property had not been taken.” (United States v. Miller (1943) 317 U.S. 369, 373 [63 S.Ct. 276, 279-280, 87 L.Ed. 336, 147 A.L.R. 55].) “He must be made whole but is not entitled to more.” (Olson v. United States (1934) 292 U.S. 246, 255 [54 S.Ct. 704, 708, 78 L.Ed. 1236]; see also Costa Mesa Union Sch. Dist. v. Security First Nat. Bk. (1967) 254 Cal.App.2d 4, 10 [62 Cal.Rptr. 113].)
Former section 1248, like present section 1263.410, authorized a setoff of “benefits,” without limitation, in all cases in which property is taken for a public use. In contrast to the statutory provision, former article I, section 14 of the state Constitution provided: “Private property shall not be taken or damaged for public use without just compensation having been first made to, or paid into court for, the owner, and no right of way shall be appropriated to the use of any corporation other than municipal until full compensation therefor be first made in money or ascertained and paid into court for the owner, irrespective of any benefit from any improvement proposed by such corporation, which compensation shall be ascertained by a jury, unless a jury be waived, as in other civil cases in a court of record, as shall be prescribed by law.” (Italics added.)
Article I, section 14 was added to the Constitution in reaction to the private railroad companies’ speculative computation of benefits. (See Note, Benefits and Just Compensation in California (1969) 20 Hastings L.J. 764.) As noted above, the Railroad Act had invested private railroad companies with the power of eminent domain, inasmuch as providing a means of transportation to isolated areas of the state was viewed as a public service. At the same time, however, the railroad companies were operated for private gain. To minimize the cost of obtaining rights of way, railroad companies frequently would take a portion of a landowner’s tract and, under the before-and-after rule of Caldwell, supra, 31 Cal. 367, would deem the benefit to the remainder property to exceed the fair value of the part taken, and thus would offer no monetary compensation for the taking. As the majority opinion in Beveridge describes this practice: “Prior to the adoption of the present constitution the supreme court had decided, in a case where it was found that there were no special benefits, but only general benefits as I have defined them, that such benefits could be set off against damages, and that by this rule the owner was fully compensated. (California Pac. R. R. Co. v. Armstrong, 46 Cal. 85.) By section 14, involved here, I believe the people intended to overrule this case and other like decisions, so far as applicable to private railroad corporations.” (Beveridge, supra, 137 Cal. at p. 624, italics added.)
It is in light of this history that we must read the Beveridge court’s analysis of the distinction between general and special benefits. In Beveridge, the court addressed two issues. Plaintiff Philo J. Beveridge, an agent for the Los Angeles Pacific Railway, instituted the condemnation proceedings to secure a right-of-way over defendant Mary Lewis’s land solely in order to convey it to the railway, which planned to build, own, and operate a railroad. In assessing the compensation due a landowner, former section 1248, as mentioned, authorized setoff of all benefits, “in all cases.” Lewis, in an effort to avoid any setoff, sought to introduce evidence of Beveridge’s status as an agent for the railway, on the theory that under former article I, section 14 of the California Constitution, setoff of benefits in condemnation actions by corporations “other than municipal” was precluded.
Acknowledging the difference between the constitutional provision’s prohibition against setoff when the condemner was a private corporation and the statute’s uniform rule of setoff in all cases, the Beveridge court first considered whether state constitutional equal protection principles would permit awarding a lesser sum to a landowner whose property was taken by a natural person than that awarded a landowner whose property was taken by a private corporation, especially when the natural person could immediately transfer the property to a corporation. The Beveridge court concluded such a result was constitutionally impermissible. (Beveridge, supra, 137 Cal. at p. 623.) The court thus held that, despite California Constitution, former article I, section 14’s complete ban on offsets in the case of condemnations by private corporations, landowners must receive the same compensation regardless of the nature of the condemning entity. (137 Cal. at p. 623.)
The Beveridge court then turned to the question that concerns us, i.e., what benefits must be set off in calculating an award for severance damages. The
Against this background, in particular the prohibition against compensation in the form of “conjectured advantage,” the Beveridge court turned its attention to the distinction between general and special benefits. “Benefits are said to be of two kinds, general and special,” the court observed. (Beveridge, supra, 137 Cal. at p. 623.) “General benefits consist in an increase in the value of the land common to the community generally, from advantages which will accrue to the community from the improvement. [Citation.] They are conjectural and incapable of estimation. They may never be realized, and in such case the property-owner has not been compensated save by the sanguine promise of the promoter.” (Beveridge, supra, 137 Cal. at pp. 623-624.) Special benefits, by contrast, are “such as result from the mere construction of the improvement” (id. at p. 624), or, in other words, “reasonably certain to result from the construction of the work” (id. at p. 626), and are “peculiar to the land in question” (id. at p. 624, italics added).
Thus, the Beveridge court distinguished general and special benefits along two distinct dimensions: generality versus peculiarity and conjecture versus certainty. The opinion does not, however, definitively state whether, to support a finding of a “general” benefit, the value of an alleged enhancement must both be conjectural or uncertain and lack peculiarity to the remainder property, or whether lack of peculiarity alone would suffice. That is, Beveridge does not resolve whether a reasonably certain, nonspeculative, nonconjectural enhancement that is not peculiar to the property in question, but is shared by a number of properties in the neighborhood, can nevertheless constitute a special benefit.
As indicated, the Beveridge court described special benefits as “peculiar to the land in question.” Although the term “peculiarity” connotes singularity or uniqueness, it also refers to the characteristic of belonging especially or exclusively to a particular group. (See Webster’s New Internal. Dict. (2d ed. 1958) p. 1801.) The parties agree a benefit need not be absolutely unique to the property in order to be considered special. That consensus scarcely advances our inquiry, however, as Beveridge gives no direction as to how widely a benefit may be shared and still be considered special rather than general.
Since Beveridge was decided, we have not attempted to clarify the rule it announced. Our most recent decision bearing on the general/special benefit dichotomy, Pierpont Inn, supra, 70 Cal.2d 282, merely applied Beveridge without providing additional guidance. In that case, a freeway off-ramp near the property in question was deemed a general benefit, the court merely noting “the same benefit . . . was received by ‘all the properties in the vicinity’ and ... it was not ‘special or peculiar only to Pierpont Inn.’ ” (Id. at pp. 295-296.) Beyond culling from Beveridge and Pierpont Inn two polarized sets of adjectives describing general and special benefits, Continental does not assist us in framing a test that is capable of easier or more predictable application.
The difficulty of the distinction has been widely remarked. As then Presiding Justice Richardson said, in his opinion for the Court of Appeal, Third Appellate District, in People ex rel. Dept. Pub. Wks. v. Giumarra Farms, Inc. (1971) 22 Cal.App.3d 98 [99 Cal.Rptr. 272] (Giumarra Farms): “The enunciation of the [Beveridge] rule . . . has proven somewhat easier than its application. . . . The application of the Beveridge principle has not been uniform and it has been criticized as causing ‘confusion.’ (See Gleaves, Special Benefits in Eminent Domain, Phantom of the Opera (1965) 40 State Bar J. 245, 249.) [¶] Nor has there been uniformity of opinion in other jurisdictions as to what constitutes benefits chargeable against the landowner in a condemnation action. ‘Upon this subject there is a great diversity of opinion and more rules, different from and inconsistent with each other, have been laid down than upon any other point in the law of eminent
The difficulty of determining whether a particular benefit is special or general, and the resulting inconsistency among published decisions on the subject, is clear in a comparison of the present case with earlier cases in which the benefit was that of enhanced access to the property. In City of Hayward v. Unger (1961) 194 Cal.App.2d 516 [15 Cal.Rptr. 301], for example, the city widened a street in the block on which the subject property was located. In rejecting the landowner’s contention the ensuing improvement of access to the property was a general benefit as a matter of law, the Court of Appeal cited expert testimony establishing that the widening of the street increased the flow of traffic past the property, and thus specially benefited it. (Id. at pp. 517-518.) Likewise, in Los Angeles v. Marblehead Land Co. (1928) 95 Cal.App. 602, 614-615 [273 P. 131], the Court of Appeal concluded the evidence supported the trial court’s finding of special benefits for enhanced access resulting from the construction of a highway through the subject property. In Pierpont Inn, supra, 70 Cal.2d 282, by contrast, we upheld a finding of no special benefit for enhanced access resulting from the construction of a freeway and offramp in the vicinity of the subject property (id. at pp. 295-296), and, of course, the lower courts in the present case came to the same conclusion regarding the enhanced access to Continental’s property from proximity to the Douglas Street station. (See also Orpheum Bldg. Co. v. San Francisco Bay Area Rapid Transit Dist. (1978) 80 Cal.App.3d 863, 874 [146 Cal.Rptr. 5] [observing, in dicta, that jury found property owner was specially benefited by proximity to transit station].) Even if, as Continental and the concurring and dissenting opinion of Justice Kennard suggest, factual differences among these apparently similar situations justify these apparently conflicting results, it is difficult to glean from the results in these individual cases a helpful rule of general application.
The MTA suggests section 1263.450, which became operative in 1976, is inconsistent with the Beveridge rule distinguishing general and special benefits. That statute provides as follows: “Compensation for the injury to the remainder shall be based on the project as proposed. Any features of the project which mitigate the damage or provide benefit to the remainder, including but not limited to easements, crossings, underpasses,
The MTA further argues that the Beveridge court’s emphasis on the conjectural nature of general benefits suggests the salient difference between general and special damages lies in whether they are speculative, on one hand, or probable and provable, on the other. The MTA points out that, at various points in its opinion, the Beveridge majority appeared to equate general benefits with those that are “uncertain, incapable of estimation, and future,” while identifying special benefits as those reasonably certain to result from the construction of the work. (E.g., Beveridge, supra, 137 Cal. at pp. 624-626 [“The property-owner, therefore, cannot be compelled to receive his compensation in such vague speculations as to future advantages, in which a jury may be induced to indulge.”].) The MTA contends the Beveridge court sought to prevent frustration of the right to just compensation by precluding setoff of asserted benefits that might never materialize. Consequently, the MTA suggests, when the evidence shows the property will enjoy immediate advantage from the improvement, the benefit should be held special regardless of how many other properties are similarly affected.
As the constitutional debates previously referred to demonstrate, the evil that primarily concerned the framers of former article I, section 14 of the California Constitution and to which the Beveridge court responded, was the
One amicus curiae, however, argues the problem of the 19th century “sanguine promoter” (see Beveridge, supra, 137 Cal. at p. 624) continues to exist, given that in some instances property has been taken for a public work that was never completed or that was abandoned after its completion. Amicus curiae thus suggests that a rule that would permit setoff of general benefits would remain potentially unfair. The argument proves too much, however: Both special benefits and severance damages likewise may not materialize, or may cease to exist, for the same reason. Valuation to an absolute certainty has never been required in arriving at just compensation. The demands of fairness are satisfied when compensation is determined on the basis of substantial evidence establishing, to a reasonable certainty, the value of the property taken and the net effect on the remainder property’s value of benefits and detriments resulting from the project. (See People v. McReynolds (1939) 31 Cal.App.2d 219, 223 [87 P.2d 734].) Moreover, if a landowner’s property enjoys improved access as a result of a public improvement and the state were later to take away that access, it may be, as the Court of Appeal observed in People ex rel. Dept. of Public Works v. Edgar (1963) 219 Cal.App.2d 381, 389 [32 Cal.Rptr. 892], that compensation through a new condemnation action would become due. We thus reject the broad argument that today, as before, fairness precludes setoff of any general benefits because they may never be realized. Nevertheless, the absence today of the historical conditions prevailing at the time Beveridge was decided, although a factor to consider, does not necessarily compel the conclusion the rule of that case should be abandoned.
The Beveridge majority advanced another rationale for its rule against setting off general benefits: “The chance that land will increase in value as population increases and new facilities for transportation and new markets are created is an element of value quite generally taken into consideration in the purchase of land in estimating its present market value. This chance for gain is the property of the land-owner. If a part of his property is taken for the construction of the railway, he stands in reference to the other property not taken like similar property-owners in the neighborhood. His neighbors are not required to surrender this prospective enhancement of value in order
Continental’s equal protection argument is flawed in that it fails to account for a significant difference, in terms of the availability of compensation for the detrimental effects of the Green Line, between Continental and its neighbors from whom no property is taken. Having had part of its property condemned, Continental is entitled to severance damages, whereas its neighbors are not. Severance damages, as noted, consist generally of the diminution in the fair market value of the remainder property caused by the project. (§ 1263.420.) As we said in Pierpont Inn, supra, 70 Cal.2d at page 295, “Where the property taken constitutes only a part of a larger parcel, the owner is entitled to recover, inter alia, the difference in the fair market value of his property in its ‘before’ condition and the fair market value of the remaining portion thereof after the construction of the improvement on the portion taken. Items such as view, access to beach property, freedom from noise, etc. are unquestionably matters which a willing buyer in the open market would consider in determining the price he would pay for any given piece of real property.” (See also City of Salinas v. Homer (1980) 106 Cal.App.3d 307, 312 [165 Cal.Rptr. 65].) Severance damages are not limited to special and direct damages, but can be based on any factor, resulting from the project, that causes a decline in the fair market value of the property. (San Diego Gas & Electric Co. v. Daley (1988) 205 Cal.App.3d 1334, 1345 [253 Cal.Rptr. 144].)
Although Continental urges that severance damages, like offsettable benefits, must be “special,” the landowner seeking severance damages need only prove the value of his or her property has been impaired, not that other members of the public are not similarly affected. (Cf. Bacich v. Board of Control (1943) 23 Cal.2d 343, 349 [144 P.2d 818] (Bacich).) In Bacich we reasoned as follows: “The major issue presented in this case is whether or not plaintiff may recover compensation [in inverse condemnation] under the constitutional provision (Cal. Const., art. I, [former] sec. 14) in the light of the facts stated by him. He is entitled thereto under the wording of that
Nothing in City of Berkeley v. Von Adelung (1963) 214 Cal.App.2d 791 [29 Cal.Rptr. 802] requires a different conclusion. Although the Court of Appeal in that case stated a claimed injury to the landowner's property was noncompensable because “it is general to all property owners in the neighborhood, and not special to defendant” (id. at p. 793), nothing in the opinion indicates the landowner presented evidence of a diminution in the value of the remainder property. (Ibid. [“At most, defendant’s offered proof would show only that the project as a whole would increase traffic flow past his lot.”]; cf. Rose v. State of California (1942) 19 Cal.2d 713, 737-742 [123 P.2d 505] [no compensation for diversion of traffic, as distinct from impairment of access to adjacent thoroughfare, because landowner has no legal right that is infringed by changing the flow of traffic past his or her property]; Friends of H Street v. City of Sacramento (1993) 20 Cal.App.4th 152, 166-167 [24 Cal.Rptr.2d 607].)
The recovery of neighboring landowners in an inverse condemnation or nuisance action, in contrast, requires more than a showing that the value of the property has diminished as a result of the project: Such landowners must establish that the consequences of the project are “not far removed” from a direct physical intrusion or amount to a.nuisance (see Varjabedian v. City of Madera (1977) 20 Cal.3d 285, 297 [142 Cal.Rptr. 429, 572 P.2d 43] [gaseous effluent from sewage treatment facility having effects not far from
As the Beveridge majority appears not to have considered the differing availability of damages for the detrimental effects of public works projects as between the landowner in condemnation proceedings and the neighbor from whom no property is taken, its reasoning should not be read as an authoritative statement about the requirements in this context of the equal protection clause of the California Constitution. (Cf. Meehan v. Hopps (1955) 45 Cal.2d 213, 218 [288 P.2d 267] [absent any indication parties argued, or court considered, point in question, court’s conclusion not authoritative].)
The United States Supreme Court has written to the same effect in Bauman v. Ross, supra, 167 U.S. at page 574 [17 S.Ct. at page 976], stating, “The just compensation required by the Constitution to be made to the owner is to be measured by the loss caused to him by the appropriation. He is entitled to receive the value of what he has been deprived of, and no more. To award him less would be unjust to him; to award him more would be unjust to the public.” And in McCoy v. Union Elevated R. R. Co. (1918) 247 U.S. 354 [38 S.Ct. 504, 62 L.Ed. 1156], the high court said: “The fundamental right guaranteed by the Fourteenth Amendment is that the owner shall not be deprived of the market value of his property under a rule of law which makes it impossible for him to obtain just compensation. There is no guarantee that he shall derive a positive pecuniary advantage from a public work whenever a neighbor does. It is almost universally held that in arriving at the amount of damage to property not taken allowance should be made for peculiar and individual benefits conferred upon it—compensation to the owner in that form is permissible. And we are unable to say that he suffers deprivation of any fundamental right when a State goes one step further and permits consideration of actual benefits—enhancement in market value— flowing directly from a public work, although all in the neighborhood receive like advantages. In such case the owner really loses nothing which he had before; and it may be said, with reason, there has been no real injury.” (Id. at pp. 365-366 [38 S.Ct. at pp. 507-508].)
Yet these principles may be said to collide with another value implicit in the just compensation clause. We have recognized that the policy underlying the just compensation clause is to ensure that the owner of damaged property is not forced to “ ‘ “contribute more than his proper share to the public undertaking” ’ ”; in other words, the clause aims “ ‘ “to distribute throughout the community the loss inflicted upon the individual by the making of the
In examining this question, we are forced to confront an obdurate fact: Applying existing rules, to distribute the cost of this project across the community with perfect equality is impossible. If Continental is subjected to setoff of general benefits resulting from proximity to the Douglas Street station, one might say it pays more than its proper share of the cost of this transit project because it loses an expectation of gain that other property owners, from whom no land is taken, are allowed to keep. If, on the other hand, Continental is permitted both to recover severance damages and to retain the general enhancement in the value of its property, one could with equal validity say it thereby pays less than its proper share of the project cost vis-á-vis those property owners from whom no property is taken, and who cannot recover damages for the diminution in the value of their property resulting from the operation of the transit line, when those effects are not sufficiently deleterious to support an action in inverse condemnation or nuisance. The law has no mechanism by which to ensure an absolutely fair distribution of costs and benefits across the entire community. We must instead search for the rule of greatest relative fairness, or least unfairness.
One general principle relevant to this determination is that taxpayers should not be required to pay more than reasonably necessary for public works projects. Stated another way, compensation for taking or damage to property must be just to the public as well as to the landowner. (United States v. Commodities Corp. (1950) 339 U.S. 121, 123 [70 S.Ct. 547, 549, 94 L.Ed. 707].) A rule permitting setoff against severance damages of all reasonably certain and nonspeculative benefits minimizes the cost of public works projects in two respects: Certain offsets would be permitted that presently are disallowed, and transaction costs would be reduced due to the new rule’s greater clarity and certainty.
A rule permitting offset of all reasonably certain, immediate and nonspeculative benefits has the virtue of treating benefits and severance damages evenhandedly. (Cf. §§ 1263.420, subd. (b), 1263.430 [parallel definitions of severance damage and benefit].) Continental was entitled to, and did, present evidence that the effects of the Green Line operation on perceptions of view, light and noise within its building would lower expected future rents. Contrary to a suggestion in Continental’s brief, the increase in rental value that the MTA sought to prove appears to be no more speculative or uncertain, and no less immediate, than the decrease in rental value that Continental was permitted to prove. Continental insists the existing Beveridge rule does treat benefits and severance damages equally because “only damage that is special to the defendant’s property is compensable.” The contention is surely incorrect if the term “special” retains any connotation of singularity, uniqueness or peculiarity, inasmuch as the Green Line obviously will affect views, light and noise levels of other properties in the neighborhood of Continental’s, property as to some of which no compensation will be paid. (Cf. Bacich, supra, 23 Cal.2d at p. 349.) If, on the other hand, “special” refers to any condition that affects the market value of the property and is not conjectural or speculative (Ill. State Toll Hwy. v. Am. Nat. Bank (1994) 162 Ill.2d 181 [205 Ill.Dec. 132, 642 N.E.2d 1249, 1255]; Sanitary Dist. of Chicago v. Boening (1915) 267 Ill. 118 [107 N.E. 810]), then Continental might press its claim for severance damages based on any decrease in the value of its property, but by the same token should be subject to setoff of any increase in value proven by competent evidence to result from proximity to the transit station. The severance damages Continental claimed for noise and loss of view thus are “special” to the same degree as the benefits the Green
On balance, and acknowledging that Continental’s position is not without some force, we overrule Beveridge, supra, 137 Cal. 619, to the extent it holds that only “special” benefits may be offset against severance damages. We hold that in determining a landowner’s entitlement to severance damages, the fact finder henceforth shall consider competent evidence relevant to any conditions caused by the project that affect the remainder property’s fair market value, insofar as such evidence is neither conjectural nor speculative.
We acknowledge that the rule we adopt today is not the majority view in the United States. (See 3 Nichols on Eminent Domain (rev. 3d ed. 1992) § 8A.03, pp. 8A-26 to 8A-31 and cases cited therein.) In adopting this rule, however, we join a quite respectable minority. (Ill. State Toll Hwy. v. Am. Nat. Bank, supra, 642 N.E.2d at p. 1255; Sanitary Dist. of Chicago v. Boening, supra, 107 N.E. at p. 812 [although Illinois law allows setoff for “special” benefits only, the definition of special benefits includes what in California would be called general benefits]; Brand v. State (1964) 21 A.D.2d 727 [250 N.Y.S.2d 158]; State v. Atchison, Topeka And Santa Fe Railway Co. (1966) 76 N.M. 587 [417 P.2d 68, 70]; Michigan State Highway Commission v. Frederick (1971) 32 Mich.App. 236 [188 N.W.2d 193]; see also N.C. Gen. Stat. § 136-112 [when North Carolina State Board of Transportation exercises power of eminent domain to condemn private property for public use, both general and special benefits may be deducted from owner’s condemnation award]; Strouds Creek & M. R. Co. v. Herold (1947)
Costs
For guidance on retrial, we next address the MTA’s argument the Court of Appeal erred in reversing the trial court’s denial of Continental’s posttrial motion for litigation expenses.
Awards of litigation expenses in eminent domain actions are governed by section 1250.410, which provides, in pertinent part, as follows: “(a) At least 30 days prior to the date of the trial on issues relating to compensation, the plaintiff shall file with the court and serve on the defendant its final offer of compensation in the proceeding and the defendant shall file and serve on the plaintiff its final demand for compensation in the proceeding. Such offers and demands shall be the only offers and demands considered by the court in determining the entitlement, if any, to litigation expenses. ...[<]□ (b) If the court, on motion of the defendant made within 30 days after entry of judgment, finds that the offer of the plaintiff was unreasonable and that the demand of the defendant was reasonable viewed in the light of the evidence admitted and the compensation awarded in the proceeding, the costs allowed pursuant to Section 1268.710 shall include the defendant’s litigation expenses. [H . . . [U (c) If timely made, the offers and demands as provided in subdivision (a) shall be considered by the court on the issue of determining an entitlement to litigation expenses.”
In Redevelopment Agency v. Gilmore (1985) 38 Cal.3d 790 [214 Cal.Rptr. 904, 700 P.2d 794] (Gilmore), we discussed the standard a trial court must apply in ruling on a motion for an award of litigation expenses pursuant to section 1250.410. We noted that prior law (former section 1249.3) had required the trial court, in ruling on such a motion, to determine whether the condemner’s offer was unreasonable and the condemnee’s demand was reasonable “ ‘all viewed in the light of the determination as to the value of the subject property.’ ” (Gilmore, supra, 38 Cal.3d at p. 808, italics omitted.)
Several factors have emerged as general guidelines for determining the reasonableness or unreasonableness of offers. They are “ ‘(1) the amount of the difference between the offer and the compensation awarded, (2) the percentage of the difference between the offer and award . . . and (3) the good faith, care and accuracy in how the amount of offer and the amount of demand, respectively, were determined.’ ” (State of California ex rel. State Pub. Works Bd. v. Turner (1979) 90 Cal.App.3d 33, 37 [153 Cal.Rptr. 156].) Thus, the mathematical relation between the condemner’s highest offer and the award is only one factor that should enter into the trial court’s determination. (Gilmore, supra, 38 Cal.3d at p. 808; Community Redevelopment Agency v. Krause (1984) 162 Cal.App.3d 860, 866 [209 Cal.Rptr. 1].)
Some Court of Appeal decisions have strayed from the principle that the mathematical disparity between the offer and the award is but one factor for the trial court to consider. For example, in San Diego Gas & Electric Co. v. Daley, supra, 205 Cal.App.3d at page 1352 (Daley), the court held unreasonable “as a matter of law” an offer that turned out to be 29.4 percent of the ultimate award. In support of that conclusion, the court cited City of Gardena v. Camp (1977) 70 Cal.App.3d 252 [138 Cal.Rptr. 656], which, however, was decided under former section 1249.3 and therefore is not precisely apposite in a case arising under the different language of section 1250.410. The Daley court also relied on Redevelopment Agency v. First Christian Church (1983) 140 Cal.App.3d 690, 706 [189 Cal.Rptr. 749], decided under the current statute, but in doing so misstated the holding of that case, which was to reject a condemner’s argument that its offer was reasonable as a matter of law. We need say little more about this issue other than to note our disapproval of any pronouncement purporting to find unreasonableness as a matter of law based purely on mathematical disparity, and to commend the lower courts in every case to consider not only the numerical figures, but also “ ‘ “the good faith, care and accuracy in how the amount of the offer and
In the present case, the MTA’s final offer was $200,000 and Continental’s final demand was $500,000. The trial court denied Continental’s motion for litigation expenses, reasoning as follows: “Plaintiff’s expert determined that just compensation totaled $76,500 and found no severance damages. Plaintiff’s offer of $200,000 clearly did not ignore defendant’s expert’s opinion in its entirety, [f] Two compensation issues separated the parties: loss due to noise and visual impact. Defendant’s final demand apparently gave no weight to its own experts’ opinion regarding loss due to visual impact. This conclusion follows from the fact that defendant’s demand of $500,000 could not have included any amount for visual impact since, according to defendant’s expert, the taking of the fee interest, the easements and the noise damage together exceeded $500,000. Since defendants gave no credence to its own expert’s opinion regarding visual impact, it would be unfair to hold that plaintiff’s failure to give any weight to that opinion was unreasonable. [CR] Continental also asserts that, in light of the evidence presented at trial, plaintiff’s offer was unreasonable. Continental points out that plaintiff conceded severance damages of $25,000 for new architectural drawings and $85,000 for special window glazing to mitigate noise. Under cross examination, plaintiff’s expert also admitted that he incorrectly discounted sums in his valuation of the temporary easement by $23,000. Since these sums, when added to those for the fee and the permanent easement as calculated by the plaintiff total $209,500, defendant argues that plaintiff’s offer of $200,000 on its face was unreasonable. The court finds this difference to be insufficient to base a finding of unreasonableness against the plaintiff. [•]□ It is clear plaintiff’s offer and defendant’s demand were so far apart because of the different manner in which their respective experts valued the noise and visual impact issues. As to the noise experts, each made highly technical presentations which the court found equally plausible in so far as it was able to understand the opinions. The court believes it would be unfair to determine that plaintiff acted unreasonably by relying on its own noise expert in light of the exceedingly technical nature of the evidence presented. [ID With respect to the visual impact issue, the court observes that, in ruling on the motion for new trial,[
In concluding the trial court abused its discretion in denying Continental’s motion, the Court of Appeal relied primarily on the fact the MTA’s offer ($200,000) was less than 18 percent of the severance damages awarded by the jury, and on the absolute disparity between the offer and the award. The Court of Appeal also took into account its view of the evidence bearing on the MTA’s good faith, care and accuracy in determining the amount of the offer, concluding the MTA acted unreasonably in adhering to the view that proximity to the Douglas Street station was a special benefit that would enhance the value of Continental’s property, despite the trial court’s ruling excluding the MTA’s proffered evidence to that effect. Of course, since we have concluded all reasonably certain, nonspeculative benefits resulting from the project may be offset against severance damages, it can hardly be said, in retrospect, that the MTA acted unreasonably. In any event, given that Hennessey’s testimony, according to the trial court, was “less than impressive,” and that Continental itself apparently did not give much weight to that testimony in formulating its offer, the MTA cannot be said to have made its offer unreasonably or in bad faith. On this record, the trial court did not “exceed[] the bounds of reason” in denying Continental’s motion. (In re Marriage of Connolly (1979) 23 Cal.3d 590, 598 [153 Cal.Rptr. 423, 591 P.2d 911].) It follows the Court of Appeal erred in finding the trial court’s ruling was an abuse of discretion.
Disposition
The judgment of the Court of Appeal is reversed and the cause remanded for further proceedings consistent with this opinion.
George, C. J., Mosk, J., Chin, J., and Brown, J., concurred.
Unless otherwise noted, further statutory references are to the Code of Civil Procedure.
The Railroad Act, in permitting setoff of benefits against both compensation owing for the property taken and severance damages, thus employed a variation of the standard currently operative in federal condemnation law, i.e., what has become known as the before-and-after rule. (See United States v. River Rouge Co. (1926) 269 U.S. 411 [46 S.Ct. 144, 70 L.Ed. 339]; Bauman v. Ross (1897) 167 U.S. 548 [17 S.Ct. 966, 42 L.Ed. 270].) As discussed in the text, contrary to the before-and-after rule, under the present eminent domain statutes of this state benefits may be set off only against damage to the remaining property, not against compensation for the part taken. (§ 1263.410, subd. (b).) The current federal law of eminent domain
We do not read Bacich, supra, 23 Cal.2d 343, so narrowly as does the concurring and dissenting opinion of Justice Kennard, post, at page 734, footnote 2, which, we observe, does not, in any event, contend the result in this case denies Continental just compensation within the meaning of article I, section 19 of the California Constitution.
We note, too, that whereas the Beveridge majority was concerned with the prospect of “corporations other than municipal” (Cal. Const., former art. I, § 14) taking property without compensating owners therefor and constructing railroads that those corporations proceeded to operate for their own “pecuniary advantage” (137 Cal. at p. 625), nothing before us suggests the MTA can be so categorized. As demonstrated above, the framers of former article I, section 14 evidently did not wish to hinder the construction of government-sponsored public works, of which the Green Line is one. (See also Beveridge, supra, 137 Cal. at p. 626 (dis. opn. of McFarland, J.) [“[I]n my judgment, the intent of section 14 of article I of our state constitution to discriminate against corporations other than municipal, and against them alone, is so obvious as to leave no room for doubt on the subject.”].)
In urging that, under our holding, it will not be “easier to calculate general and special benefits together than it is to calculate special benefits alone” because general benefits often are “less capable of quantification in a definite amount” (conc. & dis. opn. of Kennard, J., post, at pp. 733-734), the concurring and dissenting opinion does not acknowledge that the jury shall be permitted to consider only competent evidence that is neither speculative nor conjectural.
We note that the trial of condemnation actions shall continue to comply with the Eminent Domain Law, title 7 of part 3 of the Code of Civil Procedure, in particular section 1260.230 thereof, which provides: “As far as practicable, the trier of fact shall assess separately each of the following: [1 (a) Compensation for the property taken . . . . HD (b) Where the property acquired is part of a larger parcel': HQ (1) The amount of damage, if any, to the remainder • • • • HD (2) The amount of benefit, if any, to the remainder.... [1 (c) Compensation for loss of goodwill, if any . . . .”
Amicus curiae Building Owners and Managers Association of Greater Los Angeles asserts that the mere existence of the governmental power to specially assess (see Pub. Util. Code, § 33000) should be sufficient to bar any offset of special benefits whenever the affected property is close enough to a transit station to justify its inclusion in an assessment district. This question was not raised below, and we need not decide it. Suffice it to say that, as the MTA points out, the record contains no evidence there ever have been or will be any proceedings to form a special assessment district for the transit project at issue in this case, and nothing we say here in any way affects the rule in Oro Loma Sanitary Dist. v. Valley (1948) 86 Cal.App.2d 875 [195 P.2d 913], that when an assessment has been imposed, there may be no offset of benefits.
The MTA’s motion for new trial urged that the jury’s severance damage award was not supported by the evidence and that the trial court had erred in refusing to permit the MTA to cross-examine Hennessey, Continental’s valuation expert, on the issue of enhancement of the value of the property due to proximity to a transit station and in excluding evidence of such enhancement.
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