Date Of Value Rule Not As Bright Line As Intended
by James C. Powers and Rick E. Rayl Just in time for the holidays, the Court of Appeal offered landowners a present in the on-going date-of-value controversy in eminent domain, undercutting the seemingly bright-line rule established earlier last year by the California Supreme Court. San Diego Metropolitan Transit Development Board v. RV Communities (December 21, 2007) ___ Cal.App.4th ____ 2007 DJDAR 18826 was one of the cases stayed by the California Supreme Court pending last year’s ruling in Mt. San Jacinto Community College District v. Superior Court (Azusa Pacific) (2007) 40 Cal.4th 648.
The Mt. San Jacinto case sought to clarify the long-standing debate over the appropriate date of value, especially in cases where the value changed dramatically between the date of deposit and the date of trial. In Mt. San Jacinto, the California Supreme Court held that the date of deposit controlled. The Court also held that existing procedural safeguards that provide landowners a right to seek an increase in the amount of the deposit adequately protects their interests. With this decision, it appeared that the date of value issue was resolved with a bright-line, easy to apply rule.
Months later, the court in Redevelopment Agency of the City of San Diego v. Mesdaq (2007) 154 Cal.App.4th 1111 confirmed this view, applying the rule established in Mt. San Jacinto to set the date of value as the date of deposit in the face of arguments that the trial court did not rule that the deposit reflected the probable amount of compensation, that property values increased dramatically, and that the case was not brought to trial within a year.
A few weeks ago, however, the court in San Diego Metropolitan Transit Development Board v. RV Communities provided a new twist, holding that the date of deposit does not qualify as the date of value where the condemning agency subsequently concedes that the initial deposit amount was too low. The court reasoned that since the agency voluntarily increased its deposit (thereby implicitly acknowledging that it was inadequate), the Mt. San Jacinto rule did not apply, and the appropriate date of value was the trial date.
In September 2001, the plaintiff filed a condemnation action to take property owned by RV Communities. Plaintiff also sought to condemn a temporary construction easement on another portion to the RV Communities’ property. Plaintiff made an initial deposit of probable compensation in the amount of $79,357 based on an appraisal with a date of value five months before the action was filed. In 2003, RV Communities moved for an increase in the deposit to $300,300 and to have the date of value set as the date of trial. Before the hearing on the motion, Plaintiff voluntarily made an additional deposit which increased to deposit to the $300,300 requested. The trial court granted to motion to make the trial date the date of value. At trial, the jury awarded $1,132,866 for the land taken in fee simple and $576,267 for the land held to have been taken by inverse condemnation, plus other amounts. Plaintiff appealed, and the Court of Appeal affirmed. Plaintiff then sought review by the California Supreme Court, which suspended proceedings while deciding the Mt. San Jacinto case.
After the Court issued the Mt. San Jacinto opinion, it appeared likely that the RV Communities case would be reversed, and that, just as in Mesdaq, the court would apply Mt. San Jacinto and hold that the date of value was the date of deposit. But this is not what happened. Instead, the Court of Appeal again ruled in favor of RV Communities.
The RV Communities court distinguished Mt. San Jacinto on the grounds that Plaintiff’s $79,357 deposit was based on an appraisal with a valuation date five months before the date of deposit and that the appraiser who provided the original appraisal later testified that the value of the property at the time of the deposit had increased to $300,300. However, the court’s rationale is not necessarily limited to these facts. Instead, the court appears to hold that if it is later found that the deposit did not constitute just compensation (as subsequently determined), the deposit is not sufficient to set the date of value.
Unless narrowly construed, the decision may well run afoul of Mt. San Jacinto. If construed as limited to the unusual circumstances of a deposit being based on an out of date appraisal and the later recanting by the appraiser to the effect that the value is significantly higher as of the deposit date; it may fall outside the Mt. San Jacinto rule. However, if construed as meaning that a deposit does not freeze the date of value whenever it is later determined that the amount deposited did not equal just compensation on the date of deposit, it is difficult to see how the decision comports with Mt. San Jacinto.
It seems likely Plaintiff will again petition for hearing by the California Supreme Court. The Supreme Court may not want entertain another condemnation case so soon after its decision in Mr. San Jacinto, but it could simply order the case depublished. Stay tuned.
Jim Powers specializes in representing public agencies in condemnation matters and is one of California's leading experts in condemnation. He has served as lead trial counsel at dozens of trials. He can be reached at jpowers@nossaman.com or (213) 612-7835.
Rick Rayl has experience litigating a broad range of complex civil litigation issues and focuses on real estate development, complex business disputes, and condemnation matters. He can be reached at rrayl@nossaman.com or (949) 833-7800.
