Barthelemy v. Orange County Flood Control Dist.

• Decision Date: 13 July 1998
• Docket Number: No. E019638,E019638
• Citation: 65 Cal.App.4th 558,76 Cal.Rptr.2d 575
• Parties: , 98 Cal. Daily Op. Serv. 5511, 98 Daily Journal D.A.R. 7666 Jean BARTHELEMY et al., Plaintiffs and Appellants, v. ORANGE COUNTY FLOOD CONTROL DISTRICT, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

Page 575

76 Cal.Rptr.2d 575

65 Cal.App.4th 558, 98 Cal. Daily Op. Serv. 5511,

98 Daily Journal D.A.R. 7666

Jean BARTHELEMY et al., Plaintiffs and Appellants, v. ORANGE COUNTY FLOOD CONTROL DISTRICT, Defendant and Respondent.

No. E019638.

Court of Appeal, Fourth District, Division 2, California.

July 13, 1998.

Certified for Partial Publication. ^*

Rehearing Denied Aug. 3, 1998.

Review Denied Sept. 30, 1998. ^**

[65 Cal.App.4th 561] Sullivan, Workman & Dee, Roger M. Sullivan, Santa Cruz, and Henry K. Workman, Los Angeles, for Plaintiffs and Appellants.

Laurence M. Watson, County Counsel, Edward N. Duran, Daniel P. Torres, and Irving Berger, Deputy County Counsel, for Defendant and Respondent.

OPINION

RICHLI, Associate Justice.

Under Klopping v. City of Whittier (1972) 8 Cal.3d 39, 104 Cal.Rptr. 1, 500 P.2d 1345 (cited hereafter as Klopping ), a landowner may recover in inverse condemnation for losses caused by a condemning entity's unreasonable conduct prior to actual condemnation. This case presents the issue whether damages recoverable under Klopping include expenses incurred in purchasing and maintaining a new location for an ongoing business for the purpose of mitigating an anticipated loss of goodwill when the existing location is condemned. On the present facts, we conclude such expenses are not compensable Klopping damages.

I BACKGROUND

A. Factual Allegations

Because this appeal emanates from the granting of a motion for judgment on the pleadings, we assume the truth of the material factual allegations of the complaint. (Macias v. State of California (1995) 10 Cal.4th 844, 847, fn. 1, 42 Cal.Rptr.2d 592, 897 P.2d 530.) Plaintiffs' operative pleading, their first amended complaint, alleged in relevant part the following.

Since 1957, plaintiffs have owned and operated a dairy which includes about 90.47 acres in Chino, and another 120 acres about three miles away in Corona. The present case concerns the Chino property, and further references to plaintiffs' property refer to that property.

In 1986, Congress authorized construction of the Santa Ana mainstem flood control project to provide flood protection for parts of Orange, Riverside, and San Bernardino Counties. A major component of the project is the Prado Dam project, which involves raising the level of the dam and requires the acquisition of flowage rights up to an elevation of 566 feet in the adjacent area. Plaintiffs' Chino property, which is in the area affected, includes about 31.317 acres at an elevation below 566 feet. The dam project therefore will require acquisition of a flowage easement or a fee interest in that portion of plaintiffs' property, plus 1.11 acres for an access road.

At various times since the late 1960's, defendant Orange County Flood Control District (District) and the Army Corps of Engineers advised plaintiffs their property was targeted for acquisition as part of the dam project. Beginning in 1975, preliminary studies were conducted, and environmental and design reports were circulated in the area throughout the 1980's. In December 1989, the District, the Corps of Engineers, and the flood control districts of Riverside and San Bernardino Counties entered into a local cooperation agreement under which the District was authorized to handle land acquisition for the dam project. Subsequently, the District made numerous public statements indicating plaintiffs' property was within the scope of the project and published maps showing the District's proposed flowage easement through the center of plaintiffs' property.

In May 1990, the District issued a public bulletin to property owners in the area of the dam, including plaintiffs, to inform them their property "may" be affected by the project. The bulletin also set forth a timetable calling for more detailed surveys from July 1990 until 1993, appraisals between 1991 and 1994, and acquisition offers from 1991 through 1994, "subject to the availability of funds." Construction on the dam was scheduled to start in 1996, "subject to the availability of Federal funds."

The District surveyed plaintiffs' property between 1992 and 1993. However, it did not begin to acquire property for the project until 1994. An appraiser hired by the District inspected plaintiffs' property in August 1994. In December 1994, however, Orange County filed for bankruptcy, and acquisition of property for the project was canceled. At that point, the District had acquired about 13 properties and had outstanding offers on about 10 others.

The District never negotiated or made an offer to purchase plaintiffs' property or an easement over it. It did, however, complete an appraisal of the property in February 1995 and purchased a nearby property in November 1995. Sufficient funding was available to acquire the part of plaintiffs' property needed for the project at all times since 1992.

Plaintiffs cannot operate their dairy profitably if one-third of their property is taken by the District. From 1990 to the present, it has been difficult to find land suitable for dairy farming. Plaintiffs therefore knew they would have to act promptly to relocate their operations in order to avoid a major loss to their business. In 1992, plaintiffs purchased 570 acres in Tulare County for relocation of their dairy operation. ¹ They were required to borrow about $2 million to buy the Tulare property.

Plaintiffs began using the Tulare property in their operations pending the District's acquisition of the Chino property. However, the District's conduct and unreasonable delay prevented plaintiffs from selling, leasing, or developing the property slated for acquisition and diminished the value of the entire Chino property. Plaintiffs also have incurred interest expenses on the Tulare property and additional expenses of maintaining two properties since 1993. These expenses will continue unless and until the District acquires the part of the Chino property needed for the project. As a result, the value of the Chino property and improvements has decreased more than $2 million. In addition, plaintiffs' entire dairy business has sustained a loss of income and goodwill.

B. Procedural Background

Plaintiffs sued the District for inverse condemnation in February 1996, seeking damages for diminution in value of their real property, improvements, fixtures and equipment, and for loss of income and/or goodwill of their business. The District moved for judgment on the pleadings, asserting plaintiffs had not stated a viable claim under Klopping because they had failed to allege special injury to their interest in the property, failed to allege an official act by the District toward acquisition of the property, and failed to allege unreasonable delay on the part of the District. After hearing argument, the court granted the motion but allowed plaintiffs leave to amend their complaint.

Plaintiffs filed their first amended complaint, and the District again moved for judgment on the pleadings, making the same arguments as in its previous motion. After again hearing argument, the court granted the motion without leave to amend and entered judgment for the District.

II DISCUSSION

A. Requirements for Klopping Compensation

Article I, section 19, of the California Constitution provides that property may be taken or damaged for public use only if just compensation is paid to the owner. That provision authorizes not only an eminent domain proceeding instituted by a public entity to acquire private property, but also an inverse condemnation action initiated by a landowner to obtain compensation for a claimed taking or damaging of his or her property. (Holtz v. San Francisco Bay Area Rapid Transit Dist. (1976) 17 Cal.3d 648, 652, 131 Cal.Rptr. 646, 552 P.2d 430.) The same principles govern both types of actions. (Breidert v. Southern Pac. Co. (1964) 61 Cal.2d 659, 663, fn. 1, 39 Cal.Rptr. 903, 394 P.2d 719.)

In Klopping, the Supreme Court recognized a right of inverse condemnation for an entity's precondemnation activities not amounting to an actual taking of property. It had already been established that particularly oppressive acts by a public authority, involving a physical invasion or a direct legal restraint on the use of the property, could amount to a "de facto taking" of the property even without formal condemnation of it. (Klopping, supra, 8 Cal.3d 39, 45, 104 Cal.Rptr. 1, 500 P.2d 1345.) In Klopping, however, the court held that "when the condemner acts unreasonably in issuing precondemnation statements, either by excessively delaying eminent domain action or by other oppressive conduct, our constitutional concern over property rights requires that the owner be compensated. This requirement applies even though the activities which give rise to such damages may be significantly less than those which would constitute a de facto taking of the property...." (Id., at pp. 51-52, 104 Cal.Rptr. 1, 500 P.2d 1345.)

Accordingly, the court in Klopping held, "a condemnee must be provided with an opportunity to demonstrate that (1) the public authority acted improperly either by unreasonably delaying eminent domain action following an announcement of intent to condemn or by other unreasonable conduct prior to condemnation; and (2) as a result of such action the property in question suffered a diminution in market value." (Klopping, supra, 8 Cal.3d at p. 52, 104 Cal.Rptr. 1, 500 P.2d 1345, fn. omitted.) In Klopping, a landowner alleged that, as a result of the city's announcements that it intended to condemn his property, he was unable to rent the property and suffered a diminution in its value reflected in the loss of rental income. The court held these allegations were sufficient to state an inverse condemnation claim. (Id., at p. 58, 104 Cal.Rptr. 1, 500 P.2d 1345.)

Subsequent decisions have emphasized that recovery under Klopping requires some "direct" and "special" interference with the landowner's use of the property. In Selby Realty Co....