Contra Costa Water Dist. v. Vaquero Farms, Inc.

• Decision Date: 24 October 1997
• Docket Number: No. A072255,A072255
• Citation: 68 Cal.Rptr.2d 272,58 Cal.App.4th 883
• Court: California Court of Appeals Court of Appeals
• Parties: , 97 Cal. Daily Op. Serv. 8216, 97 Daily Journal D.A.R. 13,277 CONTRA COSTA WATER DISTRICT, Plaintiff and Respondent, v. VAQUERO FARMS, INC., Defendant and Appellant.

Page 272

68 Cal.Rptr.2d 272

58 Cal.App.4th 883, 97 Cal. Daily Op. Serv. 8216,

97 Daily Journal D.A.R. 13,277

CONTRA COSTA WATER DISTRICT, Plaintiff and Respondent, v. VAQUERO FARMS, INC., Defendant and Appellant.

No. A072255.

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

Oct. 24, 1997.

Joseph M. Gughemetti, Joseph M. Gughemetti A Professional Corporation, Belmont, Frederik A. Jacobsen, Law Office of Frederik A. Jacobsen, San Mateo, for Defendant and Appellant:

Jeffrey D. Polisner, Carl P.A. Nelson, Bold, Polisner, Maddow, Nelson & Judson, Walnut Creek, Andrew L. Faber, Berliner Cohen, San Jose, for Plaintiff and Respondent.

RUVOLO, Associate Justice.

INTRODUCTION

In this eminent domain proceeding, Contra Costa Water District (Water District) acquired approximately 3,500 acres of 6,000 acres owned by Vaquero Farms, Inc. (Vaquero) to be used by the Water District for the Los Vaqueros Reservoir Project (Reservoir Project). The issues on appeal involve the compensation awarded Vaquero for the taking of the property. Specifically, Vaquero contends: 1) the Water District must condemn its windpower rights, with a corresponding legal obligation to pay just compensation, even though the Water District chose to sever the property's windpower rights and reserve them to Vaquero; 2) the court erred in failing to award damages for the Water District's unreasonable precondemnation activities under Klopping v. City of Whittier (1972) 8 Cal.3d 39, 104 Cal.Rptr. 1, 500 P.2d 1345; and 3) the jury's award of $1 million in severance damages for the diminution in value of the property remaining in Vaquero's ownership was unsupported by the evidence.

We conclude it was permissible for the Water District to sever and reserve to Vaquero its windpower rights. We also affirm the trial court's finding that Vaquero was not entitled to recover damages for precondemnation activities, and the jury's severance damage award.

BACKGROUND

The Vaquero property is located approximately six miles north of the City of Livermore, and approximately six miles south of the City of Brentwood. The property fronts over three miles of Vasco Road, which is a north-south traffic corridor. The 6,000 acres owned by Vaquero was and is primarily undeveloped. It varies tremendously in topographical features, ranging from relative flatlands adjacent to Vasco Road to steep ridge areas in the center and rugged ravines in the parcel's eastern portion. The property has been used as a working cattle ranch for nearly 50 years. In 1984, large portions of the ranch (over 2,100 acres) were leased for windpower electrical production and about 260 wind turbines have been installed on the property.

The Water District filed its Complaint in Eminent Domain on June 14, 1993. By this action, the Water District sought to acquire four separate parcels of Vaquero's property, totaling approximately 3,500 acres, for the Reservoir Project. The Reservoir Project is a major public work including a reservoir, diversion facilities, pumping plants, and pipelines to convey water for storage and use. It is the largest public works project ever undertaken by the Water District. The project's primary purposes are to improve the quality of water supplied to the Water District's customers, to minimize seasonal changes in water quality, and to improve the reliability of the Water District's supply by providing for emergency storage. The project's secondary purposes include providing flood control benefits, maintaining and enhancing fish and wildlife resources, and offering recreational opportunities.

Each of Vaquero's four condemned parcels will be committed to a different use in connection with the Reservoir Project's implementation:

Parcel 1--a 2,743-acre parcel to be used for reservoir and watershed purposes;

Parcel 2--a 697-acre environmental mitigation parcel outside the reservoir/watershed area to be used to mitigate the environmental effects of the Reservoir Project on the habitat of the kit fox, an endangered species, and to mitigate the Reservoir Project's effect on the wetlands;

Parcel 3--a 4.8-acre parcel at the extreme southeast corner of the property to be used for road relocation. The proposed reservoir will inundate old Vasco Road, which provides the property's only public road access. Vasco Road will be relocated to the east of the reservoir and east of the property;

Parcel 4--a 52-acre area to be used as a combination cultural resource and environmental mitigation parcel outside the reservoir/watershed area.

Vaquero did not contest the right of the Water District to take its property. Instead, the focus of its answer to the complaint was the amount of "just compensation" to which appellant was entitled. Furthermore, in response to the complaint, Vaquero sought additional compensation for alleged damages sustained as a result of the Water District's precondemnation delays and other activities, and for severance damages.

By stipulation, the parties agreed to bifurcate the proceeding and to submit the precondemnation damages claim to a court trial in advance of the trial of other issues. The only issues which proceeded to trial by jury involved the fair market value of the property taken, generally measured by the highest and best use for which it is geographically and economically adaptable (Code Civ. Proc., § 1263.320, subd. (a) [all future undesignated statutory references are to this Code]; County of San Diego v. Rancho Vista Del Mar, Inc. (1993) 16 Cal.App.4th 1046, 1058, 20 Cal.Rptr.2d 675) and an assessment of severance damages generally measured by the diminution in market value of the property remaining in the private property owner's possession (§§ 1263.410, 1263.420; City of San Diego v. Neumann (1993) 6 Cal.4th 738, 745, 25 Cal.Rptr.2d 480, 863 P.2d 725). The presentation of evidence during the jury phase was protracted and extensive, consuming almost a month of court time. The ultimate issue of just compensation was a matter of widely-conflicting expert opinion. The Water District presented witnesses who valued the property and severance damages between $6.1 million and $7.7 million. Vaquero's The jury returned a verdict in the total sum of $14,428,327. This verdict was comprised of $13,428,327 representing the fair market value of the property taken and $1 million representing severance damages to the land remaining in Vaquero's ownership by reason of the taking. After Vaquero's motion for new trial was denied, this appeal followed.

witnesses placed the total value of the take at over $30 million.

SEVERANCE OF WINDPOWER RIGHTS

Vaquero advances the proposition that the Water District could not acquire the fee interest in its property while at the same time severing the windpower rights and windpower leasehold interests and reserving them to Vaquero. Before proceeding to a discussion of Vaquero's arguments, we note our rejection of the Water District's claim that Vaquero waived its right to press this issue on appeal because it withdrew funds deposited by the Water District as probable compensation. Specifically, the Water District relies on section 1255.260, which provides: "If any portion of the money deposited pursuant to this chapter is withdrawn, the receipt of any such money shall constitute a waiver by operation of law of all claims and defenses in favor of the person receiving such payment except a claim for greater compensation."

Vaquero's arguments on this subject are presented with the express purpose of exacting from the Water District an additional incremental payment representing the value of its windpower rights. Therefore, Vaquero is making a claim for "greater compensation" which was not waived under § 1255.260 when Vaquero withdrew the deposited funds. (Compare San Diego Gas & Electric Co. v. 3250 Corp. (1988) 205 Cal.App.3d 1075, 1081-1082, 252 Cal.Rptr. 853 [condemnee's withdrawal of deposited funds waived challenge of the right to take].) We proceed, then, to the merits of Vaquero's arguments.

As noted, portions of the area being acquired and portions of Vaquero's remaining property are subject to leases with various companies engaged in the enterprise of generating and selling electricity derived from wind blowing across the property. At the time of trial, over 2,100 acres of the Vaquero property were subject to windpower leases, and approximately 260 wind turbines were built on that acreage between 1984 and 1986.

In anticipation of having to place a monetary value on these windpower rights, the Water District hired a windpower consulting firm charged with estimating the value of the existing machines to their operators, valuing the undeveloped windpower leases, and valuing Vaquero's present and future rental income streams. The consultants' findings are summarized by the Water District as follows: "Unfortunately, the range of values for the present worth of the future windpower income stream was highly speculative and varied wildly, depending on assumed long-term future energy prices, possible future royalty rates, and discount rates. It was not until 1991 that [the Water District] decided to attempt to avoid the problem entirely by reserving all windpower rights to the landowners."

The Water District's June 1993 resolution of necessity states that it is necessary to take Vaquero's fee interest but the Water District "does not, by the passage of this resolution of necessity, intend to acquire any of the windpower rights...." Therefore, the Water District's complaint was limited to the acquisition of "[a]ll rights and incidents of the fee ownership interest vested in Vaquero Farms, ... excepting and reserving to such defendants and their successors, and present and future assigns all rights for wind energy power conversion and the transmission of power generated by wind, including (1) the exclusive and perpetual right, ... to develop, construct, install, maintain and operate windpower facilities, including...