Metropolitan Water v. Campus Crusade

• Decision Date: 23 July 2007
• Docket Number: No. S141148.,S141148.
• Citation: 161 P.3d 1175,62 Cal.Rptr.3d 623,41 Cal.4th 954
• Court: California Supreme Court
• Parties: METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA, Plaintiff and Respondent, v. CAMPUS CRUSADE FOR CHRIST, INC., et al., Defendants and Appellants.

62 Cal.Rptr.3d 623

41 Cal.4th 954

161 P.3d 1175

METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA, Plaintiff and Respondent, v. CAMPUS CRUSADE FOR CHRIST, INC., et al., Defendants and Appellants.

No. S141148.

Supreme Court of California.

July 23, 2007.

Redwine & Sherill, Justin M. McCarthy, Scott R. Heil, Riverside; Berger & Norton, Michael M. Berger, Gideon Kanner, John T. Fogarty, Los Angeles; Matteoni, Saxe & O'Laughlin, Matteoni, O'Laughlin & Hechtman, Norman E. Matteoni, San Jose, Peggy M. O'Laughlin and Gerry Houlihan, San Jose, for Defendants and Appellants.

Jenny, Jenny & Jenny and Scott E. Jenny, Martinez, as Amici Curiae on behalf of Defendants and Appellants.

Sullivan, Workman & Dee, Roger M. Sullivan and Gary A. Kovacic as Amici Curiae on behalf of Defendants and Appellants.

Palmieri, Tyler, Wiener, Wilhelm & Waldron and Patrick A. Hennessey, Irvine, as Amici Curiae on behalf of Defendants and Appellants.

Law Offices of Peter D. Lepiscopo, Peter D. Lepiscopo, San Diego, and James M. Griffiths for Pacific Justice Institute as Amicus Curiae on behalf of Defendants and Appellants.

James S. Burling, Sacramento, for Pacific Legal Foundation as Amicus Curiae on behalf of Defendants and Appellants.

Jeffrey Kightlinger, Henry S. Barbosa Lauren R. Brainard, Karen Tachiki, Sydney B. Bennion, Joseph A. Vanderhorst; Cox, Castle & Nicholson, Kenneth B. Bley,

Los Angeles, and Edward C. Dygert, Irvine, for Plaintiff and Respondent.

Janet Morningstar, Newport Beach, for Municipal Water District of Orange County as Amicus Curiae on behalf of Plaintiff and Respondent.

Myers, Widers, Gibson, Jones & Schneider and Kathrine E. Stone, Ventura, for League of California Cities, California State Association of Counties and Association of California Water Agencies as Amici Curiae on behalf of Plaintiff and Respondent.

Ferguson, Case, Orr, Paterson & Cunningham, Douglas E. Kulper and Sandra M. Robertson, Ventura, for Calleguas Municipal Water District as Amicus Curiae on behalf of Plaintiff and Respondent.

BAXTER, J.

The Metropolitan Water District of Southern California (MWD), a public agency founded in 1928, supplies water to six Southern California counties. In 1997, MWD brought an eminent domain action to condemn a portion of land in San Bernardino County owned by Campus Crusade for Christ, Inc., and Del Rosa Mutual Water Company (collectively Campus Crusade) to construct a segment of a 43-mile water pipeline to channel water from the inland areas to the coastal plains of Southern California. Prior to trial on the issue of just compensation, MWD persuaded the trial court to exclude valuation evidence offered by Campus Crusade's experts to the extent such valuation was based on the property's potential use as a planned residential development and resort area, which differed from its current use and which was not permitted under the zoning in effect at the time of the taking. The trial court also granted MWD's request to exclude evidence of severance damages to the fair market value of the remainder of Campus Crusade's property (i.e., the property not taken) to the extent the damages were based on fear that the pipeline (which crosses the San Andreas Fault on Campus Crusade's property) could rupture in an earthquake and to the extent the damages were based on certain other aspects of the pipeline and its construction process. Finally, the trial court excluded evidence of temporary severance damages to the extent the damages were based on the adverse impact of the seven-year construction period on Campus Crusade's ability to finance and market the property.

Based on these rulings, Campus Crusade waived its right to a jury trial. The trial court fixed just compensation at $479,278.45, none of which was attributable to severance damages. Campus Crusade appealed, and the Court of Appeal reversed and remanded for a new trial, finding (1) that Judge John P. Wade, who had replaced Judge Cynthia Ludvigsen following her reassignment, had overstepped his authority in reconsidering and overruling her prior evidentiary rulings; (2) that a property owner does not bear the burden of proof on the amount of compensation or on any preliminary facts that may affect the jury's determination of just compensation; (3) that the trial court had erred in preventing Campus Crusade from offering evidence that the property's highest and best use was as a future planned residential and resort development, notwithstanding evidence of a reasonable probability the property could be rezoned in the near future, and had erred as well in taking that issue away from the trier of fact; and (4) that the trial court had erred in excluding evidence of severance damages arising from fear of a pipeline rupture and in excluding evidence of temporary severance damages arising from the adverse effects of construction on Campus Crusade's ability to market and finance the property.

We granted review to clarify the respective roles of the trial court and the jury at a compensation trial in an eminent domain action and the nature of the damages that a property owner may recover. For the reasons outlined below, we affirm in part and reverse in part the judgment of the Court of Appeal and remand for further proceedings.

Background¹

Campus Crusade, a charitable religious corporation, owns 1,824 acres of land situated partly within the northern edge of the City of San Bernardino and partly in unincorporated county territory within the city's sphere of influence and slated for annexation. Although most of the property is undeveloped, it is the site of the historic Arrowhead Springs Hotel, the International School of Theology, several office buildings, a conference center, a sports field, and a village. The property is also the primary source for Arrowhead Mountain Spring Water.

In early 1996, Campus Crusade retained a land developer to assist with its plans to create a planned residential development on the property and to restore the existing resort and other buildings. The city seemed to be enthusiastic and supportive of Campus Crusade's plans for future development. But Campus Crusade's plans were disrupted when MWD decided to construct a portion of the Inland Feeder project, a 43-mile water pipeline from Devil Canyon to Diamond Valley Lake, across the property. Now built, the pipeline is 12 feet in diameter, constructed of welded steel, and buried hundreds of feet underground along most of its route. However, the pipeline enters covered trenches along the Campus Crusade property that are only 10 to 12 feet deep and, in some places, the pipeline is as close as four feet to the surface. The pipeline is designed to be close to the surface in these areas in order to facilitate repair in case of a rupture and to function as a "safety valve" in the event of an earthquake. The pipeline crosses the San Andreas Fault at this location.

MWD's board of directors adopted their resolution of necessity on December 10, 1996. The resolution provided that MWD was to acquire the land at issue "for the purpose of constructing, reconstructing, maintaining, operating, enlarging, removing, and replacing a line or lines of pipe at any time, and from time to time, for water transportation, with every appendage or structure necessary or convenient to be installed at any time in connection therewith." On December 23, 1996, MWD deposited funds into the State Treasury, thereby setting the date of valuation. The following month, MWD filed its complaint in eminent domain and an ex parte application for possession. The first amended complaint sought 10.4 acres in fee, 18.7 acres of permanent easements, 27.4 acres of temporary construction easements for a period of seven years, and two permanent tunnel easements, one below ground and the other above ground.

Campus Crusade submitted statements of valuation from three appraisers: E.R. Metcalfe, James Smothers, and Robert Swing. The appraisers estimated the value of the property interests being taken at between $1,500,000 and $1,600,000, and the temporary and permanent damage to the remainder at between $12,600,000 and $14,000,000. The pipeline cut across Campus Crusade's property at a location that was most valuable and most amenable to development. One of the permanent easements ran up against some of the existing buildings, and the resolution provided that Campus Crusade was not to interfere unreasonably with MWD's rights over the permanent easements. Further, the resolution restricted Campus Crusade's ability to modify the topography, construct buildings, or plant trees in the areas covered by the easements.

The taking also interfered with Campus Crusade's secondary access rights to the property by way of 40th Street, San Bernardino, over a neighboring parcel. In addition, Campus Crusade contended that the pipeline, which crossed a branch of the San Andreas Fault at the site where the pipeline was raised to within several feet of the earth's surface, posed a risk of rupture. A breach in the pipeline could cause a sudden outflow of millions of gallons of water onto Campus Crusade's property at a rate of 1,000 cubic feet per second. MWD analyzed this risk as a significant environmental impact in its environmental impact report.

Finally, the temporary construction easements encompassed a row of mature trees that served as a natural entryway for the historic hotel. MWD's use of these easements required the cutting of all the mature vegetation in the area. MWD disclaimed any obligation to restore the vegetation to its prior condition.

MWD submitted a revised statement of valuation of $392,000 as just compensation for all the property taken, with no amount allocated for severance or temporary severance damages. On October 7, 1999, MWD filed a final offer of compensation for $1,500,000 plus costs and interest, but subsequently increased its offer to $3,500,000. Campus Crusade revised its demand to $12,500,000 for the property...