Orange County Flood Control Dist. v. Sunny Crest Dairy, Inc.

• Decision Date: 17 February 1978
• Court: California Court of Appeals Court of Appeals
• Parties: ORANGE COUNTY FLOOD CONTROL DISTRICT, etc., et al., Plaintiffs and Appellants, v. SUNNY CREST DAIRY, INC., Defendant and Respondent. Civ. 17137.

Page 803

143 Cal.Rptr. 803

77 Cal.App.3d 742

ORANGE COUNTY FLOOD CONTROL DISTRICT, etc., et al., Plaintiffs and Appellants, v. SUNNY CREST DAIRY, INC., Defendant and Respondent.

Civ. 17137.

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

Feb. 17, 1978.

Hearing Denied April 19, 1978.

Adrian Kuyper, County Counsel, and Laurence M. Watson, Deputy County Counsel, Santa Ana, for plaintiff and appellant

Thomas G. Baggot, Gideon Kanner, Los Angeles and George E. Atkinson, Jr., Paramount, for defendant and respondent Sunny Crest Dairy, Inc.

OPINION

TAMURA, Associate Justice.

The Orange County Flood Control District (district) appeals from a judgment in condemnation and an order awarding attorneys' fees. ¹

The main issue in this appeal is whether the trial court erred in permitting the condemnee to pursue the theory that the highest and best use of the property in the before condition was a nonconforming use as of the date the eminent domain proceeding was filed rather than a permitted use on the date of value. The factual setting out of which this and other related issues arise is as follows:

The Eminent Domain Proceeding :

The district filed an action in eminent domain to acquire a perpetual easement for an underground storm channel and a temporary construction easement along and adjacent to the perpetual easement. The larger parcel consisted of 9.35 acres under a long-term lease to Sunny Crest Dairy, Inc. (hereafter Sunny Crest). The property is located in the City of Westminster and fronts on the southerly side of Westminster Avenue. The land in and over which the perpetual easement was sought consisted of a 50-foot wide strip (designated Parcel 104) comprising 1.41 acres along and adjacent to the east and south boundary lines of the larger parcel. The land over which the temporary construction easement was sought consisted of a 30-foot wide strip (designated Parcel 104.1) comprising .786 acre lying along and adjacent to the interior boundary lines of Parcel 104. The construction easement was for the period January 1974 to May 1975.

The district filed the action on October 29, 1973, and obtained an order of possession a day later.

Zoning :

The northerly half of the larger parcel was zoned commercial and the southerly half single family residential. However, at the time the eminent domain proceeding was filed, the property was subject to a nonconforming use for a cash-and-carry dairy business conducted on the land by Sunny Crest.

In December 1973, after the district commenced construction of the storm channel, Sunny Crest ceased its cash-and-carry dairy business and confined its activities to a dock dairy business on .6 acre at the northwest corner of the property. A cash-and-carry dairy business is one in which milk is produced, processed and sold on the site; whereas a dock dairy operation is one where milk is processed and sold at the site. According to Sunny Crest, it discontinued the cash-and-carry dairy operation because the district's construction activities made it economically infeasible to continue operating that business on the land.

In July 1975, Sunny Crest obtained a conditional use permit to develop the remainder (8.75 acres) in conjunction with an adjoining 1.39-acre parcel to the east for a mobile home park.

Valuation Testimony :

Although trial did not commence until October 20, 1975, the date of value was stipulated to be January 20, 1975. ²

Experts on both sides agreed the highest and best use of the larger parcel in the after condition was for the development of the remainder, along with the adjoining 1.39-acre parcel, for a mobile home park and retention of the dock dairy business on the .6 acre at the northwest corner of the property. The controversy centered on the highest and best use of the property in the before condition.

As of the date of value, the nonconforming cash-and-carry dairy use had been lost through cessation of that use for more than one year. Sunny Crest's position nevertheless was that the highest and best use of the land in the before condition was the nonconforming use. Sunny Crest's experts arrived at their opinion of the highest and best use in the before condition on the following theory: Institution of the condemnation action and the district's possession of the strip of land sought to be condemned necessitated removal of a substantial number of cows maintained on the premises; herd reduction coupled with the disruption of existing drainage facilities resulting from the district's construction activities rendered it infeasible to continue the cash-and-carry dairy operation; thus the loss of the nonconforming use was the direct result of the district's condemnation activities, and accordingly, any diminution in market value resulting from that loss must be disregarded in ascertaining just compensation and damages.

Sunny Crest's experts were also permitted to testify that the taking caused "temporary severance damage" for the years 1974 to 1975. Sunny Crest adduced evidence showing that upon cessation of the cash-and-carry dairy business, it immediately investigated other feasible uses for the remainder, including its potential development as a mobile home park; in order to satisfy a zoning requirement of a minimum 10-acre site for a mobile home park, Sunny Crest acquired an adjoining 1.39-acre parcel and engaged in lease negotiations with a mobile home park developer; in July 1975, Sunny Crest obtained a conditional use permit for a mobile home park; following further negotiations, a lease with the developer was executed. ³ Based upon the foregoing evidence, Sunny Crest's experts testified that Sunny Crest suffered "temporary severance damage" through loss of the fair rental value of that part of the remainder not burdened by the permanent and temporary easements for two years.

In addition, Sunny Crest was permitted to introduce evidence of "out-of-pocket expenses" it had incurred in bringing about the mobile home park development. The evidence was admitted on the theory the expenses were incurred in mitigation of damages. ⁴

The district's position was that highest and best use must be determined as of the date of value. Its expert, Mr. Joseph A. Mueller, was of the opinion the highest and best use of the remainder in the before and after conditions was for a mobile home park development. ⁵

On a motion pursuant to Code of Civil Procedure section 1249.3, the court awarded the condemnee attorneys' fees calculated on a percentage of the total verdict as well as expert witness' fees. ⁶

Contentions on Appeal :

The district contends the court erred in the following respects: (1) In permitting Sunny Crest to pursue and to recover compensation on its theory of highest and best use of the property in the before condition; (2) in overruling district's objections to evidence of the loss of fair rental value of the property for the years 1974 to 1975; (3) in denying district's motion to strike evidence of claimed damage in mitigation; and (4) in allowing interest on the award for the period prior to January 1, 1976, in addition to the "Temporary severance damage." ⁷

In the ensuing discussion, we have concluded that under the unique facts of the instant case, the court properly permitted Sunny Crest to adduce valuation evidence based on its theory of the before condition's highest and best use. We have further concluded, however, that the court erred in permitting Sunny Crest to recover the fair rental value of the property for the two-year period and the claimed damages in mitigation.

I HIGHEST AND BEST USE

The district mounts the following two-pronged attack on Sunny Crest's theory of highest and best use of the property in the before condition: (a) Highest and best use must as a matter of law be determined as of the date of value, and (b) the evidence fails to support the theory espoused by Sunny Crest.

(a) District's Standing to Challenge the Legality of Sunny Crest's Theory:

Before reaching the merits of the district's contentions, we deal with Sunny Crest's threshold response that the district failed to preserve for appellate review the legal propriety of Sunny Crest's highest and best use theory.

The record reveals the following: Mr. Williams was Sunny Crest's first expert. Although the district objected to some of Mr. Williams' testimony concerning the profitability of the cash-and-carry dairy business, no objections were interposed to his opinion that the highest and best use in the before condition was the nonconforming cash-and-carry dairy use or to his value opinions based upon that use. However, after Mr. Williams concluded his testimony and Sunny Crest's next expert, Mr. McCune, was sworn and testified as to his qualifications, the district moved "to exclude the valuation testimony of Mr. Williams in its entirety" on the ground his opinions were based on a nonconforming use which was no longer extant as of the date of value. Following extended argument and discussion, the court expressed the view that under the pertinent case law, Sunny Crest was entitled to proceed on its theory of highest and best use.

If the foregoing had been the only record made by the district, there might be merit in Sunny Crest's contention that the district failed to make an adequate record to challenge the validity of Sunny Crest's theory on appeal. Ordinarily a motion to strike a valuation witness' testimony must be directed with precision to the particular testimony sought to be stricken, especially where only part of it is objectionable. (Rose v. State of California, 19 Cal.2d 713, 742, 123 P.2d 505; San Bernardino County Flood Control Dist. v. Sweet, 255 Cal.App.2d 889, 901, 63 Cal.Rptr. 640; People v. Loop, 127 Cal.App.2d 786, 800, 274 P.2d 885.) In the case at bench, much of Mr. Williams' testimony and value opinions was not subject to the district's objection that he used the wrong date of value. Consequently, the district's motion to...