People v. Southern California Edison Co.

• Decision Date: 20 April 2000
• Docket Number: No. S078712.,S078712.
• Citation: 996 P.2d 711,22 Cal.4th 791,94 Cal.Rptr.2d 609
• Court: California Supreme Court
• Parties: The PEOPLE ex rel. DEPARTMENT OF TRANSPORTATION, Plaintiff and Respondent, v. SOUTHERN CALIFORNIA EDISON COMPANY, Defendant and Appellant.

94 Cal.Rptr.2d 609

22 Cal.4th 791

996 P.2d 711

The PEOPLE ex rel. DEPARTMENT OF TRANSPORTATION, Plaintiff and Respondent, v. SOUTHERN CALIFORNIA EDISON COMPANY, Defendant and Appellant.

No. S078712.

Supreme Court of California.

April 20, 2000.

Rehearing Denied June 2, 2000.¹

Donald A. Redd; Douglas P. Ditonto, Rosemead; Berger & Norton and Michael M. Berger, Santa Monica, for Defendant and Appellant.

Daniel G. McGovern; William M. McMillan, Pasadena; David R. Simmes; Anthony J. Ruffolo; Alexander D. DeVorkin; Cox, Castle & Nicholson, Kenneth B. Bley, Los Angeles; Greines, Martin, Stein & Richland and Marc J. Poster, Beverly Hills, for Plaintiff and Respondent.

BROWN, J.

The purpose of our eminent domain statutes is obvious. The Legislature undoubtedly envisioned speedy acquisitions and timely compensation. Unfortunately, government agencies and public utilities sometimes have other priorities and do not follow the script. Consequently, we must now examine the applicability of one of these statutes to an acquisition that began over 30 years ago and consider whether the trial court properly awarded interest on an eminent domain award from the date of valuation rather than from the date of possession as required by Code of Civil Procedure section 1268.310.² We conclude the court acted properly by declining to apply section 1268.310 under the particular facts of this case, but abused its discretion by awarding interest from the valuation date. Instead, we hold that interest in this case should accrue from the date the con-demnee demanded legal action and asserted its statutory right to compensation.

FACTUAL AND PROCEDURAL BACKGROUND

In the 1960's, the People of the State of California (the State), acting by and through the Department of Transportation, decided to extend the 605 Freeway from Interstate 10 to Interstate 210. To do so, the State needed to acquire certain sections of a six-mile-long and 250-foot-wide corridor owned by Southern California Edison Company (Edison). Negotiations with Edison began in 1963.

Despite the early start, the State and Edison were unable to agree on the terms of the acquisition by 1969 when construction of the freeway extension was scheduled to begin. As a stopgap, the State and Edison entered into a permission-to-enter agreement (Agreement). Under the Agreement, Edison gave the State permission "to enter, upon the lands of the Southern California Edison Company ... for the purpose of constructing or improving a public highway...." Permission was contingent "on the understanding that you [the State] will hereafter without unnecessary delay, negotiate with the undersigned [Edison] ... to agree upon terms of compensation, and that, if agreement cannot be reached, you [the State] will promptly commence eminent domain proceedings to have such compensation determined." The Agreement further provided that permission "shall continue in effect pending such negotiations, or until a reasonable time after you [the State] have been requested by the undersigned [Edison] to commence eminent domain proceedings." Finally, the Agreement established that the date of entry, June 20, 1969, "shall be" the date of valuation in any subsequent eminent domain proceeding and that any award made in the proceeding "shall bear interest at the rate of 7 per cent annum" from the date of entry.

Over the next 25 years, the State and Edison engaged in sporadic negotiations with no success. Despite the lack of progress, Edison did not ask the State to initiate eminent domain proceedings until July 24, 1994.³ One month later, Edison filed an inverse condemnation action demanding compensation.⁴ Over one year after Edison filed its action, the State filed a separate eminent domain action. The trial court consolidated the two actions and bifurcated the trial into a "legal issues" and a valuation phase.

In the legal issues phase, the trial court, concluding this was not a "close case," held that the State breached the Agreement. The court further found that the State "knowingly" delayed negotiations and misled Edison "up to a certain point ... with respect to what was being done." In a subsequent letter brief, the State conceded that, because the court found the State breached the Agreement, it should not enforce the Agreement and should, instead, use the date of valuation established by law. Accordingly, the court refused to enforce the Agreement's 1969 valuation date and reluctantly fixed the date of valuation as November 16, 1995, the date the State made a deposit of probable compensation in the eminent domain action. (§ 1263.110, subd. (a).) The court, however, found that Edison "wholly failed to act reasonably to protect its rights and mitigate its damages."⁵

At the end of the valuation phase, a jury awarded Edison $49.5 million in damages. Specifically, the jury found that the condemned property was worth $13.5 million and severance damages to the remainder of Edison's corridor totaled $36 million. In reaching this verdict, the jury largely adopted the valuation of Edison's expert who used an appraisal method that yielded the upper limit of value and calculated Edison's damages to be $54.5 million: $13.7 million for the condemned property plus $40.8 million in severance damages.

In posttrial proceedings, the trial court declined to accrue interest on the award from June 20, 1969, the date the State took possession of Edison's property, as required by section 1268.310, and award Edison roughly $367 million in interest. Citing Edison's vast experience with condemnations, its lack of diligence, its receipt of an "extreme measure of value" and the existence of the Agreement, the court concluded the application of section 1268.310 to this case would violate the constitutional requirement of just compensation. Looking to inverse condemnation cases for guidance, the court then awarded Edison interest from the date of the valuation, resulting in an award of $5.65 million.

Upon announcing its decision, the trial court acknowledged that a reviewing court might reverse its interest award. In an attempt to avoid a waste of judicial resources, the court gave a "backup" position. Specifically, the court stated that, if a reviewing court disagreed with its decision, it would award interest from the date the State breached the Agreement. Although the court did not specify the date of the breach, it noted that this date was "significantly earlier" than the valuation date.

Both the State and Edison appealed. The Court of Appeal affirmed the judgment in its entirety. With respect to the interest award, the court relied primarily on Citizens Utilities Co. v. Superior Court (1963) 59 Cal.2d 805, 31 Cal.Rptr. 316, 382 P.2d 356 (Citizens Utilities), and held that the trial court properly exercised its inherent power to disregard section 1268.310. The court further concluded the trial court did not abuse its discretion by awarding Edison interest from the valuation date.

We granted review solely to determine whether the trial court acted properly by awarding interest on the jury's award from the date of valuation rather than from the date of possession as required by section 1268.310. We conclude the trial court properly declined to apply section 1268.310 under the unusual circumstances of this case, but abused its discretion by setting the 1995 valuation date as the accrual date. Instead, we believe interest should accrue from the date Edison demanded legal action from the State.

DISCUSSION

I

As an initial matter, we reject the State's contention that section 1268.310 does not apply because the State (a) acquired possession by agreement and (b) filed the eminent domain action after Edison filed an inverse condemnation action. Section 1268.310 provides that "[t]he compensation awarded in the [eminent domain] proceeding shall draw interest, computed as prescribed by Section 1268.350, from the earliest of the following dates: [¶] (a) The date of entry of judgment. [¶] (b) The date the plaintiff takes possession of the property. [¶] (c) The date after which the plaintiff is authorized to take possession of the property as stated in an order for possession." The statutory language does not distinguish between possession by agreement or by any other means. The statute also makes no distinction between eminent domain proceedings filed before or after the filing of an inverse condemnation proceeding. Finally, nothing in the legislative history suggests an intent to make these distinctions. Accordingly, section 1268.310, by its terms, applies and ostensibly requires the accrual of interest from the date of possession. (See Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735, 248 Cal.Rptr. 115, 755 P.2d 299 (Lungren) ["If the language [of a statute] is clear and unambiguous there is no need for construction...."].)

Nonetheless, we find that section 1268.310 should not control here. Instead, we believe this case presents the rare situation where the literal application of a statute contravenes the legislative intent behind its enactment and extends its reach far beyond those situations contemplated by the Legislature.

Ordinarily, the literal meaning of the words of a statute governs. (See Lungren, supra, 45 Cal.3d at p. 735, 248 Cal. Rptr. 115, 755 P.2d 299.) We will not, however, apply the literal language of a statute "when to do so would evidently carry the operation of the enactment far beyond the legislative intent and thereby make its provisions apply to transactions never contemplated by the legislative body." (People v. Davenport (1939) 13 Cal.2d 681, 685, 91 P.2d 892.) "A code may strive for comprehensiveness, but exceptional situations will arise." (Knox v. Phoenix Leasing Inc. (1994) 29 Cal. App.4th 1357, 1365, 35 Cal.Rptr.2d 141 (Knox).) As a result, we may decline to apply a statute in those rare cases where "it is obvious that the Legislature cannot have intended the statute to apply." (People v. Oliver (1961) ...