Redevelopment Agency v. Elementis Pigments

• Decision Date: 09 August 2002
• Docket Number: No. A091716.,No. A090932.,No. A093126.,A090932.,A091716.,A093126.
• Court: California Court of Appeals Court of Appeals
• Parties: EMERYVILLE REDEVELOMENT AGENCY, Plaintiff and Appellant, v. ELEMENTIS PIGMENTS, INC., Defendant and Appellant. Emeryville Redevelopment Agency, Plaintiff and Appellant, v. Elementis Pigments, Inc., Defendant and Respondent.

125 Cal.Rptr.2d 12

101 Cal.App.4th 1083

EMERYVILLE REDEVELOMENT AGENCY, Plaintiff and Appellant, v. ELEMENTIS PIGMENTS, INC., Defendant and Appellant.

Emeryville Redevelopment Agency, Plaintiff and Appellant, v. Elementis Pigments, Inc., Defendant and Respondent.

No. A090932.

No. A091716.

No. A093126.

Court of Appeal, First District, Division 4.

August 9, 2002.

Review Denied November 13, 2002.

Natalie E. West, Oakland, Carol R. Victor, Kevin D. Siegel, Karen W. Murphy, Oakland, Michael Biddle, Emeryville, Benjamin L. Stock, Oakland, Thomas A. Douvan, for Appellant.

James M. Berg, F. Gale Connor, Jeffrey B. Kirschenbaum, San Francisco, for Respondent.

Lee C. Rosenthal, San Francisco, William F. DiCamillo, for California Redevelopment Association as Amicus Curiae.

SEPULVEDA, J.

These consolidated appeals arise from a judgment and posttrial orders in an eminent domain proceeding brought by the Emeryville Redevelopment Agency (Agency or plaintiff) to condemn about 13 acres of chemically contaminated land owned by defendant Elementis Pigments, Inc., formerly Harcros Pigments, Inc. (Elementis or defendant). The appeals, and a cross-appeal by Elementis, present numerous questions of eminent domain law. We have concluded that the judgment must be reversed. Specifically, we hold that (1) the Agency's own purchases of neighboring properties were inadmissible to establish the value of the condemned property; (2) the jury could not consider, and the appraisal witnesses could not rely upon, a recital in a contract for the purchase of a neighboring property, which purported to "apportion" the overall price for the property between two segments divided by a political boundary; (3) it was error to admit, over objection, evidence concerning specific development plans for the property, since no one disputed the highest and best use for it and no other materiality was shown; (4) because it was undisputed that the property must inevitably be adapted to a higher and more valuable use, and because there was no proper ground for finding a qualifying period of "interim use," the trial court properly withheld from the jury Elementis's claim for loss of goodwill; (5) for the same reasons, however, defendant cannot recover for the value of equipment or fixtures "in place, in use." Our reversal of the judgment, coupled with intervening external events, makes it unnecessary or improper to address other issues, notably whether the trial court erred by excluding evidence of soil remediation costs and staying a corresponding portion of the judgment pending resolution of a federal cost-recovery action, and whether the court erred by awarding Elementis its attorneys fees.

BACKGROUND

The property in question was originally occupied by a Native American midden, or shellmound, rising to a height of at least 40 feet. In the late 1800s the property held an amusement park known as Shellmound Park. Sometime in the 1920s it was leveled and developed for industrial use. At one time part of the property included a pesticide manufacturing operation. In 1987 the property was designated for inclusion in a 270-acre redevelopment project. In 1990, it was acquired by Elementis, which manufactured iron oxide pigments on the property. In 1992 Elementis notified the City of Emeryville (City) that it was permanently laying off 70 of its 85 employees. After that time it apparently continued to manufacture, or at least to blend, iron oxide pigments on a small part of the property.

In January 1996 Elementis indicated to the Agency that it was willing to sell the property to the Agency for fair market value. The Agency expressed interest but stated that "the existence of hazardous materials is of concern and will greatly impact [the property's] fair market value," and "at this time the Agency has little understanding as to the extent of contamination on the site and the cost of remediation." Almost a year later the parties negotiated two right-of-entry agreements permitting the Agency to conduct activities relating to appraisal and environmental testing. Ultimately the soil on the property was found to contain significant levels of contaminants including lead and arsenic. A dispute thereafter arose between the parties concerning, at least ostensibly, who would control the "remediation" (cleanup) of the property and what methodology would be employed.

On February 19, 1998, the Agency filed this action in eminent domain.¹ In May of 1998, the Agency deposited probable compensation of $1,062,000 with the State Treasurer and applied to the court for prejudgment possession and an order for entry. The court ultimately authorized the Agency to take possession of the most contaminated portions of the property by September 30, 1998, and the remainder by December 31, 1998. Around the end of 1998, Elementis relocated what remained of its operation to Colton in Southern California. The parties later stipulated that the "valuation date" for purposes of this matter would be November 1, 1998.

On January 11,1999, after a trial limited to the "right to take," the court found that the Agency had the right to acquire the property by eminent domain.

In 1999, during demolition and soil remediation, extensive remnants of the original Emeryville shellmound were discovered on the subject property along with the remains of well over 100 humans. These materials constituted a cultural resource protected under the California Environmental Quality Act, Public Resources Code sections 21000 et seq. (CEQA) and triggered certain statutory requirements governing the treatment and disposition of such remains. (Pub. Resources Code, § 5097.98.) The Agency proceeded to take various steps to comply with these provisions. Defendant contended at trial that the Agency's actions exceeded statutory requirements and, thus, the reasonable cost of such compliance.

On August 4, 1999, the Agency and the City filed a complaint in the United States District Court for the Northern District of California, seeking monetary damages and other relief from Elementis, its predecessors, and others, based on the contamination of the subject property and neighboring properties, the necessity of remediating those properties, and the costs incurred in doing so. (City of Emeryville et al. v. Elementis Pigments, Inc. et al. (N.D.Cal., Aug. 6, 1999) No. C 99-03719-BZ.) The complaint invoked a variety of federal and state laws, most notably the Comprehensive Environmental Response, Compensation, and Liability Act, title 42 U.S.C. § 9601 et seq. (CERCLA).

On November 8, 1999, with the federal action still pending, trial commenced in this action on the issue of the "just compensation" to be awarded to Elementis. On December 20, 1999, the jury returned a verdict fixing the fair market value of the property at $12,493,283. The trial court entered a judgment condemning the property to the Agency. However the court stayed a portion of the award, equal to the soil remediation costs claimed to have been incurred by the Agency, pending further developments in the federal lawsuit.

The Agency filed a timely appeal from the judgment (A090932), in which Elementis filed a cross-appeal. The Agency appealed separately from postjudgment orders allowing, and fixing the amount of, costs and attorneys fees. (A091716, A093126.) We have already consolidated the first two appeals, and have implicitly granted the plaintiffs unopposed request that all three appeals be considered together.

While the appeals were pending, both parties requested judicial notice of a written settlement agreement reached by them and approved by the court in the federal lawsuit. In the agreement, Elementis promised to compensate the City with (1) "cash consideration" of $3,850,000, and (2) "forbearance consideration" in the form of the relinquishment of claims against the City for over $2,450,800 in relocation benefits. It was further agreed that the cash consideration (plus interest) would "be a credit in Emeryville's favor against any sums Emeryville may be required to pay Elementis in satisfaction of a final judgment resulting from the Eminent Domain Appeal or subsequent proceeding resulting from that Appeal."

I. AGENCY'S PURCHASES OF NEIGHBORING PROPERTIES

The state's power to take property by eminent domain is conditioned on its obligation to pay "just compensation" to the owner. (U.S. Const., 5th Amend.; Cal. Const., art. I, § 19.) "Just compensation" is defined as "fair market value" (Code Civ. Proc, § 1263.310), which in turn is defined as "the highest price on the date of valuation that would be agreed to by a seller .. . and a buyer ... each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available" (id., § 1263.320). The constitutional guarantee of "just compensation" is obviously intended to protect the landowner, but it also protects the public by limiting its liability to losses that can fairly be attributed to the taking. "`A landowner is not entitled to be placed in a better position financially than he was before the condemnation; neither is the state required to pay more than land is worth merely because of some theoretical, intangible concept.'" (San Diego County Water Authority v. Mireiter (1993) 18 Cal. App.4th 1808, 1817, 23 Cal.Rptr.2d 455 (Mireiter), quoting City of Fresno v. Cloud (1972) 26 Cal.App.3d 113, 123, 102 Cal.Rptr. 874.)

Here both parties sought to establish the fair market value of the subject property through analyses, by expert appraisers, of "comparable sales." (See Evid.Code, § 816; cf. id. § 819 [capitalized income approach].) Under this method, the appraiser identifies sales of properties deemed to resemble the condemned property in relevant respects, and then derives a market value for the condemned property from the prices paid for these "comparables," typically adjusting the price to reflect such matters as material differences between the...