San Diego County Water Authority v. Mireiter

• Decision Date: 29 September 1993
• Docket Number: No. D016677,D016677
• Citation: 23 Cal.Rptr.2d 455,18 Cal.App.4th 1808
• Court: California Court of Appeals Court of Appeals
• Parties: SAN DIEGO COUNTY WATER AUTHORITY, Plaintiff and Appellant, v. John MIREITER, et al., Defendants and Respondents.

Page 455

23 Cal.Rptr.2d 455

18 Cal.App.4th 1808

SAN DIEGO COUNTY WATER AUTHORITY, Plaintiff and Appellant, v. John MIREITER, et al., Defendants and Respondents.

No. D016677.

Court of Appeal, Fourth District, Division 1, California.

Sept. 29, 1993.

Review Denied Jan. 13, 1994.

Jennings, Engstrand & Henrikson and Bruce W. Beach, San Diego, for plaintiff and appellant.

Endeman, Lincoln, Turek & Heater, Ronald L. Endeman, Donald R. Lincoln and Linda B. Reich, San Diego, for defendants and respondents.

WIENER, Acting Presiding Justice.

In eminent domain cases, the "date of valuation" generally precedes the date of trial at which the value of the property is determined. The question here is whether a jury, in determining the amount of compensation due the property owner, is required to consider facts discovered during this lag which tend to reduce the property's fair market value. We conclude that the language of Code of Civil Procedure section 1263.320, which defines "fair market value" 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," necessarily implies such facts must be taken into account. Accordingly, because the jury here was not properly instructed with respect to such facts, we reverse the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Defendants John and Maria Mireiter, Joseph and Lee Mireiter, and Josef and Adelheid Bauer owned a rectangular piece of undeveloped property consisting of 7.38 acres located in the City of San Marcos. Studies in 1979 and 1986 had identified four "vernal pools" located on the property. Vernal pools are temporary ponds of water, varying in size and duration, which form during the rainy season and disappear in the summer. They are associated with various species of plants and animals, some of which are endangered and some of which are found only in San Diego County.

To facilitate the construction of a water pipeline, plaintiff San Diego County Water Authority (the Authority) filed this action in 1990 seeking condemnation of a 100-foot-wide strip totaling 1.64 acres running through the middle of the property owned by defendants. This left two "remainders," a northern parcel totaling 2.58 acres and a southern parcel consisting of 3.16 acres. In June 1990 the Authority deposited $286,743 with the court as the probable amount of compensation. Pursuant to Code of Civil Procedure section 1263.110, this deposit established June 29, 1990, as the date of value for the purpose of awarding compensation. The Authority took possession of the property a month later by virtue of an order entered pursuant to Code of Civil Procedure section 1255.460. Trial was set for January 1992, with the only issue being the amount of compensation to be paid.

In May 1991 a biologist inspecting the property located several new vernal pools not previously identified in the 1979 and 1986 reports. The Authority contended that the effect of this new discovery was to reduce the value of the condemned property--and in turn the amount of compensation due--because the existence of more vernal pools would make development of the property more difficult. Defendants unsuccessfully sought to exclude evidence of the subsequently discovered vernal pools but the trial court then curiously rejected instructions sought by the Authority which would have required the jury to consider the effect of the new vernal pools on the property's value. Instead, the jury was instructed that the post-valuation date discoveries were relevant only to the extent that the possibility of such discoveries would have been considered by a buyer and seller and thus reflected in the market price as of the valuation date:

"In determining fair market value you may consider discoveries regarding the physical condition of the property which were made after the date of valuation if you find a reasonable buyer and seller would have taken the probability of such conditions into account in fixing the selling price."

The jury then returned a verdict, finding that the market value of the property was slightly more than $457,000 and that the condemnation resulted in severance damages of over $263,000, for a total award in excess of $720,000.

DISCUSSION

I.

The central issue in this case is whether the court erred in instructing the jury regarding the effect of information about the condemned property discovered after the valuation date which tended to reduce the property's value. Specifically, the Authority contends the court was obligated to instruct the jury it must consider the May 1991 discovery of two additional vernal pools in assessing the compensation to be paid to defendants.

Perhaps the most oft-cited case on after-acquired information as it affects value in condemnation proceedings was decided by the California Supreme Court in 1899. In City of Los Angeles v. Pomeroy (1899) 124 Cal. 597, 57 P. 585, the city sought to condemn 315 acres in the San Fernando Valley for the purposes of constructing a tunnel project to maintain and enhance the city's water supply system. (Id. at pp. 604-607, 57 P. 585.) Apparently information discovered after the date of summons (the valuation date for the purposes of the case) indicated the volume and hence the value of the subterranean water flow was greater than previously assumed. The trial court instructed the jury as follows:

"Although you may believe from the evidence that by reason of things done, discovered, or ascertained since June 27, 1893, it now appears that the land was then more valuable for any purpose or use than it was then known to be; yet you cannot consider such additional value unless you believe also that these things were sufficiently known or obvious in June, 1893, to affect the market value at that time, and did so affect it." (Id. at p. 642, 57 P. 585 (lead opn. of Beatty, J.).)

What appears to be the lead opinion in the case, a 43-page tome, was authored by Chief Justice Beatty. In it he argues that the giving of such an instruction was error:

"In several of these instructions the jury are told in effect that in estimating the value of these lands they must not take into consideration any fact discovered since the summons was issued. In other words, to use the illustration put by appellants, if a gold mine worth millions of dollars had been discovered in the land the day after the issuance of summons, the city could take the land by paying its value for agricultural purposes.

"This conclusion, it is true, follows logically from the proposition that market value at the date of the summons is to control, and that is the idea upon which the instructions are based. But I think this is a mistaken idea. The thing to be ascertained is not market value, but actual value (Code Civ.Proc., sec. 1249), and the only reason why market value is taken as the criterion of compensation in ordinary cases is because it is in such cases the true measure of actual value--the only practical test. But in a case where discoveries made after the issuance of summons demonstrate that the actual intrinsic value of the land at that date was greater than its market value--in other words, when it appears that market value is no criterion of actual value--those discoveries should be taken into consideration. As such discoveries were claimed in this case, I think the court erred in giving and refusing the instructions referred to." (124 Cal. at p. 644, 57 P. 585 (lead opn. of Beatty, J.).)

The Chief Justice's opinion has been frequently cited, apparently as the opinion of the court, in support of a "hindsight" rule requiring consideration of facts discovered after the date of valuation which affect the value of the property. (See, e.g., City of Little Rock v. Moreland (1960) 231 Ark. 996, 334 S.W.2d 229, 230-231; 4 Nichols on Eminent Domain (3d ed. rev. 1989) § 12A.07; Orgel, Valuation Under the Law of Eminent Domain (2d ed. 1953) § 27, p. 133; Jahr, Law of Eminent Domain--Valuation and Procedure (1953) p. 110.)

The concurring opinion of Justice Temple follows the Chief Justice's opinion. Close examination, however, reveals that Justice Temple's opinion was joined in by four other justices, thus making it a majority opinion as to those points on which Justice Temple and the Chief Justice disagree. ¹ The first of those points, according to Justice Temple, "has regard to the time when the property is to be valued." He goes on to dispute Chief Justice Beatty's asserted distinction between "actual value" (the then-existing statutory standard) and "market value":

"It is said if a gold mine worth millions of dollars had been discovered in this land the day after the summons was issued, the city could take the land by paying its value for agricultural purposes.

"The supposition is an impossible one. A gold mine of the known actual value of millions could not be so discovered. The phrase 'actual value' is here used in opposition to the phrase 'market value.' It is difficult to give any meaning to it when so used, but in regard to a gold mine it must have reference to the amount which could be taken out of it over and above the cost of extraction. This could not be known until the mine was worked out, and therefore whenever it was valued necessarily the value could not be the actual intrinsic value, as defined, but would necessarily be its market value. So the proposed value only changes the statutory date at which the right of the city is deemed to accrue, and when the value is to be estimated. It is contended that the right must be deemed to have accrued and the valuation made after other elements of value have been discovered.

"The phrase 'actual value' is sometimes used in contradistinction to market value to indicate that property is valued too high to make it a good investment. If the market value of the land was...