Southern Cal. Edison Co. v. Bourgerie

• Decision Date: 28 March 1973
• Citation: 9 Cal.3d 169,507 P.2d 964,107 Cal.Rptr. 76
• Court: California Supreme Court
• Parties: , 507 P.2d 964 SOUTHERN CALIFORNIA EDISON COMPANY, Plaintiff and Respondent, v. Richard D. BOURGERIE et al., Defendants and Appellants. L.A. 30095. In Bank

Page 76

107 Cal.Rptr. 76

9 Cal.3d 169, 507 P.2d 964

SOUTHERN CALIFORNIA EDISON COMPANY, Plaintiff and Respondent, v. Richard D. BOURGERIE et al., Defendants and Appellants.

L.A. 30095.

Supreme Court of California,

In Bank.

March 28, 1973.

Jack Otero, Santa Barbara, Roger M. Sullivan, Los Angeles, and Gideon Kanner, Beverly Hills, for defendants and appellants.

Rollin E. Woodbury, Los Angeles, Robert J. Cahall, Rosemead, Harry W. Sturges, Jr., and Tom P. Gilfoy, Los Angeles, for plaintiff and respondent.

MOSK, Justice.

The sole question at issue is whether a building restriction in a deed constitutes 'property' for purposes of article I, section 14, of the California Constitution ¹ so that compensation must be made to a landowner who has been damaged by the construction of an improvement which violates the restriction on land acquired by eminent domain.

In 1964, defendants purchased a tract of land in Santa Barbara from the Bank of America; the bank retained a portion of the tract adjoining defendants' property on the west. The deed from the bank to defendants provided that the property transferred could not be used for an electric transmission station, and the land retained by the bank was made subject to the same restriction. Plaintiff, Southern California Edison Company (Edison), a public utility, sought to acquire the bank's land by eminent domain, for the purpose of building an electric substation. ¹

In its complaint against the bank, Edison joined defendants, alleging that they owned or claimed some right, title or interest in the bank's land. Defendants answered, asserting that the bank's land was burdened with a restriction in their favor, and that they would be damaged by the proposed electric substation. Subsequently, the bank and Edison entered into a stipulation for judgment in which the bank agreed to permit Edison to acquire the bank's land for a specified sum. The action proceeded to trial on the issues relating to the propriety of the condemnation, and the trial court rendered judgment in Edison's favor, holding that the property sought to be condemned would be applied to uses authorized by law. It held also that the restriction forbidding the construction of an electric transmission station on the bank's land did not create a compensable property interest in defendants.

In attacking the basic issue defendants fire two salvos. First, they maintain that a building restriction constitutes 'property' as that term is used in article I, section 14, of the California Constitution and, therefore, a taking must be compensated whether the plaintiff seeking condemnation is a governmental entity or a private party. Second, they assert even if a restriction is not viewed as compensable property when the condemner is a governmental entity, nevertheless a private, profit-making corporation such as Edison may not violate the restriction without compensating the property owner in whose favor it runs. We need not reach the second of these issues since, as will appear, we conclude that whether the condemner is a public or private entity, a building restriction constitutes 'property' within the meaning of article I, section 14, and compensation must be paid whenever damage to a landowner results from a violation of the restriction.

The trial court ruled against defendants in reliance upon Friesen v. City of Glendale (1930) 209 Cal. 524, 288 P. 1080, and Lombardy v. Peter Kiewit Sons' Co. (1968) 266 Cal.App.2d 599, 72 Cal.Rptr. 240. In Friesen, a case we have not reexamined in over four decades, the court held: a building restriction is not a property right but merely a negative easement or an equitable servitude; such an interest is, in essence, a contractual right cognizable in equity as between the contracting parties but not binding upon the sovereign since parties may not by mutual covenants in private contracts create for themselves an estate in land entitling them to compensation by the state; moreover, if plaintiffs' position were sustained, each landowner in the tract to which the restriction applied as well as the encumbrancers of the various lots would be necessary parties to a condemnation suit, thereby greatly increasing the cost of condemnation. In Lombardy the Court of Appeal denied compensation on the authority of Friesen.

A majority of jurisdictions which have considered the matter hold that building restrictions constitute property rights for purposes of eminent domain proceedings and that a condemner must compensate a landowner who is damaged by violation of the restriction. (Horst v. Housing Auth. of County of Scotts Bluff (1969) 184 Neb. 215, 166 N.W.2d 119, 121; Meredith v. Washoe County School District (1968) 84 Nev. 15, 435 P.2d 750, 752--753; United States v. Certain Land in City of Augusta, Maine (S.D.Me.1963) 220 F.Supp. 696, 700--701; School District No. 3 v. Country Club of Charleston (1962) 241 S.C. 215, 127 S.E.2d 625, 627; Town of Stamford v. Vuono (1928) 108 Conn. 359, 143 A. 245, 249; Allen v. City of Detroit (1911) 167 Mich. 464, 133 N.W. 317, 320; see cases collected in 4 A.L.R.3d 1137; 2 Nichols on Eminent Domain (3d ed. 1970) § 5.73(1).) The Restatement of Property also adopts this view. (Rest., Property, § 566.) Friesen and other cases adhering to the minority view have been sharply criticized by law review commentators. (See, e.g., Aigler, Measure of Damages for Extinguishment of Easement by Condemnation, 1945 Wis.L.Rev. 5; Stoebuck, Condemnation of Rights the Condemnee Holds in Lands of Another (1970) 56 Iowa L.Rev. 293; Spies & McCoid, Recovery of Consequential Damages in Eminent Domain (1962) 48 Va.L.Rev. 437; Comment (1955) 53 Mich.L.Rev. 451.)

We are impressed with the cogent criticism of the conceptual underpinnings of Friesen. First, it is unquestioned that building restrictions constitute property rights for some purposes (Mock v. Shulman (1964) 226 Cal.App.2d 263, 269--270, 38 Cal.Rptr. 39; see 5 Powell on Real Property (1971) § 671, p. 147). Furthermore, it is difficult to justify affording compensation for the appropriation of an easement, which is unquestionably compensable 'property' (see 2 Nichols on Eminent Domain (3d ed. 1970) § 5.72), while denying payment for violation of a restriction. Both easements and building restrictions may be created by agreements between private parties and, therefore, upon condemnation in both situations the financial burden of the condemner is increased solely by virtue of agreements made between private parties. ³ Equally important, the violation of a building restriction could cause far greater damage in monetary value to a property owner than the appropriation of a mere right of way. To establish a substantive distinction by merely labeling one a property interest for which compen sation must be made and the other a mere contractual right which may be appropriated by a condemner without any compensation is inequitable and rationably indefensible.

We need not contemplate in depth the somewhat esoteric dialogue on he appropriate characterization of a building restriction. One writer has perceptively declared that the 'no-property-interest argument is less the motivation for denial of compensation than it is a rationalization for a result desired for other reasons' (Stoebuck, op. cit. Supra, 56 Iowa L.Rev. at p. 306). An objective analysis reveals the real basis for the decisions which deny compensation for the violation of building restrictions by a condemner relates to pragmatic considerations of public policy rather than abstract doctrines of property law, and it is upon these issues of policy that jurisdictions choose between the minority and majority views. (Compare Wharton v. United States (1st Cir. 1907) 153 F. 876, expressing in dictum the minority concept, with the most frequently cited case for the majority position, town of Stamford v. Vuono, supra, 143 A. 245.) ⁴

Denial of compensation has been justified upon the ground that the cost of constructing public projects will be substantially increased if compensation must be provided by a condemner for the violation of a restriction. In addition, it is asserted that a condemner might be required to join a large number of landowners as defendants in cases where the benefit of the restriction runs to numerous lots, and that this could result in inhibiting the condemner's ability to acquire essential property. ⁵ Finally, it has been suggested that landowners might 'pluck valuable causes of action from the thin air' by entering into agreements imposing restrictions whenever condemnation proceedings are on the horizon. (Arkansas State Highway Commission v. McNeill (1964) 238 Ark. 244, 381 S.W.2d 425, 427.)

We find these reasons for denying compensation to be unpersuasive. Conceding the possibility that the cost of condemning property might be increased somewhat by awarding compensation for the violation of building restrictions, we cannot conclude that such increases will significantly burden exercise of the power of eminent domain. As a practical matter some takings would result in negligible damage to the owners of the restriction (e.g., public works such as parks or access roads); if the character of the improvement were such that damage to some landowners would result (e.g., schools or fire stations), it is likely that only those immediately adjoining or in close proximity to the improvement would suffer substantial injury, even in highly restricted areas. As to the procedural difficulties, while they are not here involved and we need not decide the issue, it has been posited by some authorities that a condemner need only selectively join in the action landowners whose property is most likely to be damaged by the violation of the building restriction; there are other remedies for excluded owners who anticipate the improvement will result in damage to their property. (See Stoebuck, op cit. Supra, 56 Iowa L.Rev. pp. 307--308.) Finally, the...