Tilem v. City of Los Angeles

• Decision Date: 05 May 1983
• Citation: 142 Cal.App.3d 694,191 Cal.Rptr. 229
• Court: California Court of Appeals Court of Appeals
• Parties: CITY OF LOS ANGELES, a municipal corporation, Plaintiff, Respondent, and Cross-Appellant, v. Joseph N. TILEM, Defendant, Appellant, and Cross-Respondent. Civ. 64576.

Page 229

191 Cal.Rptr. 229

142 Cal.App.3d 694

CITY OF LOS ANGELES, a municipal corporation, Plaintiff, Respondent, and Cross-Appellant, v. Joseph N. TILEM, Defendant, Appellant, and Cross-Respondent.

Civ. 64576.

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

May 5, 1983.

Rehearing Denied May 25, 1983.

Hearing Denied Aug. 24, 1983.

Ira Reiner, City Atty., Norman L. Roberts, Asst. City Atty., Kenneth Cirlin, Deputy City Atty., for plaintiff, respondent, and cross-appellant.

Fadem, Berger & Norton, A Professional Corp. by Michael M. Berger, Santa Monica, for defendant, appellant, and cross-respondent.

COMPTON, Acting Presiding Justice.

In February of 1978, the City of Los Angeles (City) filed an action in eminent domain as to a portion of two contiguous parcels of real property owned by Joseph Tilem (Tilem). Tilem was not served until June of that year.

Meanwhile, in June of 1978, Tilem filed an action against the City for inverse condemnation and damages. The two actions were subsequently consolidated, but just a month before trial, the City abandoned its action and the matter was tried on Tilem's complaint.

The judgment which was entered awarded Tilem some, but not all, of the damages and costs that he sought. Both sides have appealed.

The subject property, situated on the north side of Media Drive in the suburb of Highland Park, consists of two residentially zoned lots approximately 800 feet in length and 40 to 50 feet in width. Parcel 1 is improved with two eight unit apartment buildings moved on to the land shortly after it was purchased by Tilem in or about 1970. Parcel 2 is undeveloped and has remained so since its acquisition.

The genesis of the instant litigation occurred in 1972, when Tilem learned that the City Council had proposed a project to widen and improve Media Drive pursuant to the Improvement Act of 1911. (Sts. & Hy.Code, § 5000 et seq.) The plan, as originally proposed, required the taking of a 6 foot strip of land extending the length of Tilem's property. The City's intention to go forward with the project was reaffirmed in February 1974, when a Notice of Determination was filed with the County Clerk. Revised notices were filed in November 1976, after the City's engineer recommended extending the width of the street an additional ten feet.

In January 1977, however, the scope of the project was again altered when the Council adopted ordinance number 149201, declaring the City's intention to condemn only a ten foot strip of Tilem's land. It is of interest that only Tilem's property was to be taken. The residential property on the other side of the street was to remain intact.

One of the more startling provisions of the Ordinance was that the City proposed to finance the widening of the street by the creation of two assessment districts consisting entirely of Tilem's property. Thus whatever the City paid Tilem for the property plus the other costs of the judgment would be charged back to him as an assessment.

Two months later, the Council, after conducting a public hearing at which Tilem appeared and registered his protest against the project, adopted two separate ordinances (Nos. 149445 and 149446), authorizing the condemnation of the ten foot wide strip and establishing the one-man assessment districts. In September 1977, after appraising the property, the City offered $21,850 in compensation for the taking; said offer was refused as unreasonable. As noted earlier, the action in eminent domain was not filed until February of 1978.

Between 1972 when the project was first proposed, and 1976, Tilem paid little attention to the project and, for the most part, believed that it would not go forward. In mid-1976, however, Tilem found a building suitable for moving to Parcel 2 and began preparations for its relocation. In July of that year, he visited the City's Department of Building & Safety to ascertain the feasibility of the move on and to initiate the process of acquiring the necessary permits.

During conversations with departmental employees he was advised that a ten-foot setback from the improved street would be required. At the same time he was shown printed diagrams depicting the Media Drive widening project. Tilem then concluded that once the ten-foot strip of land was taken by the City, he would be unable to comply with the limit line requirements. He thereafter made no further attempt to go forward with the development of the vacant land.

In December 1977, Tilem concluded lengthy negotiations with Mr. and Mrs. Peter Asher (Ashers) and thereafter entered into an irrevocable lease-option agreement for the purported purchase of Parcel 1. Under no circumstances could the option to purchase the lot be exercised until January 31, 1981. The purchase price was set at $225,000, with a total cash down payment of $52,000 less the amount of the option payments paid over the course of the tenancy. A basic monthly rental fee was set at $1,350. In accordance with other provisions of the agreement, this fee could reach as high as $3,000 per month.

Trial of the action was bifurcated into a legal issues phase and a valuation phase. ¹ Since the City had abandoned its condemnation action before the commencement of trial, only two issues required resolution by the court: (1) "Whether condemnor engaged in any precondemnation activities for which condemnees are entitled to damages" and (2) "The amount of any precondemnation damages, if any."

The legal issues trial was held before the Honorable Arleigh Woods on May 15, 1979. Tilem and his valuation expert testified that the City's conduct had placed a "cloud" over both parcels of land, making it impossible to develop the vacant property and forcing a sale of the apartment complex at less than fair market value, and that compensation offered by the City for the taking was unreasonable. Tilem also argued that the creation of the assessment district was inequitable and discriminatory.

The City vigorously contested each of these claims, arguing that Tilem's property had suffered no diminution in value and that its conduct from 1972 onward had been fair and reasonable.

On September 26, 1979, Judge Woods rendered her interlocutory judgment in which she found that the City's precondemnation conduct had unreasonably interfered with Tilem's ability to use the vacant lot and to sell the developed property at fair market value. The court further concluded that the City had violated its duties under Government Code section 7267 et seq. by arbitrarily refusing to consider severance damages for either parcel in calculating its offer of compensation. It was further determined that the City had not commenced condemnation proceedings within the six month period required by Code of Civil Procedure section 1245.260, ² and that the lease-option contract was to be construed as a sales transaction for purposes of determining the extent of Tilem's damages.

Upon commencement of the valuation proceedings, both parties waived trial by jury and stipulated that the matter could be heard before the Honorable J. Wesley Reed. Both Tilem's expert, Kathy Shannon, and the City's appraiser, Robert Jackson, offered remarkably similar opinions as to the value of Parcel 1, unaffected by the Media Drive project or the threatened condemnation. Shannon concluded that on January 1, 1978, the developed parcel was worth $290,000, while Jackson set the undiminished value of the property at $275,000. Both appraisers also gave their opinions as to the value of the lease-option. Tilem's appraiser reached the conclusion that, depending upon the date of the exercise of the option, the value to Tilem was from $43,000 to $92,000 less than the market value of the property.

The City's appraiser took the position that because of the tax benefits accruing to Tilem under the lease-option arrangement as distinguished from a straight cash sale, Tilem suffered no loss.

In relation to Parcel 2, Tilem's appraiser fixed the loss at $6,300, and the City's appraiser valued the loss at $5,000.

Following trial, Judge Reed issued his rulings and judgment. He awarded Tilem the sum of $6,300 as damages for loss of use of Parcel 2 during a 36 month period, but denied any recovery for Parcel 1. Despite Judge Woods' earlier finding that the lease-option agreement constituted a "sale" of the apartment complex, Judge Reed concluded that there was no purchase and that Tilem was not entitled to damages. In so ruling, the court further determined that if a "sale" had occurred, Tilem would have sustained a loss in the amount of $10,679. Any tax benefits flowing to Tilem, however, were specifically excluded in appraising the value of the option. ³ Attorney fees and costs were awarded in the sum of $23,421.

On appeal, Tilem complains that Judge Reed was without jurisdiction to reevaluate the earlier finding that the lease-option constituted a sale for purposes of determining damages and that it was error for the court to preclude recovery for the diminution in value of Parcel 1. He further argues that the award of costs was unreasonably low. For its part, the City generally assails Judge Woods' finding of liability for its precondemnation conduct and asserts that the award of damages and costs is contrary to law and not supported by substantial evidence.

The threshold question to be resolved on this appeal is whether the City's conduct would entitle Tilem to an award of damages. We have concluded that both the record and the law support the trial court's finding of liability in relation to both parcels of land.

Under the California Constitution, Art. I, section 19, compensation is required when property has been "taken or damaged." It is generally recognized that the "damaged" language was added to our state Constitution to broaden the "taking" language found in the Fifth Amendment to the United States Constitution. The California Supreme Court has also noted that the technical distinction...