Tracy Joint Unified Sch. Dist. v. Pombo

• Decision Date: 29 October 2010
• Docket Number: No. C061239.,C061239.
• Citation: 2 0 1,10 Cal. Daily Op. Serv. 13, 795,189 Cal.App.4th 889,117 Cal.Rptr.3d 470,261 Ed. Law Rep. 1008
• Court: California Court of Appeals Court of Appeals
• Parties: TRACY JOINT UNIFIED SCHOOL DISTRICT, Plaintiff and Respondent, v. Ernest J. POMBO, Jr., et al., Defendants and Appellants.

189 Cal.App.4th 889

117 Cal.Rptr.3d 470

261 Ed. Law Rep. 1008

10 Cal. Daily Op. Serv. 13,795

2010 Daily Journal D.A.R. 16,624

TRACY JOINT UNIFIED SCHOOL DISTRICT, Plaintiff and Respondent,

v.Ernest J. POMBO, Jr., et al., Defendants and Appellants.

No. C061239.

Court of Appeal, Third District, California.

Oct. 29, 2010.

**472 Miller Starr Regalia, George B. Speir, Thomas S. McConnell and Kathryn Rowe Jones for Defendants and Appellants.

Kronick, Moskovitz, Tiedemann & Girard and William T. Chisum, Sacramento, for Plaintiff and Respondent.

BUTZ, J.

*892 Having decided to build a new high school, plaintiff Tracy Joint Unified School District (the District) filed this eminent domain action to acquire 61.6 acres in the middle of a 231-acre parcel of raw development land owned by defendant Ernest J. Pombo, Jr., and others.

The trial resulted in a battle of real estate appraisers. The District's expert valued the taking at about $3 million, with no severance damages. Defendants' expert fixed total compensation at around $12.4 million, including almost $3.1 million in severance damages.

The jury split the difference. It awarded defendants $7,085,150, plus severance damages of $900,000, for a total compensation award of $7,985,150. The verdict virtually matched defendants' pretrial settlement demand of $7,995,000, but was a far cry from the District's final offer of $3,181,500.

*893 Defendants moved to recover their litigation expenses under Code of Civil Procedure section 1250.410,¹ contending that the District's offer was unreasonable and that their demand was reasonable. The trial court denied the motion, determining that the offer was reasonable under the circumstances.

On this appeal, we shall conclude that the District's stubborn adherence to a pretrial settlement offer that barely exceeded its own expert's appraisal was unreasonable as a matter of law. We shall reverse the order with directions.

FACTUAL AND PROCEDURAL BACKGROUND

Defendants are the owners of a 231.26-acre parcel of undeveloped land (subject property) lying just to the east of the Tracy city limits.² The subject property **473 consists of three contiguous parcels under a single ownership.

In May 2007, the District adopted a resolution of necessity authorizing the initiation of condemnation proceedings to acquire 61.6 acres in the middle of the subject property, for the purpose of constructing a high school.

On June 7, 2007 (the operative date of the taking), the District filed two complaints in eminent domain to acquire two tracts of land within the subject property for the high school project. The District deposited probable compensation totaling $3,080,000 with the State Treasurer. The figure was based on estimates from the District's appraiser, Jesse Smyers.

Before trial, the parties exchanged a list of valuation data prepared by their appraisers. Smyers's written appraisal valued the acquisition at $3,081,500, and did not include severance damages. Defendants' appraiser, Chris Carneghi, valued the taking at $12,406,000, which included $3,081,000 in severance damages.

Prior to trial, the parties exchanged their final offer and demand for settlement. The District offered to settle the case for $3,181,500. Defendants submitted a final demand of $7,995,000.

The case was tried to a jury, with the Honorable Elizabeth Humphreys presiding. Each party's appraiser, Carneghi on behalf of defendants and *894 Smyers on behalf of the District, testified in support of his valuation of the property and explained the basis for his opinion. The details of their testimony will be set forth as they become relevant.

The jury returned with a verdict that awarded defendants $7,985,150, consisting of $7,085,150 in compensation for the fair market value of the property and $900,000 in severance damages. Judgment was entered in conformance with the jury verdict. Neither party has appealed the judgment and it is now final.

Defendants then moved to recover their litigation expenses under section 1250.410, seeking approximately $574,000 in expert fees, attorney fees and "nonstatutory costs and expenses." Defendants contended that, based on the offer, demand and the evidence at trial, their final settlement demand was reasonable and the District's offer unreasonable.

Judge Humphreys denied the motion. She found that both experts "had significant problems in their evaluations"; that, given the rapidly changing real estate market in the area, "valuation of the subject property [was] particularly difficult"; and that, although the jury chose to give more credence to the testimony of Carneghi than Smyers, it would have been difficult to predict which expert would be more credible before the trial began. While acknowledging that defendants' demand was reasonable and that the percentage difference between the demand and the jury's award was extremely small, the judge found that "these factors are outweighed by the good faith, care and accuracy exhibited by [the District] in its overall evaluation of the value of the subject property." The court concluded that "[i]n light of the facts known prior to the expert witnesses' trial testimony, [the District's] offer was reasonable."

Defendants appeal from the order denying fees.

DISCUSSION

I. Applicable Principles of Law

An award of litigation expenses in an eminent domain action is governed by **474 section 1250.410, which provides, in pertinent part: "(a) At least 20 days prior to the date of the trial on issues relating to compensation, the plaintiff shall file with the court and serve on the defendant its final offer of compensation in the proceeding and the defendant shall file and serve on the plaintiff its final demand for compensation in the proceeding. The offer and the demand shall include all compensation required pursuant to this title, including compensation for loss of goodwill, if any, and shall state whether *895 interest and costs are included. These offers and demands shall be the only offers and demands considered by the court in determining the entitlement, if any, to litigation expenses.... [¶] (b) If the court, on motion of the defendant made within 30 days after entry of judgment, finds that the offer of the plaintiff was unreasonable and that the demand of the defendant was reasonable viewed in the light of the evidence admitted and the compensation awarded in the proceeding, the costs allowed pursuant to Section 1268.710 shall include the defendant's litigation expenses. [¶] ... [¶] (d) If timely made, the offers and demands as provided in subdivision (a) shall be considered by the court on the issue of determining an entitlement to litigation expenses." (Italics added.)

"Section 1250.410 is intended to protect the property owner from being forced unnecessarily to litigate the value of the property sought to be condemned. [Citation.] Under the statute, the court is to view the reasonableness of the offer and the demand in the light of the evidence presented and the compensation awarded." ( Escondido Union School Dist. v. Casa Sueños De Oro, Inc. (2005) 129 Cal.App.4th 944, 985, 29 Cal.Rptr.3d 89 ( Escondido ).)

An assessment of reasonableness must be based on " 'all the evidence admitted, not just the numerical amounts of the offer, demand and award.' " ( Glendale Redevelopment Agency v. Parks (1993) 18 Cal.App.4th 1409, 1416, 23 Cal.Rptr.2d 14 ( Parks ), quoting County of San Diego v. Woodward (1986) 186 Cal.App.3d 82, 90, 230 Cal.Rptr. 406.) The question of reasonableness is addressed in the first instance to the trial court. ( County of Los Angeles v. Kranz (1977) 65 Cal.App.3d 656, 659, 135 Cal.Rptr. 473 ( Kranz ).) Thus, we will affirm the order if it is supported by substantial evidence, resolving factual conflicts and drawing all legitimate inferences in its favor. ( Moulton Niguel Water Dist. v. Colombo (2003) 111 Cal.App.4th 1210, 1217, 4 Cal.Rptr.3d 519 ( Moulton ).) However, if the uncontradicted facts permit only one reasonable conclusion, the issue is one of law, and the rule of deference does not apply. ( Kranz, supra, at p. 659, 135 Cal.Rptr. 473.)

II. The Demand Was Reasonable

Section 1250.410 provides that if (1) the offer of the plaintiff was unreasonable and (2) the demand of the defendant was reasonable, in the light of the evidence admitted and the compensation awarded, it shall award the defendant its litigation expenses. (§ 1250.410, subd. (b).) Thus, if both of the above conditions are met, the court has no discretion-it must award the property owner its litigation expenses, including reasonable expert and attorney fees. (§ 1250.410, subd. (e).)

*896 Here, defendants' settlement demand of $7,995,000 was approximately midway between the two experts' appraisals and came within one percent of duplicating the eventual jury award. Based on these two compelling facts, defendants' demand was manifestly reasonable, as the trial court expressly found. Only the reasonableness of plaintiff's offer is open to dispute.

**475 III. The Offer Was Not Reasonable

The question of whether a condemner's offer was a "reasonable" one has been litigated many times over the years. Appellate decisions have instructed the trial court to consider three factors in resolving this issue: (1) the amount of the difference between the offer and the compensation awarded, (2) the percentage of the difference between the offer and the award, and (3) the good faith, care and accuracy in how the amount of the offer and amount of demand, respectively, were determined. ( Los Angeles County Metropolitan Transportation Authority v. Continental Development Corp. (1997) 16 Cal.4th 694, 720, 66 Cal.Rptr.2d 630, 941 P.2d 809 ( Continental Development ); People ex rel. Dept. of Transportation v. Acosta (2009) 178 Cal.App.4th 762, 773, 100 Cal.Rptr.3d 669 ( Acosta ); Parks, supra, 18 Cal.App.4th at pp. 1415-1416, 23 Cal.Rptr.2d 14.) In her written ruling, Judge Humphreys acknowledged that she was applying the three-part test. We therefore...