Property Rights and Eminent Domain: Court Overturns Condemnation Victory On Right to Take Where Taking Did Not Result in Landlocked Parcel

September 27, 2012

By Matthew Hinks

In an opinion containing echoes of the United States Supreme Court's controversial and much maligned decision in Kelo v. City of New London, 545 U.S. 469 (2005), the California Court of Appeal has limited the reach of California Code of Civil Procedure § 1240.350(a). That section provides that a condemning agency that takes property resulting in the property being "cut off from . . . access to a public road", may also take property belonging to another party to provide alternative access to the original property. The Court of Appeal in Council of San Benito County Governments v. Hollister Inn, Inc., limited Section 1240.350(a) to situations where the taking leaves the original property completely landlocked.

Factual Background

Hollister Inn, Inc. ("Hollister") operates a Best Western hotel near the intersection of Highways 25 and 156 in San Benito County. In 2006, a joint powers authority (the "COG") filed eminent domain proceedings to acquire property neighboring the Best Western for the Highway 25 Bypass Project, which, once completed, would result in the elimination of a roadway easement over the neighboring property connecting Hollister's hotel to Highway 25 The main entrance to the hotel was located over that easement and Hollister contended that the elimination of the access way would "severely damage business and impact . . . profits." Although Hollister's property also had access to Highway 156, 80 to 90 percent of the hotel's business came in from Highway 25. Moreover, in addition to eliminating that access, the project proposed adding a center median to Highway 156 preventing drivers travelling north from making a left onto the property.

Prior to the adoption of the resolution of necessity -- which is the government agency's formal decision to acquire property by eminent domain and must be adopted before the condemning agency can commence an eminent domain action in court -- the COG had considered the possibility of relocating the driveway. However, the idea was rejected because Hollister was not the owner of the property that would have been condemned and, the COG concluded, the project could not condemn someone else's property for the benefit of an adjacent property owner.

Proceedings in the Superior Court

The COG filed eminent domain proceedings in March 2006. Following a trial on the right to take, the trial court held that the COG committed a gross abuse of discretion by failing "to consider the possibility of taking the property of an adjoining landowner to provide [Hollister] access to Highway 25" pursuant to Section 1240.350 and that the COG "failed to exercise its discretion to determine whether the project was planned or located in the manner that will be most compatible with the greatest public good and the least private injury" given the failure to consider alternative access to the hotel.


Court of Appeal Opinion

The court of appeal reversed.

Under both California law and the United States Constitution, the power of eminent domain may be exercised to acquire property only for a public use. California law establishes three prerequisites to the exercise of the power of eminent domain: (1) the public interest and necessity must require the project; (2) the project must be planned or located in a manner that will be most compatible with the greatest public good and the least private injury; and (3) the property sought to be acquired must be necessary for the project. The adoption of a resolution of necessity conclusively establishes these facts except in the narrow circumstances where its adoption or contents were influenced or affected by a gross abuse of discretion, which is established by showing that (1) the adoption of the resolution of necessity was arbitrary, capricious or entirely lacking in evidentiary support; (2) the governing body failed to follow mandated procedure; or (3) the governing body was irrevocably committed to taking the property regardless of the evidence.

Resolution of the appeal turned on the interpretation of Section 1240.350(a). The COG contended on appeal that the section applied only to landlocked properties. The Court of Appeal agreed. Examining both the text of the statute as well as its legislative history, the court concluded that Section 1240.350(a) "may be invoked to provide access to a public road only where a public entity's acquisition leaves unacquired property without public road access." Interestingly, and somewhat ironically citing the Kelo decision, the court's interpretation of the statute was guided by "constitutional requirements", including the Fifth Amendment, which "bars the government from taking 'the property of A for the sole purpose of transferring it to another private party B, even though A is paid just compensation." (quoting Kelo).

The court also rejected Hollister's argument that the COG failed to exercise its discretion under Section 1240.350 to determine whether or not it should condemn neighboring property to provide Hollister with alternative access. The COG contended that -- regardless of whether Section 1240.350 allowed it to condemn neighboring property -- it had no legal obligation to exercise discretion under that section. The Court of Appeal agreed holding that nothing in Section 1240.350 or any other provision of the eminent domain law compels a public entity to consider additional condemnation when considering condemnation that will eliminate an unacquired property's access to a particular public road.

Implications

The implications from the Court of Appeal's opinion are twofold. First, where a taking results in property losing access to a public road, Section 1240.350 will permit the condemning authority to condemn substitute access only where the take leaves the original property landlocked. Moreover, the property owner losing its access will not be able to compel the agency to condemn such access. Where the situation arises, the property owner will likely be left to argue for additional compensation.

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Matthew Hinks is a litigator with a wide-ranging practice that focuses primarily on the representation of real estate developers in difficult land use cases. Matt has extensive experience litigating complex mandamus actions and other claims involving signage disputes, governmental takings, CEQA challenges, planning and zoning law, civil rights violations, eminent domain issues, title disputes, lease disputes and community redevelopment and density bonus law. He has extensive experience in both federal and state courts, including trial courts and courts of appeal, as well as in arbitration, mediation and administrative settings. Contact Matt at MHinks@jmbm.com or 310.201.3558.