By Matthew Hinks
Evidence of just compensation to be awarded in an eminent domain action is all but invariably put on through expert opinion. In a bit of good news for property owners facing eminent domain proceedings, the California Court of Appeal has issued a new opinion offering a relaxed view of the admissibility of expert opinions relating to comparable sales.
Patrick Foley is the trustee of a marital trust and holds fee title to real property in Glenn County, California. Beginning in 1971, the County rented 200 acres on Foley’s property for use as a landfill. In 2008, with the landfill nearing capacity, the County Board of Supervisors decided to acquire fee title to the existing leased lands and additional acreage surrounding the landfill. It commenced eminent domain proceedings in 2009.
Foley’s property was located in an agriculture area and was surrounded by a variety of agricultural uses, including rice, row crops and olive and almond orchards. The remainder of Foley’s property, not leased to the County, was used for livestock grazing. Foley’s appraisal expert determined that the anticipated return from an orchard use was greater than the return on grazing even when factoring in the costs to develop the necessary irrigation supply to transform the property. Thus, the expert determined that an orchard use was the highest and best use of the property.
The expert then looked at comparable sales to assign a value to the condemned property. To adjust for differences between the Foley and comparable properties, the expert assigned values to improvements such as buildings, personal property and existing orchards, and deducted them from the sales price. He also applied qualitative factors, such as topography and soil quality, to adjust the prices. Using this methodology, Foley’s expert determined the value of the property to be $1.7 million.
The County’s expert, on the other hand, believed the highest and best use of the property was grazing land. He assigned a value of $637,000 to the property.
Trial Court Proceedings
Before trial, the County filed a motion in limine to exclude the testimony of Foley’s appraiser. In it, the County contended that the expert’s valuations of the non-land components of the comparable properties ran afoul of Evidence Code § 822(a)(4) (“Section 822”), which renders inadmissible an “opinion as to the value of any property or property interest other than that being valued.” The County also argued that the appraiser used poor comparables and that his appraisal therefore did not comply with Evidence Code § 816 (“Section 816”), which sets forth foundational criteria for comparable sales.
The trial court agreed with the County on both arguments and excluded the testimony of Foley’s expert. The Court of Appeal reversed.
Court of Appeal Analysis
The Court first noted the origins of Section 822. Citing a 1960 report that was the basis for the predecessor to Section 822, the Court noted that “opinions regarding the value of comparable property (as opposed to objective evidence such as sales price) should be excluded from determining just compensation” because such opinions would involve the determination of “collateral questions” and would “unduly prolong the trial of condemnation cases”. Nevertheless, the bar of Section 822 is a limited one. As the Court explained, the statute forbids a party from using an expert’s “opinion of the value of property X as a whole as a prop in proving the value of the subject property.” By contrast, an opinion, such as the opinion in question here, “regarding one of the combination of underlying factors that influence the comparable nature of an objective sales price” is permissible.
Moving to Section 816, the Court noted that the “essence of comparability is recent and local sales ‘sufficiently alike in respect to character, size, situation, usability, and improvements’ so that the price ‘may fairly be considered as shedding light’ on the value of the condemned property.” Thus, the role of the trial court under Section 816 is limited to determining whether the sales price of the other property can shed light on the condemned property’s value regardless of the differences between them.
The Court likened the “shedding light” standard to the relevancy standard. So long as the comparable sale provides any rational inference in support of the issue, it should be allowed. Once that preliminary question is resolved, it is then up the jury to determine the extent to which the other sales are in fact comparable. Given that relaxed standard, the Court had little trouble concluding that the expert’s appraisal was not incapable of shedding light on the value of Foley’s property and therefore should have been allowed.
The case now moves back to the trial court which is instructed to issue a new order denying the County’s motion in limine. Barring a settlement, the matter will be set for trial in due course. More than four years after the County’s decision to acquire Foley’s property, the battle rages on.
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.