Attorney: Supreme Court decision in precondemnation case a mix of win for state agencies and property owners

By Karen Kidd | Aug 29, 2016

SAN FRANCISCO – A state Supreme Court decision earlier this summer to reform an unconstitutional California statute in eminent domain cases wasn't exactly a loss for property owners and probably isn't over yet, an eminent domain attorney said during a recent interview.

SAN FRANCISCO – A state Supreme Court decision earlier this summer to reform an unconstitutional California statute in eminent domain cases wasn't exactly a loss for property owners and probably isn't over yet, an eminent domain attorney said during a recent interview.

"The decision is a significant victory for public agencies," Brad B. Kuhn, chair of the Eminent Domain and Valuation Practice Group at Nossaman's Irvine office, said during a Northern California Record email interview. "Rights of entry are a necessary component to keep public projects on schedule while still complying with the maze of environmental laws that govern their approval. If the court had elected to strike down the law as unconstitutional, agencies would have had no choice but to resort to a formal condemnation action just to gain access to a property for environmental testing – a process which takes nearly a year just to gain possession."

That would have added additional complications for projects with federal funding because federal law typically requires environmental processes be complete before and agency begins the condemnation process, Kuhn said. "The decision also protects property owners, ensuring that they are afforded the basic constitutional protections of a formal eminent domain action even where the agency only seeks a right of entry."

The California Supreme Court handed down its ruling in the case, Property Reserve v. Superior Court, on July 21 to reform an otherwise unconstitutional state statue, stating that reformation recognizes the state legislature’s intent and preference. The court reformed the state statute to include the right to a jury trial when it comes to determining just compensation, according to court documents.

"While the decision to 'reform' the statutes may be a bit unusual, and while it may create some initial confusion in terms of how the lower courts should implement this 'reform,' all in all the court showed real sensitivity towards finding a solution that both protected basic constitutional rights while not wreaking havoc on the already complicated process of seeking environmental approval for a proposed public project," Kuhn said.

In general, governments claim right of entry onto private property in three ways: The government does so with the property owner's permission; in an emergency or if there is a search warrant such as outlined under the 10th and Fourth Amendments and various police powers; or when government seizes property for public use and pays just compensation under the Fifth and 14th Amendments.

California historically claimed the right to enter private property before condemnation under the state's Code of Civil Procedure sections 1245.010-1245.060, a process that was called “pre-condemnation,” to conduct tests and inspections. Property Reserve Inc. v. Superior Court challenged that.

The case has its roots in California Department of Water Resources' entry in 2009 onto hundreds of pieces of private property along the San Joaquin-Sacramento River Delta. Water resources workers were conducting environmental and geological studies for the Bay Delta Conservation Plan and Gov. Jerry Brown's proposed twin tunnels project. Water resources officials claimed the right to enter the properties under the state's pre-condemnation statutes.

Landowners denied that right of entry and filed suit. The case made its way to San Joaquin County Superior Court and then was appealed to the 3rd Appellate District, which initially refused to hear the case but, in 2011, was ordered by the California Supreme Court to consider the claims.

In what was widely seen as a victory for California property owners, the California Court of Appeal for the 3rd Appellate District, in a split decision handed down March 13, 2014, ruled the state's pre-condemnation entry and inspection activities were unconstitutional. The state's use of pre-condemnation violated property owners’ rights that are guaranteed by the California Constitution, that ruling said.

The case was appealed to the state Supreme Court. In that appeal, Supreme Court justices considered whether California's pre-condemnation statutes, especially those that involve physical drilling and occupation of the property, were actually authorized by those statutes. Another question before the justices was whether those same procedures and the statutes were constitutional under the Fifth Amendment to the U.S. Constitution, and Article I, Section 19 of California's Constitution.

Property rights advocates feared that it the Supreme Court overturned the appeals court decision, pre-condemnation also would be affirmed. Officials with California's public agencies and governmental entities pointed out that if the appeals court decision stood, they would have to initiate eminent domain proceedings for what may turn out to be temporary access to property, in cases where landowners deny entry. That would add to paperwork, procedures and litigation just to see if the property should be taken, they said.

The state Supreme Court's ruling did not fully affirm or overturn the appeals court decision. The high court ruled the state statute does violate California's Constitution but cited a 1995 case, Kopp v. Fair Pol. Practices Com, which said a court may reform a statute to satisfy constitutional requirements under certain circumstances. A court has to conclude with confidence that it is possible to reform the statute in a manner that closely effectuates policy judgments clearly articulated by the enacting body; and the enacting body has preferred such a reformed version of the statute to invalidation of the statute.

The high court ruled that Property Reserve Inc. v. Superior Court meets that standard.

"In light of the legislative history of the pre-condemnation entry and testing statutes discussed above, it is clear that the legislature intended to adopt a procedure that satisfies the requirements of the California takings clause," Justice Goodwin H. Liu wrote in the state Supreme Court's ruling. "Further, providing a property owner the ability to obtain a jury determination of damages at the latter stage of the pre-condemnation proceeding will not interfere with or undermine the fundamental purposes or policies of the pre-condemnation entry and testing legislation. Thus, we conclude that both prongs of the Kopp standard are satisfied here. Accordingly, the provisions of section 1245.060, subdivision (c), are reformed to provide a property owner the option of obtaining a jury trial on the measure of damages at the proceedings provided for in that subdivision."

"The court concluded that the Legislature enacted the pre-condemnation right of entry statutes to allow public agencies to conduct investigations and testing on private property in order to meet the requirements to obtain environmental approvals of projects," Kuhn said. "In reviewing the right of entry statutes, the Court concluded that with the exception of providing for a jury trial, the statutory mechanism met constitutional requirements since it requires (i) the institution of a legal proceeding, (ii) a limitation on the entry to only those activities reasonably necessary to accomplish the investigation, (iii) a deposit into court the probable amount of compensation, and (iv) a process to obtain additional compensation for any losses."

The high court was very clear about flaws in the statute, Kuhn said.

"The court concluded that the right of entry statutes’ only substantive shortcoming was the fact that they provided no right to a jury trial on the amount of compensation, a constitutional requirement," he said.

The case may not be over yet, Kuhn said.

"It is not clear at this point, but my sense is that the parties will have a fundamental disagreement over the amount of compensation that is owed for the department’s pre-condemnation investigations and testing," he said. "Therefore the amount of compensation will be either settled or tried to a jury at the trial court level."

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