P. ex rel. CA Dept. Transp. v. . Hansen's Truck Stop , 236 Cal. App. 4th 178 ( 2015 )

Filed 4/24/15
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
THE PEOPLE ex rel. CALIFORNIA
DEPARMENT OF TRANSPORTATION,
Plaintiff and Respondent, A133252
v. (Humboldt County
HANSEN’S TRUCK STOP, INC., et al., Super. Ct. No. DR 070923)
Defendants and Appellants.
In eminent domain actions, the law directs the parties to exchange formal
settlement proposals prior to trial. (Code of Civ. Proc., § 1250.410, subd. (a).)1 If, after
trial, the property owner’s statutory demand for compensation is found to be reasonable
and the condemning agency’s statutory offer unreasonable, then the property owner is
entitled to recover litigation expenses. (§ 1250.410, subd. (b).) When determining
entitlement to litigation expenses, the law instructs the judge to consider only the final
offer and demand that were made “[a]t least 20 days prior to the date of the trial on issues
relating to compensation.” (§ 1250.410, subd. (a).)
In this eminent domain action, the proceedings were bifurcated. A statutory offer
and demand ($784,000 and $5 million, respectively) were made prior to the first trial. In
that trial the court was asked to decide whether the property owners could pursue damage
claims for impairment of access and loss of goodwill as a result of the condemnation.
The property owners prevailed.
1
All statutory references are to the Code of Civil Procedure, unless otherwise
specified.
1
Prior to the second trial the property owners made an amended, much lower
demand, but the condemning agency made no new offer. In the second trial the jury
determined the amount of compensation due. It returned a verdict in excess of $2.5
million, which was about 85 percent of the property owners’ amended demand of $2.99
million and more than three times the agency’s original offer of $784,000.
The property owners made a motion to recover their litigation expenses. Looking
only at the offer and demand made before the first trial date, the trial court denied the
motion for litigation expenses because the property owners’ demand of $5 million was
unreasonable. The property owners appealed the order.
The appeal poses two questions of statutory interpretation. First, when directing
the court to consider only the offers and demands made “prior to the date of the trial” to
determine entitlement to litigation expenses, does the statute mean the court must
consider only offers and demands made prior to the first date set for trial? If it does not,
then the second question is, in a bifurcated proceeding, does the statutory phrase “prior to
the date of the trial on issues relating to compensation” refer to (a) the trial in which the
right to damages is adjudicated, or (b) the trial in which the amount of compensation is
adjudicated?
We conclude the statute does not restrict the court to considering only the offer
and demand made prior to the first date set for trial. We further hold that, in a bifurcated
proceeding, “the trial on issues relating to compensation” means the trial in which the
amount of compensation is determined. We will therefore vacate the order denying
litigation expenses and remand for further proceedings.
I. FACTUAL AND PROCEDURAL BACKGROUND
In December 2007, the State of California (the State), through its Department of
Transportation, filed a complaint in eminent domain, seeking to condemn a portion of a
2
larger parcel owned by the Hansens,2 for the purpose of building a highway interchange.
The Hansens operated a truck stop on the larger parcel. The Hansens filed answers that
included claims for additional compensation due to the impairment of highway access
and the loss of goodwill in their business resulting from the condemnation and the
construction project. Trial was set for March 2009.
Two months prior to the trial date the State filed a motion to bifurcate the
proceedings, seeking separate adjudication of the Hansens’ alleged entitlement to seek
damages for impairment of access and loss of goodwill. The court granted the
bifurcation request, and ordered that “[t]he jury phase of the trial, to determine the
amount of just compensation . . . shall immediately follow the court phase of the trial.”
Prior to the March 2009 trial date, the State filed its “Final Offer of
Compensation” pursuant to Section 1250.410, offering a total of $784,000, excluding
interest and costs. The Hansens simultaneously filed their “Final Demand for
Compensation” in the sum of $5 million comprised of $600,000 for the property being
taken (“the take”), $1.9 million as “severance damages” (including impairment of access)
and $2.5 million for loss of goodwill.
After several continuances, the court trial on the bifurcated issues was scheduled
for September 2, 2009, and the jury trial on compensation was set for an estimated start
date of September 17. The bench trial went forward in September, but the court did not
issue its decision until October. It ruled that the Hansens “ha[d] proven entitlement to the
benefits of the goodwill statute for not only substantial impairment of access and loss of
visibility and exposure, but also for impairment of the internal use of [their] property.”
2
Various persons and entities were named as defendants, but only two have
appealed, Hansen’s Truck Stop, Inc. and Charles F. Hansen, Jr., as Trustee of the Charles
& Imogene Hansen Trust No. 1 U/T/D February 1, 1979. We shall refer to them
collectively as the Hansens.
3
The jury trial on compensation was set for February 22, 2010, but was continued
by agreement of the parties to April 19, 2010. Twenty days before the continued trial
date, the Hansens filed a second “Final Demand for Compensation.” The new demand
was for $2.99 million, comprised of $570,000 for the take, $200,000 for goodwill,
$340,000 for loss of tangible property and $1.88 million for severance damages. The
State did not file a new offer, but did file an acceptance of only the goodwill portion of
the new demand, in the amount of $200,000.
The Hansens opposed the acceptance, stating they had no intention of separately
settling the component parts of their demand. The State moved for an order overruling
the Hansens’ objection, arguing that it had served “a valid and operable acceptance of
defendants’ March 30, 2010, revised statutory demand for goodwill compensation,” and
that elimination of the goodwill issue will significantly shorten the trial and thus “fulfill
the intent and purpose of eminent domain settlement offer/demand procedures (Code Civ.
Proc. § 1250.410).” The court denied the State’s motion.
After two more continuances, the jury trial finally commenced on January 18,
2011. On February 9, 2011, the jury issued a special verdict, which awarded
compensation to the Hansens in the sums of $525,122 for the land and improvements,
$300,000 for loss of goodwill, $8,000 for vegetation easement, and approximately $1.7
million in damages to the remainder of the property. The total judgment, exclusive of
interest, was $2,533,122.
The Hansens filed a motion to recover $345,306 in litigation expenses. The
Hansens argued that their final demand of $2.99 million was reasonable and the State’s
final offer of $784,000 was unreasonable, in light of the jury’s award in excess of $2.5
million.
The State opposed the motion, arguing that only the Hansens’ first demand, in the
amount of $5 million, could be considered in determining whether the court should award
4
litigation expenses because the second demand (for $2.99 million) was filed after the trial
had commenced, and was therefore untimely.
The Hansens contended that the second demand was timely and argued, further,
that the State had waived its objections to the timeliness of the demand by its partial
acceptance of the goodwill component of the demand and by its admission that the
demand was “in compliance with Section 1250.410.”
The trial judge rejected the waiver argument as unsupported by authority, and
agreed with the State’s position. The court concluded that case law “required” it to use
the Hansens’ first demand when evaluating the reasonableness of the parties’ offer and
demand, although it believed the “better result” would be that any final offers or demands
made 20 days prior to a trial on issues of compensation should be considered. The court
found the Hansens’ first demand of $5 million to be unreasonable, and therefore denied
the Hansens’ motion to recover litigation expenses. The Hansens appealed from the
order denying the motion.
II. THE STATUTORY FRAMEWORK
A. The Current Statute
Section 1250.410 governs the service and filing of settlement offers and demands
in condemnation proceedings, and the circumstances under which the condemnee is
entitled to an award of litigation expenses. It provides, as pertinent here: “(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 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
5
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. [¶] (c) In determining
the amount of litigation expenses allowed under this section, the court shall consider the
offer required to be made by the plaintiff pursuant to Section 7267.2 of the Government
Code,[3] any deposit made by the plaintiff pursuant to Chapter 6 . . . and any other written
offers and demands filed and served before or during the trial.” (Emphasis added.)
The purpose of section 1250.410 is “to encourage settlement of condemnation
actions by providing incentives to a party who submits a reasonable settlement offer or
demand before trial. [Citation.] A property owner who files a reasonable demand, but is
required nonetheless to litigate because of the public agency’s unreasonable position, can
be fully compensated for . . . litigation expenses. Conversely, a condemnor who makes a
timely reasonable offer may avoid having to pay the property owner’s expenses except
for taxable costs.” (Santa Clara Valley Water Dist. v. Gross (1988) 200 Cal. App. 3d
1363, 1368 (Gross).)
B. Historical Changes to the Statute
The statute was originally enacted in 1974, as former section 1249.3. (Stats. 1974,
ch. 1469, § 1, p. 3208.) A year later it was re-enacted with minor changes, and provided
as follows: “At least 30 days prior to the date of trial, the plaintiff shall file with the
court and serve on defendant its final offer of compensation in the proceeding and the
defendant shall file and serve on the plaintiff his final demand for compensation in the
proceeding.” (Stats. 1975, ch. 1275, § 2, p. 3432, emphasis added.) In 1982 that
3
Government Code section 7267.2 essentially requires a condemning agency,
prior to adopting a resolution of necessity, to determine the amount of just compensation,
including damages, to which the property owner would be entitled due to the taking, and
to make an offer to the property owner to acquire the property for the full amount so
determined.
6
language was changed to require that the offer and demand be made “[a]t least 30 days
prior to the date of the trial on issues relating to compensation . . . .” (Stats. 1982,
ch. 1059, § 2, p. 3833, emphasis added.) The origin and significance of this amendment
will be discussed in other portions of this opinion.
Finally, we note that the 1999 amendment to the statute changed the deadline for
filing the final offer and demand from 30 days to 20 days prior to trial. (Stats. 1999,
ch. 102, § 1, pp. 1704–1705.)
III. THE STANDARD OF REVIEW
The parties agree the issues presented are questions of law pertaining to the
interpretation and application of Section 1250.410. Accordingly, our review is de novo.
(Carver v. Chevron USA, Inc. (2002) 97 Cal. App. 4th 132, 142.)
IV. ARGUMENTS ON APPEAL
As we have described, section 1250.410, subdivision (a), provides that the offer
and demand made “at least 20 days prior to trial on issues relating to compensation” shall
be “the only offers and demands considered by the court in determining the entitlement,
if any, to litigation expenses.” According to the State, this language means that the offer
and demand filed prior to the first date set for trial are the only offer and demand that can
be considered in determining entitlement to litigation expenses. For this proposition they
cite City of San Leandro v. Highsmith (1981) 123 Cal. App. 3d 146 (Highsmith) and
People ex rel. Dept. of Transportation v. Gardella Square (1988) 200 Cal. App. 3d 559
(Gardella Square).
In Highsmith, the condemnor (the City) filed an offer of $250,000 under section
1250.410, prior to the date set for trial. The property owners did not make a formal
demand under the statute. Rather, less than 30 days prior to the date set for trial they
communicated to the City their opinion of value in the amount of $550,000 at a
deposition, and repeated this valuation in the pretrial and settlement conference
statements. (Highsmith, supra, 123 Cal.App.3d at pp. 151, 153.) The trial date was
7
continued, however, and 14 days before trial the property owners filed a “Final Demand
for Compensation” in the amount of $450,000. The jury found the property was worth
$410,000, but the trial court denied the property owners’ motion for litigation expenses.
(Id. at p. 152.)
On appeal, the property owners conceded that their demand for $450,000 filed 14
days before trial was untimely, but argued that the $550,000 demand in their pretrial and
settlement conference statements “ ‘substantially complied’ ” with the statutory
requirements. (Id. at p. 153.) Although these earlier demands were not made at least 30
days prior to the first scheduled trial date, they were nonetheless timely, the property
owners claimed, because they were made more than 30 days before the actual trial date.
(Id. at p. 154.)
The court rejected both arguments. It concluded that “a recital of the demand and
offer in a settlement conference statement, or in any other document, is not an adequate
substitute for the formal demand and offer contemplated by section 1250.410 unless the
parties have stipulated to a less formal exchange.” (Id. at p. 155.) It further ruled that
“[t]he original trial date is the proper one for measuring the 30-day notice. To hold
otherwise would encourage procrastination in making an offer or demand and would
delay meaningful negotiations. ‘[The] purpose [of the statute] is to encourage early
settlement so trial can be avoided’ [citations], and the statute imposes upon ‘both parties
to the litigation the duty to act reasonably in an effort to settle the disputes.’ [Citation.]
To allow either party to gamble on a delay in the trial court would not serve the purposes
of the statute.” (Id. at pp. 154–155.)
Gardella Square essentially followed Highsmith. The appellate court there
concluded that “the original trial date was the proper date to use when determining
whether the parties’ final offer and demand were reasonable under section 1250.410”; it
rejected the contention that an offer made prior to a continued trial date satisfied the
statute. (Gardella Square, supra, 200 Cal.App.3d at p. 577.) The Gardella Square court
8
repeated the Highsmith rationale that allowing consideration of a statutory offer or
demand made prior to a continued trial date would “encourage procrastination in making
an offer or demand, . . . would delay meaningful negotiations[, and would] allow either
party to gamble on a delay in the trial [date, which] would not serve the purposes of the
statute.” (Id. at p. 576.)
The Hansens question both the application and the reasoning of Highsmith and
Gardella Square.4 They argue that the later case of Community Redevelopment Agency v.
Matkin (1990) 220 Cal. App. 3d 1087 (Matkin), controls.
In Matkin, the property owners asserted in their answer that the condemnor (the
City) had no right to take the property. The issue of the City’s right to condemn was
bifurcated and proceeded to trial, after which the parties stipulated to an interlocutory
judgment in which the City’s right to take was resolved. (Matkin, supra, 220 Cal.App.3d
at pp. 1091–1092.) A trial date was then set on the issue of compensation. The City
thereafter filed three separate offers in advance of three continued trial dates, the final
offer being $663,776. The property owners, however, did not file any demand until six
weeks prior to the actual trial, at which time they demanded $690,000. (Id. at p. 1092.)
The case went to trial and the jury awarded compensation in the amount of $686,868.
(Ibid.) The property owners, over the City’s objection, were awarded their litigation
expenses. (Id. at pp. 1092–1093.)
On appeal, the City argued that the property owners’ actions were “ ‘antithetical to
the spirit and purposes’ ” of the statute because they “ ‘gambled on the possibility that
trial would not commence’ ” on the dates originally set. (Matkin, supra, 220 Cal.App.3d
at p. 1093.) Because the statute is primarily for the property owners’ benefit, the City
4
Because the property owner in Highsmith never made a timely, statutorily valid
demand under any interpretation of the phrase “date of trial,” the conclusion in Highsmith
has been described as dicta. (Gardella Square, supra, 200 Cal.App.3d at p. 576; Matkin,
supra, 220 Cal.App.3d at p. 1094, fn. 4.)
9
argued, their failure to file a timely final demand under the statute extinguished their right
to seek litigation expenses. (Id. at p. 1093.) The City also cited the holding in Gardella
Square for the proposition that the phrase “date of the trial” in the statute refers only to
the original trial date. (Id. at p. 1094.)
For their part, the property owners argued that Highsmith was no longer good law
because the statute was amended the following year, and the phrase “30 days prior to the
date of trial” was changed to “30 days prior to the date of the trial on the issues relating
to compensation . . . .” (Emphasis added.) (§ 1250.410, subd. (a).) The property owners
claimed this was intended to abrogate the Highsmith rule so that courts could consider the
last “final” offers and demands made prior to the actual trial on the issue of
compensation in deciding whether a condemnee is entitled to litigation expenses.
(Matkin, supra, 220 Cal.App.3d at p. 1095.)
The Court of Appeal rejected both arguments. With regard to the City’s
contention it stated, “we see no reason why a condemnee’s failure to file a demand 30
days before the original trial date should have any bearing on the effect of filing a
demand as to a continued trial date. Allowing the condemnee another chance, even after
the failure to timely file at an earlier date, does not defeat the purpose of the statute.”
(Matkin, supra, 220 Cal.App.3d at p. 1094.) The court distinguished Gardella Square on
the ground that, there, the court decided “which trial date—original or continued—was
the appropriate one for purposes of determining the reasonableness of the parties’ final
offer and demand—not whether the failure to file a demand before the original trial date
precludes an award of litigation expenses as a matter of law.” (Matkin, at p. 1095.)
The court also rejected the property owners’ argument that Highsmith was
effectively overruled by the 1982 amendment. The court reviewed the legislative history
of that amendment and determined there was no indication the Legislature intended to
overrule Highsmith’s conclusion that only offers/demands made before the “date first set
for trial” could be considered. Rather, the legislative intent was “to clarify any ambiguity
10
which might result in instances where the condemnation proceedings are bifurcated. In
other words, without the clarifying language, the term ‘trial’ would be confused with the
proceeding at which noneconomic issues are resolved, such as one relating to the
condemnee’s objections to the taking.” (Matkin, supra, 220 Cal.App.3d at p. 1096.)
The court nevertheless ruled in favor of the property owners, as it agreed with
their contention that the intent of section 1250.410 is better achieved if there is incentive
to engage in settlement negotiations before each continued trial date, particularly given
the practical reality that cases often do not go forward on the first date set for trial.
(Matkin, supra, 220 Cal.App.3d at p. 1096.) Conversely, the court explained, if the
statute were interpreted as argued by the City, “ ‘all incentives for reasonable settlement
conduct would be removed after an initial trial date has passed, settlement of eminent
domain cases would be discouraged and more cases would proceed unnecessarily to
trial.’ ” (Id. at p. 1096.) The court therefore concluded “the purpose of section 1250.410,
i.e., to encourage settlement and to avoid trial, is served where final offers and final
demands are filed at least 30 days prior to the actual trial, regardless of whether offers
and demands were timely filed in connection with previously scheduled trial dates. The
‘30-day cutoff period was presumably chosen by the Legislature as a stage of the
condemnation proceeding at which needless incurrence of litigation preparation expenses
could be avoided by receipt of a reasonable settlement offer from the other party.’
[Citation.] This is accomplished so long as the offers and demands are filed and served
30 days before the actual trial date.” (Id. at p. 1097, emphasis added.)
The State seeks to distinguish Matkin as applying only to cases where “there was
no statutory demand made prior to a previously scheduled trial date,” and argues that
“[Matkin] does not in any way authorize basing litigation expenses on a midtrial demand
made in connection with a continued portion of a trial.” In the State’s view, Los Angeles
11
County Flood Control Dist. v. Mindlin (1980) 106 Cal. App. 3d 698 (Mindlin) is the
controlling authority.5
In Mindlin, the proceedings were bifurcated, with preliminary issues being decided
by the court, including whether the land being condemned was actually in a river bed, or
in a flood control channel, or was subject to flood hazard, which would preclude its
development as a commercial property. (Mindlin, supra, 106 Cal.App.3d at pp. 703–
704.) The condemnor (the District) made a pretrial offer of $11,500, and the property
owner demanded $60,000. (Id. at p. 703.) After the bench trial, which resulted in rulings
favorable to the property owner, the parties agreed to the appointment of an independent
appraiser, who opined the property was worth $44,200. More than 30 days prior to the
valuation trial, the District made additional offers, one for $40,000 (without interest), and
a second one for $44,200 with interest, but subject to the District’s right to appeal on the
preliminary issues. The property owner accepted this offer, subject to his right to request
litigation expenses. (Id. at p. 704.)
In seeking litigation expenses, the property owner argued that the only
“meaningful” offer was the original offer in the amount of $11,500. (Mindlin, supra, 106
Cal.App.3d at p. 717.) The trial court agreed, finding, among other things, that (1) the
operative “date of trial” was that which commenced in June (on the preliminary issues),
and (2) the District’s offer submitted before the date of trial was unreasonable and the
property owners’ demand was reasonable. (Id. at pp. 718–719.) The court also ruled that
the District’s amended final offer could not be considered for the additional reason that it
was made subject to the right to appeal on the preliminary issues, and so it was not a final
5
Mindlin involved the application of former section 1249.3. The key language
differs from the current section 1250.410. It provides, “[a]t least 30 days prior to the
date of trial, plaintiff shall file with the court and serve a copy thereof on defendant its
final offer to the property sought to be condemned and defendant shall in like manner,
file and serve a copy thereof on plaintiff his final demand for the property sought to be
condemned.” (Emphasis added.)
12
offer in the sense intended by the statute, i.e., an offer to finally settle the litigation. The
court awarded approximately $30,000 in litigation expenses. (Id. at p. 704.)
On appeal, the District argued that the statutory phrase “ ‘before the trial’ ” refers
only to the valuation phase of the trial, and therefore the operative offers, for purposes of
determining reasonableness, were those made after the trial on the preliminary issues and
before the valuation trial. The Court of Appeal disagreed. While musing that “it may
well be that the Legislature did not, in enacting . . . section 1249.3, consider the
possibility of bifurcated proceedings,” the court concluded it could not “rewrite the
statute.” It determined that the phrase “before the trial” was reasonably construed to
mean “before the commencement of trial of the eminent domain action including both
legal (and possibly preliminary) issues and valuation of the subject property,” and so,
“the pertinent offer was that made by the District before the litigation on the preliminary
issues commenced. Since the statute was intended to compensate a condemnee
unnecessarily put to the expense of litigation (without specifying litigation on the issue of
value) it seems in keeping with that intention to allow, under appropriate circumstances,
an award of expenses even when the litigation task is that of presenting the condemnee’s
position on preliminary issues; the expense incurred on such issues is as necessary as that
incurred with respect to the valuation issue.” (Mindlin, supra, 106 Cal.App.3d at p. 718.)
The Hansens maintain that the State’s reliance on Mindlin is misplaced because it
was decided prior to the 1982 amendment which newly specified that the operative offer
and demand are to be filed prior to the date of “the trial on issues relating to
compensation.” Citing Matkin, the Hansens point out that the intention of the
amendment was to clarify that, in bifurcated proceedings, the statutory exchange does not
occur prior to the trial in which “noneconomic issues” are adjudicated.
In response, the State argues that the phrase “noneconomic issues” pertains only to
issues predicate to the condemnation itself, such as “the condemnee’s objections to the
right to take” (also citing Matkin), and that the issues of entitlement to damages for loss
13
of goodwill and impairment of access are “economic issues directly relating to
compensation.” The Hansens counter that the term “compensation” has a particular
meaning in eminent domain law, and pertains narrowly to the monetary aspects of the
trial; therefore, the operative offer and demand are those timely made prior to the trial in
which compensation is determined.
In this appeal we have been asked to elucidate the statute’s meaning against the
backdrop of these somewhat conflicting developments in the caselaw.
V. DISCUSSION
The Legislature has provided specific directions as to how a court is to decide
whether a property owner is entitled to litigation expenses, based upon each party’s final
offer and final demand for compensation. The offer and demand must be made “[a]t least
20 days prior to the date of the trial on issues relating to compensation,” and these “shall
be the only offers and demands considered by the court in determining the entitlement, if
any, to litigation expenses.” (§ 1250.410, subd. (a).) Any other “written offers and
demands filed and served before trial” may be considered only in determining the amount
of litigation expenses allowed. (§ 1250.410 subd. (c).) If the offer and demand are
timely, the court must then determine whether the condemnor’s offer was unreasonable
and the property owner’s demand was reasonable “in the light of the evidence admitted
and the compensation awarded.” (§ 1250.410, subd. (b).)6
While these directions are specific they are not entirely clear. The statute does not
define the phrase “trial on issues relating to compensation,” nor does it specify whether
6
Of interest here, but not directly relevant to our analysis is the test used in
determining the reasonableness of the condemning agency’s offer. The courts do not
simply compare the amount of the offer and the amount of the jury award. Rather, they
also look to whether the offer was made in good faith, based upon defensible legal
assumptions. Thus, for example, an extremely low offer can nonetheless be found
reasonable if it is premised on a good faith, fact-based estimate and on an arguable, but
incorrect legal premise. (San Diego Metropolitan Transit Development Bd. v. Cushman
(1997) 53 Cal. App. 4th 918, 933 (Cushman).)
14
the term “date of the trial” means the original trial date, the continued trial date, the actual
trial date, or the bifurcated trial dates. Thus, we must first determine whether only the
offer and demand made prior to the first date set for trial qualifies under section
1250.410, or whether any additional offer or demand made at least 20 days prior to the
actual trial so qualifies.
A. What Offers and Demands Qualify Under Section 1250.410, Subdivision (a)?
As has been described, the purpose of Section 1250.410 “is to encourage
settlement of condemnation actions by providing incentives to a party who submits a
reasonable settlement offer or demand before trial.” (Gross, supra, 200 Cal.App.3d at
p. 1368.) The Highsmith and Gardella Square courts concluded that final offers and
demands must be made 30 days before the original trial date because any other rule
“would encourage procrastination in making an offer or demand and would delay
meaningful negotiations.” (Highsmith, supra, 123 Cal.App.3d at p. 154; and see
Gardella Square, supra, 200 Cal.App.3d at pp. 576–578.) Because the purpose of the
statute is to encourage “early settlement so trial can be avoided,” the courts reasoned, to
allow “either party to gamble on a delay in the trial court would not serve the purposes of
the statute.” (Id. at p. 576.)
We agree that the goal of the statute is to encourage an “early settlement so trial
can be avoided,” but we do not agree that this goal would be thwarted by considering, for
purposes of section 1250.410, offers and demands made at least 20 days before a
continued or actual trial date. Nothing in the statute states or implies that it was intended
to disallow from consideration sequential settlement attempts throughout the life of the
lawsuit, up until 20 days before the trial on issues related to compensation. If the
statute’s purpose is to avoid the unnecessary incurrence of trial preparation expenses,
(Matkin, supra, 220 Cal.App.3d at p. 1097), it makes little sense to limit the operative
statutory offer and demand to those made prior to the first trial date. Allowing the court
to consider later offers and demands under section 1250.410 would not inevitably
15
“encourage procrastination” or “delay meaningful negotiations,” but even where it might
result in such a delay, it would also have the salutary benefit of promoting the continual
refinement of the offers and demands toward a compromise.
We find the reasoning of Matkin persuasive. There, the court concluded that the
statute’s intentions are carried out “where final offers and final demands are filed at least
30 [now 20] days prior to the actual trial, regardless of whether offers and demands were
timely filed in connection with previously scheduled trial dates.” (Matkin, supra, 220
Cal.App.3d at p. 1097.) Because the cutoff period was presumably selected by the
Legislature as the point in time when the parties could avoid the “needless incurrence of
litigation preparation expenses,” the statute’s goal is achieved “so long as the offers and
demands are filed [20] days before the actual trial date.”7 (Ibid.)
The Matkin reasoning also aligns with realities of litigation. Trial dates are
routinely continued, sometimes multiple times (see, e.g., Highsmith, supra, 123
Cal.App.3d at p. 152 [one continuance]; Gardella Square, supra, 200 Cal.App.3d at
pp. 564–565 [two continuances]; Matkin, supra, 220 Cal.App.3d at pp. 1091–1092
[bifurcated proceedings, total of four continuances].) In this case, trial was originally set
for March of 2009. After the matter was bifurcated it was rescheduled four times, and the
court trial did not begin until September of 2010. Similarly, the jury trial on valuation
and damages was originally set for February 2010, but was continued four times, and trial
did not commence until nearly a year later. One can imagine any number of reasons why
7
Matkin attempts to distinguish Gardella Square on the ground that, “unlike our
case, the court in Gardella Square was called upon to decide which trial date—original or
continued—was the appropriate one for purposes of determining the reasonableness of
the parties’ final offer and demand—not whether the failure to file a demand before the
original trial date precludes an award of litigation expenses as a matter of law.” (Matkin,
supra, 220 Cal.App. 3d at p. 1095.) Given the holding in Matkin that an offer or demand
is timely so long as it is filed 30 days before trial “regardless of whether offers and
demands were timely filed in connection with previously scheduled trial dates” (id. at
p. 1097), we think the distinction is tenuous, if not illusory.
16
the parties might have wished to reconsider their offers and demands during that three-
year period, including the simple desire to put an end to protracted litigation. We see no
reason to discourage a party from revisiting its statutory settlement offer or demand by
declaring subsequent offers and demands invalid for the purpose of determining
entitlement to litigation expenses. We therefore hold that the offer and demand made
prior to the first date set for trial are not the only offer and demand that qualify under
section 1250.410, subdivision (a); an offer or demand is timely so long as it is filed 20
days before trial regardless of whether offers and demands were timely filed in
connection with previously scheduled trial dates.
This does not, however, resolve the matter. We must still determine whether, for
purposes of section 1250.410, “the trial on issues relating to compensation” refers only to
the trial on the amount of compensation to be awarded, or whether it begins at phase one
of a bifurcated proceeding in which preliminary issues of the property owner’s right to
seek damages for impairment of access, loss of goodwill, or other severance damages is
adjudicated.8
B. In a Bifurcated Eminent Domain Proceeding, What Is “the trial on issues
relating to compensation”?
The State argues that the court and jury phases of an eminent domain trial are two
parts of a single trial, and therefore “the trial” in this case began at the start of the first
bifurcated proceeding, citing City of Santa Barbara v. Superior Court (1966) 240
Cal. App. 2d 612 (City of Santa Barbara) and City of Los Angeles v. Cole (1946) 28
Cal. 2d 509, 512 (Cole), overruled on another ground in County of Los Angeles v. Faus
(1957) 48 Cal. 2d 672, 680. Neither case is on point. For example, in City of Santa
Barbara, a bifurcated eminent domain action, the court held that a notice of intention to
8
This issue was raised for the first time in the Hansens’ reply brief below, but
was not decided below. The issue has been thoroughly briefed on appeal, however, and it
being a question of law, we proceed to decide it.
17
move for a new trial was premature because it was filed after the jury returned a verdict
on the question of compensation, but before the trial court rendered its decision on the
issues of public use and necessity. (City of Santa Barbara, supra, 240 Cal.App.2d at
p. 614; see also, Cole, supra, 28 Cal.2d at p. 512.) The question of whether the court and
jury phases of a bifurcated eminent domain action constitute one trial or two trials did not
arise in either case.
Certainly, an eminent domain action is subject to the single judgment rule, and the
action is not completed until all issues have been adjudicated. (Cole, supra, 28 Cal.2d at
p. 512.) This does not answer the question whether a bifurcated proceeding is one trial or
two. We have found no authority on point, although the statutes and cases we have
examined speak primarily in terms of separate trials. (§ 1048, subd. (b) [“when separate
trials will be conducive to expedition and economy, [the court] may order a separate trial
of any cause of action”]; § 598 [the court may order “that the trial of any issue . . . shall
precede the trial of any other issue” and if the issue so tried does not result in a judgment,
then “the trial of the other issues . . . shall thereafter be had”].) In Horton v. Jones (1972)
26 Cal. App. 3d 952, for example, the court described a proceeding which was bifurcated
on the issues of liability and damages variously as a “continuing trial” (id. at p. 959), as
“bifurcated trials” (id. at p. 956) and as, “in effect, two trials in one action” (id. at p. 957).
What we can glean from these authorities is that bifurcated proceedings are not uniformly
characterized either as a continuing trial or as two trials, and therefore this analytical
approach is not helpful in solving the problem before us.
The State next argues that, even if there are two separate trials, the trial on issues
relating to compensation encompasses a trial on any preliminary issue upon which
compensation might be predicated, such as adjudication of the right to damages for loss
of goodwill and impairment of access. The State asserts, “if ‘the right to claim
compensation’ is not ‘an issue relating to compensation,’ then nothing is.”
18
It is arguable that the plain meaning of the words “issues relating to
compensation” can be understood to include any issue that might have relevance to the
ultimate question of the property owner’s compensation. But we must consider, too, the
Hansens’ contention that the phrase “issues relating to compensation” has a particular
meaning in the context of eminent domain law, and in that context refers only to the
valuation and damages portion of the case. The Hansens further argue that the statutory
language and history indicate the Legislature contemplated two trials where the
proceedings have been bifurcated, and the reference to “the” trial on issues related to
compensation can only refer to the trial in which the jury decides how much
compensation should be awarded. The Hansens assert, “[s]ince the purpose of Section
1250.410 is to encourage settlement, it is practical and common sense to conclude that
the legislative intent was to allow offers and demands prior to the trial when
compensation was actually decided, rather than the trial where entitlement to
compensation was decided.”
There is no precedent that interprets the phrase “issues relating to compensation”
in section 1250.410. We therefore looked to another area of eminent domain law that
might illuminate the issue, namely, the right to a jury trial on the issue of compensation.
The California Constitution guarantees to the parties the right to a jury trial on the
issue of just compensation. (Cal. Const. Art. 1, § 19.) In all other respects, an eminent
domain trial is a “special proceeding[] of a civil nature” (Code Civ. Proc., Part 3, §§ 1063
et seq.), and is governed by a specially crafted set of statutes (§ 1230.010 et seq.).
Because it is a special proceeding, it is not included in the class of cases enumerated in
section 592 in which a jury trial is required, and so, “except [for] those relating to
compensation, the issues of fact in a condemnation suit, are to be tried by the court . . . .”
(Vallejo etc. R. R. Co. v. Reed Orchard Co. (1915) 169 Cal. 545, 556 (Vallejo), emphasis
added.)
19
Thus, for example, In Oakland v. Pacific Coast Lumber etc. Co. (1915) 171 Cal.
392 (Oakland), the property owner argued that the property being taken was actually part
of a larger parcel and therefore the owner was entitled to seek damages to the remainder.
(Id. at p. 396.) At trial the judge decided this question rather than allowing it to be
submitted to the jury, for which appellant claimed error. (Id. at p. 397.) The court of
appeal affirmed, stating that “neither the state nor . . . any other person or corporation,
exercising the power of eminent domain, is compelled to submit to the determination of a
jury every question of fact . . . . It is only the ‘compensation,’ the ‘award,’ which our
constitution declares shall be found and fixed by a jury. All other questions of fact, or of
mixed fact and law, are to be tried, as in many other jurisdictions they are tried, without
reference to a jury.” (Id. at pp. 397–398.)
Similarly, in People v. Ricciardi (1943) 23 Cal. 2d 390 (Ricciardi), the court
concluded it was the judge’s province to decide whether the property owner was entitled
to damages due to impairment of the property owner’s right of access, because “all issues
except the sole issue relating to compensation, are to be tried by the court.” (Id. at
p. 402, emphasis added.) “It was therefore within the province of the trial court and not
the jury to pass upon the question whether under the facts presented the defendants’ right
of access will be substantially impaired. If it will be so impaired the extent of the
impairment is for the jury to determine.” (Id. at pp. 402–403.)
Finally, in Los Angeles Unified School Dist. v. Casasola (2010) 187 Cal. App. 4th
189 (Casasola), the property owner was subjected to a penalty for failure to vacate the
property in a timely fashion, as had been agreed between the property owner and the
school district. The property owners argued on appeal that the trial court erred in not
submitting to the jury the question of whether the school district had, by its conduct,
waived the penalty provision. (Id. at p. 213.) The Court of Appeal rejected that
argument, with the following explanation: “In an eminent domain action, a property
owner ‘ “is entitled to a jury trial on the issue of just compensation—i.e., the fair market
20
value of the property taken’ ” (§ 1263.310). [Citation.] However, because a
condemnation suit is a special proceeding, ‘ “all issues except the sole issue relating to
compensation[] are to be tried by the court” including, “except those relating to
compensation, the issues of fact.” [Citation.]’ [Citation.].” (Ibid., emphasis supplied.)
It thus appears that in the parlance of eminent domain, “issues relating to
compensation” are those pertaining to the amount of compensation, that is, the fair
market value of the property plus the amount of any other damages resulting from the
condemnation. The compensation issues do not include other issues of fact or law, such
as whether the property owner is entitled to severance damages because the parcel being
taken is part of a larger parcel (Oakland, supra, 171 Cal. at pp. 396–397), whether the
condemnor has the legal authority to condemn the property (Matkin, supra, 220
Cal.App.3d at pp. 1091–1092) or whether the property owner is entitled to damages for
impairment of access (Ricciardi, supra, 23 Cal.2d at pp. 402–403). We therefore
conclude that the phrase “the trial on issues relating to compensation” found in section
1250.410 has a particular meaning in eminent domain practice, and refers to the trial in
which the trier of fact determines the amount of compensation, including the amount of
damages if any, to be awarded to the property owner. (Creutz v. Superior Court (1996)
49 Cal. App. 4th 822, 829 [“when the Legislature uses a term of art, a court construing that
use must assume that the Legislature was aware of the ramifications of its choice of
language”].)
The scant legislative history of the amendment supports this construction. The
1982 amendment replaced the phrase “prior to the date of trial” with “prior to the date of
the trial on the issues relating to compensation.” The suggestion to include this language
came from the Committee on Condemnation of the State Bar. As originally proposed, the
1982 amendment provided that the plaintiff would file its final offer “at least 30 days
prior to the date of trial” and the defendant was to file its final demand “at least 30 days
prior to the date of any valuation trial.” The Committee opined, “[t]he problem with that
21
text is the application of its terms to a bifurcated trial. Often the noneconomic issues are
tried first, after which there is a trial on the economic issues. [Also, as] presently written
the first sentence is unclear as to when the plaintiff has to file an offer [while it] specifies
when the defendant has to file a demand.” (Com. on Condemnation of the State Bar of
Cal., letter to Terrance Flanigan, State Bar of Cal., in Legis. Bill File of Assem. Com. on
Judiciary regarding Assem. Bill No. 3274 (1981–1982 Reg. Sess.), Mar. 19, 1982.)
Based upon this legislative history, Matkin concluded that the change was intended to
“clarify any ambiguity which might result in instances where condemnation proceedings
are bifurcated.” (Matkin, supra, 220 Cal.App.3d at p. 1096.) Condemnation proceedings
are commonly bifurcated precisely because, as here, all issues except compensation are
tried to the court and the issue of compensation is tried to the jury. (Redevelopment
Agency v. Contra Costa Theatre, Inc. (1982) 135 Cal. App. 3d 73, 79–80.) As the State
itself pointed out, “a bifurcated trial is the usual practice in eminent domain proceedings,
given the separate functions of the judge and the jury in such cases,” citing Marshall v.
Department of Water & Power (1990) 219 Cal. App. 3d 1124. It thus follows most
logically that the Legislature, in adopting the 1982 amendment, was referring to “the
trial” in which compensation is determined.
The State contends the cases (Oakland, Ricciardi and Casasola) merely hold that
juries decide the amount of compensation and courts decide all other “questions of fact
and law, including those relating to compensation.” In the State’s view, the Legislature
was presumed to know that issues “related to compensation,” such as the right to
severance damages, have always been tried to the court, so when it amended the statute
“it clearly did not intend to limit exchanges of demands and offers to the jury phase of a
bifurcated proceeding.” But this is simply another way of saying that the issue of a
property owner’s entitlement to severance damages is an issue “related to compensation”
as that phrase is used in section 1250.410. We have already noted that this ignores the
actual language of the cases. The cases do not say the court decides all other issues
22
“relating to compensation” except the amount, as the State’s argument implies. Rather,
the cases describe the court as deciding: “[the issues of fact] except [for] those relating to
compensation” (Vallejo, supra, 169 Cal. at p. 556, emphasis added); “all issues except the
sole issue relating to compensation” (Ricciardi, supra, 23 Cal.2d at p. 402 (emphasis
added)); or “ ‘ “all issues . . .” including, “except those relating to compensation, the
issues of fact.” ’ ” (Casasola, supra, 187 Cal.App.4th at p. 213, emphasis added.)
Taking a slightly different approach, the State proffers a broad interpretation of the
1982 amendment by which “the trial on the issues relating to compensation” would
include a trial on any issues that are relevant to compensation, and would exclude only a
trial on issues that are completely unrelated to compensation, such as a challenge to the
right to take, or a claim that there was an erroneous determination of public use and
necessity. In support, the State points to Matkin, which states that the amendment was
added so “the term ‘trial’ [would not be] confused with the proceeding at which
noneconomic issues are resolved, such as one relating to the condemnee’s objections to
the taking.” (Matkin, supra, 220 Cal.App.3d at p. 1096, emphasis added.)
We do not think this sentence supports the State’s position. Matkin did not
purport to define the distinction between economic and noneconomic issues; it only used
the “condemnee’s objections to the taking” as one example of a noneconomic issue—
presumably because in Matkin the condemnee’s objection to the taking was the
preliminary issue. Nothing in the court’s opinion suggests that by using that example it
was also expressly or impliedly deciding that any question relating to a property owner’s
right to claim damages was an “economic” issue. In any event, the statutory framework
gives us no reason to distinguish between bifurcated proceedings in which the right to
take is adjudicated and bifurcated proceedings in which the right to seek damages is
adjudicated.
The State also claims that if the Legislature wanted the offer and demand to be
triggered only by the jury phase of the trial relating to the amount of compensation, “it
23
could have easily done so by narrowly stating ‘trial on the issue of the amount of
compensation.’ That it did not do so evidences the legislature’s intent not to limit
exchanges to the jury phase of trial only.”
We know of no rule of statutory construction—and the State cites no authority for
its claim—that if the Legislature could have been more explicit, but was not, then the
Legislature intended the statute to be more inclusive. Any number of statutes might be
made more explicit with additional words, but the courts cannot rely on such theoretical
suggestions untethered to legislative history or statutory context in ascertaining
legislative intent.
Finally, the State argues that the goal of early settlement is hindered by delaying
the statutory exchanges until the compensation phase, such that “all issues but the amount
of compensation must be tried without an exchange of offers and demands.” This
argument has merit, but we think that in bifurcated proceedings our interpretation more
effectively advances the statute’s central purpose of encouraging settlement. In a
bifurcated proceeding, such as here, settlements are less likely to occur if the parties are
required to make their one and only statutory final demand and offer prior to the trial in
which the court adjudicates, for example, the property owner’s entitlement to various
categories of damages. It can be safely assumed that the disputed preliminary issues will
usually result in dramatically divergent assessments of the amount of just compensation.
(See, e.g., Mindlin, supra, 106 Cal.App.3d at pp. 703–704 [prior to determination of
whether land could be developed for commercial purposes offer was $11,500 and
demand was $60,000].) Therefore, it is only after those preliminary questions are
decided that the parties will be able to make a reasonably reliable estimate that
encompasses “all compensation” that is due. (§ 1250.410, subd. (a).)
Additionally, if the statutory exchange must be made prior to a bifurcated trial on
the type of damages the property owner may claim, then the condemning agency would
gain an undue advantage. As we earlier explained, the condemnor’s offer will be
24
considered “reasonable” even if it is only a fraction of the jury’s award if it is based on a
reasonable set of legal assumptions. So, for example, courts have found very low offers
to be nonetheless reasonable where the crux of the parties’ disagreement was not about
valuation, but was due to a bona fide legal dispute that required resolution. The court’s
rationale is that a condemning agency need not “compromise its legal position just to
avoid litigation.” (Cushman, supra, 53 Cal.App.4th at p. 933 [dispute as to whether the
appraiser’s method of calculation was legally valid]; and see, Escondido Union School
Dist. v. Casa Sueños de Oro, Inc. (2005) 129 Cal. App. 4th 944, 986 [dispute as to whether
manufactured homes were “ ‘improvements pertaining to the realty’ ” for which the
property owner was entitled to compensation]; State of California ex rel. State Pub.
Works Bd. v. Turner (1979) 90 Cal. App. 3d 33, 37 [dispute as to whether the State should
be held liable for inverse condemnation damages].)
In this case, the State’s statutory offer of $784,000 was predicated on its position
that the Hansens were not entitled to damages for impairment of access. Assuming
arguendo that this position was legally tenable, under the authorities cited above the offer
would likely have been considered to be “reasonable” even though it was less than a third
of the jury’s award. Under the State’s interpretation of the statute—which would lock in
that offer for purposes of determining reasonableness—it would have no incentive to
make any new settlement offers prior to the trial on compensation. And, in fact, the State
made no new offer even after the property owners prevailed on the issue of entitlement to
damages, thus forcing the trial on compensation to go forward. The State’s construction
of the law does not advance the cause of settlement.
We do not ignore, nor do we necessarily disagree with, the Mindlin court’s
reasoning in concluding that the final offer and demand must be made prior to the first
bifurcated trial: “Since the statute was intended to compensate a condemnee
unnecessarily put to the expense of litigation (without specifying litigation on the issue of
value) it seems in keeping with that intention to allow . . . an award of expenses even
25
when the litigation task is that of presenting the condemnee’s position on preliminary
issues; the expense incurred on such issues is as necessary as that incurred with respect to
the valuation issue.” (Mindlin, supra, 106 Cal.App.3d at p. 718.) But the 1982
amendment, adopted after Mindlin was decided, did “specify[] litigation on the issue of
value,” and so Mindlin is no longer apposite.
In sum, we hold that section 1250.410, subd. (a) permits the courts, in determining
reasonableness, to use the statutory final offer and demand made at least 20 days prior to
the actual trial, and that, in a bifurcated proceeding, the statutory final offer and demand
made at least 20 days prior to the trial on compensation issues are the operative offer and
demand.
C. A Note to the Legislature
While we think this interpretation of the law accurately reflects its intent, we are
nonetheless troubled by the statute’s constricted mandate that allows only a single offer
and demand to be considered on the issue of reasonableness. As we read and understand
the statute, it is at least theoretically possible for a condemning agency to set its
prelitigation offer under Government Code section 7267.2 at an artificially low sum,
insist upon a bifurcated trial on preliminary issues of dubious merit, then avoid paying
the property owner’s expenses for that trial by making a section 1250.410 offer that is
reasonable prior to the compensation trial.
We observe that this provision—that only one offer and demand can be considered
for purposes of entitlement to litigation expenses—was added in the 1982 amendment of
the statute. The legislative history indicates that its purpose was to codify the decision in
City of Gardena v. Camp (1977) 70 Cal. App. 3d 252, which held that offers or demands
made after the 30-day cutoff in the statute could not be considered in determining
entitlement to litigation expenses. (Id. at p. 258; see id. at p. 254, fn. 1.) A report to the
Assembly Committee on the Judiciary explained that, according to the source of the bill,
“trial courts are inconsistent in their application of the existing statute and will sometimes
26
consider on the question of entitlement offers or demands made after thirty days before
trial. This measure is sought to eliminate the uncertainty and confusion found in the
application of the statute.” (Assem. Com. on Judiciary, Rep. on Assem. Bill No. 3274
(1981–1982 Reg. Sess.), as amended Apr. 12, 1982.) Thus, while the legislative history
expresses concern only about the use of late offers and demands for determining
reasonableness, the unequivocal language of the statute goes beyond this concern to limit
the court’s reasonableness determination to a single final offer and demand made at least
20 days prior to the trial on the compensation issues. We, of course, cannot rewrite the
statute, but the Legislature may wish to consider whether the scenario set forth above
might be avoided, and whether settlement opportunities might be enhanced, if the courts
were allowed to consider more than one offer and demand in determining whether the
parties were being reasonable throughout the course of the litigation—the kind of
determination that is routinely undertaken in the trial courts.9
VII. DISPOSITION
The order denying the Hansens’ motion for litigation expenses is vacated. The
matter is remanded for further proceedings consistent with the views expressed in this
opinion.
9
This approach is consistent with the rationale of Martinez v. Brownco
Construction Co. (2013) 56 Cal. 4th 1014, 1026, in which our Supreme Court held that
“where . . . a plaintiff serves two unaccepted and unrevoked statutory offers [pursuant to
section 998] and the defendant fails to obtain a judgment more favorable than either
offer, the trial court retains discretion to order payment of expert witness costs incurred
from the date of the first offer.” This encourages the making of more settlement offers
and promotes the public policy of compensating injured parties by “according parties
flexibility to adjust their settlement demands in response to newly discovered evidence.”
(Ibid.) In an eminent domain proceeding, allowing multiple statutory offers would give
parties flexibility to adjust their settlement demands in response to the adjudication of
preliminary legal issues.
27
_________________________
Rivera, J.
We concur:
_________________________
Ruvolo, P.J.
_________________________
Reardon, J.
A133252
28
The People ex rel. California Department of Transportation v. Hansen’s Truck Stop, Inc.,
et al. (A133252)
Trial court: Humboldt County
Trial judge: Hon. Dale A. Reinsholtsen
Attorneys:
Law Offices of Thomas Becker, Thomas Becker, for Defendants and Appellants
California Department of Transportation Legal Division, Ronald W. Beals, Chief
Counsel, David Gossage, Deputy Chief Counsel, Lucille Baca, Assistant Chief Counsel,
and Douglas C. Jensen, Counsel, for Plaintiff and Respondent
29