A Bit of Common Sense in California. Wow!

Since we freely criticize the many shortcomings of eminent domain law, it seems only fair that we should deliver a loud attaboy to California Supreme Court Justice Ming Chin and his colleagues who have just restored some common sense to California law of eminent domain.

California law, as in most jurisdictions, provides for a quick take procedure whereby the condemnor can make a deposit in court for the owners and thereupon gain immediate possession of the subject property that is being taken. Actually, to get technical about it, that procedure is unconstitutional because the California state constitution (Article I, Sec. 19) provides that in takings of property just compensation must first be paid to the owner or deposited in court for him, before the taking can occur, and of course compensation isn’t determined until after a valuation trial. On the other hand, that constitutional provision also provides for prejudgment possession. So how can just compensation be “first made” if it isn’t determined until after trial? Besides, that “deposit” is not “just compensation” but only only a condemnor’s unilateral estimate of what it thinks the “just compensation” should be, and both historical data and more recent studies demonstrate that condemnors tend to lowball the condemnees in a great many cases. In fact, California condemnation lawyers charge their clients only a 30% fraction of the recovery they obtain that is over and above the condemnor’s offer, so if those offers were consistrently fair, condemnation lawyers would starve.

Moreover, when a California condemnor makes a deposit, it isn’t really a deposit into court but only into a special state fund where it earns a miniscule rate of interest — currently around one percent — rather than either the market rate, or the statutory rate of 10% that all other litigants get. But we digress — that’s not what this case, Los Angeles County Metropolitan Transit Authority v. Alameda Produce Market, that just came down from a uninanimous California Supreme Court, was about.

The California statutory scheme (Cal. Code Civ. Proc. Sec. 1255.310) provides that when owners withdraw their deposit, there is a catch. A withdrawal is deemed a waiver of all defenses to the taking except a claim for greater compensation. Which is no big deal most of the time because defenses, in the sense of challenging the right to take, are rarely raised. Anyway, four years ago in Redevelopment Agency of San Diego v. Mesdaq, 154 Cal.App. 4th 1111 (2007) the agency made a deposit shereupon the mortgage lender bellied up to the counter demanding a withdrawal of sufficient funds to satisfy its loan balance. The owner had no objection because he naively thought that it was no skin off his nose — and indeed it wasn’t. The lender was entitled to withdraw the balance of his loan, so why object?  But hey man, this is California where the local judiciary can be relied on to do its best to twist statutes to favor condemnors. Actually, some of our statutes do the twisting all by themselves — but that’s another story for another time. Still, we should note in passing that during oral arguments in Alameda Produce, one of the Justices observed that California eminent domain law is not very user friendly. That it isn’t, if by “user” you mean the hapless property owner — but it sure is “friendly,” actually warm and fuzzy to condemnors. Which is another story for another time too. Anyway,  in Mesdaq the Court of Appeal held that a withdrawal is a withdrawal, and it didn’t matter who requested it. The owner made no objection to the lender’s withdrawal, so that was that — his statutory rights went poof! even though he did not waive them. The state Supreme Court denied review.

In the Alameda Produce Market case that just came down the same thing happened, except this time the California Supreme Court woke up and rectified this outrageous rule whereby your mortgage lender can waive your substantial constitutional rights without your consent. The court analyzed the statutory language and concluded that it provided no basis fo the Mesdaq holding, because the waiver by operation of law applied only to the party withdrawing funds from the deposit, not the other defendants. Sensible ruling because the Mesdaq court never explained what purpose would be served by the owner having to make an objection in court when he has no basis for objecting  because the lender is clearly entitled to its share of the deposit. What would the owner have to argue in such a bizarre “objection”? So the California Supreme Court reversed and disapproved Mesdaq to the extent it was inconsistent with the present ruling.

All of which goes to show that there is hope. You have to be persistent and remember that this is a never-ending battle in which the good guys have to keep at it, bearing in mind Edmund Burke’s admonition that for evil to succeed, it is only necessary that good men do nothing. So you have to fight the kleptocrats every chance you get, because for all their condemnor-orientation, courts do see the light at times.

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