Archive for June, 2011

Taking Land But Not Using It — CalTrans Is At It Again

Monday, June 27th, 2011

Part II – The Orange County Fiasco

In Part 1 of this discussion, June 19, 2011, we discussed the origins of the California scandal whereby CalTrans, our Department of Transportation got into the excess land business – taking of land ostensibly for a freeway, but actually in excess of what it meant to put to such use. You can read all about it by clicking here. In a rational world, you would have thought that after being nailed by the Little Hoover Commission wasting some $100,000,000 (in circa 1970 dollars) on excess land that CalTrans could neither use nor sell, those folks would have been chastized into straightening out their behavior. But no, it went right on.

The second chapter came in Orange County in 2006, when the Orange County Register ran an expose on CalTrans’ wasteful behavior, whereby it acquired land in connection with the widening of the I-5 freeway, but wasn’t doing anything with it. See Kimberly Kindy & Natalya Shulakovskaya, Highway Robbery, Orange County Register, Oct. 15, 2006, at p. 1 (News), describing how CalTrans acquired large holdings of land which it was not using, selling or maintaining, causing a loss to local taxing authorities of anywhere from $78 million to $100 million. CalTrans also incurred $29 million in liability for inverse condemnation damages  for harm caused to other homes.

For additional coverage of these events, also see Steven Greenhut, California’s Biggest, Nastiest Landlord, Orange County Register, Nov. 26, 2006, at p. 1 (Commentary), and Associated Press, CalTrans Bought Houses, Let Them Decay, L.A. Daily Jour., Oct. 18, 2006, at p. 2.

Just how much money was wasted on this caper by our ever-watchful guardians of the public fisc was never entirely clear (at least not to the likes of us) but it clearly ran into the nine figures.

Your tax money at work.

(The Story of CalTrans’ waste of money acquiring but not using land will continue later)

 

Man Bites Dog In South Carolina!

Saturday, June 25th, 2011

It bears noting, if only in passing, that the South Carolina Supreme Court (the same court, interestingly, which thought that denying David Lucas all economically viable use of his beachfront property in Lucas v. South Carolina Coastal Council was hunky dory) has held that when a lawyer is appointed to represent indigent criminal defendants, he is entitled to just compensation for the resulting taking of his property in the form of his time and labor, and even in some cases, for expenditures incurred in connection with handling such cases. The case is Brown v. Howard, No. 26991 (S.C. June 21, 2011).

This is an overdue decision. Maybe in the olden days a barefoot country lawyer could stroll down to the court house and do his share in providing legal representation to indigent criminal defendants. Though hardly de minimis, the economic burden of such representation was then comparatively modest. But given today’s economic burdens of running a law practice, it can get economically burdensome, and lawyers who undertake pro bono defense of people accused of murder or other serious crimes, can become de facto indentured servants for years on end. While the added economic burden thus placed on the criminal justice system by the requirement of appointed lawyer compensation is not to be sneezed at, it’s the same old story: the economic burden of such representation must fall somewhere, and it does not seem fair that it should fall only on defense lawyers, even as society demands that criminal defendants receive punctilliously fair and at times highly complex treatment by the criminal justice system. Once again, there ain’t no such thing as a free lunch, and a society that insists on a high level of representaton for indigent as well as paying defendants, incurs a cost in doing so.

As you may suspect, this development in the law has already been covered by a number of blogs, so rather than repeat this stuff, we refer you to the blog of out esteemed colleague Robert Thomas who runs the inversecondemnation.com blog and who has already covered this bit of news, providing links to other blogs. Click here to get his take on this decision.

Lowball Watch – New Jersey. With a Moral.

Saturday, June 25th, 2011

The Jersey Journal (nj.com) reports that the New Jersey Appellate Division (that state’s intermediate level appellate court) has affirmed an award of $18.6 million for the taking of a 3.4-acre parcel of land by the Jersey City Redevelopment Agency. Terrence McDonald, Court Rejects Challenge to $18.6M Award in Jersey City Eminent Domain Case, June 25, 2011 – Click here.

The taking took place in 2004. The Redevelopment Agency offered $3.9 million. A jury awarded $18.6 million which, with interest, has grown by now to $22 million, a sum that, as it happens, comes close to the owners’ trial valuation testimony of $25.3 million.

What is most interesting about this case to us is the Agency’s reaction. Even though in this case it is the redeveloper who is supposed to pay the judgment,  evidently the Redevelopment Agency has learned a sobering lesson. Its Executive Director is quoted as saying the Agency “has retooled its position regarding eminent domain in recent years and [this] case is partially responsible.” The Agency “has been much more hesitant to seize properties via eminent domain.” Which is a nice illustration of our general belief that economic solutions are best because they are self-enforcing. When the redevelopment agency and its redevelopers are made to understand that there is no free lunch, that they won’t be able to pursue their grandiose plans on the backs of property owners whose land is targeted for acquisition, and that they will have to pay the true amount — or something approaching it — of the cost of doing business, they will be more likely to use the power of eminent domain with restraint, and invoke it only when necessary and economically sound. There is nothing like an economic disincentive to trying to redevelop on the cheap, at the expense of condemnees whose land fortuitously winds up in the path of the project.

Our observation has been that no matter how much the legislature fiddles with the statutory right to take, chances are that even on their face the legislative changes won’t amount to a hill of beans, because they always have an exception for “blight,” a term that is so amorphous as to cover a multitude of municipal sins. The recent New York cases (Goldstein and Kaur) provide excellent examples of how far judges can go in rubber-stamping condemnor plans. In other words, even when not as intellectually corrupt as New York law, when it comes to the right to take,  judges are likely to interpret laws in favor of the condemning agencies. At least that has been the sad history of American eminent domain law.

Lowball Watch – New Jersey

Friday, June 24th, 2011

The Star Ledger (NJ.com) reports that a Monmouth County jury awarded $2.8 million to a developer, on the city’s offer of $880,000. The developer was in the midst of developing the subject property and wanted to be the designated redeveloper for this site. But the city chose another one. Mary Ann Spoto,  Asbury Park Developer Awarded $2.8 Million for City’s Abandone Eminent Domain Project, Jan. 23, 2011. For the story, clich here.

The project has since been abandoned. Here is what it looks like (Google maps):

kingsley-apartments-domain.jpg

Your tax money at work.

Lowball Watch – Missouri

Thursday, June 23rd, 2011

The Maplewood-Brentwood Patch reports that the city of Maplewood offered $140,000 for a used car lot next to the city hall, evidently for parking. The case settled for $520,000, or 3.7 times the offer. To get the story click here.

Abolish Redevelopment! (Cont’d.)

Sunday, June 19th, 2011

Once more into the breach dear friends! Up in Sacramento, redevelopment may be dead again, but then again it may be alive. Sort of.

We recommend that you go to the Nossaman California Eminent Domain Blog for a mind-numbing summary of the ups and downs of that legislation in the California legislature during the past few days. Click http://www.californiaeminentdomainreport.com/ We find it too much to guide you through that morass, particularly since the boniface of the Nossaman blog, Rick Rayl, has spelled it all out in his last two — or is it three — posts.

Anyway, if you are interested in redevelopment, read it, with our thanks to Mr. Rayl.

Taking Land But Not Using It — CalTrans Is At It Again

Sunday, June 19th, 2011

Part I – How It All Began

With rhythmic regularity of the tides, dispatches from the state land acquisition front inform us that once again, CalTrans has acquired land for a freeway which is not being built, while the land sits there, consuming public funds but doing no one any good. This time, the locale is South Pasadena, and the new twist is that it isn’t just land. This time, there are houses sitting on it, that CalTrans is maintaining at an eye-popping cost, with no prospects of that freeway being bult in the foreseeable future. You don’t believe it? Then try this: how about $103,472 to replace a roof on a single-family house? Or $171,508 for a roof on another house that has been sitting vacant for over a decade? Etc., etc. See Jack Dolan, Sky-High Prices for Roofs on Caltrans-Owned Homes, L.A. Times, June 19, 2011, at p. A1 – click here

These houses were acquired years ago by CalTrans for an extension to the 70 Freeway, that has not been built due to fierce resistance of the City of South Pasadena – which is another story worthy of telling, but which will have to be told another time.

This isn’t the first time that CalTrans wound up with land it acquired but then could neither use nor sell. In our experience, this kind of boondogglery goes back to the 1960s.  Check out People etc. v. Superior Court (Rodoni), 68 Cal.2d 103 (1968). There, Caltrans, intending to put a 0.65-acre parcel of Roy Rodoni’s Central Valley farmland to use as part of the Interstate 5 right of way, filed a condemnation action seeking to take his entire 54-acre farm. Why take over ten times as much land as would be put to freeway use? Because, said CalTrans, taking only the half-acre would landlock the remainder, making severance damages high, so taking it all would cost less. How is that possible, you ask? How can taking ten times more land be cheaper than taking one tenth of the take? It isn’t. But do read on.

What we have here is government-style arithmetic, which goes something like this. Under eminent domain law,  when a condemnor takes only a part of a larger parcel of land, it has to pay for the part taken, plus severance damages measured by the diminution in  value of the remainder. So by taking all of it, “reasoned” CalTrans, it would not have to pay severance damages, and — voila! — it would save money. But what about the cost of the whole 54-plus acres, as opposed to the cost of only the half-acre that would be used for the freeway and as such be compensable in a partial taking? After all, an entire parcel of land can only be worth 100% of its fair market value, no more and no less. So if you take and pay for all of it, you necessarily pay the highest possible price, as opposed to taking only a part of it whose value necessarily has to be less than the whole, because the remainder (even a landlocked remainder) is always worth something, if only when sold to a neighbor at a bargain price.

But alas, the majority of the California Supreme Court endorsed CalTrans’ argument,  granting CalTrans the opportunity to go to trial and demonstrate that the cost of the partial taking would not be “excessive” and would save the state money.

Justice Mosk, in concurrence with Justice Peters, dissented, pointing out two things. First, that CalTrans’ was engaging in strange mathematics under which more would cost less, and second, explaining why CalTrans was defending the arithmetically indefensible, why it was insisting that acquiring over ten times the amount of land it meant to use for its freeway would cost less money. Justice Mosk noted that the property owners charged, and CalTrans conceded, that  its functionaries were in the habit of engaging in coercive behavior, demanding favorable settlements in part-taking cases, on pain of taking the affected condemnees’ land in its entirety, even though the excess part of it would not be put to any public use. If you don’t believe me (or Justice Mosk) you can see a copy of such a CalTrans demand for yourself in 20 Hastings L. Jour. at 585, n. 73. While we admire the late Chief Justice Traynor, we never could comprehend how a person of his stature and intellectual acumen could fall for so transparent a scam as that presented by CalTrans’ coercive tactics revealed in the Rodoni case. As the King of Siam said to Anna: “Is a puzzlement.”

CalTrans argued that it could “save” by selling the excess land and recouping its money, but the problem with that was that this collided with the settled rule forbidding excess condemnation for recoupment purposes – i.e., the taking of land in excess to the public project being built, in order to resell it, hopefully at a profit and use the sales price to offset the acquisition cost. The court’s majority, in an opinion by Chief Justice Traynor, more or less bought this argument but insisted that CalTrans prove on remad that it would actually save money by taking all of Rodoni’s land.

So what happened then? We are not really sure, but rumor had it at the time, that faced with the arithmetically impossible task of showing that the cost of acquisition of 0.65-acre of farm land would equal or exceed the cost of acquition of 54 acres of that land, CalTrans threw in the towel and settled, paying only for the partial taking and letting Rodoni keep the excess land.

But that was not the end of the story. Shortly thereafter the Little Hoover Commission undertook a study of CalTrans’ excess land acquisition program, and — surprise, surprise! — revealed that the state’s excess land acquisition program, far from being the money-saver CalTrans claimed it to be, was a rathole for public funds. CalTrans was found to be sitting on some $100 million worth of excess land that it acquired but could neither use nor sell. In fact, as revealed by the Los Angeles Times, the program was so poorly managed, that  CalTrans’ excess holdings included some $10 million worth of land that CalTrans was not even aware it owned. And remember — those were 1960s dollars — probably four times as much in today’s dollars.

It was a different story in the federal court where in Sherwood v. Bradford, 246 F.Supp. 550 (S.D.Cal. 1965) District Judge Peirson Hall enjoined the construction of the 210 Freeway because CalTrans had been using excess condemnation. But that case settled.

It seemed at the time that the Legislature put an end to this story when, in 1976, it enacted Cal. Code Civ. Proc. Sec. 1240.410 tightening up the definition of a remnant and providing that excess condemnation of remnants would not be permissible where the condemnee could prove that the condemnor “has a reasonable, practicable, and economically sound means to prevent the property from being a remnant.” And if there is one thing condemnors hate, it is having to defend the extent of their takings on the merits. Moreover, the Legislature also provided that in cases of takings leaving genuine economic remnants, the owner as well as the condemnor can request that they be acquired and compensation be paid for them. Gov’t. Code Sec. 7267.7.  This made the excess taking game a two-sided affair, so we don’t see any overtly excess condemnation cases these days, and presumably, CalTrans is no longer acquiring land that it then fails to use.

Or do we?

(The story of CalTrans’ abuses of land acquisition will continue later)

 

Let’s Toast Magna Carta Day

Wednesday, June 15th, 2011

Our thanks to the Volokh Conspiracy folks for their reminder that today is Magna Carta day. Not only that, but they have also posted the full text of that document. Reading it reminds us of two things. First, provisions of the Magna Carta are mostly devoted to protection of property rights. Most of that other good stuff concerning personal liberties hat we have enshrined in the Bill of Rights is conspicuous by its absence. So next time you hear someone extoll the virtues of that Great Charter, remind him of that fact.

Second, since this is a blog concerned primarily with eminent domain, we note the text of paragraph 39 of the Magna Carta, as follows:

“(39) No free man shall be seized or imprisoned, or stripped of his rights
or possessions, or outlawed or exiled, or deprived of his standing in any other
way, nor will we proceed with force against him, or send others to do so, except
by the lawful judgement of his equals or by the law of the land.

So next time you hear someone go on about how there is no right to a trial by jury in eminent domain cases, because supposedly there was no such right in England when Seventh Amendment was adopted, remind him about that “lawful judgment of his equals” passage. To say nothing of more modern British law, discussed in DeKeyser’s Royal Hotel v. The King, a 1919 British Court of Appeal decisions that reviews British history on this point and concludes that eminent domain (or compulsory purchase) cases were tried to juries until at least 1845.

Lowball Watch – Louisiana

Monday, June 13th, 2011

Little did we know when we started to cover the topic of attempted undercompensation by condemning agencies a while back, that it would prove to be so frequently recurring. Here is a doozy from Louisiana, as reported by Ownerscounsel.com. The case caption is State of Louisiana v. Monteleone, et al.

1987 State DOT offer for taking of some 153 acres out of a 14,034.948-acre tract of wetlands: $46,558. Jury verdict (at the end of first trial): $91,672. This judgment was reversed on appeal for jury misconduct. See 976 So.2d 791 (2008).

At the end of the second (non-jury)  trial, the verdict was $214,534.14 for the part taken, plus $1,584,442.54 in severance damages, plus interest on the additional just compensation of $1,584,442.54, plus expert cost in the amount of $173,030.00, plus $900,000.00 in attorney’s fees. Interest on expert costs and attorneys’ fees is yet to be calculated.

Altogether, according to our calculator, the total award comes to some $4,288,472, or some 92 times the original offer.

 

 

Lowball Watch – Oklahoma

Friday, June 10th, 2011

The Owners Counsel reports (June 10, 2011)  a verdict from Tulsa, Oklahoma, as follows. Condemnor’s initial offer for approximately 12 acres of agricultural land: $365,000. Commissioners’ award: $1,402,850. Jury verdict: $3,100,000.

Additionally, since the jury verdict exceeded the commissioners’ award by more than 10%, under Oklahoma law the owners are entitled to attorneys’ fees and costs. These have not yet been calculated.

For the full story from Tulsa World, the local newspaper click here


The purpose of this blog is to provide a forum for people, whether eminent domain professionals or not, for exchange of ideas and a discussion of eminent domain news and issues. It does not provide legal advice. Questions concerning actual cases should be directed to the readers' own legal, appraisal and real estate advisers.

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