Archive for December, 2012

Now Hear This: In California, Statutes Can Trump the Constitution

Sunday, December 30th, 2012

Technically, this is not a taking case because the parties evidently did not raise that issue. Except that it really is. Sub silentio, as it were. To gain an understanding of the background, read Pruneyard Shopping Center v. Robbins, 447 U.S. 74 (1980) holding that California shopping mall owners must admit into their malls people who do not wish to shop, but only to collect signatures on petitions that have nothing to do with malls. The court held that the state constitutional freedom of expression provision that under state law extended to quasi-public forums like large malls trumped the owner’s property rights. So it was a case of conflicting state constitutional provisions.

Now, along comes Ralphs Grocery Co. v. United Food & Commercial Workers Union, Cal. Supr. Ct. Docket No. S185544, filed December 27, 2012, slip opinion at p. 2, which reads just like a labor law case, except it also illustrates that the California Supreme Court does not appear to have much regard for private property rights. Said the Court:

“We agree with the Court of Appeal that the supermarket‘s privately owned entrance area is not a public forum under the California Constitution‘s liberty of speech provision. For this reason, a union‘s picketing activities in such a location do not have state constitutional protection. Those picketing activities do have statutory protection, however, under the Moscone Act.” Emphasis added.

In other words, the owner’s [constitutional] right to exclude must yield to the union’s statutory right to enter his land, even where the land in question provides access and is not freely open to the general public.

So the union won because the court held that — constitution, shmonstitution — a labor relations statute (the Moscone Act) trumps the owner’s constitutional right to exclude, and allows union pickets and them alone  to enter the area in question and do their thing. So unlike Robbins, this was not a clash of two constitutional provisions, but a conflict between the constitution and a statute.

So slice it any way you want, but what the court thus de facto held was that a statute (the Moscone Act) can, and in this case did, override a constitutional right – i.e., the business owner’s right to exclude strangers from the part of his private property that is used only for the limited purpose of access and is not open to the general public. See Kaiser Aetna v. United States, 444 U.S. 164 (1979).

Just how the court managed the feat of making the owner’s constitutional right yield to the union’s statutory one  we are not sure. Maybe it’s because we went to a small, urban night law school that (at least in the olden days) did not instill in us the highly refined modes of legal reasoning employed by our betters these days.

Oh, we almost forgot. Wasn’t there a taking problem lurking in this factual scenario? There sure was. After all, this was was a variant of the Pruneyard case, and absent a constitutional basis for the union’s position, it was present in the case. But the California Supreme Court never mentioned the subject. That was no oversight, because though the parties did not go into that, the taking concerns were brought to the court’s attention in an amicus brief of the California Retail Association et al. which urged reconsideration of the Pruneyard case. But as we know, an amicus must take the case as the parties have made it, and may not embark on a “juridical expedition” of its own, as the court once put it.

So California remains in the miniscule minority that follows the Robbins rule, and has now expanded it. And here you wonder why the exodus of businesses out of California continues unabated.

 

The Corps Giveth, and the Corps Taketh Away

Saturday, December 29th, 2012

The annals of environmental regulation are replete with horror stories whereby private individuals who engage in harmless or even constructive activities that may involve “wetlands” are harassed or subjected to draconian punishment for what are at most trivial offenses, and sometimes completely harmless or even constructive activities. Woebetide the land owner who clears trash and debris from his arguably wet land without a Clean Water Act permit, when the Corps of Engineers deems it to be a “wetland.” Why quotation marks? Because under the bizarre Corps of Engineers’ regulations, even dry land that never gets wet except when it rains, may be deemed a “wetland.” You don’t think so? Then check out 38 Santa Clara L. Rev.837,  845-853 (1998), particularly fn. 52 at p. 848. And get this: in the 1970s your faithful servant was involved in a case in Florida (Context Development Co. v. Alexander, U.S.D.C. So. Dist. Fla., Docket No. 80-1708-Civ-JE) in which the Corps took the position that plowing bone-dry land for a new citrus grove was “dredging and filling in waters of the United States.” No one ever explained how it is possible to plow waters of the United States, or any other kind.

In that context, in which the Corps purports to act as a saintly protector of field and stream, imagine the shock of Los Angeles environmentalists when a week or so ago they realized that some 43 acres of land in the Sepulveda Flood Control Basin, described by the L.A. Times as a “lush habitat . . . , home to one of the most diverse bird population in Southern California, has been reduced to dirt and broken limbs — by the U.S. Army Corps of Engineers.” Louis Sahagun, Nature Group Stunned After Army Corps Levels Habitat, Los Angeles Times, December 29, 2012, at p. AA1 – click here.

We could stop here because this little horror story, bizarre as it is, is hardly news. There are others like it, if anything, worse. What gives this story a special twist is not just the casual destruction of that 43-acres of “cottonwood and willow groves, undergrowth and marshes that had maintained a rich inventory of mammals, reptiles and 250 species of birds;” it is that it had been planted and created in the 1980s by — who else? — the U.S. Corps of Engineers as a designated wildlife preserve. But in 2010 the EPA designated the Los Angeles River (which flows through this area) to be navigable and as such subject to protection under the Clean Water Act. But now that its time to put it on the Corps’ chopping block, the Corps took the position that the destruction of  this wildlife preserve’s “would not significantly disturb wildlife and habitat.” You try that in the case of similar, privately owned land. Just try it and see what happens.

Anyway, local environmentalists are furious and some have asserted that the Corps misrepresented its intent on the use of this land all along. We don’t know whether this is true, but we wouldn’t put it past ‘em.

In the end, the problem is much larger than the questionable behavior of the government with regard to one parcel of land. This is yet another demonstration that the government cannot be trusted, and that it exempts itself unfairly from  having to follow “rules” that it imposes on the citizens.

If you have an interest in such matters, we recommend a book by James V. DeLong, PROPERTY MATTERS (1997). Reading it will be well worth your time and effort.

One more thing. As we read (and reread this story, to make sure that we saw what we saw) we were struck by the fact that any reference to the cost of this caper was conspicuous by its absence, leaving us to wonder: (a) how much did it cost to create this wildlife preserve, and (b) how much did it cost to destroy it? Whatever it was, you can bet that it wasn’t cheap.

Your tax money at work.

Carving Up The “Undivided Fee” Roast Chicken — This Time the Good Guys Win

Thursday, December 27th, 2012

It is largely conceded that the law of eminent domain has more than its share of absurdities, and of these, few are as absurd as the so-called ”undivided fee rule.” It requires that when property is taken and just compensation is determined, the appraisers are required to ignore the actual state of title and to pretend that the entire subject property is owned by one person, even when it isn’t. If it produces an income, they are told they must ignore it. Such a contradiction of reality is particularly absurd when the property being valued is a rented-out commercial property, because the preferred and soundest way of valuing it is to capitalize the cash flow produced by the rentals, because that is what people pay for when they buy income property in the free market, and therefore that is what determines its market value.

But even though courts say that “just compensation” is to be deemed fair market value, in eminent domain, as we just explained, you have to assume that  irrespective of what the market does,  the lease does not exist, and further that one person owns all property interests in the subject property. But if you assume that, what do you capitalize? Good question. The courts that follow this absurd rule say that the appraiser must  posit reasonable rents, capitalize those and — voila! — thus  come up with an opinion of value. Why reality (the actual lease) should be disregarded in favor of fiction no one has to the best of our knowledge explained.

Then, after value is determined in that fictitious fashion, the trial court apportiones the resulting lump sum among the owners of the various property rights in the property — landlords, tenants, easement holders, etc. If you say that quickly, it may make sense to slow-witted or morally insensitive folks, but if you think about it you have to face this question: if you assume that the actual lease does not exist and produces no cash stream to be capitalized, then what do you capitalize? The appraisers have to come up with something to capitalize. But by permitting appraisers to do that, you open the door to abuses — you then allow them to skew their opinions of value to suit their and their clients’ interests, by letting them capitalize fictitious rents, thus more or less assuming the answer to the question they are called upon to answer.

The problem is that if the appraiser capitalizes a lower-rent cash flow than what the subject property actually produces, the value will come out low, and there won’t be enough money in the court’s lump-sum award to cover the values due all owners of all property interests in the subject property.

As the Utah Supreme Court pointedly noted in a recent case, Utah D.O.T. v. FPA West Point, ___ P.3d ___, 2012 WL 5857334 (Utah), that puts the court in the ”place of the head of the household who must superintend the carving up and distribution of a chicken which is really not big enough to go around.” Quoting Orgel On Valuation Under Eminent Domain, at p. 482. Nicely put. California’s late, lamented Justice Otto M. Kaus, was less gentle when, in one of his opinions, he called such a result an “absurdity.”*

Which brings us back to the Utah Supreme Court and its FPA West Point decision. Here, the taking was of an access easement to a parcel owned by FPA (owner) and K-Mart (tenant), each of which wanted a separate valuation of its interest: FPA asked for a bench trial, and K-Mart wanted a jury trial. This forced the court to consider whether this could be done (each property interest would have to be valued separately, and these awards would then have to be added up (or aggregated) to produce the total award that the condemnor must pay. That is the ”aggregate of interest” approach, which is the opposite of the “undivided fee” rule, under which the whole shebang is tried as one ownership, with the resulting lump sum apportioned between FPA and K-Mart. The court chose the former approach, and in the process of doing so relied on a Utah statute (sec.  78B-6-511(1)), requiring that “the fact finder shall determine and  assess the value of the property sought to be condemned . . . [and] each estate and interest therein.” Bottom line:

Under the aggregate of interests approach, “the condemnor pays each of the several owners the fair market value of his, her, or its property interest even [if] the total amount paid exceeds the fair market value of the property as if owned by a single owner. This approach ensures that all individual interests are accounted for and that each individual interest holder ‘is made whole by placing him in the position he would have occupied but for the taking.’ “

Or as Justice Holmes put it in rejecting the “undivided fee” rule on behalf of the Supreme Court (in this precise legal context, as it happens): “The Constitution deals with people, not with tracts of land.” Particularly so when what is in issue is the interpretation of a provision of the Bill of Rights which protects the people from the government, not the other way around.

Full disclosure: We dealt with his issue in our wet-behind-the-ears stage as a practicing lawyer, with very satisfactory results. See People v. Lynbar, Inc., 253 Cal.App.2d 870 (1967). For round two of that fight, see  And Now, for a Word from the Sponsor: People v. Lynbar, Inc. Revisited, 5 Univ. San Francisco L. Rev. 39 (1970).

 

 

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* Said the court: ”If real property worth $100,000 is subject to a lease at the economic rent, the lease — by definition — is neither a burden on the lessee, nor does it have any bonus value. The owner of the property would therefore receive the entire award, $ 100,000. If, however, the lease has a bonus value of $ 25,000 then . . . the condemner will only suffer a judgment of $ 75,000. This however, means that the court will be $ 25,000 short when, after the condemner is discharged, it attempts to award both the lessor and the lessee just compensation for their respective interests.”  Kaus, J. in Clayton v. County of Los Angeles, 26 Cal.App.3d 390, 394, n. 6 (1972).

High Speed Train — Chinese Version

Thursday, December 27th, 2012

We are embarrassed after all the fun we have been having,  poking at the adventures and misadventures of the proposed California high-speed train that is planned to run between Los Angeles (or maybe Orange County) and San Francisco, via the Central Valley (Bakersfield and Modesto). California voters approved a $9 billion bond issue back in 2009, but the cost has gone up and is now estimated at sixtysomething billion dollars. Construction has not yet begun.

And so our embarrassment came from reading a piece in today’s New York Times (Keith Bradsher, On Longest Bullet Train Line, Chinese Ride 1,200 Miles in 8 Hours, December 27, 2012, at p. B1 – click here) informing us that Chinese high-speed trains are in operation, and China now has 5,809 miles of high-speed train lines, operating at 218 mph. So far, we Americans have bobkes. But the Chinese achievements didn’t come cheap — the Chinese hired 100,000 construction workers for each high-speed line (three so far) and  incurred a debt of $640 billion.

Whale Carcass Disposal – East Coast Division

Thursday, December 27th, 2012

No sooner did the ink dry on our story about the wayward whale whose lifeless body wound up on the beach at Malibu, California, causing endless consternation to assorted public functionaries who proclaimed themselves just plumb unable to do anything to get rid of the odoriferous carcass (click on http://gideonstrumpet.info/?p=4569), that a smilar dispatch reaches us from the East Coast. Andy Newman and Daniel Silva, ‘Nothing We Can Do,’ Rescuers Say, For Whale Beached on Queens Shore, N.Y. Times, December 27, 2012, at p. A17 – click here.

It seems that a 60-f00t finback whale, in dire straits but not quite dead, has beached itself on Breezy Point beach in Queens, New York. People who are mavens in such matters assert that the poor creature will expire presently, thus giving rise to a formidable problem of disposal. And whereas the would-be California whale disposers cited the creature’s decomposed condition as preventing the simple solution of towing the carcass way out to sea and letting nature take its course, their New York counterparts claim that towing out to sea won’t work after a necropsy is performed.

“Assuming a necropsy is performed on the whale, its body will be so carved up that towing it out to sea and dumping it will not be possible, . . . and finding a place to bury the remains in an urban area can be difficult . . . If the whale has to be euthanized , . . . such large quantities of toxic drugs will have to be used that the carcasswill become an environmental hazard. Finding a landfill for 60 tons of biological waste is expensive.”

Last time a whale carcass washed up on a New York beach (in 1964) it was towed out to sea and exploded with 500 lbs. of explosives. Sounds efficient, but the New York Times reports that this time, the local “marine-rescue coordinator with the National Marine Fisheries Service” informs us that this method is “off the table.”

So here you are, folks, our mighty nation that has performed technological miracles and — how can we not use this cliche? — has put a man on the moon, proclaims itself unable to dispose of a whale carcass. Then again, how was that California beached whale taken care of? We’re glad you asked. A group of private, beach-dwelling citizens got tired of the smell and the government nonsense, hired a private tugboat, had the whale carcass towed out to sea, and left it out there to its natural fate, even as local government functionaries were explaining that this couldn’t be done on account of the whale’s decayed condition. Evidently nobody told the whale. All of which reminds us  of a line of the late Bill Buckley who once observed that there are two things government does best: wage war and inflate the currency, except that after Vietnam there is some doubt as to the former.

And so, we wish that New York whale a peaceful death, and we hope that with all the resources of the Big Apple at hand, something will be done by someone to dispose of the remains.

Who Caused the Subprime Mortgage Mess?

Wednesday, December 26th, 2012

A tip of our hat to the Volokh Conspiracy for alerting us to a new study demonstrating again that the culprit in the housing fiscal Ka-boom! of 2008 was the Community Redevelopment Act that the Clinton administration used as a coercive tool with which to pressure banks to make unsound “subprime” loans to prospective home owners who were simply not sufficiently creditworthy to become home buyers. See Paul Sperry, New Study Finds CRA ‘Clearly’ Did Lead to Risky Lending, News.investors.com – click here

“Housing analysts say the CRA is the central thread running through the subprime  scandal — from banks and subprime lenders to Fannie and Freddie to even Wall  Street firms that took most of the heat for the crisis.”

This may be very interesting, but it isn’t news. We offer the following 1999 quote from  the New York Times:

“Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.” . . . “In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1990s.” Steven A. Holmes, Fannie Mae Eases Credit To Aid Mortgage Lending, N.Y. Times, Sep. 30, 1999. Emphasis added.

And if you would like another such dispatch, try Gretchen Morgenson, Housing Bust: It Won’t Be Pretty, N.Y. Times, July 25, 2004, Sec. 3, at p. 1.

 

Guess Who’s The Wicked Landlord Charged With Violating Rent Laws?

Friday, December 21st, 2012

You’re gonna like this one, folks.

As everybody west of the Colorado River must surely know, Santa Monica is hard on landlords. Possibly, such a thing has happened, but offhand we can’t think of a reported case ivolving rent control in Santa Monica that a landlord won.

The city went so far as to acquire a mobile home park so it could run it in an exemplary way, being as in the usual course of things, the city is the regulator and enforcer of rent control laws. But guess what? Today’s Sun Mirror reports that the tenants of that city-operated mobile home park have filed suit against it, charging it with a variety of landlord-type misdeeds and demanding damages in the amount of $121 million, “citing failure to maintain the trailer park, civil rights abuse and emotional distress.” See Brenton Garen, Mountain View Mobile Home Trailer Park Residents File $121 Million Claim Against City of Santa Monica; Click here

“Residents claim they are being forced to live in substandard conditions, that new construction is carried out under expired permits, and there is ongoing civil rights and and fair housing abuse that’s causing them constant mental anguish, emotional distress, and discomfort.”

For this, they want $1 million  per space for the claimants, plus  150,000 “financial barrier”  for each of the 105 spaces at the trailer park. (We don’t know what a “financial barrier is either).

We can’t wait to see how it all turns out, and in the meantime we plan to observe these proceedings as a great example of the saying that turnabout is fair play.

Stay tuned.

The plaintiffs have fired the opening gun by filing an administrative claim with the city.

Justice in Florida — Real Justice

Monday, December 17th, 2012

We recommend that you read the new opinion of the Florida Court of Appeal (3rd Dist.)– Galleon Bay Corp. v. Commissioners of Monroe County etc., No. 3D11-296, December 5, 2012, reversing the decision of the trial court. And what a reversal! One does not often see an appellate opinion that painstakingly dissects the errors of the trial court in so thorough a fashion. Did we say errors? Actually they may have been more than that.

Suffice it to say that in this case the trial judge made a number of rulings favorable to the owners who had a pretty strong case. Then he retired and the second judge who replaced him proceeded to reverse these rulings and enter a defense judgment for the county. But the appellate court did not like this at all, and proceded to perform an autopsy on the [second] trial judge’s rulings, demonstrating their deficiencies. You gotta read this one for yourself, and you can find a link to the opinion on our fellow blogmeister’s blog, www.inversecondemnation.com

Don’t miss it!

This opinion rings a special bell with us because it reminds us of our last case in the California courts, Metropolitan Water Dist. v. Campus Crusade for Christ, that followed a similar scenario of Judge B reversing Judge A. It too was reversed by the California Court of Appeal with the reversal upheld on the merits by the California Supreme Court in an opinion you can find at 41 Cal.4th 954. All’s well that ends well. To give you an idea how well, Judge B awarded a sum in the $475,000s (with no severance damages), but this judgment was reversed on appeal, and the case eventually settled for some $15 million, we are told.

Atlantic Yards — The Promises and the Reality

Friday, December 14th, 2012

Here comes another dispatch from Norman Oder, an experienced watcher of the ups and downs — mostly downs — of the Brooklyn Atlantic Yards redevelopment project. This time he writes for Reuters.com, and his article, Brooklyn’s Vaunted, Tainted Barclays Center, December 14, 2012. Check it out. http://blogs.reuters.com/great-debate/2012/12/14/brooklyns-vaunted-tainted-barclays-center/

The botom line is that the city has lavished accommodations on the redeveloper, and the timeline for completion of the project has grown from 10 to 25 years. But all there is so far, is the Barclays basketball arena. Your tax money at work.

An odd afterthought. We doubt that there is any connection between the two, but today’s New York Times (Dec. 14, 2012, at p. B10) reports that Barclays Bank bonds (7.625s of ’22) are selling just below par (99.5) with a current yield of 7.697, which doesn’t sound very good given prevailing interest rates.

Plowing Under Detroit?

Thursday, December 13th, 2012

The idea of plowing under parts of Detroit and converting them into truck farms that would produce wholesome veggies for the remaining inhabitants of the erstwile Motor City has been kicked around for a while, and we have written about it in the past. Now it looks like they are taking a shot at doing it. The Detroit News reports that the Detroit City Council has approved the sale of a 140-acre tract of land to a private party who intends to demolish remaining houses, clear the land, and convert it into tree farm at a projected cost of $3.2 million. The price paid to the city is $520,000.  See Steve Pardo,140 Acres in Detroit Sold to Grow Trees, Detroit News, December 12, 2012.

The subject land is still occupied by some 100 people, presumably squatters, since nothing was said about acquiring the land by eminent domain.

We’ll just have to wait and see how it turns out.

 

 

 

 

     

     


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