Opinion
This аppeal by Robert and Audrey Parks (appellants) is from judgment in an eminent domain proceeding initiated by the Glendale Redevelopment Agency (Agency). The court below denied appellants’ motion for litigation costs, for interest on a deposit of funds made prior to possession and their challenge to the constitutionality of Code of Civil Procedure section 1268.350, setting the rate of interest in eminent domain proceedings.
The facts are as follows. Additional facts will be set forth as necessary to our discussion of the legal issues.
In 1987, appellants owned a 30-unit apartment building located at the corner of Central Avenue and Burchett Street in the City of Glendale. The property was located in the city’s central business district. Zoning in that
On July 6, 1987, the trial court issued an order permitting the Agency to deposit the sum of $1.2 million with the court. The amount of the dеposit was based upon an appraisal of the subject property by Stephen Whittlesey, who assessed its value at $1.4 million. On July 6, 1987, the court issued an order for prejudgment possession authorizing possession 90 days after the order. On October 11, 1987, the Agency took possession of the subject property.
On January 11, 1988, the first pretrial conference was held. The date of valuation of the property was established as July 2, 1987. Using that date, the Agency’s appraiser, Whittlesey, submitted a trial appraisal valuing the subject property at $1,545,000, or $145,000 more than his original appraisal. Appellants submitted an appraisal done by Robert Flavell in which he valued the subject property at $1,950,000. Both appraisers stated that the highest and best use of the property was “as presently improved with a 30 unit apartment building.” The case was then set for a mandatory settlement conference. In the interim, the Agency’s attorney reviewed the Flavell appraisal and directed Whittlesey to also review and comment on the Flavell appraisal. Whittlesey reviewed the Flavell appraisal and advised the Agency’s attorney and its executive director that there was nothing in it that caused him to change his opinion of the subject property’s value.
At the mandatory settlement conference, the Agency offered the appellants $1.7 million to settle, which was $155,000 over its appraisal. Appellants demanded $1,850,000, or $100,000 less than their appraisal. The settlement judge suggested that the parties essentially split the difference, but appellants refused to consider it.
The matter came to trial in March 1990. The only issue was the valuation of the subject property. Flavell, appellants’ appraiser, testified that, as of July 9, 1987, the highest and best use of the subject property was its existing use as an apartment building. Whittlesey testified to the same effect. Both appraisers used the same methods to produce their valuations of the property, an income approach and a market data approach. They differed, however, on variables like comparable sales, gross income multipliers and fair market rents.
On March 9, 1990, the jury returned a verdict in which it found that the fair market value of the subject property on July 2, 1987, was $1.9 million.
The court denied all of appellants’ posttrial motions and a judgment was entered on August 16, 1990. This appeal ensued. We affirm.
I
Appellants contend that the court abused its discretion when it denied their request for litigation expenses under Code of Civil Procedure section 1250.410. 1 Subdivision (b) of that section provides: “If the court, on motion of the defendant made within 30 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.” (§ 1250.410, subd. (b).)
“The statute calls on the trial judge to make a discretionary determination of reasonableness after weighing all the evidence and assessing witness credibility independently of the jury.”
(County of San Diego
v.
Woodward
(1986)
“General guidelines have been developed to aid trial courts in determining the reasonableness or unreasonableness of the offer. [Citation.] They are (1)
In the instant case, the evidence relevant to the issue of reasonableness is as follows: The Agency initially appraised the value of the subject property at $1.4 million. Thereafter, the Agency ordered its aрpraiser, Whittlesey, to prepare a trial appraisal. Whittlesey’s trial appraisal valued the subject property at $1,545,000, some $145,000 more than his initial appraisal. Appellants’ appraisal of the subject property conducted by Robert Flavell was in the amount of $1,950,000. After the Agency was provided with the Flavell appraisal, its counsel reviewed it and directed Whittlesey to also review it in advance of the mandatory settlement conference. Whittlesey reviewed the Flavell appraisal and advised the Agency’s counsel and executive director that he would stand by his opinion of value. Nonetheless, the Agency’s final offer was $1.7 million, which was $155,000 over its appraisal and only $150,000 less than appellants’ statutory demand of $1,850,000. Moreover, when the settlement officer urged the parties to consider settling at the midpoint between their offers, the Agency was willing to consider his proposition, but not appellants. The final jury award was $1.9 million.
When the trial court denied appellants’ request for litigation expenses, it impliedly found that the Agency’s offer was reasonable. Basеd on the evidence we have set out, we find no error. The common thread that runs through the case law, moreover, is the deference the reviewing court pays to the trial court’s decision.
In
County of Los Angeles
v.
Kranz
(1977)
The extent tо which the reviewing court will affirm the reasonableness determination of the trial court is also demonstrated in those cases in which the trial court denied the request for litigation expenses.
In
Los Angeles Unified Sch. Dist.
v.
C. F. Bolster Co.
(1978)
In
State of California
ex rel.
State Pub. Works Bd.
v.
Turner, supra,
Finally, in
County of San Diego
v.
Woodward, supra,
We find these observations in
Woodward
particularly relevant to the case before us. Here, the Agency’s final offer was 89 percent of the award and 92
Contrary to appellants’ assertion, the record states, in the form of a declaration by the Agency’s counsel, that not only did he review appellants’ appraisal, but he instructed his appraiser to do so, and both counsel and the Agency’s legal director met with the appraiser to discuss his review of that appraisal. The Agency did not ignore the landowners’ appraisal and therefore did not violate one of the factors of a good faith inquiry.
(County of Los Angeles
v.
Kranz, supra,
65 Cal.App.3d at pp. 659-600.) Nor did the Agency’s conduct show an intransigence “incompatible with the spirit of compromise.”
(County of San Diego
v.
Woodward, supra,
Appellants attack the Agency’s appraisal and particularly the methodology of its appraiser, Whittlesey, as demonstrative of bad faith. Essentially, the same argument was made to the trial court. It involves an assessment of the evidence and particularly the qualifications, testimоny, demeanor and credibility of Stephen Whittlesey. This assessment is best made by the trial court.
(State of California
ex rel.
State Pub. Works Bd.
v.
Turner, supra,
We conclude that the trial court did not abuse its discretion in denying appellants’ request for litigation expenses.
II
Next, appellants attack the constitutionality of section 1268.350. That section sets forth the statutory interest rate in eminent domain cases. Appellants contend that the statute abrogates the judiciary’s power to set compensation in eminent domain cases and denies them equal protection. The argument is without merit.
Section 1268.360 states: “The interest payable for each six-month period [on a condemnation award] shall draw interest, computed as prescribed by Section 1268.350, in each succeeding six-month period for which interest is
These provisions were enacted in response to the Supreme Court’s decision in
Redevelopment Agency
v.
Gilmore
(1985)
Gilmore also stated that the determination of what constituted the appropriate rate of interest for just compensation was a matter for the courts. “Many courts have recognized that, while the statutory rate of interest may apply if it is constitutionally adequatе, ultimate determination of the rate of interest required for ‘just compensation’ is a judicial function. An adequate rate, these cases hold, must reflect conditions in the usual interest markets. [Citations.]” (Redevelopment Agency v. Gilmore, supra, 38 Cal.3d at pp. 797-798.) The court suggested that this task “must primarily be the task of trial rather than appellate courts.” (Id. at p. 806.)
Citing Gilmore, appellants contend that sections 1268.350 and 1268.360 are unconstitutional because they represent an improper legislative limitation on just compensation interest. There is no merit to this contention.
Preliminarily, we note that
Gilmore
does not prohibit the Legislature from sеtting guidelines for the rate of interest for condemnation awards, it merely prohibits the Legislature from enacting a ceiling that does not reflect prevailing interest markets. (
Whether or not the rate of earnings of the Surplus Money Investment Fund is a reasonable and judicially acceptable one cannot be determined because appellants failed to make any showing on the issue. There is nothing in the record to document the rate of earnings for the Surplus Money Investment Fund. Instead, as an exhibit to their trial brief, appellants attached various advertisements for investment opportunities with rates of interest from a low of 7.07 percent to 8.50 percent. Since there is no transcript of the hearing at which this issue was argued, the record is silent as to what evidence, if any, was introduced on the point. This omission is significant because the interest issue as articulated by Gilmore was not whether a specific rate of interest was constitutionally mandated, but whethеr the rate of interest which the trial court applied produced just compensation.
Under
Gilmore,
therefore, appellants were required in the first instance to establish at the trial level that the rate of earnings of the Surplus Money Investment Fund denied them just compensation.
(Redevelopment Agency
v.
Gilmore, supra,
Having failed to establish this factual record, appellants contend instead that sections 1268.350 and 1268.360 are constitutionally inadequate as а matter of law.
Gilmore
makes it clear, however, that the question of whether a rate of interest is constitutionally adequate cannot be resolved simply as a matter of law. As we have noted,
Gilmore
provided that resolution of this question “must primarily be the task of trial rather than appellate courts.”
(Redevelopment Agency
v.
Gilmore, supra,
Further support for our analysis is found in the recent case of
People
ex rel.
Dept, of Transportation
v.
Diversified Properties Co. III
(1993)
In
Diversified Properties,
the trial court awarded the condemnee postjudgment interest of 10 percent, using the legal rate of interest statute. The state argued on appeal that the court had erred by applying the legal rate of interest. The Court of Appeals agreed. Citing
Gilmore,
the court reaffirmed the principle that it “is the duty of the trial court, in each instance, to determine the appropriate ‘prevailing market rate’ of interest to be applied in a ‘taking’ case.” (
Appellants also contend that the interest statutes violate equal protection. This argument suffers from the same deficiency of record as their prior argument. Appellants failed to establish the factual predicate of this argument, which is that the rate of interest they reсeived on the condemnation awards under the statute was less than the legal rate of interest. Where an appellant fails to provide an adequate record and affirmatively show error, “ . .all presumptions and intendments are in favor of the regularity of the action of the lower court in the absence of a record to the contrary.’ ”
(People
v.
Green
(1979)
Moreover, in
Diversified Properties,
a similar equаl protection claim was rejected because the issue of interest rates in a condemnation case failed to implicate a suspect classification requiring strict scrutiny.
(People
ex rel.
Dept, of Transportation
v.
Diversified Properties Co. III, supra,
Finally, appellants argue that they are owed interest on the deposit of the condemnation funds from the time such funds were deposited on July 6, 1987, when the Agency obtained an order of prejudgment possession rather than from October 11, 1987, when the Agency actually took possession. During this period, appellants continued to operate the subject property as an apartment building and receive rent.
Section 1268.310 states: “The compensation awarded in the рroceeding shall draw interest, computed as prescribed by Section 1268.350, from the earliest of the following dates: [1] (a) The date of entry of judgment. [j[] (b) The date the plaintiff takes possession of the property. [1] (c) The date after which the plaintiff is authorized to take possession of the property as stated in an order for possession.”
In this case, the Agency obtained an order for prejudgment possession on July 6, 1987. That order authorized possession 90 days hence, and the Agency actually took possession on or about Octobеr 11, 1987. Thus, the earliest date on which interest began to accrue was October 4, 1987, the date the Agency was authorized to take possession.
Nonetheless, appellants argue that they were entitled to interest on the funds deposited on July 6, 1987, because they “owned” the deposit. For this proposition they cite article I, section 19 of the state Constitution,
Metropolitan Water Dist.
v.
Adams
(1948)
Article I, section 19 is the constitutional guarantee of just compensation in eminent domain proceedings, providing: “Private property may be taken or damaged for public use only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner. The Legislature may provide for possession by the condemnor following commencement of eminent domain proceedings upon deposit in court and prompt release to the owner of money determined by the court to be the probable amount of just compensation.” (Cal. Const., art. I, § 19.)
This constitutional provision does not mandate the payment of prejudgment interest upon deposit of funds into the court where the subject property is neither damaged nor possessed by the condemner. On the contrary, it is well settled that “Until a citizen is deprived of possession of the property sought to be condemned, his right to the use and enjoyment thereof as it stood at the time of commencing the action is in no wise abridged. Therefore, it cannot, in a legal sense, be said that he is damaged until the actual
We have read and considered
Metropolitan Water Dist.
and
Goodman.
Neither of them provides any support for the proposition that appellants advance here. In
Metropolitan Water Dist.,
the question was whether the plaintiff-condemner or the county was entitled to interest on a deposit of funds for condemnation purposes. The Supreme Court held that the interest belonged to the condemner, not the county, because to hold otherwise “results in a windfall to the county, substantially undeserved and earned.” (
Goodman
does not assist appellants.
Goodman
invоlved a dispute over postjudgment interest and is entirely inapposite.
Goodman’s
gloss on
Metropolitan Water Dist.,
is, however, instructive: “In
Metropolitan Water Dist.
v.
Adams, supra,
The judgment is affirmed. The Agency to have its costs on appeal.
Vogel (C. S.), J., and Rappe, J., * concurred.
Notes
All further statutory references are to the Code of Civil Procedure.
Our resolution of this issue in favor of the validity of sections 1268.350 and 1268.360 also disposes of appellants’ claim that interest should have been compounded daily rather than in the six-month increments set forth by the statute.
Judge of the Los Angeles Superior Court sitting under assignment by the Chairperson of the Judicial Council.