Opinion
The Metropolitan Water District of Southern California (MWD), a public agency founded in 1928, supplies water to six Southern California counties. In 1997, MWD brought an eminent domain action to condemn a portion of land in San Bernardino County owned by Campus Crusade for Christ, Inc., and Del Rosa Mutual Water Company (collectively, Campus Crusade) to construct a segment of a 43-mile water pipeline to channel water from the inland areas to the coastal plains of Southern California. Prior to trial on the issue of just compensation, MWD persuaded the trial court to exclude valuation evidence offered by Campus Crusade’s experts to the extent such valuation was based on the property’s potential use as a planned residential development and resort area, which differed from its current use and which was not permitted under the zoning in effect at the time of the taking. The trial court also granted MWD’s request to exclude evidence of severance damages to the fair market value of the remainder of Campus Crusade’s property (i.e., the property not taken) to the extent the damages were based on fear that the pipeline (which crosses the San Andreas Fault on Campus Crusade’s property) could rupture in an earthquake and to the extent the damages were based on certain other aspects of the pipeline and its construction process. Finally, the trial court excluded evidence of temporary severance damages to the extent the damages were based on the adverse impact of the seven-year construction period on Campus Crusade’s ability to finance and market the property.
Based on these rulings, Campus Crusade waived its right to a jury trial. The trial court fixed just compensation at $478,278.45, none of which was attributable to severance damages. Campus Crusade appealed, and the Court of Appeal reversed and remanded for a new trial, finding (1) that Judge John P. Wade, who had replaced Judge Cynthia Ludvigsen following her reassignment, had overstepped his authority in reconsidering and overruling her prior evidentiary rulings; (2) that a property owner does not bear the burden of proof on the amount of compensation or on any preliminary facts that may affect the jury’s determination of just compensation; (3) that the trial court had erred in preventing Campus Crusade from offering evidence that the property’s highest and best use was as a future planned residential and resort development, notwithstanding evidence of a reasonable probability the property could be rezoned in the near future, and had erred as well in taking that issue away from the trier of fact; and (4) that the trial court had erred in excluding evidence of severance damages arising from fear of a pipeline rupture and in excluding evidence of temporary severance damages arising from the adverse effects of construction on Campus Crusade’s ability to market and finance the property.
Background 1
Campus Crusade, a charitable religious corporation, owns 1,824 acres of land situated partly within the northern edge of the City of San Bernardino and partly in unincorporated county territory within the city’s sphere of influence and slated for annexation. Although most of the property is undeveloped, it is the site of the historic Arrowhead Springs Hotel, the International School of Theology, several office buildings, a conference center, a sports field, and a village. The property is also the primary source for Arrowhead Mountain Spring Water.
In early 1996, Campus Crusade retained a land developer to assist with its plans to create a planned residential development on the property and to restore the existing resort and other buildings. The city seemed to be enthusiastic and supportive of Campus Crusade’s plans for future development. But Campus Crusade’s plans were disrupted when MWD decided to construct a portion of the Inland Feeder project, a 43-mile water pipeline from Devil Canyon to Diamond Valley Lake, across the property. Now built, the pipeline is 12 feet in diameter, constructed of welded steel, and buried hundreds of feet underground along most of its route. However, the pipeline enters covered trenches along the Campus Crusade property that are only 10 to 12 feet deep and, in some places, the pipeline is as close as four feet to the surface. The pipeline is designed to be close to the surface in these areas in order to facilitate repair in case of a rupture and to function as a “safety valve” in the event of an earthquake. The pipeline crosses the San Andreas Fault at this location.
MWD’s board of directors adopted their resolution of necessity on December 10, 1996. The resolution provided that MWD was to acquire the land at issue “for the purpose of constructing, reconstructing, maintaining, operating, enlarging, removing, and replacing a line or lines of pipe at any time, and from time to time, for water transportation, with every appendage or structure necessary or convenient to be installed at any time in connection therewith.”
On December 23, 1996, MWD deposited funds into the State Treasury, thereby setting the date of valuation. The following month, MWD filed its complaint in eminent domain and an ex parte application for possession. The first amended complaint sought 10.4 acres in fee, 18.7 acres of permanent easements, 27.4 acres of temporary construction easements for a period of seven years, and two permanent tunnel easements, one below ground and the other above ground.
Campus Crusade submitted statements of valuation from three appraisers: E. R. Metcalfe, James Smothers, and Robert Swing. The appraisers estimated the value of the property interests being taken at between $1.5 million and $1.6 million, and the temporary and permanent damage to the remainder at between $12.6 million and $14 million. The pipeline cut across Campus Crusade’s property at a location that
The taking also interfered with Campus Crusade’s secondary access rights to the property by way of 40th Street, San Bernardino, over a neighboring parcel. In addition, Campus Crusade contended that the pipeline, which crossed a branch of the San Andreas Fault at the site where the pipeline was raised to within several feet of the earth’s surface, posed a risk of rupture. A breach in the pipeline could cause a sudden outflow of millions of gallons of water onto Campus Crusade’s property at a rate of 1,000 cubic feet per second. MWD analyzed this risk as a significant environmental impact in its environmental impact report.
Finally, the temporary construction easements encompassed a row of mature trees that served as a natural entry way for the historic hotel. MWD’s use of these easements required the cutting of all the mature vegetation in the area. MWD disclaimed any obligation to restore the vegetation to its prior condition.
MWD submitted a revised statement of valuation of $392,000 as just compensation for all the property taken, with no amount allocated for severance or temporary severance damages. On October 7, 1999, MWD filed a final offer of compensation for $1.5 million plus costs and interest, but subsequently increased its offer to $3.5 million. Campus Crusade revised its demand to $12.5 million for the property taken and severance damages.
Prior to trial, MWD filed several motions in limine to exclude evidence. Judge Cynthia Ludvigsen denied most of the motions and allowed Campus Crusade to present evidence to support its claim of severance damages, including damages caused by fear of a pipeline rupture. Judge Ludvigsen also allowed Campus Crusade to present evidence of construction-related damages if those damages were excessive and beyond the ordinary annoyances associated with a public works project.
After Judge Ludvigsen was reassigned and replaced by Judge John P. Wade, MWD filed additional motions in limine: requests to exclude evidence of temporary and permanent severance damages, including evidence of damages caused by the seven-year period that would be needed to complete construction of the pipeline; a request to exclude valuation evidence to the extent it was based on uses not permitted by current zoning; a request to exclude evidence concerning impairment of Campus Crusade’s access to the property via 40th Street; and a request to exclude evidence concerning the fear of a pipeline rupture. Judge Wade granted each of these motions, effectively precluding Campus Crusade from presenting evidence of severance damages, on the grounds that such damages were not recoverable as a matter of law, were too speculative, or assumed circumstances that did not exist on the date of valuation.
Based on Judge Wade’s rulings, Campus Crusade reduced its demand for compensation to $5,380,000. Because Judge Wade’s rulings effectively limited its recovery to compensation for the actual taking only, Campus Crusade also waived its right to a jury. On June 12, 2003, Judge Wade awarded Campus Crusade $478,278.45, which did not include any amount for severance damages.
We granted MWD’s petition for review.
Discussion
This case arises under article I, section 19 of the California Constitution, which requires the owner whose property is taken or damaged for a public use be paid “just compensation, ascertained by a jury unless waived.”
The Legislature has defined the measure of just compensation as “the fair market value of the property taken.” (Code Civ. Proc., § 1263.310.)
2
“The fair market value of the property taken is the highest price on the date of valuation that would be agreed to by a seller, being willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing, and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available.” (§ 1263.320, subd. (a).) “As section 1263.320 indicates, the fair market value of property taken has not been limited to the value of the property as used at the time of the taking, but has long taken into account the ‘highest and most profitable use to which the property might be put in the reasonably near future, to the extent that the probability of such a prospective use affects the market value.’ ”
(City of San Diego
v.
Neumann
(1993)
When the property taken is part of a larger parcel, the owner is compensated not merely for the injury to the part taken but also for the injury, if any, to the remainder. (§ 1263.410, subd. (a).) Compensation for injury to the remainder is the amount of the damage to the remainder caused by the taking, reduced by the amount of the benefit to the remainder caused by the taking. (§ 1263.410, subd. (b).) Such compensation is commonly called “severance damages.” (City of San Diego v. Neumann, supra, 6 Cal.4th at p. 741.)
The procedures governing eminent domain actions differ in some respects from those governing other actions. For example, “all issues except the sole issue relating to compensation ... are to be tried by the court.”
(People v. Ricciardi
(1943)
A. The Reasonable Probability of Rezoning
The Court of Appeal found that that the trial court improperly excluded— and thus prevented Campus Crusade’s appraisal experts from relying on— evidence that the highest and best use of the property was comprehensive development for residential, commercial, industrial, and recreational uses. In the view of the Court of Appeal (and echoed by Campus Crusade here), the trier of fact should have been allowed to consider these prospective uses in assessing the value of the property taken and the damage to the remainder; instead, the trial court usurped the jury’s role by deciding for itself, prior to trial, whether there was a reasonable probability the property could be rezoned to permit these other uses. MWD, by contrast, argues that the question whether there was a reasonable probability of the property being rezoned is properly entrusted to the court, not the jury, and that the court’s pretrial determination that rezoning was not reasonably probable here is supported by substantial evidence.
There is no dispute that the existing zoning did not authorize the development envisioned by Campus Crusade. The portion of the property lying within the City of San Bernardino was zoned residential low, which imposed a maximum density of 3.1 dwelling units per gross acre and did not allow commercial uses. The remaining property was zoned rural living, which imposed a minimum three-acre lot size; single residential, which permitted a slightly higher density; and resource conservation, which imposed a minimum 40-acre lot size. The existing buildings on the property, including the hotel, predated the current zoning and were operating as legal nonconforming uses.
Prior to trial, MWD filed a motion in limine “for an order prohibiting the presentation of any evidence treating Campus Crusade’s property as zoned for anything other than the uses permitted by the Resource Conservation zone unless, and until, Campus Crusade has borne its burden of proof and convinced the Court, outside of the jury’s presence, that there is substantial evidence of a reasonable probability of rezoning on the date of value.” After conducting a pretrial evidentiary hearing, Judge Wade granted the motion. He agreed with MWD that the question whether a reasonable probability of rezoning existed in the near future was for the court to decide, and he determined, based on the evidence presented by both sides at the pretrial hearing, that “it is not reasonably probable that the subject property would be rezoned in the reasonably near future.” As a result, Judge Wade prohibited Campus Crusade’s appraisers “from valuing the remainder as anything other than Resource Conservation.” Unfortunately, the trial court thereby usurped the role of the jury in valuing the property.
“Where due to zoning restrictions the condemned property is not presently available for use to which it is otherwise geographically and economically adaptable, the condemnee is entitled to show a reasonable probability of a zoning change in the near future and thus to establish such use as the highest and best use of the property.” (City of Los Angeles v. Decker (1977)18 Cal.3d 860 , 867 [135 Cal.Rptr. 647 ,558 P.2d 545 ].) The jury’s role in this assessment is settled. “ ‘[T]hedetermination as to whether or not there is a reasonable probability of a [use] change is ordinarily a question of fact for the jury.’ ” (Redevelopment Agency v. Contra Costa Theatre, Inc. (1982) 135 Cal.App.3d 73 , 84 [185 Cal.Rptr. 159 ], quoting People ex rel. Dept. Pub. Wks. v. Arthofer (1966)245 Cal.App.2d 454 , 467 [54 Cal.Rptr. 878 ]; see Community Redevelopment Agency v. Henderson (1967)251 Cal.App.2d 336 , 345 [59 Cal.Rptr. 311 ] [“the court . . . correctly left to the jury the determination whether there was a reasonable probability of a zone change”]; see also City of Los Angeles v. Decker, supra,18 Cal.3d at p. 872 [“the purported need for airport parking and the suitability of defendant’s property for that purpose were critical to the issue of valuation”]; People ex rel. Dept. of Public Works v. Donovan (1962)57 Cal.2d 346 , 354 [19 Cal.Rptr. 473 ,369 P.2d 1 ] [criticizing defendant’s proffered jury instruction concerning the probability of rezoning where the evidence was conflicting because of “the possible implication that the court had concluded as a matter of law that there was a reasonable probability of a zoning change”]; accord, 4 Nichols on Eminent Domain, supra, § 12C.03[3], p. 12C-82 [“The existence of a reasonable probability of an imminent change in zoning is a question of fact”]; id., § 12C.03[3], p. 12C-88 [“it is for the jury to consider the weight to be given the testimony based on such probability, whether there is such probability, and its effect on the fair market value”].)
Before such evidence may be presented to the jury, however, the trial court must first determine whether there is sufficient evidence that would permit a jury to conclude there is a reasonable probability of rezoning in the near future. Evidence of a reasonable probability of a zoning change in the near future “ ‘must at least be in accordance with the usual minimum evidentiary requirements, and that which is purely speculative, wholly guess work and conjectural, is inadmissible.’ ”
(City of Los Angeles v. Decker, supra,
Relying on language in certain Court of Appeal decisions, MWD contends that the property owner bears the burden of proving that a reasonable probability of rezoning exists. MWD relies in particular on
County of San Diego
v.
Rancho Vista Del Mar, Inc.
(1993)
108], and
City of San Diego v. Barratt American, Inc.
(2005)
What does section 1260.210, subdivision (b) mean when it says that neither party “has the burden of proof on the issue of compensation”? “We begin with a discussion of key terms: burden of proof and burden of producing evidence. Attorneys, judges, and commentators often have confused these terms and the concepts they represent. As the United States Supreme Court observed, ‘For many years the term “burden of proof’ was ambiguous because the term was used to describe two distinct concepts. Burden of proof was frequently used to refer to what we now call the burden of persuasion—the notion that if the evidence is evenly balanced, the party that bears the burden of persuasion must lose. But it was also used to refer to what we now call the burden of production—a party’s obligation to come forward with evidence to support its claim.’ ”
(Sargent Fletcher, Inc. v. Able Corp.
(2003)
We thus understand the “burden” described in
Rancho Vista Del Mar, supra,
Accordingly, when presented with a proffer that there is a highest and best use that is not permitted by the property’s current zoning, the trial court should examine whether the proffer supplies sufficient evidence to permit
the jury
to find that there was a reasonable probability of rezoning to permit that use in the near future. The jury should then be instructed that it may consider the change in use, provided that it first finds a reasonable probability the property could be rezoned in the near future. In this case, however, the trial court collapsed these two steps into one by deciding, prior to trial, whether
it
was convinced there was a reasonable probability of rezoning. Because the trial court examined the evidence of rezoning under an unduly rigorous standard, we direct the Court of Appeal to remand the matter to the trial court to reexamine the record under the correct standard in the first instance. (E.g.,
Ramirez v. Yosemite Water Co.
(1999)
B. Severance Damages
The Court of Appeal also found that the trial court usurped the jury’s role by purporting to determine whether Campus Crusade had proven an entitlement to severance damages and then excluding evidence of such severance damages from the trial. The Court of Appeal held that it was for the trier of fact to determine whether the fear of a pipeline rupture during an earthquake and whether the impact of the delay in construction on Campus Crusade’s ability to market and finance the property negatively affected the value of the property not taken—or, in other words, whether these factors established severance damages. MWD, on the other hand, contends that the trial court should decide first whether severance damages exist; if so, only then does the jury determine the amount of those damages. We agree with the Court of Appeal, but only in part.
Severance damages, as noted above, consist generally of the diminution in the fair market value of the remainder property caused by the project. “ ‘Where the property taken constitutes only a part of a larger parcel, the
owner is entitled to recover,
inter alia,
the difference in the fair market value of his property in its “before” condition and the fair market value of the remaining portion thereof after the construction of the improvement on the portion taken. Items such as view, access to beach property, freedom from noise, etc. are unquestionably matters which a willing buyer in the open market would consider in determining the price he would pay for any given piece of real property.’ [Citation.] Severance damages are not limited to special and direct damages, but can be based on
any factor,
resulting from the project, that causes a decline in the fair market value of the property.”
(Los Angeles County Metropolitan Transportation Authority
v.
Continental Development Corp.
(1997)
The property owner in an eminent domain action “is entitled to a jury trial on the issue of just compensation.”
(Citizens Utilities Co.
v.
Superior Court
(1963)
In support of its theory that entitlement to severance damages is for the court and only the amount thereof is for the jury, MWD points to certain issues related to severance damages that we have deemed issues for the trial court. For example, we have held that what constitutes the larger parcel (for purposes of determining severance damages) “is essentially a question of law for the determination of the court”
(Oakland v. Pacific Coast Lumber etc. Co.
(1915)
Both sides here thus agree that the court, not the jury, must make certain determinations that are a predicate to the award of severance damages. But MWD is on weaker ground when it attempts to derive from the above cases a general rule that “as a matter of constitutional and decisional law,
all
issues having to do with the existence of, or entitlement to, severance damages are entrusted to the trial judge,” such that “[ojnly after the trial judge has determined that severance damages exist does the jury consider the amount of those severance damages.” MWD’s proposed rule assumes that questions relating to the measurement of severance damages can be readily distinguished from questions relating to the entitlement to them in the first place but, as we have previously cautioned, the two concepts are not necessarily “so easily separable.”
(City of San Diego
v.
Neumann, supra,
The factors Campus Crusade identified below—e.g., fear that the pipeline will rupture in an earthquake, negative visual and aesthetic impacts on the landscaping, and limitations on potential development caused by grading restrictions and placement of the pipeline—at least arguably have the potential of affecting the market value of the remaining property.
4
As long as the effect of these factors on market value is not conjectural, speculative, or remote, it is for the
jury
to decide the extent to which they may affect the value of the property.
(City of Pasadena v. Stimson
(1891)
By contrast, the issues we have reserved for the trial court in condemnation actions have been issues of law—or mixed issues of law and fact where the legal issues predominate, even if there are also underlying disputes of fact—antecedent to the valuation of the property and the question of severance damages. (See
Emeryville Redevelopment Agency
v.
Harcros Pigments, Inc.
(2002)
MWD then contends that, even if such factors are for the jury to consider, the property owner still bears the burden to prove the existence of severance damages. But this misconceives the nature of severance damages, which is simply a shorthand term describing the diminution in the market value of the remaining property as a result of a taking and, hence, of describing the compensation for the property owner’s loss.
(Ark. Hwy. Comm. v. Lewis
(1968)
The foregoing is sufficient to dispose of most of the issues presented in the petition for review concerning severance damages. Having now determined the respective roles of the judge and jury in connection with severance damages and the nonexistence of a burden of persuasion with respect to such damages, we have no cause to determine whether the trial court overstepped its bounds in excluding evidence of certain severance damages prior to trial or whether the trial court erred in finding that certain other severance damages had not been established at trial, inasmuch as MWD (with one exception) has not challenged here any part of the Court of Appeal’s opinion relating to severance damages, nor did Campus Crusade challenge in its answer any such ruling by the trial court.
The lone exception concerns Campus Crusade’s attempt to recover temporary severance damages for the allegedly adverse impact of the project on its ability to use, develop, and market its property during the seven-year period of construction. The trial court granted MWD’s motion in limine to exclude evidence of such damages, observing that “[t]he time period of construction may result in severance damages as to rental losses, for example, but not as to marketability.” The Court of Appeal disagreed and held that Campus
In support of its claim of temporary severance damages, Campus Crusade relies on
Placer County Water Agency
v.
Hofman
(1985)
If
Campus Crusade had sold the property during the construction period and
if the
ongoing construction had temporarily lowered the sales price of the property, it would appear that Campus Crusade would be entitled to recover that loss from MWD. (See
City of Los Angeles v. Ricards, supra,
This is not to say, however, that Campus Crusade is barred from recovering damages for actual injury it may have suffered during the construction of the pipeline. On remand, Campus Crusade may have the opportunity before the trial court to create an appropriate record to support its claim of severance damages. In addition, “[w]hen the condemnation action is tried before the improvement is constructed, and substantial although temporary interference with the property owner’s rights of possession or access occurs during construction, the property owner may maintain a subsequent action for such damage occurring during construction.”
(People v. Ayon
(1960)
Disposition
The judgment of the Court of Appeal is affirmed in part and reversed in part and the matter is remanded to the Court of Appeal for further proceedings not inconsistent with this opinion.
George, C. J., Kennard, J., Werdegar, J., Chin, J., Moreno, J., and Corrigan, J., concurred.
Respondent’s petition for a rehearing was denied September 12, 2007.
Notes
Because no party petitioned for rehearing to challenge the Court of Appeal’s recital of the factual and procedural history, we take our statement of facts largely from that opinion. (Cal. Rules of Court, rule 8.500(c)(2).)
All further statutory references are to the Code of Civil Procedure unless otherwise noted.
MWD relies as well on our statement in
City of Los Angeles
v.
Decker, supra,
We need not decide whether Campus Crusade satisfied its burden of production with respect to these factors inasmuch as that issue was not included in our grant of review.