Firm Achieves Important Clarification of Evidentiary Rules in Eminent Domain Trials

Shute, Mihaly & Weinberger won a significant victory for longtime client Sacramento Area Flood Control Agency (SAFCA) when the Third District Court of Appeal upheld a favorable eminent domain jury verdict in Sacramento Area Flood Control Agency v. Dhaliwal (2015) 236 Cal.App.4th 1315. The case was tried by the firm’s veteran trial attorney, Andrew Schwartz, and defended on appeal by Mr. Schwartz and SMW’s Catherine Engberg. The California Supreme Court denied review on July 29, 2015.

The Dhaliwal case clarifies two important evidentiary rules applicable to the jury’s determination of “just compensation” in eminent domain trials.

•    First, consistent with the rule that the determination of “severance damages” is an issue of fact for the jury to decide, the jury may consider all evidence of such damages (or lack thereof) so long as the evidence is not speculative and does not conflict with the agency’s resolution of necessity.

•    Second, the requirements for pre-trial disclosure of evidence in eminent domain cases—unlike the rules applicable to ordinary civil cases—permit rebuttal expert testimony without pre-trial disclosure of that testimony, as long as the testimony is proper rebuttal and not evidence that should have been presented in the party’s case in chief.  

Facts

The property at issue in the Dhaliwal case is located in the Natomas Basin, a large flood plain bordered by the American and Sacramento Rivers, including portions of the City of Sacramento and the Sacramento International Airport. To provide the best possible flood protection for residents and businesses in the area, SAFCA has embarked on a multi-year program to improve its levee system. This program requires SAFCA to acquire dozens of agricultural properties in the Natomas Basin so that it can widen and strengthen existing levees.

While SAFCA has acquired most of the properties it needs by voluntary agreement, the agency could only acquire the Dhaliwal property through eminent domain proceedings. In 2010, SAFCA filed this “partial take” action to acquire an 11-acre portion of the 131-acre agricultural property. The only issue at trial was the amount of “just compensation” that SAFCA was required to pay for the property, including whether SAFCA was required to pay “severance damages” for any economic damage to the remaining 120-acre parcel caused by the acquisition of the 11-acre portion.

Both sides’ appraisers submitted expert testimony on the severance damages issue. The owner’s appraiser testified that the partial taking would cut off access to the non-condemned land, and concluded that this lack of access would cause $620,000 in damages to the remainder. SAFCA’s appraiser, on the other hand, presented evidence that the remaining 120-acre property would remain fully accessible from the two primary access roads and from two secondary roads. SAFCA’s appraiser investigated these two access points and found that one, a private road through an existing subdivision, must remain accessible consistent with settled subdivision law. The second access point, a public road, would not change at all. To the extent the owner decided to build an access driveway from this public road in the future, SAFCA’s appraiser testified that, according to his research, the County would grant an encroachment permit for the driveway as a matter of course.

SAFCA’s appraiser found severance damages in the amount of $28,600, the cost of building a new access driveway. In the end, SAFCA’s appraiser valued the 11-acre portion at $108,000. In contrast, the owner’s appraiser concluded that the property was worth $1.13 million, including $620,000 in severance damages. The jury reached a verdict much closer to SAFCA’s figure, awarding the landowner $207,803, which figure included $29,100 in severance damages, only $500 more than the value of SAFCA’s appraiser, and substantially below the opinion of severance damages of the owner’s appraiser.

All Evidence of Severance Damages Goes to the Jury, Provided It Is Not Speculative and Does Not Conflict with the Resolution of Necessity

On appeal, the landowner argued that SAFCA’s evidence of future access to the remainder property was inadmissible and should not have been submitted to the jury. He contended that SAFCA’s evidence contradicted its resolution of necessity and therefore violated the “doctrine of most injurious use” as set forth in County of San Diego v. Bressi (1986) 184 Cal.App.3d 112 and Coachella Valley Water District v. Western Allied Properties, Inc. (1987) 190 Cal.App.3d 989. 

The Court of Appeal rejected the landowner’s arguments and held that all of SAFCA’s evidence related to access in the “after condition” properly went to the jury. Citing Metropolitan Water District of Southern California v. Campus Crusade for Christ, Inc. (2007) 41 Cal.4th 954, 972-73, the Court concluded that SAFCA’s evidence was admissible because it had the potential to affect market value, and was not conjectural, speculative or remote.

The Court of Appeal also found that SAFCA’s evidence did not contradict the scope of the resolution of necessity, which sets forth the extent of the taking. In doing so, the Court refused to acknowledge the “doctrine of most injurious use.” It easily distinguished Bressi, where the condemning agency had adopted a resolution to acquire avigation easements for commercial aircraft, yet presented conflicting testimony stating that it would not allow commercial aircraft, arguing that it therefore should pay less for the property. In contrast, SAFCA presented no such conflicting testimony.

The Court likewise rejected the owner’s expansive reading of Coachella, a case where the agency’s acquisition would have left the remainder parcel landlocked. Here, even the property owner’s appraiser agreed that the remainder was not landlocked.

Tip:  Property owners are properly entitled to severance damages where a partial acquisition would impair access to the remainder parcel. But the issue of impaired access is a question of fact for the jury. SAFCA v. Dhaliwal confirms that, as long as the condemning agency’s evidence is not speculative and does not conflict with the resolution of necessity, the agency may present evidence showing that no (or minimal) severance damages will result from the acquisition.

Expert Rebuttal Testimony

The Dhaliwal opinion also clarifies a nuanced but critical distinction between the rules governing disclosure of expert rebuttal testimony under the Eminent Domain Law and the Civil Discovery Act. At trial, following SAFCA’s presentation of its case in chief, SAFCA proceeded to put on its rebuttal case. The landowner objected to the rebuttal testimony because SAFCA had exchanged pre-trial expert witness information only with respect to its case in chief, not for its rebuttal case. The trial court overruled the objection and permitted SAFCA’s appraiser to explain why he disagreed with the comparable sales and appraisal methodology of the owner’s appraiser.

The Court of Appeal upheld the trial court’s ruling, reasoning that the Eminent Domain Law, not the Civil Discovery Act, governs rebuttal evidence in eminent domain proceedings, and that the Eminent Domain Law does not require pre-trial disclosure of rebuttal evidence. In reaching this conclusion, Dhaliwal provides crucial guidance on the proper interpretation of the Eminent Domain Law’s Code of Civil Procedure section 1258.280, which prohibits the introduction of undisclosed expert evidence in eminent domain cases—but only during a party’s case in chief. The Civil Discovery Act, on the other hand, excludes undisclosed expert opinion testimony regardless of whether it is presented in the party’s case in chief or in rebuttal. Civ. Proc. Code § 2034.300.

Prior to Dhaliwal, only one case, County of Monterey v. W.W. Leasing (1980) 109 Cal.App.3d 636, 642, addressed the admissibility of undisclosed expert testimony in the eminent domain context. However, Dhaliwal distinguishes W.W. Leasing on the grounds that W.W. Leasing prohibited the introduction of the undisclosed expert testimony on rebuttal because it should have been offered in support of the party’s case in chief.

Tip: Eminent domain practitioners may determine that it is necessary to present expert rebuttal testimony at trial. Indeed, rebuttal expert testimony can be a highly effective means to discredit the owner’s appraisal. SAFCA v. Dhaliwal confirms that such rebuttal testimony is permissible without pre-trial disclosure of such testimony, as long as the testimony is proper rebuttal of the owner’s expert evidence, rather than evidence that could and should have been presented in the agency’s case in chief. In doing so, it harmonizes the Civil Discovery Act with the Eminent Domain law, and clarifies that the Civil Discovery Act means what it says when it states that “[t]his chapter does not apply to exchanges of lists of experts and valuation data in eminent domain proceedings.” Code Civ. Proc. § 2034.010.

For more information, contact SMW attorneys Catherine Engberg and Andrew Schwartz.

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