Opinion
B326965
10-09-2024
COUNTY OF LOS ANGELES, Plaintiff and Respondent, v. 8400 S. VERMONT AVENUE, L.P., et al., Defendants and Appellants.
Newmeyer &Dillion, Charles S. Krolikowski and Leah K. McKechnie for Defendants and Appellants. Dawyn R. Harrison, County Counsel, Thomas Faughnan, Assistant County Counsel, Adrienne M. Beyers, Assistant County Counsel, Keever Rhodes Muir, Deputy County Counsel; BDG Law Group, Brian J. Bergman and Marina Melikyan for Plaintiff and Respondent.
NOT TO BE PUBLISHED
Order Filed Date:10/30/24
APPEAL from an order of the Superior Court of Los Angeles County No. BC686141, Daniel S. Murphy, Judge. Affirmed.
Newmeyer &Dillion, Charles S. Krolikowski and Leah K. McKechnie for Defendants and Appellants.
Dawyn R. Harrison, County Counsel, Thomas Faughnan, Assistant County Counsel, Adrienne M. Beyers, Assistant County Counsel, Keever Rhodes Muir, Deputy County Counsel; BDG Law Group, Brian J. Bergman and Marina Melikyan for Plaintiff and Respondent.
ORDER MODIFYING OPINION
THE COURT:
It is ordered that the opinion filed herein on October 9, 2024, be modified as follows:
On the caption page, second full paragraph, line 2, delete the name "Adrienne M. Beyers" and replace with "Adrienne M. Byers."
There is no change in the judgment.
ASHMANN-GERST, ACTING P. J.
Plaintiff and respondent County of Los Angeles (the County) filed the instant eminent domain action against defendants and appellants 8400 S. Vermont Avenue, L.P.; 8300 S. Vermont Avenue, L.P.; Sasson Lerner, LLC; 8400 S. Vermont Avenue LLC; Vermont Development, LLC; Vermont Entertainment Village, LLC; and 8528 South Vermont Avenue LLC (collectively appellants). Prior to trial, the County made "its final offer of compensation" to appellants pursuant to Code of Civil Procedure section 1250.410, subdivision (a). Appellants rejected the offer and the matter proceeded to trial.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
Following a jury verdict, appellants moved to recover their litigation expenses pursuant to section 1250.410, subdivision (b). The trial court denied their motion on the ground that the County's pretrial settlement offer was reasonable. Appellants appeal, raising a host of challenges to the County's pretrial settlement offer.
We affirm.
BACKGROUND
I. The Eminent Domain Complaint
On December 8, 2017, the County filed a complaint in eminent domain seeking to acquire the fee simple title in 16 adjacent assessor's parcels owned by appellants, located on the 8400 and 8500 blocks of South Vermont Avenue (the Property), for construction and operation of the Vermont and Manchester Transit Priority Joint Development Project. The Property covers approximately 4.203 acres.
II. Prejudgment Possession of the Property
On December 13, 2017, the County deposited $15,700,800 with the State Treasurer, representing its estimate of just compensation for the Property based on the expert opinion of Frances Wolfe Mason. (See § 1255.010.) Pursuant to section 1255.460, in April 2018, the trial court issued an order authorizing the County to take prejudgment possession of the Property.
III. Exchange of Appraisal Reports
In October 2019, the parties exchanged appraisal reports prepared by their respective experts. The County's expert, John G. Ellis (Ellis), appraised the fair market value of the Property at $17.98 million. Appellants' expert, Michael F. Waldron (Waldron), appraised the fair market value of the Property at $65.8 million.
On November 27, 2019, the County deposited an additional $2,279,400 with the State Treasurer to account for the difference between the amount the County had previously deposited and Ellis's valuation of the Property.
Both experts valued the Property as of December 13, 2017.
IV. Section 1250.410 Offer and Demand
In January 2020, the County made a final offer under section 1250.410 in the amount of $26.6 million. The offer included "all compensation, damages, interest, costs, fees, causes of action, and claims, except for [appellants'] claim for severance damages."
Appellants' claims for severance damages were settled separately and are not at issue in this appeal.
On the same day, appellants made a final demand under section 1250.410 in the amount of $42.5 million. The demand excluded "statutory interest and costs as provided by law."
Neither the offer nor the demand was accepted.
V. Trial; Judgment
In August 2022, the case proceeded to trial on the sole issue of the value of the Property. During his testimony, Waldron, appellants' expert, revised his opinion of the value of the Property to be $60.145 million. Ellis, the County's expert, also testified and, as in his earlier report, valued the Property at $17.98 million. The jury rendered its verdict, determining that the fair market value of the Property was $39 million.
The trial court subsequently entered judgment. VI. Appellants' Motion to Recover Litigation Expenses
In October 2022, appellants filed a motion to recover $4,954,065 in litigation expenses under section 1250.410. They argued that, while their final pretrial demand was reasonable, the County's final pretrial offer was unreasonable in light of the $39 million jury verdict. According to appellants, if interest and costs were excluded from the County's offer, the offer "constitute[d] only 64 percent of the verdict" (italics, bolding &underlining omitted), which was "almost per se unreasonable."
The County opposed the motion. It argued that its offer was reasonable, it had "used good faith, care, and accuracy in" making it, and it had not "rigidly adhere[d] to" its expert's valuation of the Property.
Following a hearing, the trial court took the matter under submission.
On December 6, 2022, the trial court issued an order denying appellants' motion to recover litigation expenses. The court found that, given the evidence adduced at trial and the compensation awarded, the County's final offer had been reasonable. The court further found that the County had "acted with sufficient good faith, care, and accuracy." The court noted that the County's offer was more than $8 million above its expert's estimate, which was "hardly a token amount." "The estimate was supported by evidence including comparable sales, analysis of highest and best use, rental data, and housing projects." Even so, the County had "not stubbornly adhere[d] to its own estimate by offering a nominal amount above its expert's appraisal. At the same time, the County was not required to agree with [appellants' expert's] appraisal." The court noted that appellants' expert had even testified that he had found no fault with the report or methodology of the County's expert, although they had ultimately formed different opinions.
The trial court considered and rejected appellants' arguments that (1) the County's offer improperly included costs and fees, and (2) the County's offer was unreasonable because it only constituted 64 percent of the jury verdict.
VII. Appeal
Appellants timely appealed from the denial of their motion to recover litigation expenses.
DISCUSSION
I. Applicable Law
Section 1250.410 governs the award of litigation expenses in eminent domain proceedings. (Weiss v. People ex rel. Dept. of Transportation (2020) 9 Cal.5th 840, 862, fn. 7.; Los Angeles County Metropolitan Transportation Authority v. Continental Development Corp. (1997) 16 Cal.4th 694, 719 (Continental Development).) It provides, in pertinent part: "At least 20 days prior to the date of the trial on issues relating to compensation, the plaintiff shall file with the court and serve on the defendant its final offer of compensation in the proceeding and the defendant shall file and serve on the plaintiff its final demand for compensation in the proceeding. The offer and the demand shall include all compensation required . . . and shall state whether interest and costs are included.... [¶] 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 [s]ection 1268.710 shall include the defendant's litigation expenses." (§ 1250.410, subds. (a) &(b).)
In the context of section 1250.410, "'litigation expenses' means the party's reasonable attorney's fees and costs, including reasonable expert witness and appraiser fees." (§ 1250.410, subd. (e).)
Thus, before the trial court can award litigation expenses to the property owner, section 1250.410 requires that it find both that the property owner's demand was reasonable and that the County's offer was unreasonable. (San Diego Gas &Electric Co. v. Schmidt (2014) 228 Cal.App.4th 1280, 1305 (San Diego Gas); see also Santa Clara Valley Water Dist. v. Gross (1988) 200 Cal.App.3d 1363, 1373 ["the court must find both that the plaintiff was unyielding, and that the property owner tendered a reasonable demand"].)
"Several factors have emerged as general guidelines for determining the reasonableness or unreasonableness of offers. They are '"(1) the amount of the difference between the offer and the compensation awarded, (2) the percentage of the difference between the offer and award . . . and (3) the good faith, care and accuracy in how the amount of offer and the amount of demand, respectively, were determined."' [Citation.] Thus, the mathematical relation between the condemner's highest offer and the award is only one factor that should enter into the trial court's determination." (Continental Development, supra, 16 Cal.4th at p. 720.) The California Supreme Court in Continental Development disapproved "any pronouncement purporting to find unreasonableness as a matter of law based purely on mathematical disparity, and to commend the lower courts in every case to consider not only the numerical figures, but also '"'the good faith, care and accuracy in how the amount of the offer and the amount of the demand, respectively, were determined.' [Citations.]"'" (Id. at pp. 720-721; see also City and County of San Francisco v. PCF Acquisitionco, LLC (2015) 237 Cal.App.4th 90, 94.)
"An assessment of reasonableness must be based on '"all the evidence admitted, not just the numerical amounts of the offer, demand and award."' [Citation.]" (Tracy Joint Unified School Dist. v. Pombo (2010) 189 Cal.App.4th 889, 895 (Tracy).)
II. Standard of Review
"The question of reasonableness is addressed to the court's discretion, to be exercised 'after weighing all the evidence and assessing witness credibility independently of the jury.' [Citation.] 'The trial court's determination of that issue is a resolution of a question of fact and will not be disturbed on appeal if supported by substantial evidence.' [Citation.]" (People ex rel. Dept. of Transportation v. Yuki (1995) 31 Cal.App.4th 1754, 1763 (Yuki); see also Redevelopment Agency v. Gilmore (1985) 38 Cal.3d 790, 808; People ex rel. Dept. of Transportation v. Acosta (2009) 178 Cal.App.4th 762, 775 (Acosta).) To the extent that we are tasked with interpreting section 1250.410, our review is de novo. (People ex rel. Dept. of Transportation v. Hansen's Truck Stop, Inc. (2015) 236 Cal.App.4th 178, 187 (Hansen's Truck Stop).)
III. Analysis
A. The trial court did not err
Applying these legal principles, we conclude that the trial court did not err. Substantial evidence supports its finding that the County's final offer of compensation to appellants was reasonable.
The County's expert, Ellis, appraised the fair market value of the Property at $17.98 million. At trial, Ellis testified at length as to his qualifications to render his opinion and the methodology he used to arrive at his valuation. At over 80 pages, Ellis's appraisal report provided a detailed analysis of the Property and the sales comparison approach used to value it. And appellants' expert, Waldron, testified that he knew Ellis professionally and respected him. From this evidence, the trial court could find that it was reasonable for the County to rely on its expert's appraisal, that the County exercised care and accuracy when formulating the offer, and that the County was not compelled to radically inflate its offer based on the much higher appraisal of appellants' expert.
The reasonableness of the County's offer is further evidenced by the fact that its offer of $26.6 million exceeded Ellis's appraisal by $8.62 million. Thus, "this is not a case where the [condemner] stuck stubbornly to its own appraisal" (City of Long Beach Redevelopment Agency v. Morales (2007) 157 Cal.App.4th 287, 294 (Morales)) or offered only a nominal amount above it (see Tracy, supra, 189 Cal.App.4th at p. 893 [concluding that a condemner's "stubborn adherence to a pretrial settlement offer that barely exceeded its own expert's appraisal was unreasonable as a matter of law"]). Rather, as the trial court reasonably concluded, the County's offer was "a significant departure" from its expert's appraisal of the Property, upon which, as we have already explained, the County could reasonably rely. This is substantial evidence of the County's good faith.
We recognize that the offer included costs, fees, and interest. In its reply brief below, appellants estimated approximately $1.2 million in interest; $300,000 in costs; and $4 million in fees. After deducting appellants' estimates of these costs, fees, and interest (the accuracy of which we assume for the purpose of this appeal only), the offer's valuation of the Property was approximately $ 21.1 million. This adjusted valuation still exceeded Ellis's valuation of the Property by $3.12 million, which is a significant amount.
That the jury ultimately determined that the fair market value of the Property was $39 million-$12.4 million more than the County's offer-does not compel a finding that the County's offer was unreasonable. The jury essentially averaged the valuations of the parties' experts, which suggests that it found both experts persuasive to an extent. It also reflects the jury's conclusion that the County's expert undervalued the Property by $21.02 million and that appellants' expert overvalued the Property by $21.145 million. The evidence admitted at trial and the jury's award demonstrate that the Property was unique; accordingly, the valuations of rational actors could vary significantly. There is nothing unreasonable as a matter of law about the County finding its expert more persuasive than appellants' expert and anchoring its offer to its expert's lower appraisal value.
This conclusion renders it unnecessary to address the County's argument, made for the first time on appeal, that appellants failed to submit a valid demand under section 1250.410, subdivision (a).
B. Appellants' arguments
Urging reversal, appellants advance several meritless arguments.
1. Invalidity of the County's offer
Appellants contend that the County's offer was invalid because it included "damages, fees, causes of action, and claims" instead of simply compensation for the Property, interest, and costs. But nothing in the text of section 1250.410 prohibits a party from offering the type of broad, global settlement made by the County. (See Los Angeles County Metropolitan Transportation Authority v. Alameda Produce Market, LLC (2011) 52 Cal.4th 1100, 1107 ["If the statutory language is unambiguous, then its plain meaning controls"].) Nor does section 1250.410 require a party who offers or demands a lump sum to parse out its valuations of the condemned property and other categories such as costs and fees. A party must state whether the offer or demand includes interest and costs. (§ 1250.410, subd. (a).) The statute thus contemplates that an offer or demand may include more than compensation.
Appellants are incorrect that County of Contra Costa v. Pinole Point Properties, Inc. (1994) 27 Cal.App.4th 1105 (Pinole Point) held that the inclusion of litigation expenses in an offer or demand does not comply with the requirements of section 1250.410. In that case, a condemnee argued that the condemning county's "offer was unreasonable because it did not include any amount to compensate it for the litigation expenses it had incurred up to that point." (Pinole Point, supra, 27 Cal.App.4th at p. 1114.) The Court of Appeal disagreed, explaining that the condemning county "was not required to consider this expense under the applicable statutory framework." (Ibid.) Pinole Point does not stand for the proposition that the inclusion of litigation expenses in an offer violates section 1250.410.
Recognizing the lack of authority supporting its position, appellants urge us to look to cases involving section 998 offers. (See Martinez v. Brownco Construction Co. (2013) 56 Cal.4th 1014, 1017 [§ 998 "provid[es] for augmentation and withholding of the costs recoverable at trial when a party fails to achieve a result better than it could have obtained by accepting an offer of compromise or settlement conforming to statutory requirements"].)
Section 998 does not assist appellants. First, section 998 is expressly inapplicable to an offer made by a plaintiff in an eminent domain action. (§ 998, subd. (g)(1).) Second, the section 998 offers in the cases cited by appellants were found invalid for reasons not present here and are, thus, factually distinguishable. (See K.M. v. Grossmont Union High School Dist. (2022) 84 Cal.App.5th 717, 776 [§ 998 offers invalid because they required the execution of a settlement agreement and release without meaningfully describing the terms]; Ignacio v. Caracciolo (2016) 2 Cal.App.5th 81, 83, 86-90 [§ 998 offer invalid because it required the release of claims outside the scope of the litigation]; Hurlbut v. Sonora Community Hospital (1989) 207 Cal.App.3d 388, 408-409 [§ 998 offer invalid because it included a monthly annuity for the life of the plaintiff, which made it impossible to determine its present value and whether the plaintiff had achieved a more favorable judgment at trial].)
Accordingly, we reject appellants' argument that the County's offer was invalid as a matter of law.
2. Reliance on incorrect figures
Appellants next argue that "the trial court relied upon incorrect numbers" because it "erred by not deducting the interest, costs, fees and other items [from the County's offer] to achieve a truly symmetrical, 'apples to apples,' comparison of the offer of compensation and the verdict."
We disagree. The record reflects that the trial court understood what the County's offer included and excluded. In their reply brief in support of the motion to recover litigation expenses, appellants estimated their entitlement to approximately $1.2 million in interest, $300,000 in costs, and $4 million in fees. Appellants told the court that, after deducting these estimates, the offer's valuation of the Property amounted to approximately $21 million. The court was thus well aware of what appellants considered to be an "apples to apples" comparison of compensation and still concluded that the County's total $26.6 million offer was reasonable. Furthermore, appellants' own calculations belie their claim that it was difficult or impossible to determine the value of the County's offer.
Across their moving papers below and briefs on appeal, appellants have provided different estimates for the County's net offer for the Property (the $26.6 million offer minus appellants' varying estimates of interest, costs, and fees), ranging from $20.2 million to $21 million.
Appellants' reliance on Morales, supra, 157 Cal.App.4th 287 is unavailing. The lower court in Morales determined that the condemning agency's offer had been unreasonable and awarded the condemnees litigation expenses under section 1250.410. (Morales, supra, at p. 291.) The Court of Appeal reversed, concluding that the lower "court mistakenly calculated the actual and percentage difference between the offer and the compensation awarded" and, thus, its "factual determination [wa]s incorrect." (Morales, at p. 295.) The matter was remanded for the lower court to "exercise proper discretion." (Ibid.) Here, in contrast, the trial court did not miscalculate or use erroneous figures. And, unlike in Morales, where the condemning agency did not bring the calculation "error to the attention of the [lower] court" (Morales, supra, at p. 292, fn. 3), appellants, here, expressly presented for the trial court's consideration what they considered to be the correct figures.
3. Failure to address mathematical factors
Appellants also fault the trial court for not "properly address[ing] the required mathematical factors of the reasonableness test." Appellants refer to two of the factors used by courts to determine the reasonableness of an offer: (1) the difference between the offer and the compensation awarded; and (2) the percentage of the difference between the offer and the compensation awarded. (Continental Development, supra, 16 Cal.4th at p. 720.)
Appellants' argument is premised on an erroneous contention that the trial court was required to consider these mathematical factors in determining reasonableness. These factors-as well as an assessment of the "good faith, care and accuracy with which the demand or offer was calculated" (PCF Acquisitionco, supra, 237 Cal.App.4th at p. 94)-have only "emerged as general guidelines for determining the reasonableness or unreasonableness of offers." (Continental Development, supra, 16 Cal.4th at p. 720, italics added.) It follows that a court does not necessarily commit reversable error if it fails to analyze one of the factors.
In any event, the trial court here was aware of these factors, as well as the California Supreme Court's express "disapproval of any pronouncement purporting to find unreasonableness as a matter of law based purely on mathematical disparity[.]" (Continental Development, supra, 16 Cal.4th at p. 720; see also San Diego Gas, supra, 228 Cal.App.4th at p. 1305.) The court's order noted the County's offer ($26.6 million) and the compensation awarded ($39 million). The order also discussed appellants' own calculation that the County's offer was 64 percent of the award. Nothing about these numbers compelled a finding of unreasonableness. (See Continental Development, at p. 720; Yuki, supra, 31 Cal.App.4th at p. 1764.) Even appellants' alternative calculation of the percentage of the difference between the offer and the award- 52 percent-would not be per se evidence of unreasonableness.(See Continental Development, at p. 720; Hansen's Truck Stop, supra, 236 Cal.App.4th at p. 193, fn. 6 ["an extremely low offer can . . . be found reasonable if it is premised on a good faith, factbased estimate and on an arguable, but incorrect legal premise"]; Tracy, supra, 189 Cal.App.4th at p. 898 ["where mathematical comparisons would ordinarily dictate an award to the owner, a trial court may properly deny litigation expenses where there is significant countervailing evidence that the condemner's offer was nonetheless made in good faith and with reasonable care"].)
Appellants arrived at 64 percent by dividing $25.12 million (the $26.6 million offer minus appellants' estimate of interest and costs, only) by $39 million (the award).
Appellants' alternative 52 percent calculation is based on dividing $20.22 million (the $26.6 million offer minus one of appellants' various estimates of interest, costs, and fees) by $39 million (the award).
4. Misapplication of good faith factor
Finally, appellants challenge the trial court's finding that the County acted with good faith, care, and accuracy. "But to assert that the court erred in concluding that [the condemner] acted in good faith and evaluated the case accurately is merely another way to argue that substantial evidence does not support the decision of the trial court ...." (Moulton Niguel Water Dist. v. Colombo (2003) 111 Cal.App.4th 1210, 1215.)
Appellants essentially ask us to reweigh the evidence and find that it does not reflect good faith, care, and accuracy. That is not our role. (See San Diego Gas, supra, 228 Cal.App.4th at p. 1306 ["We do not reweigh the evidence presented"]; Acosta, supra, 178 Cal.App.4th at p. 775 [the task of determining whether a condemner's offer was reasonable is for the trial court-not the appellate court]). Having already identified substantial evidence to support the trial court's finding, "it is of no consequence that the . . . court believing other evidence, or drawing other reasonable inferences, might have reached a contrary conclusion. [Citations.]" (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 874, italics omitted.)
DISPOSITION
The order denying appellants' motion to recover litigation expenses is affirmed. The County is entitled to costs on appeal.
We concur: CHAVEZ, J., HOFFSTADT, J.