Daily Development for Thursday, March 29, 2001

EMINENT DOMAIN; CONDEMNATION AWARD; INTEREST:

Award of 25 years' interest on eminent domain claim inappropriate where, although State took possession of the property 25 years previously in under an agreement calling for the parties to negotiate terms of compensation, and then never completed negotiations, landowner with substantial experience in takings failed to take any action to oppose the taking for 25 years.

People v. Southern California Edison Co., 996 P.2d 711 (Cal. 2000).

As part of a highway extension in the 1960s, the State of California began negotiations with Southern California Edison Company ("Edison"). Although negotiations started in 1963, they were not complete by 1969 when construction was scheduled to begin. The State and Edison entered into an agreement which allowed the State to enter the property and construct, subject to the understanding that the State would negotiate with Edison on final terms of compensation and that the date of entry of June 20, 1969 would be the date of valuation for any subsequent eminent domain proceeding and that any award made in the proceeding shall "bear interest at the rate of 7% per annum" from the date of entry.

The State and Edison then proceeded to engage in sporadic negotiations over the next 25 years, but Edison did not ask for any eminent domain proceedings until 1994. Following the jury award, the trial court found that the State had knowingly delayed negotiations and misled Edison, but, based on Edison's extensive experience in these situations and lack of diligence, the trial court, awarded interest from a valuation date of November 16, 1995 (the date of the award), rather than from Edison's requested June 20, 1969. The Supreme Court held that there were unique circumstances in this case, particularly focusing on the fact that Edison, which had vast experience with condemnation, acted with a substantial lack of diligence. The Supreme Court held that while it was inappropriate to grant interest from the date of entry of June 20, 1969, it was also inappropriate to grant interest only from the date of valuation of November 16, 1995. Instead, the Supreme Court proposed that interest should accrue from the date that Edison asked the State to commence legal proceeding July 24, 1994. Ultimately, the Supreme Court's holding arguably varied from the terms of the California condemnation statutes with regard to timing of the interest. The Supreme Court noted, however, that this case was subject to special circumstances.

Comment: This case is probably an oddity, but the substantial periods of time for which no interest was paid, despite clear language in the agreement, strikes the editor as worthy of note.

Normally, when the parties specifically address what happens when a certain planned action does not occur, the party who suffers consequences is the one who ought to bear the burden of negotiating in the contract or otherwise for an alternative.

Here, as the court notes, the State of California was at least as responsible for the failure to complete negotiations within a "reasonable time," as the contract implicitly provided. But the contract indicated that interest continued to run, imposing on the State a duty to bring the negotiations to a close by bringing a condemnation action. It is true that the landowner was sophisticated in condemnation actions. But what about the State of California's condemnation lawyers chopped liver?

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