Daily Development for

Tuesday, December 2, 1997

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

CONDEMNATION; EMINENT DOMAIN; DAMAGES: Reversing long-standing precedent, the California Supreme Court rejects the traditional distinction between "general" and "special" benefits of condemnation, and holds that a landowner's damages will be offset by all reasonably certain, immediate and nonspeculative benefits the landowner receives as a result.

M.T.A. v. Continental Develop. Corp., 941 P.2d 809 (Cal. 1997).

A landowner's severance damages ordinarily are offset by benefits incurred by the taking. In Beveridge v. Lewis, 70 P. 1083 (Cal. 1902), the California Supreme Court distinguished between unique "special" benefits to property resulting from the improvement, which were subject to offset, and "general" benefits common to the entire community, which were not. Noting that courts had struggled to apply the old rule consistently, the Court replaced it with the above modern standard recognized by a "respectable minority" of jurisdictions (Illinois, New Mexico, Michigan and Virginia).

The Los Angeles Metropolitan Transit Authority ("MTA") attempted to acquire an easement to construct an elevated rail line. Before trial, MTA offered evidence showing that the owner's property would be enhanced by approximately $4 million due to its proximity to a new rail stop. The trial court ruled the evidence inadmissible on the grounds that the rail's location provided a benefit of access to several vicinity properties and therefore, to the community generally. Unable to prove any offsetting benefit, MTA appealed the jury's $1 million damage award.

The Supreme Court found that the majority opinion in Beveridge created confusion by seeming to equate general benefits to the community with conjectural or speculative damages. In Beveridge, the Court held that general benefits were "incapable of estimation," but that particular benefits to specific property were "reasonably certain" to result from the improvement. Beveridge did not anticipate the scenario in this case, in which benefits enjoyed by the community generally -- improved access to mass transit -- could also provide a quantifiable benefit to particular properties. Beveridge also provided no guidance on how "community" should be defined, such as properties in the vicinity of a project or an entire metropolitan region.

The California Supreme Court also rejected the equal protection justification for the old rule. In Beveridge, the Court found that it would be unfair to offset a landowner's damages by the value of benefits similarly conferred on owners whose land was not taken. However, the disadvantage to the owner whose land is taken must be balanced against the owner's ability to obtain damages in the first place, a right not enjoyed by owners who suffer losses but from whom no property is taken. Because it failed to discuss the differing availability of damages, the Supreme Court concluded that Beveridge "should not be read as an authoritative statement" concerning the equal protection requirements. While acknowledging that the fairness concerns remained, the Court concluded that distributing the costs of any improvement with perfect equality was not possible, and that reducing damages by all reasonably certain, immediate and nonspeculative benefits amounted to a more workable and evenhanded rule.

Comment: It likely was not lost upon the court that the "more workable and evenhanded rule" would result in far lower condemnation payments to parties whose land was taken for the public benefit. Whether the Beveridge argument ought to rise to constitutional dimensions is one thing, but it does seem that as a matter of policy the government ought not to be able to offset against its condemnation payments those benefits that all citizens enjoy whether they are condemnation victims or not. Difficulties in making the distinction in California courts may have said more about the California courts than it did about the propriety of the rule.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1-6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Stacy Walter at the ABA. (312) 988 5260 or stacywalter@staff.abanet.org

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