Opinion
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. CV810069
Bamattre-Manoukian, ACTING P.J.
In this eminent domain action, the Santa Clara Valley Transportation Authority (VTA) initiated a taking of a portion of a parcel of real property owned by appellant Mission West Shoreline, LLC (Mission West), commonly referred to as Parcel 2. Mission West contends that the trial court incorrectly ruled in a November 10, 2003 pretrial order (1) that the highest and best use of Parcel 2 is for landscaping and non-required parking, (2) that the larger parcel for purposes of severance damages is Parcel 2, and (3) that Parcel 2 had no loss of developmental potential. We conclude that the trial court did not err or abuse its discretion in finding that the highest and best use of Parcel 2 is for landscaping and non-required parking. However, we conclude that the court erred in finding that the larger parcel for purposes of severance damages is Parcel 2. Accordingly, we reverse the judgment and remand the matter for a new jury trial, and we do not reach Mission West’s third contention.
BACKGROUND
In April 1990, the City of Mountain View adopted the L’Avenida South Precise Plan (The Plan), covering approximately 39 acres of land north of U.S. Highway 101, south of L’Avenida Avenue, and west of Stevens Creek. The Plan established limitations on the use and development of land covered by The Plan, zoning the land “for light industrial, office, or research and development use.” Special conditions of development included restrictions on the size of buildings and the ratio of gross floor area (FAR) per acre as well as requirements for the number of parking spaces and the amount of landscaping. Buildings were to be limited to 14,000 square feet of gross area per acre, equal to a FAR of approximately .32, but an additional 1,000 square feet per acre, bringing the total FAR to .344, could be granted on the finding “that the project provides innovative, award-quality architectural and site design, exceeding the minimums for landscaping, amenities and building design.” Another special condition of development was that “[l]and should be reserved (that is not built on or developed except for landscaping or nonrequired parking) for the planned freeway improvements to Route 85/Highway 101. The applicant should contact the Santa Clara office of Caltrans for information about the specifics of the planned improvements.”
In 1996, Mission West’s predecessor in interest, Berg & Berg Enterprises, Inc. (B&B), purchased nine parcels comprising approximately 32 acres of land covered by The Plan. In January 1998, B&B applied to the City of Mountain View for a permit to construct a five-building campus on its land for Microsoft, stating in the application that “the project was designed to meet . . . guidelines given in the L’Avenida South Precise Plan.” The Mountain View City Council approved the permit by resolution dated April 14, 1998, subject to B&B’s fulfillment of specified conditions. One specified condition was that “[a]ll parcels within the boundaries of the project area shall be merged prior to issuance of building permits.”
In August 1998, B&B applied for “a lot line adjustment to accommodate Highway 101, Route 85 improvements and the Microsoft Campus.” In October 1998, the Subdivision Committee “conditionally approved the lot line adjustment to merge nine lots into two lots,” creating what has come to be designated as Parcel 1 and Parcel 2. Parcel 2 consists of a narrow strip of land of approximately two acres adjacent to Highway 101. Parcel 1 consists of approximately 30 acres adjacent to and north of Parcel 2. Mountain View notified B&B in October 1998 that two conditions for final approval of the lot line adjustment were that “[a]ll development rights for Parcel 2 have been transferred to Parcel 1 and incorporated into the approved [Microsoft] project,” and that “[s]hould the Valley Transportation Agency or successive public entity determine that all or any portion of Parcel 2 is not required for freeway improvements, it shall revert back to Parcel 1 through lot line adjustment or other mechanism approved by the City.” After the Mountain View Public Works Department determined that all conditions of the final approval had been complied with, a notice of lot line adjustment approval issued on July 27, 1999.
Meanwhile, in April 1999, Mission West bought both Parcel 1 and Parcel 2 from B&B for $33.36 per square foot. At the time of the transaction, Mission West was aware of The Plan and the restrictions it contained as well as of the expectation that Microsoft would be its tenant in the development on Parcel 1.
The Eminent Domain Proceeding
VTA filed its complaint in eminent domain on August 6, 2002, seeking to acquire easements on a portion of parcel 2 for a Route 85/Highway 101 interchange project. On August 8, 2002, VTA made a deposit of $9,500 as the amount of probable compensation for the easements. (See Code Civ. Proc., § 1255.010.) In its answer filed October 28, 2002, Mission West alleged that the land sought by VTA “is an indispensable and non-severable part of” Parcel 2.
VTA sought to acquire 22,641 square feet for a permanent highway easement; 5,819 square feet for a utility easement; 1,756 square feet for a maintenance easement and 10,658 square feet for a temporary construction easement. The remaining portion of parcel 2 was approximately 68,000 square feet.
Further unspecified statutory references are to the Code of Civil Procedure.
On September 11, 2003, VTA filed a motion pursuant to section 1260.040, requesting that the court: “1) Find that the highest and best use of Parcel 2 . . . (including the subject property and the remainder) is for open space; [¶] 2) Find that the larger Parcel for purposes of valuing severance damages, if any, is Parcel 2; and, [¶] 3) Order that no evidence be admitted asserting as an element of damages any loss of development potential to the lands that are now Parcels 1 and 2, either separately or together.”
Attached to the motion, as Exhibit A, were excerpts from the deposition testimony of Bradley Eckhardt, a Mountain View senior planner. Eckhardt testified that, at the time B&B sought to develop its property, “[w]e knew that the VTA was going to need some property along the southern boundary of [its] parcel.” “So what we asked [B&B] to do, . . . was to take the worst case scenario, the scenario that would take the most property and . . . put all the floor area, all the improvements to the north of that, knowing that at some point there was going to be some land that was going to be given back to VTA. [¶] So we calculated [the] floor area and [the] design and parking requirement based on this whole site. There was some discussion with [B&B], knowing that that was [the] developable area. [¶] There’s a condition of approval on the subdivision that says that that floor area for this other parcel is used.” “[A]t the time there was . . . no parcel one and parcel two. There was only the . . . civil survey. And it included all of the land at the time that [B&B] was aggregated. [¶] So it was the net area which now would be both parcels one and two.” “Based on this document, and what I know of the development in the past, there are no development rights on [parcel 2]. . . . [¶] It is, as far as I know, an undevelopable piece with the caveat that . . . should this, or lot one, be reduced in floor area, there may be granted back some floor area back to parcel two. [¶] Again, all this is speculative. But right now, it’s my understanding that there is no development potential on parcel two.”
Mission West filed opposition to VTA’s motion on September 29, 2003, contending that (1) the development moratorium imposed by Mountain View pursuant to The Plan does not affect the condemnation valuation, (2) the development rights to Parcel 2 were not released or otherwise lost, and (3) Parcel 1 should be considered part of the larger parcel for purposes of severance damages. Mission West argued that Parcel 2 could have been, and could still be, used to expand the parking lot used by the Microsoft development on Parcel 1, and that having additional parking would increase the value of that development.
The hearing on the motion was held October 9, 2003, before the case management judge by agreement of the parties. On November 10, 2003, the court filed its order, stating in relevant part: “1) No evidence shall be admitted that is inconsistent with the highest and best use of Parcel 2 . . . being open space, parking, or landscaping as specified in the City of Mountain View L’Avenida South Precise Plan . . .; [¶] 2) The larger Parcel for purposes of valuating severance damages, if any, is Parcel 2 . . .; [¶] 3) No evidence shall be admitted that allocates as an element of compensation any loss of development potential to the lands that are now designated as Parcel 1 . . . and Parcel 2 . . . .”
On August 2, 2004, VTA increased its deposit of probable compensation by $30,950, for a total deposit amount of $40,450. (§ 1255.030, subd. (f).)
On October 1, 2004, Mission West filed, as a motion in limine, a request that the trial judge “revisit and reconsider” the November 10, 2003 order. At a hearing on both parties’ in limine motions on October 5, 2004, the court stated that, “right or wrong, I am not changing [the] ruling” of November 10, 2003. The court also granted a continuance of the trial.
Prior to the new date set for trial before a new trial judge, VTA filed motions in limine seeking exclusion of evidence at trial of certain land sales, ground lease transactions, “PAIRED SALES,” and “COMPARABLE PARKING LOT SALES” as comparable sales for purposes of valuation. Following a hearing in April 2005, the court denied the motion to exclude “comparable parking lot sales,” but granted VTA’s other motions.
The jury trial was held January 24 through 27, 2006. At trial, Chris Metzger testified that his company was hired by VTA as a consultant in 1997 to design and manage its Route 85/Highway 101 interchange project. He further testified that his final design required three highway easements of 20,678, 682, and 1,281 square feet, respectively; a maintenance easement of 1,764 square feet; a utility easement of 5,819 square feet; and two temporary construction easements of 6,600 and 4,058 square feet on Parcel 2.
Carl Berg testified on behalf of Mission West that when he began to develop the B&B property in 1998, Mountain View told him that they did not know what part of it would be needed for the highway interchange project. Thus, he was required to “take the worst case situation and draw a line there and [not] build anything within that area.” However, as it turned out, “they needed only a very small portion of what they had us hold for some six or seven years and that’s part of the issue today.”
As an expert on the usage and value of research and development property and the layout and design of parking, Berg testified that there is no such thing as parking lot zoning; property that is used as a parking lot can be used for some other purpose in most cases. Developers will pay the same price for land that is to be used for parking or open space as they do for land to be used for a building. Berg found six comparable land sales involving parking lots in the time period around August 2002; all but one of them had the potential for redevelopment. Based on these comparable sales, he determined that the fair market value for each of the two parts of Parcel 2 – the taken and the remaining parts – were approximately $650,000, or $32 per square foot. However, after the taking, the remaining part of Parcel 2 has no value because all it could reasonably be used for is landscaping; the cost of building the six to eight parking spaces that could be put there would make them unaffordable.
Terry Larson, a commercial real estate appraiser, testified that he was retained by VTA in February 2002 to appraise the two-acre parcel known as Parcel 2 and the part of Parcel 2 involved in the taking. He determined that, on August 8, 2002, the highest and best use of Parcel 2 under The Plan was for non-required parking, landscaping and highway improvements. The restrictions on the use of Parcel 2 limits its value to $8 per square foot, both for the entire parcel and for the part taken. The only likely buyer for Parcel 2 would be the owner of Parcel 1, so Larson based his opinion on comparable sales of small parcels that were bought by owners of adjacent parcels in order to add to the building or parking space potential of the adjacent parcels. Computed at $8 per square foot, the fair market value for all of Parcel 2 is $709,427; the fair market value of the part of Parcel 2 being taken is $234,011; and the fair market value of the remaining part of Parcel 2 after the severance is $475,416. In Larson’s opinion, the remaining part of Parcel 2 after the severance did not have any loss in value, or severance damage; it has a fair market value of $8 per square foot both before and after the taking because it could still be used for parking in conjunction with Parcel 1.
On January 27, 2006, the jury returned a special verdict, finding that the “value of the property interests being acquired” is $11 per square foot, that Mission West is “entitled to severance damages,” and that “the amount of severance damages [is] $21,848.20.” The parties stipulated that, using a formula they agreed upon based on the special verdict, the value of all the easements VTA sought is $321,757.22. The judgment in condemnation filed May 10, 2006, awarded Mission West $343,605.42, plus interest, costs, and attorney fees. Mission West timely appealed from the judgment.
DISCUSSION
Protective Zoning
Mission West contends that the court’s November 10, 2003 order incorrectly portrays its land’s potential use for condemnation valuation purposes as limited to “open space, parking or landscaping as specified in the City of Mountain View L’Avenida South Precise Plan.” It argues that The Plan zoned its land for light industrial, office, or research and development use, except that some land had to be reserved, and thus limited to use for landscaping and non-required parking, for the planned freeway project. It further argues that the general rule is that it is improper to use a protective zoning ordinance such as The Plan to establish just compensation for condemned property, and that the exception to this rule when the zoning agency and the condemning agency are different entities does not apply.
VTA contends that it is not responsible for the zoning and the land-use decisions affecting Mission West’s property that were made by Mountain View and B&B prior to the condemnation action. Therefore, VTA argues, it is not liable for any damage to the value of Mission West’s property attributable to those decisions. “[T]o require a reduction in value to be included as compensation owed by the condemnor would cause one agency to pay for the actions of another agency (and the property owner) over which it had no control.”
When property is acquired by eminent domain, “[c]ompensation shall be awarded for the property taken. The measure of this compensation is the fair market value of the property taken.” (§ 1263.310 ; see also Cal. Const. , art. I, § 19; Metropolitan Water Dist. of So. California v. Campus Crusade for Christ, Inc. (2007) 41 Cal.4th 954, 965 (Campus Crusade).) “In order to determine the fair market value of a property being condemned in an eminent domain proceeding, ‘there must be a determination of the highest and best use to which the property being condemned can be put.’ ” [Citations.] (City of San Diego v. Rancho Penasquitos Partnership (2003) 105 Cal.App.4th 1013, 1028 (Rancho Penasquitos); § 1263.320.) “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.’ [Citations.]” (City of San Diego v. Neumann (1993) 6 Cal.4th 738, 744; Campus Crusade, supra, 41 Cal.4th at p. 965.)
“[T]he general rule in eminent domain actions is that ‘ “the right to a jury trial . . . goes only to the amount of compensation.” ’ (Redevelopment Agency v. Contra Costa Theatre, Inc. (1982) 135 Cal.App.3d 73, 80; see Cal. Const. , art. I, § 19; People v. Ricciardi (1943) 23 Cal.2d 390, 402 (Ricciardi).)” (Emeryville Redevelopment Agency v. Harcros Pigments, Inc. (2002) 101 Cal.App.4th 1083, 1116 (Harcros Pigments); see also Campus Crusade, supra, 41 Cal.4th at p. 965.) “ ‘It is only the “compensation,” the “award,” which our constitution declares shall be found and fixed by a jury. All other questions of fact, or of mixed fact and law, are to be tried . . . without reference to a jury.’ ” (Ricciardi, supra, 23 Cal.2d at p. 402; Campus Crusade, supra, 41 Cal.4th at p. 971.)
“If there is a dispute between plaintiff and defendant over an evidentiary or other legal issue affecting the determination of compensation, either party may move the court for a ruling on the issue.” (§ 1260.040, subd. (a).) “This section supplements, and does not replace any other pretrial or trial procedure otherwise available to resolve an evidentiary or other legal issue affecting the determination of compensation.” (§ 1260.040, subd. (c); see, e.g., Evid. Code, § 402.) “Section 1260.040 is intended to provide a mechanism by which a party may obtain early resolution of an in limine motion or other dispute affecting valuation.” (Cal. Law Revision Com. com., 19 West’s Ann. Code Civ. Proc. (2007 ed.) foll. § 1260.040, p. 623.) Trial courts routinely conduct hearings in limine to determine the scope of admissible evidence, and a court may properly rule pursuant to a party’s motions in limine in an eminent domain proceeding that evidence not relevant to the valuation questions presented to the jury be excluded. (See Coachella Valley Water Dist. v. Western Allied Properties, Inc. (1987) 190 Cal.App.3d 969, 976, fn. 3; see also Campus Crusade, supra, 41 Cal.4th at pp. 967-968, 973.) Here, the trial court properly decided pursuant to VTA’s motion in limine the highest and best use of the condemned land, a disputed issue affecting the determination of compensation. (§ 1260.040, subd. (c) ; see also Dina v. People ex rel. Dept. of Transportation (2007) 151 Cal.App.4th 1029, 1043-1047 (Dina).)
The question remains whether the trial court’s ruling that the highest and best use of Parcel 2 was open space, parking or landscaping as specified in The Plan was an abuse of discretion. (See Rancho Penasquitos, supra, 105 Cal.App.4th at p. 1027.) “ ‘Broadly speaking, an appellate court applies the abuse of discretion standard of review to any ruling by a trial court on the admissibility of evidence. [Citations.] Speaking more particularly, it examines for abuse of discretion a decision on admissibility that turns on the relevance of the evidence in question. [Citations.]’ ” (City of Ripon v. Sweetin (2002) 100 Cal.App.4th 887, 900.) “Under this standard, we will not reverse a trial court’s ruling if it was ‘based on a “reasoned judgment” and complies with . . . “. . . legal principles and policies appropriate to the particular matter at issue.” [Citations.]’ [Citation.] Rather, we will only overturn the court’s decision if it ‘ “exceeds the bounds of reason, all of the circumstances before it being considered.” ’ [Citation.]” (Rancho Penasquitos, supra, 105 Cal.App.4th at p. 1027; but see Dina, supra, 151 Cal.App.4th at pp. 1047-1048.)
Mission West argues that the court improperly relied on The Plan to determine the highest and best use of its land because it is improper to use a protective zoning ordinance such as The Plan to establish just compensation. Mission West’s argument is based on the fact that, although Parcel 2 was originally zoned for light industrial, office, or research and development under The Plan, it was subsequently restricted by Mountain View to landscaping and non-required parking in anticipation of VTA’s Route 85/Highway 101 interchange project. Mission West cites People ex rel. Dept. of Public Works v. Graziadio (1964) 231 Cal.App.2d 525 (Graziadio) in support of its argument. The court in Graziadio stated: “If property to be taken is to be valued by the jury ‘just as though there was no taking for highway purposes,’ certainly the landowner must be permitted to introduce evidence tending to show that the zoning was predicated upon the taking.” (Id. at p. 530).)
“The fair market value of the property taken shall not include any increase or decrease in the value of the property that is attributable to any of the following: [¶] (a) The project for which the property is taken. [¶] (b) The eminent domain proceeding in which the property is taken. [¶] (c) Any preliminary actions of the plaintiff relating to the taking of the property.” (§ 1263.330.) Thus, property condemned in an eminent domain proceeding must be valued as if the project had not taken place. (Graziadio, supra, 231 Cal.App.2d at p. 529.) “ ‘[A]n actual change in zoning which results from the fact that the project which is the basis for the taking was impending cannot be taken into account in valuing the property in a condemnation proceeding. [Citations.] . . . Therefore, changes in land use, to the extent that they were influenced by the proposed improvement, [are] properly excluded from consideration in evaluating the property taken.’ [Citation.]” (Rancho Penasquitos, supra, 105 Cal.App.4th at p. 1029.)
“It is practical and logical to require that such invalid zoning be disregarded where the zoning authority is also the condemner. Permitting recovery in eminent domain disregarding the zoning restriction combines in one action the right to recover compensation for both the inverse condemnation resulting from the disguised taking in the form of zoning and for the actual taking of the property. The process avoids separating the matter into two causes involving the same subject matter and the same parties. Moreover, the condemning authority is also the zoning government so that much of the vice of a collateral attack on zoning in the usual eminent domain proceeding is not present.” (People ex rel. Dept. Pub. Wks. v. Southern Pac. Trans. Co. (1973) 33 Cal.App.3d 960, 966 (Southern Pacific); Rancho Penasquitos, supra, 105 Cal.App.4th at p. 1032.)
“In contrast, admission of the zoning ordinance that was designed to freeze or depress the price of the property for later acquisition [is] proper in actions where the condemning and zoning authorities [are] not the same: ‘To require that the city’s zoning which was an inverse condemnation by that body be disregarded here shifts the financial burden of the disguised taking from the city to the [actual condemner]. It permits a condemnee which failed to pursue its remedies for inverse condemnation against the city to recover compensation from an entity not directly responsible for the damage compensated.’ (Southern Pacific, supra, 33 Cal.App.3d at p. 966.)” (Rancho Penasquitos, supra, 105 Cal.App.4th at p. 1032.)
Had the eminent domain action in the matter before us been commenced by Mountain View against B&B, the trial court could have properly excluded evidence of the existing zoning restrictions on the property to landscaping and non-required parking. (Southern Pacific, supra, 33 Cal.App.3d at p. 965; Rancho Penasquitos, supra, 105 Cal.App.4th at pp. 1032-1033.) When B&B bought the land that is now Parcel 1 and Parcel 2, it was all zoned for light industrial, office, or research and development under The Plan. However, when B&B sought to develop the land, Mountain View would not allow B&B to develop what became Parcel 2, and restricted the use of that part of B&B’s land to landscaping and non-required parking. Thus, B&B might have been entitled to recover compensation in a later eminent domain proceeding initiated by Mountain View for both the inverse condemnation resulting from the disguised taking in the form of the zoning restriction and from the actual taking of the property. (Southern Pacific, supra, 33 Cal.App.3d at p. 966; Rancho Penasquitos, supra, 105 Cal.App.4th 1013.)
However, the eminent domain proceeding in the matter before us was commenced by VTA against Mission West. Thus, unlike in Southern Pacific, the condemning authority is not also the zoning authority. The zoning authority here was Mountain View while the condemning authority is VTA. In addition, when Mountain View limited the use of what is now Parcel 2 to landscaping and non-required parking, B&B was the owner of the property, and when Mission West bought the land from B&B, it was fully aware of the zoning restrictions that Mountain View had already placed on what became Parcel 1 and Parcel 2. B&B was allowed to develop Parcel 1 as it did because all development rights that would otherwise be available to Parcel 2 were transferred to Parcel 1 and were incorporated into the Microsoft project. The FAR of .344 for the Microsoft project was computed based on the entire area of B&B’s land, the land comprising both Parcel 1 and Parcel 2. Therefore, while B&B might have been able to recover compensation from Mountain View for inverse condemnation resulting from the restricted zoning on Parcel 2, Mission West is not entitled to compensation from either Mountain View or VTA for that inverse condemnation. Mission West is only entitled to compensation from VTA for its actual taking of property restricted to use as landscaping, non-required parking and open space, and the trial court did not err or abuse its discretion in so ruling.
Severance Damages
The trial court also found in its November 10, 2003 order that the “larger Parcel for purposes of valuing severance damages, if any, is Parcel 2.” Mission West concedes that the designation of the larger parcel for severance damages, if any, is an issue properly determined by the trial court. However, Mission West contends that the record does not support the trial court’s findings and order. “[B]ased on the facts clearly and undisputably in the record, the ‘larger parcel’ is in fact the whole of [Mission West’s] continguous property, which is the balance of the privately-held property in the L’Avenida South Precise Plan including both Parcels 1 & 2.”
VTA contends that the record supports the trial court’s order. “[W]hile unity of title and physical contiguity existed with regard to Parcels 1 and 2, there was no unity of use. Accordingly, the Pretrial Order correctly held that severance damages were required to relate solely to Parcel 2, which was the larger parcel established by the evidence.”
When property acquired by eminent domain is part of a larger parcel, compensation must be awarded not only for the part taken, but also for the injury, if any, to the part remaining. (Cal. Const., art. I, § 19; § 1263.410, subd. (a).) Compensation for injury to the remainder property is called severance damages. (Neumann, supra, 6 Cal.4th at p. 741; Los Angeles County Metropolitan Transportation Authority v. Continental Development Corp. (1997) 16 Cal.4th 694, 698 (Continental Development); Campus Crusade, supra, 41 Cal.4th at p. 965.) Severance damages are measured by comparing the fair market value of the remainder property before and after the taking. (§ 1263.410; Neumann, supra, 6 Cal.4th at p. 745; Continental Development, supra, 16 Cal.4th at pp. 704, 715.) “The property taken must . . . be valued in the ‘before condition;’ that is, as if the subject project had never taken place, without considering increases or decreases in its value caused by the project. [Citations.] The ‘after condition’ refers to the reduction in value, if any, to the part of the remaining property that is caused by the condemnation. [Citation.]” (Rancho Penasquitos, supra, 105 Cal.App.4th at p. 1029.) “Because severance damages are intended to compensate the property owner for the destruction of the integrity of his land [citation], the property owner must be able to demonstrate both how his property functions as an integrated unit and how the value of what remains has been injured by the taking of a part.” (Neumann, supra, 6 Cal.4th at p. 745.) The claimed loss in market value must directly and proximately flow from the taking. Thus, recovery may not be based on “ ‘ “speculative, remote, imaginary, contingent, or merely possible” ’ ” events. (City of Hollister v. McCullough (1994) 26 Cal.App.4th 289, 296-297; see also Neumann, supra, at pp. 748-749.)
Although section 1263.410, subdivision (a), provides that severance damages are available “[w]here the property acquired is part of a larger parcel,” the term “larger parcel” is not further defined in the statutes governing eminent domain law (§§ 1230.010 – 1273.050), thus permitting “continued judicial development” of the concept. (12 Cal. Law Revision Com. Rep. (1974) p. 1835.) “The property owner’s intended unified use of the separate parcels, standing alone, is insufficient to establish the ‘larger parcel’ that is prerequisite to his proof of injury; rather, he must also demonstrate that his intended use is reasonably probable in the reasonably foreseeable future. The facts relevant to the proof of these conditions will undoubtedly vary with the circumstances of each case, but we anticipate that they will typically include, among other things, evidence of the existing uses of the property, the time and expense necessary for their termination, the physical adaptability of the property for use as an integrated whole, the existing and the proposed zoning applicable to the several parcels in question, local market conditions, the local regulatory climate, and the property owner’s plans for development. These are indeed factual issues, but whether, taken as a whole, they support a finding that a larger parcel exists remains an issue of law to be decided by the trial court. [Citation.]” (Neumann, supra, 6 Cal.4th at p. 757.)
Thus, although the question whether condemned property is part of a larger parcel within the meaning of the statute is generally described as a question of law, it also involves issues of fact. (Neumann, supra, 6 Cal.4th at pp. 745, 757; Harcros Pigments, supra, 101 Cal.App.4th at p. 1117; People ex rel. Dept. Publ. Wks. v. International Tel. & Tel. Corp. (1972) 22 Cal.App.3d 829, 833 (International Tel. & Tel.); People ex rel. Dept. Pub. Wks. v. Nyrin (1967) 256 Cal.App.2d 288, 292 (Nyrin).) If there is no conflicting evidence and the court decides as a matter of pure statutory interpretation whether the condemned parcel is “part of a larger parcel” under section 1263.410, we review the issue independently of the trial court. However, where the trial court weighs evidence, judges credibility of witnesses, and decides issues of fact, we must apply the deferential substantial evidence standard of review to the court’s factual findings. (Nyrin, supra, 256 Cal.App.2d at p. 292; International Tel. & Tel., supra, 22 Cal.App.3d at pp. 833-834.) In this case, because the facts underlying the determination of the larger parcel are essentially undisputed, although the parties draw different conclusions from the facts, our review is independent.
“Traditionally, three requirements must be met to establish that the land remaining to the owner after condemnation is part of a ‘larger parcel’: (1) unity of title; (2) contiguity of the parcels; and (3) unity of use. [Citations.]” (Neumann, supra, 6 Cal.4th at p. 745.; City of Los Angeles v. Wolfe (1971) 6 Cal.3d 326, 330.) In this case there is no dispute that Parcel 2 and Parcel 1 have unity of title and physical contiguity. The issue here is whether Mission West had shown unity of use, that is, “that there is a probability that [the] contiguous commonly owned lots are or will be available for development or use as an integrated economic unit in the reasonably foreseeable future” so that “the separate lots may be considered as a larger parcel for purposes of awarding severance damages.” (Neumann, supra, 6 Cal.4th at p. 756.)
In this case, the parties do not dispute that: (1) B&B owned nine parcels covered by The Plan, and sought to develop a five-building research and development campus on the entire property in 1998; (2) one of the conditions Mountain View placed on approval of the development was that all nine parcels be merged and that a new lot line be created; (3) the new lot line created Parcel 1 & Parcel 2 in 1999, and Parcel 2 was created because Mountain View did not want B&B to develop any land that might be needed for a future highway interchange project; (4) one of the conditions Mountain View placed on approval of the lot line adjustment was that all development rights to Parcel 2 be transferred to Parcel 1; (5) the design of the approved development on Parcel 1 took into account all of the floor space and parking space allotments allowed for both Parcel 1 and Parcel 2; (6) the parties expected that, when the highway interchange project was completed, all the remaining portion of Parcel 2 would be rejoined to Parcel 1; (7) in 2002 VTA condemned only a portion of Parcel 2, the remaining portion of Parcel 2 is contiguous to Parcel 1, and the highest and best use of the remaining portion is for added landscaping and parking for the development on Parcel 1.
After independently reviewing these undisputed facts as a whole, we find as a matter of law that they support the finding that “a larger parcel exists,” which consists of Parcel 1 and Parcel 2. (Neumann, supra, 6 Cal.4th at p. 757.) Parcel 1 and Parcel 2 have unity of title and are contiguous. In addition, they have unity of use. Mountain View required the creation of Parcel 2, and the development rights for Parcel 2 were taken into account when Mountain View approved the development on Parcel 1. The highest and best use of Parcel 2 is for additional parking and landscaping for the development on Parcel 1. In addition, the parties expected that the remaining portion of Parcel 2, after the taking, would be rejoined to Parcel 1. Therefore, for purposes of severance damages, Mission West was entitled to present evidence to the jury that the larger parcel for purposes of severance damages, if any, was Parcel 1 and Parcel 2. “[T]he prospective joinder of the severed property with other land is one of the factors which a valuation witness properly may consider to determine market value of the remaining property both before and after severance from the part taken . . . . The same factors should be used in determining the market value of the remainders in the before condition and in the after condition as well as for determining the value of the part taken.” (People ex rel. Dept. Pub. Wks. v. TeVelde (1970) 13 Cal.App.3d 450, 455.)
The trial court’s November 10, 2003 ruling precluded Mission West from submitting testimony showing the impact the severance of a part of Parcel 2 had on Parcel 1 as well as on the remainder of Parcel 2. That is, Mission West was precluded from submitting testimony to show the value of the larger parcel consisting of Parcel 1 and Parcel 2 before the taking and the reduction in value of the larger parcel consisting of Parcel 1 and Parcel 2 after the taking. Mission West must be allowed to present evidence to a jury that the amount of compensation it is entitled to is based on the value of the larger parcel consisting of Parcel 1 and Parcel 2.
Accordingly, we will reverse the judgment and remand the matter for a new jury trial. Because the parties may present additional evidence and argument on the issue of whether Parcel 2 suffered a loss of developmental potential, we do not reach Mission West’s third contention on appeal.
DISPOSITION
The judgment is reversed. Appellant shall recover its costs on appeal. (Code Civ. Proc., § 1268.720.)
I CONCUR: MCADAMS, J.
Mihara, J., Concurring and Dissenting.
While I agree with my colleagues that the superior court erred in finding that the larger parcel for purposes of severance damages is Parcel 2, I do not agree with my colleagues’ conclusion that it was proper for the superior court to make a pretrial ruling that the highest and best use of Parcel 2 is for landscaping, parking and open space. I would conclude that the superior court erred in making factual findings that the highest and best use for Parcel 2 was limited to parking, open space, and landscaping, and that appellant Mission West Shoreline LLC (Mission West) lacked any development rights for Parcel 2.
I. Background
In 1990, the City of Mountain View adopted the L’Avenida South Precise Plan (the Plan), which was a specific zoning plan for the 34 acres of land in the City of Mountain View where the then-nine parcels which eventually were transformed into Parcels 1 and 2 are located. The Plan specified that this land should be developed “for light industrial, office, or research and development use.” The Plan set forth a specific maximum floor area ratio (FAR) for this land. A FAR restricts the floor area that may be developed on a parcel based on the parcel’s size. The FAR for this land was set at .32 or 14,000 square feet per acre, but the Plan provided that the FAR could be increased to .344 or 15,000 square feet per acre as a design incentive if the project provided “innovative, award-quality architectural and site design.” The Plan also provided “Other Special Conditions.” One of these conditions was the following. “Land should be reserved (that is not built on or developed except for landscaping or nonrequired parking) for the planned freeway improvements to Route 85/Highway 101 [85/101]. The applicant should contact the Santa Clara office of Caltrans for information about the specifics of the planned improvements.” At the time the Plan was adopted in 1990, the exact route for the 85/101 freeway improvements was not known.
Berg & Berg Enterprises, Inc.’s land was the only private land covered by this Plan.
Mission West’s predecessor in interest, Berg & Berg Enterprises, Inc. (B&B), purchased the parcels in 1996. In 1998, B&B sought approval from the City of Mountain View for its planned development of a 483,500 square-foot Microsoft campus on the nine parcels. The campus was designed in accordance with the Plan. B&B received the “design incentive” increase in the FAR. The City of Mountain View granted a permit to B&B for the Microsoft campus in April 1998.
B&B and Mission West are not significantly different owners. Carl Berg was the principal in B&B, and he continues to be a primary beneficial owner of Mission West.
B&B also applied for a lot line adjustment that was specifically intended to accommodate the planned freeway improvements. The lot line adjustment would transform the nine parcels into two parcels, with the campus to be built entirely on Parcel 1, and Parcel 2 remaining undeveloped to accommodate the planned freeway improvements.
In October 1998, the Subdivision Committee, which is the administrative body authorized to approve lot line adjustments in the City of Mountain View, conditionally approved B&B’s application for a lot line adjustment. The approval was “subject to the conditions listed on Exhibit A [which was attached to the approval letter]” which “must be fulfilled prior to recordation of the lot line adjustment, unless otherwise noted.” The conditions of approval included the requirement that “All development rights for Parcel 2 have been transferred to Parcel 1 and incorporated into the approved project, No. 028-98-PCZA.”
A “Notice of Lot Line Adjustment” was recorded in September 1999. The recorded notice stated that “the Public Works Director has determined that all conditions of approval have been complied with.” Carl Berg signed the notice of lot line adjustment on behalf of B&B. The lot line adjustment resulted in Parcel 1 containing 31.284 acres, while Parcel 2 contained 2.0488 acres.
B&B transferred title to Mission West, and Santa Clara Valley Transportation Authority (VTA) subsequently filed this eminent domain action seeking to take a portion of Parcel 2. VTA sought a pretrial order providing that (1) “the highest and best use of Parcel 2 . . . is for open space” and (2) excluding any evidence “asserting as an element of damages any loss of development potential to the lands that are now Parcels 1 and 2, either separately or together.” VTA submitted documentary evidence in support of its motion, and Mission West opposed the motion and submitted documentary evidence in support of its opposition.
The superior court ordered that: (1) “No evidence shall be admitted that is inconsistent with the highest and best use of Parcel 2 . . . being open space, parking, or landscaping as specified in [the Plan];” and (2) “No evidence shall be admitted that allocates as an element of compensation any loss of development potential to the lands that are designated as Parcel 1 . . . and Parcel 2 . . . .” The court refused to consider Mission West’s subsequent motion for reconsideration.
II. Discussion
There are three preliminary issues that require resolution at the outset. First, does Code of Civil Procedure section 1260.040 permit a court to itself resolve a factual issue related to compensation rather than permitting a party to place this issue before the jury? Second, assuming that the court may make such a pretrial ruling, what is the standard of proof that the superior court must utilize in making such a determination? That is, must the moving party establish that there are no material factual disputes, and it is entitled to prevail on that issue as a matter of law (a standard of proof akin to a summary adjudication standard), or is it enough that the moving party provided proof by a preponderance (even if the opposing party submitted evidence to the contrary)? Third, what is our standard of review? The answer to this third question depends on the answer to the second question. If the standard of proof is one akin to the summary adjudication standard, we should exercise de novo review. If the superior court was making factual findings on disputed evidence, our review would logically be for substantial evidence. The resolution of these three questions facilitates and informs my analysis of the issues raised by Mission West.
All further statutory references are to the Code of Civil Procedure unless otherwise noted.
A. Scope of Code of Civil Procedure Section 1260.040
Section 1260.040 permits a party to an eminent domain proceeding to seek pretrial resolution of a dispute between the parties “over an evidentiary or other legal issue affecting the determination of compensation . . . .” (§ 1260.040, subd. (a).) The issue of the highest and best use of property is one “affecting the determination of compensation,” so the only question is whether this issue was “an evidentiary or other legal issue.”
Section 1260.040 was enacted in 2001, and only one case has interpreted it. Dina v. People ex rel. Dept. of Transp. (2007) 151 Cal.App.4th 1029 (Dina) was an inverse condemnation case in which the trial court resolved the issue of liability under section 1260.040 and dismissed the case. On appeal, the plaintiffs claimed that section 1260.040 did not permit the court to dismiss the case. The Second District Court of Appeal held that the trial court could properly make a dispositive ruling on such a motion if the plaintiffs failed to produce evidence that could demonstrate liability by a preponderance. Utilizing a de novo standard of review, the Second District upheld the trial court’s ruling.
While Dina is the only case addressing the scope of section 1260.040, its holding is limited. Liability is an issue for the court in an eminent domain action, so the trial court in Dina was the appropriate factfinder on all liability issues, even those that could not be resolved as a matter of law. More importantly, the liability issue raised by the motion in Dina could properly be resolved as a matter of law because there was a lack of substantial evidence to support a jury finding of liability by a preponderance of the evidence. Since the liability issue could be resolved as a matter of law, it was unquestionably a “legal issue” which fell within the facial ambit of section 1260.040. It is well accepted that appellate courts review legal issues, which have been resolved as a matter of law, under a de novo standard of review.
Dina does not tell us when section 1260.040 may be utilized to resolve a factual issue that is ordinarily required to be submitted to the jury. Valuation is a factual issue for the jury. (Metropolitan Water Dist. of Southern California v. Campus Crusade for Christ, Inc. (2007) 41 Cal.4th 954, 971 (Campus Crusade).) “[T]he 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) 6 Cal.4th 738, 744.)
Since the highest and best use to which the property is a factual question for the jury, it may be resolved by the court, rather than the jury, only if it can be resolved as as a matter of law—thereby becoming a “legal” issue within the scope of section 1260.040.
The majority opinion appears to acknowledge that the superior court’s ruling was not an evidentiary issue when it characterizes the court’s order as a “ruling that the highest and best use of Parcel 2 was open space, parking or landscaping . . . .” (Maj. opn., ante, at p. 10) Obviously, this was a factual finding.
B. Standard For Resolving “Legal Issues” Under Section 1260.040
The California Supreme Court’s decision in Campus Crusade is instructive on the issue of the appropriate standard for the trial court to apply in resolving a section 1260.040 motion. In Campus Crusade, the property’s restrictive zoning permitted only limited residential use. The property owner sought to introduce evidence that the highest and best use of the property was a comprehensive development that included residential, commercial, industrial, and recreational uses. (Campus Crusade, supra, 41 Cal.4th at p. 966.) The trial court precluded the property owner from introducing any such evidence because the court concluded, as a factual matter, in advance of trial, that there was not a reasonable probability that the property would be rezoned. (Campus Crusade, at p. 967.)
The California Supreme Court held that the trial court had usurped the jury’s role because this was a valuation issue that should have been submitted to the jury. (Campus Crusade, supra, 41 Cal.4th at p. 967.) “If the trial court determines that no fact finder could find a reasonable probability of rezoning on the record presented, it may exclude all evidence and opinions of value based on a use other than that authorized by the existing zoning. [Citations.] If, on the other hand, the trial court determines that there is sufficient evidence of a reasonable probability of rezoning to warrant submitting the issue to the jury, it is for the jury, in considering the weight to be given valuation testimony based upon a reasonable probability of rezoning, to determine whether there was a reasonable probability of rezoning and, if so, its effect on the market value of the property.” (Campus Crusade, at p. 968.)
The California Supreme Court’s analysis in Campus Crusade necessarily dictates that factual issues related to compensation in an eminent domain action may be resolved by the court, rather than a jury, only when the moving party has satisfied a standard akin to that applicable in the standard applicable on a summary adjudication motion. If the moving party fails to produce substantial evidence that would support a finding in its favor on the issue, or the adverse party produces substantial evidence that could support a jury finding in its favor on the issue, the issue must go to the jury. It is only where the moving party produces substantial evidence to support its position and the adverse party fails to produce substantial evidence to counter that showing that the court may decide the issue in advance of trial and preclude the presentation of the adverse party’s evidence to the jury.
C. Standard of Appellate Review
Since a trial court is only permitted to resolve “legal issues” under section 1260.040, and it may do so only under a standard that is akin to that applicable to summary adjudication rulings, it naturally follows that review of such a ruling must be de novo. The question of whether a party has produced substantial evidence is a legal issue upon which a trial court exercises no discretion, and its ruling on such an issue is entitled to no deference.
D. Application To The Superior Court’s Ruling Here
Identification of the highest and best use for condemned property in an eminent domain action is a factual question for the jury. Such an issue may be resolved by the court on a section 1260.040 motion only if the moving party submits substantial evidence to support its position and the adverse party fails to produce substantial evidence to counter that showing. Our review of a section 1260.040 ruling is de novo.
In this case, the question is whether the evidence before the superior court on VTA’s motion established that the property was not available for any use other than open space, parking and landscaping. We independently review the evidence produced by the parties on VTA’s motion to determine whether the superior court’s order was a proper exercise of its limited power to decide legal issues under section 1260.040.
1. VTA’s Motion and Supporting Evidence
VTA’s motion initially stated that it sought a “ruling of law . . . restricting Owner from presenting evidence of damages for any loss caused by the actions of Mountain View, and prohibiting any method of valuation based on the development of Parcels 1 or 2 as an office complex or other use inconsistent with zoning and other restrictions imposed by law.” However, the conclusion of VTA’s motion asked the that “the Court: [¶] 1) Find that the highest and best use of Parcel 2 . . . is for open space; . . . 3) Order that no evidence be admitted asserting as an element of damages any loss of development potential to the lands that are now Parcels 1 and 2, either separately or together.” (Italics added.)
VTA submitted solely documentary evidence in support of its motion. These documents were: (1) excerpts from the transcript of Brad Eckhardt’s deposition; (2) the Plan; (3) B&B’s application for a permit for the Microsoft campus; (4) the resolution approving the permit; (5) B&B’s application for the lot line adjustment; (6) the Subdivision Committee’s letter conditionally approving the lot line adjustment; (7) the recorded notice of lot line adjustment approval; (8) plat maps of the parcels; (9) a VTA comment letter on the Environmental Impact Report (EIR) for the Microsoft campus; and (10) a City of Mountain View ordinance establishing that the Subdivision Committee is the administrative body authorized to grant or deny lot line adjustment applications.
The Plan zoned the land “for light industrial, office, or research and development use.” It provided that “[l]and should be reserved (that is not built on or developed except for landscaping or nonrequired parking) for the planned freeway improvements to Route 85/Highway 101. The applicant should contact the Santa Clara office of Caltrans [VTA’s predecessor] for information about the specifics of the planned improvements.” The Plan itself did not specify the location or size of any parcel of land that “should be reserved” for the freeway improvements.
B&B’s January 1998 application for a permit for the Microsoft campus stated that the campus had been designed in accordance with the Plan. The April 1998 resolution approving the permit for the campus with conditions stated that the campus would be a 483,500 square foot development. The permit conditions provided: “Various alternatives are being studied to improve Highway 101. The applicant is advised that some of the land between the applicant’s proposed development and Highway 101 may or may not be required by the VTA, depending upon the specific alternative selected. It is recommended that the applicant contact the VTA to obtain the latest information on the Highway 101 route designs.”
B&B’s August 1998 lot line adjustment application stated that the proposed lot line adjustment would “accommodate Highway 101, Route 85 improvements and the Microsoft campus.” In October 1998, the Subdivision Committee notified B&B that it had conditionally approved the lot line adjustment. One of the conditions was that “[a]ll development rights for Parcel 2 have been transferred to Parcel 1 and incorporated into the approved project, No. 028-98-PCZA [the Microsoft campus].” The July 1999 notice of lot line adjustment approval, which was recorded in September 1999, stated “the Public Works Director has determined that all conditions of approval have been complied with” and was signed by Berg on behalf of B&B. The plat maps showed that, after the lot line adjustment, Parcel 1 would be 31.284 acres while Parcel 2 would be 2.0488 acres. The VTA comment letter contained no relevant information.
Eckhardt, a City of Mountain View senior planner, testified at his deposition that B&B had received the “design incentive” under the Plan that permitted an FAR of .344. The FAR had been “computed” based on the “net area . . . [of] both parcels one and two.” Eckhardt stated that the City of Mountain View “calculated [B&B’s] floor area and [B&B’s] design and parking requirement based on this whole site,” and “[t]here’s a condition of approval on this subdivision that says that that floor area for this other parcel was used. It’s burnt on this project . . . .” Eckhardt explained that the reference in the lot line adjustment conditions to “development rights” referred to the FAR restriction. B&B did not challenge the conditions of approval for the lot line adjustment, which could have been challenged by an appeal to the City Council. Eckhardt testified that, “as far as I know,” it was his “understanding that there is no development potential on parcel two.”
2. Mission West’s Opposition and Evidence
Mission West’s opposition to the motion disputed VTA’s claim that the zoning precluded any development other than open space and disputed VTA’s claim that all development rights for Parcel 2 had been transferred to Parcel 1 and incorporated into the Microsoft campus. Mission West argued that the City of Mountain View might well permit development on Parcel 2 because “[t]he FAR is not cast in stone” and “[t]he Council has the authority to waive the FAR guidelines or treat the new owner and separate Parcel #2 on its own merits.”
Mission West’s opposition was supported by Berg’s declaration and grant deeds for the two parcels. Berg asserted that the zoning for both Parcel 1 and Parcel 2 was “light industrial, office, or research and development, but with a building moratorium on Parcel 2 which lay within the areas under consideration as a possible location for expansion of the Highway 101/85 Interchange.” “This parcel was subject only to the moratorium on development which, if abandoned, would have released the property to its full potential.”
Berg asserted that the highest and best use for the property was not limited to parking, open space and landscaping. “The most obvious use for Parcel 2 was for additional parking for the buildings comprising the Microsoft campus. Other use[s] which would not adversely affect the landscape or environmentally sensitive concerns of the community would have included, under ground product or vault storage, backup fuel supply, etc. These are uses for which the existing zoning or Floor Area Ratio (FAR) limitations would not have been a significant impediment, yet maintain the land value.” (Italics added.)
Berg declared that, in his extensive experience as a developer, “all zoning is subject to exception or change so as to best accommodate the communities [sic] ever changing needs.” “Experience has led me to believe that the Floor Area Ration [sic] (“FAR”) was merely a bench mark and generalization to reach the development goal. It was subservient to the over all plan objective and would have been increased to accommodate the additional acres of Parcel 2.” Berg asserted that “[n]o one in authority agreed to trade development rights [FAR] belonging to Parcel 2 for an increase in development rights [FAR] on Parcel 1. If such were the case, it would have been specifically stated in writing, and signed by me on behalf of the owner.” The grant deeds, like the plat maps, showed that Parcel 1 was 31.284 acres and Parcel 2 was 2.0488 acres.
3. Analysis
Mission West claims that VTA cannot rely on any restrictive zoning in the Plan because such zoning was intended solely to facilitate VTA’s project. Mission West relies upon the rule that zoning enacted to facilitate a taking cannot be relied upon to determine the property’s value, and claims that this rule applies here notwithstanding the fact that the zoning ordinance was enacted by an entity other than the condemnor. Mission West also argues that it produced substantial evidence to support a finding that the property was available for a use other than parking, open space, or landscaping.
a. Consideration of Protective Zoning Ordinance
A line of cases stretching back more than half a century have dealt with the issue of what role zoning should play in determining the available uses for property being taken by the government in an eminent domain action. “[T]he general rule is that present market value must ordinarily be determined by consideration only of the uses for which the land ‘is adapted and for which it is available.’ The exception to this general rule is that if the land is not presently available for a particular use by reason of a zoning ordinance or other restriction imposed by law, but the evidence tends to show a ‘reasonable probability’ of a change ‘in the near future’ in the zoning ordinance or other restriction, then the effect of such probability upon the minds of purchasers generally may be taken into consideration in fixing present market value.” (Long Beach City H. S. Dist. v. Stewart (1947) 30 Cal.2d 763, 768-769 (Stewart).)
Thus, the general rule has long been that restrictions in a zoning ordinance should be considered by the factfinder in determining the highest and best use for condemned property, but the factfinder may also consider whether there was a reasonable probability that the zoning for the property would have changed in the near future. Over the years, courts have refined and supplemented this general rule.
In People ex rel. Dept. of Public Works v. Graziadio (1964) 231 Cal.App.2d 525 (Graziadio), the City of Fullerton had zoned the property for residential use, but identified it for possible conversion to commercial use. The owner asked the City to change the zoning to commercial use. The state, which was planning to build a state highway over a portion of the property, objected to a zoning change for that portion of the property. The City, in deference to the state, refused to change the zoning on that portion, but changed the zoning on the rest of the property. (Graziadio, at pp. 527-528.) In the subsequent eminent domain proceedings by the state to take that portion of the property, evidence of the City’s zoning was admitted, but the trial court refused to allow the owner to introduce evidence of the communication between the state and the City to show that the City’s refusal to change the zoning was induced by the state’s desire to build a highway on that portion. (Ibid.)
The Court of Appeal held that the trial court had erred in excluding this evidence because it “bears upon the possible uses of the property had there been no taking for highway purposes.” (Graziadio, supra, 231 Cal.App.2d at p. 529.) “[T]o the extent that the communication from [the state] affected the [City’s] R-1 zoning ordinance that was received in evidence, the communication was relevant and admissible.” (Ibid.) “[T]he landowner must be permitted to introduce evidence tending to show that the zoning was predicated upon the taking.” (Graziadio, at p. 530.)
Graziadio stands for the proposition that restrictions in a zoning ordinance enacted by one governmental entity to facilitate the taking of property by another governmental entity do not necessarily limit uses for which a property may be considered available in an eminent domain action.
In County of Santa Clara v. Curtner (1966) 245 Cal.App.2d 730 (Curtner), the County condemned a portion of the defendant’s land in connection with its construction of a freeway, and the City created a new traffic plan to accommodate the proposed freeway. The court held that the two governmental entities had not acted in cooperation, but instead the City had acted, for its own purposes, in reaction to the County’s actions. “Insofar as the [City’s] plan is designed to rectify detriment which the [County’s] freeway improvement has caused to the public as a whole, the individual property owner should look to the [City] planning authority for recompense.” (Curtner, at p. 750; see also People ex rel. Dept. Pub. Wks. v. Curtis (1967) 255 Cal.App.2d 378, 385-386 [following Curtner].)
Curtner, unlike Graziadio, did not involve actions by a City to facilitate another governmental entity’s taking, but actions by a City to remedy the fallout from another governmental entity’s taking.
In People ex rel. Dept. Pub. Wks. v. Southern Pac. Trans. Co. (1973) 33 Cal.App.3d 960 (SP), the property in question was a railroad right-of-way that had been abandoned. The City’s zoning for the property permitted residential and a few other uses but not commercial use. (SP, at p. 963.) It was undisputed that the City and the state had not agreed or cooperated in any way to depress the value of the property so that the state could acquire it for less. (SP, at p. 964.) In the state’s eminent domain action, the property owner introduced evidence that the highest and best use of the property was for commercial use, and that the City had a policy of preventing development of all abandoned railroad right-of-ways. (SP, at pp. 963-964.) The trial court excluded evidence of the property’s zoning. (SP, at p. 965.)
The Court of Appeal held that the exclusion of evidence of the City’s restrictive zoning was erroneous because the state could not be held liable for actions taken by the City. “The distinction between the governmental entity imposing the improper restriction in the guise of zoning and the governmental unit taking property for which the constitution demands it pay just compensation creates the critical problem in the case at bench. A zoning restriction imposed to depress value with a view to future eminent domain proceedings itself creates a cause of action in inverse condemnation against the governmental unit enacting the zoning ordinance.” (SP, supra, 33 Cal.App.3d at p. 966.)
“It is practical and logical to require that such invalid zoning be disregarded where the zoning authority is also the condemner. Permitting recovery in eminent domain disregarding the zoning restriction combines in one action the right to recover compensation for both the inverse condemnation resulting from the disguised taking in the form of zoning and for the actual taking of the property. The process avoids separating the matter into two causes involving the same subject matter and the same parties. Moreover, the condemning authority is also the zoning government so that much of the vice of a collateral attack on zoning in the usual eminent domain proceeding is not present.
“In contrast, logic dictates that the combination of causes of action is improper in the case at bench. To require that the city’s zoning which was an inverse condemnation by that body be disregarded here shifts the financial burden of the disguised taking from the city to the state. It permits a condemnee which failed to pursue its remedies for inverse condemnation against the city to recover compensation from an entity not directly responsible for the damage compensated. It is damage to the condemnee and not benefit to the condemner that is recoverable. [Citation.] Since the condemnee has its rights of recovery against the city, there is no compelling need that the same damage be compensated in the eminent domain proceeding brought by the state. [¶] A realistic approach is to treat the existing zoning as a factor bearing on valuation in the sense that it would be considered by a willing buyer and willing seller of the property and to also consider the potential invalidity of the zone as evidence of the reasonable probability of a zoning change, another factor to be considered by the theoretical willing seller and purchaser.” (SP, supra, 33 Cal.App.3d at pp. 966-967.) The court in SP cited Graziadio with approval. (SP, at p. 967.)
Although SP used very broad language and suggested that there is a bright-line rule that zoning ordinances enacted by one governmental entity cannot be disregarded in an eminent domain action by a second governmental entity, its facts, coupled with its express approval of Graziadio, limit the scope of its holding. SP only stands for the same proposition as Curtner. When one governmental entity enacts restrictive zoning that is not intended to facilitate a taking by a second governmental entity, the restrictive zoning is relevant on the issue of the available uses for the property in an eminent domain action by the second governmental entity.
The most recent case to discuss this issue did not diverge from the prior cases. In City of San Diego v. Rancho Penasquitos Partnership (2003) 105 Cal.App.4th 1013 (RPP), the City condemned a portion of a parcel for a freeway project. The parcel was zoned for agricultural use, and the City contended that it had to be valued as agricultural land because the City had zoned it, and all property in the potential path of the freeway project, to preclude development. (RPP, at pp. 1017-1018.) Rancho Penasquitos Partnership (Rancho) contended that the zoning should not be considered because the City was both the condemnor and the zoning authority, and Rancho sought to exclude evidence of the City’s restrictive zoning. (RPP, at p. 1018.) Rancho contended that the property could be rezoned for residential use. (Ibid.) The City sought to exclude evidence that the property could be rezoned. The trial court excluded evidence of the City’s restrictive zoning and allowed in evidence that the property could be rezoned. The City challenged these rulings on appeal. (RPP, at pp. 1018-1019.) The Court of Appeal rejected the City’s challenges and held that, because the condemnor was the zoning authority, the restrictive zoning could not be considered in valuing the property. (RPP, at p. 1019.)
Since RPP did not involve a situation where there was a distinction between the condemnor and the zoning authority, its holding did not alter the rules as established in the prior cases.
The issue in the case before us is whether Mission West should have been permitted to introduce evidence that its property was available for a use that would not have been permitted under the City of Mountain View’s zoning ordinance. The general rule is that the restrictions in a zoning ordinance limit the available uses for a property unless there is a reasonable probability of a zoning change in the near future. However, the zoning ordinance will not necessarily limit the available uses of the property if the zoning ordinance was enacted to facilitate the taking, even if the zoning ordinance was enacted by a governmental entity other than the one taking the property.
When these rules are applied to the undisputed facts, it is readily apparent that the City of Mountain View’s zoning ordinance did not itself preclude Mission West from introducing evidence in an attempt to prove that Parcel 2 was available for a use other than those specified in the zoning ordinance. The zoning ordinance’s restrictions were explicitly premised on the specific project for which VTA sought to take the property and were indisputably intended to facilitate VTA’s taking of the property. Indeed, the zoning ordinance, instead of specifically identifying the location or size of the parcel of land that was restricted, directed property owners to contact VTA’s predecessor to determine what would be permitted. A clearer case of a zoning ordinance intended to facilitate a taking cannot be imagined. It follows that the superior court could not properly support its exclusion of evidence of an available use of the property that was inconsistent with the City of Mountain View’s zoning ordinance by relying solely on the existence of the zoning ordinance.
b. Evidence of Available Uses
Although the City of Mountain View’s zoning ordinance did not provide adequate support for the superior court’s order, the order could still be upheld if VTA produced other substantial evidence to support the superior court’s order and Mission West failed to produce substantial evidence to the contrary.
VTA relies on the evidence it produced of the lot line adjustment condition. This condition provided that “[a]ll development rights for Parcel 2 have been transferred to Parcel 1 and incorporated into the approved project, No. 028-98-PCZA [the Microsoft campus].” Mission West contends that it produced substantial evidence that its development rights to Parcel 2 were not in fact transferred to Parcel 1 in connection with the lot line adjustment, such an extraction would have been unlawful under Government Code section 66412, subdivision (d), and B&B never agreed to such a transfer.
Mission West’s reliance on Government Code section 66412, subdivision (d) is inapt. That subdivision applies only to “[a] lot line adjustment between four or fewer existing adjoining parcels.” (Govt. Code, § 66412, subd. (d), italics added.) B&B’s lot line adjustment involved nine existing adjoining parcels. Therefore, Government Code section 66412, subdivision (d) did not restrict the conditions on the lot line adjustment.
Nor can I credit Mission West’s contention that the lot line adjustment condition was not binding on it because B&B never agreed to the condition. The recorded notice of lot line adjustment approval stated that “the Public Works Director has determined that all conditions of approval have been complied with,” and the notice was signed by Carl Berg on behalf of B&B. (Italics added.) Berg’s signature on the lot line adjustment approval, which stated that the conditions had been fulfilled, can only be properly viewed as signifying B&B’s agreement to those conditions. Any other interpretation of this document would necessarily be premised on the assumption that B&B misrepresented both to the City and to any subsequent purchasers of the property that it had fulfilled the conditions. The record does not contain substantial evidence to support a jury finding by a preponderance that Berg engaged in such devious behavior.
The remaining issue as to the lot line adjustment condition is determining precisely what the condition means. Eckhardt testified that the “development rights” referenced in the condition referred to the permitted floor area that he understood had been transferred from Parcel 2 to Parcel 1. Berg’s declaration confirmed that this was also B&B’s understanding of the term “development rights,” as it was used by the City of Mountain View in the condition. The condition must be construed in accordance with the mutual intent of the City of Mountain View and B&B. Thus, the condition contemplated the transfer of permitted floor area from Parcel 2 to Parcel 1 so that the Microsoft campus could incorporate the floor area permitted for both parcels.
Eckhardt testified that B&B had utilized all of the permitted floor area for both parcels in the development on Parcel 1. However, other evidence conflicted with Eckhardt’s belief. VTA’s own evidence could have been interpreted to support a finding that only a portion of Parcel 2’s permitted floor area had been utilized in the development on Parcel 1. Nearly half of the permitted floor area for Parcel 2 had not been utilized in the development on Parcel 1. The Plan permitted a maximum of 15,000 square feet of floor area per acre. Based on the plat maps and the grant deeds, the acreage of Parcel 1 would have been permitted a maximum of 469,260 square feet of floor area, which is substantially short of the Microsoft campus’s permitted floor area of 483,500 square feet. The acreage of Parcel 2 would have been permitted a maximum floor area of 30,732 square feet. When these figures are combined, it is clear that approximately half of the floor area permitted for Parcel 2 was not utilized for the Microsoft campus on Parcel 1.
The total of these figures is 499,992 square feet, which is 15,492 square feet more than the size of the project.
It is possible, of course, that the relevant acreage figures for determination of the maximum permitted floor area for these parcels are different from those reflected on the plat maps and grant deeds. However, VTA did not adduce such evidence in support of its motion, and it would be pure speculation to assume that such evidence exists. The evidence that was before the superior court reflected that the acreages indicated on the plat maps, 31.284 acres for Parcel 1 and 2.0488 acres for Parcel 2, were accurate and reflected the acreage used for calculating the maximum permitted floor area. The EIR stated that the combined acreage for the two parcels was “approximately 33 acres in area.” Eckhardt testified that the determination of the maximum floor area for the two parcels was “a simple calculation” based on the “land area” on B&B’s plat map. Eckhardt also conceded that “there may be granted back some floor area back to parcel two” if it was not completely utilized on Parcel 1.
The evidence before the superior court on VTA’s motion could have supported a jury finding that about half of the maximum floor area permitted for Parcel 2 had not been utilized on Parcel 1, and therefore could have been transferred back to Parcel 2. Such a retransfer of “development rights” to Parcel 2 would have made Parcel 2 available for a use other than parking, open space, or landscaping. Berg’s declaration also indicated that Parcel 2 could have been developed, even in the absence of a retransfer of floor area, as “under ground product or vault storage, backup fuel supply” or some other use. VTA produced no evidence to show that these proposed uses would have been precluded by the City of Mountain View’s floor area restrictions.
VTA did not establish that Parcel 2 was not available for any use other than parking, open space, and landscaping, or that Mission West lacked any development rights for Parcel 2. The record before the superior court contains substantial evidence that Parcel 2 was available for other uses, and that Mission West retained some development rights to Parcel 2. Consequently, the superior court was not entitled to rule on these factual issues under section 1260.040 as a matter of law and was required to submit these factual issues to the jury. Its failure to do so was prejudicial error and requires reversal.
III. Conclusion
I would reverse the judgment in its entirety. The superior court’s pretrial orders were prejudicially erroneous, and the matter must be remanded for a new trial.