Judge Bruce G. Iwasaki, Case 22STCV36603 2023-02-21 Tentative Ruling

Tentative Ruling: The motion for order for prejudgment possession is conditionally granted.

In this eminent domain action, the City of Monterey Park (City or Plaintiff) seeks to acquire property located at 1688 Garvey Avenue belonging to Center Int’l Investments, Inc. (CII or Defendant). The acquisition is necessary to stabilize the site as part of the “Goodviews Abatement Project” (Project).

The City now moves for an order of prejudgment possession. CII opposes the motion, asserting there is no overriding need because the City already has possession, the proceeding is improper because it is a tactical delay to divert the issue from a parallel case that CII has filed against the City, and the City has failed to make the required deposit. The City reiterated its arguments in reply.

“Private property may be taken . . . for a public use and only when just compensation . . . has first been paid to, or into court for, the owner.” (Cal. Const., Art. I, § 19, subd. (a); see also Gov. Code, § 37350.5 [“A city may acquire by eminent domain any property necessary to carry out any of its powers or functions”].)

A plaintiff may move for prejudgment possession of property, “demonstrating that the plaintiff is entitled to take the property by eminent domain.” (Code Civ. Proc., § 1255.410, subd. (a).) “If the motion is opposed by a defendant or occupant within 30 days of service, the court may make an order for possession of the property upon consideration of the relevant facts and any opposition, and upon completion of a hearing on the motion, if the court finds each of the following:

(B) The plaintiff has deposited pursuant to Article 1 (commencing with Section 1255.010) an amount that satisfies the requirements of that article.

(C) There is an overriding need for the plaintiff to possess the property prior to the issuance of final judgment in the case, and the plaintiff will suffer a substantial hardship if the application for possession is denied or limited.

(D) The hardship that the plaintiff will suffer if possession is denied or limited outweighs any hardship on the defendant or occupant that would be caused by the granting of the order of possession. (Code Civ. Proc., § 1255.410, subds. (d)(2)(A)–(D).)

The City seeks to acquire a “270,462 square foot historically unstable property” to “protect the health and safety” of the public by stabilizing it as part of the Project.

Here, the first requirement under section 1255.410 is met. “A public entity may not commence an eminent domain proceeding until its governing body has adopted a resolution of necessity that meets the requirements of this article.” (Code Civ. Proc., § 1245.220.) “Except as otherwise provided by statute, a resolution of necessity adopted by the governing body of the public entity pursuant to this article conclusively establishes the matters referred to in Section 1240.030.”[1] (§ 1245.250, subd. (a).)

The Council of the City of Monterey Park adopted Resolution of Necessity 2022-R80 on October 5, 2022, with the findings required under Code of Civil Procedure section 1245.230. (Complaint, Ex. A.)

Defendant’s contention recognizes that the Resolution of Necessity creates a “conclusive presumption” of entitlement to take the property by eminent domain, but it tries to distinguish this from a “right to acquire the Subject Property.” This is unpersuasive. The Resolution satisfies the first requirement under section 1255.410.

Defendant also argues that there is no overriding need because “the City has already been in possession of the Subject Property for over a year.” It cites to Redevelopment Agency v. Norm’s Slauson (1985) 173 Cal.App.3d 1121 (Norms) that this proceeding is a “sham.” However, the issue in Norms involved a challenge to the “hearing which led to the adoption of the resolution of necessity.” (173 Cal.App.3d at p. 1127.) That is, the trial court found there was an “absence of any substantial evidence from the Agency that the taking of the [] lots in question was necessary to a public purpose or was compatible with the least private harm and the greatest public good.” (Id. at p. 1129, italics added.) That requirement is embedded in section 1245.230, mandating that the Resolution contain certain statements. (Code Civ. Proc, § 1245.230, subd. (c)(2).) Here, Defendant does not challenge the Resolution. Its argument is that this proceeding “appears to be a sham” because the City is already in possession of the Property.[2] Finally, CII’s position that this motion is “moot” because the City is already in possession, weighs in favor of granting the motion because CII is conceding it faces no prejudice or hardship.

As to the other requirements, the City has shown an overriding need for prejudgment possession and substantial hardship if the motion was denied. It avers that it previously entered into a settlement agreement with CII for a long-term solution to stabilize the Property. (Appendix, Exs. 2-4.) However, CII defaulted on the settlement, which necessitated the City to construct new plans to stabilize the hillside. (Id., Ex. 2, Conkle Decl., ¶¶ 3-7.) Construction has commenced and is expected to be completed by the end of February 2023; however, there are continuing geologic hazards including slope instability, expansive soils, and seismic risks. (Bow Decl., ¶¶ 3, 15.) If prejudgment possession is denied, this would threaten public health and safety because of the continued monitoring and maintenance necessary for the Project. (Id. at ¶¶ 3, 16, 17.)

Defendant fails to indicate any prejudice it would suffer if prejudgment possession was granted, and no declaration was filed attesting to any facts supporting a hardship. (Code Civ. Proc., § 1255.410, subd. (c).) Indeed, CII seemingly argues the opposite – it would suffer no injury because the City already has possession. The City also contends that its license to be on the Property “exists only as long as necessary to complete” the Project, which is expected to conclude in March 2023. Thus, if prejudgment possession is denied, the City will be unable to “secure the hillside and maintain the GAP infrastructure.” The Court finds that this outweighs any hardship that CII may suffer.

Finally, as to the deposit under Code of Civil Procedure section 1255.010, the City contends this is unnecessary because the “three nuisance abatement liens recorded against the Property in favor of City” exceed the Property’s appraised value. Defendant opposes, asserting that the City’s citation to sections 1265.210 and 1265.220 to use the liens as a deduction apply “from the judgment” and is inapplicable when deciding prejudgment possession.

Under article I, section 19, subdivision (a) of the California Constitution, the “Legislature may provide for possession by the condemnor following commencement of eminent domain proceedings upon deposit in court and prompt release to the owner of money determined by the court to be the probable amount of just compensation.” The purpose of this authority is to “protect[] the interests of both public entities and property owners.” (Property Reserve, Inc. v. Superior Court (2016) 1 Cal.5th 151, 188; Mt. San Jacinto Community College Dist. v. Superior Court (2007) 40 Cal.4th 648, 653 [“The just compensation is aimed at making the landowner whole for a governmental taking or damage to the owner’s property . . . ‘ “the owner is constitutionally entitled [to] the full and perfect equivalent of the property taken” ’] (Mt. San Jacinto).)

Here, the City produces the appraisal of Tony Hwang, who valued the Property at $6,400,000 as of January 23, 2022. (Hwang Decl., Ex. B.) The City produced evidence that it has two nuisance abatement liens recorded against the Property in its favor in the amounts of $1,253,613.46 and $4,436,217.07 that were recorded on May 17, 2022 and August 11, 2022. (Appendix, Exs. 15-16.) These liens were for CII’s failure to reimburse the City for its hillside nuisance remediation costs. In addition, there is a third lien that was recorded on December 7, 2022 in the amount of $2,665,405.63. (Campen Reply Decl., Ex. 20.) In total, there are $8,355,236.16 in liens against the Property, with the amounts increasing because of the City’s continuing efforts. (Id. at ¶ 3, Ex. 19.)

CII argues that the City is foreclosing on those liens and that CII is disputing their validity; however, it fails to provide any evidence outside of a conclusory statement by its counsel. (Hodges Decl., ¶ 22.) In its reply, the City contends that the foreclosure proceedings relate to a different property. (Campen Reply Decl., ¶ 6.) In any event, CII’s submission does not substantively challenge the validity of these liens.

While CII’s position may have textual support, the City’s position is consistent with economic reality. If the City’s nuisance liens exceed the value of the Property, it would make little economic sense to require an additional deposit. Neither party has cited any case on this issue and the Court is not aware of any. Of course, a defendant owner can always move to have the probable compensation recalculated under Code of Civil Procedure section 1255.030, though the text of this statute also requires that a deposit first be made. (Code Civ. Proc., § 1255.030, subd. (a).)

Irrespective of the practicality of the deposit, the Court has concerns related to a deposit for purposes of the valuation date at trial. “Because compensation is immediately available to the property owner in a quick-take action, the date of valuation of the property is statutorily required to be no later than the date the condemner deposits ‘probable compensation’ for the owner. (§ 1263.110 et seq.) The deposit earns statutory interest until it is withdrawn. (§ 1268.310.) The property owner can immediately withdraw the funds, but by doing so waives all rights to dispute the taking other than the right to challenge the amount of just compensation. (§ 1255.260.).” (Mt. San Jacinto, supra, 40 Cal.4th at p. 653.) Our Supreme Court held that the statutory date of valuation occurs “when a deposit was made before trial and the owner had access to the money at that time.” (Id. at p. 662.) Thus, where a “deposit of probable compensation is made, and the trial court determines that the amount equals or exceeds the probable amount of the owner’s just compensation, the property must be valued on the date of the deposit.” (Id. at p. 666; Code Civ. Proc., § 1263.110, subd. (a).)

If the City continues to rely on the $6,400,000 appraisal – which is less than outstanding liens – there may be potential concerns about determining the valuation date if no deposit is made.

Furthermore, there may be issues with waiver. Under section 1255.260, if any portion of the deposit is withdrawn, this “shall constitute a waiver by operation of law of all claims and defenses in favor of the persons receiving such payment except a claim for greater compensation.” Thus, a defendant owner who withdraws any amount is deemed to have waived its right to contest the taking. It is unclear what happens if there is no deposit for the Defendant to withdraw.

At least in the context of other lienholders on the Property, the correct procedure is to require the deposit. In Los Angeles County Metropolitan Transportation Authority v. Alameda Produce Market, LLC (2011) 52 Cal.4th 1100, 1104-1105, three lenders and lienholders applied to withdraw the deposit. The trial court ultimately decided the eminent domain case on its merits and ruled against the agency. However, the agency argued that because the lenders withdrew the money and the owner failed to object, section 1255.260 operated to waive the owner’s right to challenge the taking. Our Supreme Court disagreed, finding that nothing in the language of section 1255.260 “refers to a nonwithdrawing defendant’s failure to object” and thus, did not operate to waive the owner’s right to contest the case on the merits. (52 Cal.4th at pp. 1108-1109.) Here, the Court recognizes that the lienholder and the agency are one and the same, so there are no third-party lienholders.

Therefore, the Court is inclined to grant prejudgment possession on the condition that the amount of $1,000.00 be deposited with the State Treasury. This will allow the City to comply with its notice obligations and establish a date of valuation. This will also permit any party to challenge the probable compensation under section 1255.030 and provide the option of possible waivers under section 1255.260. In this largely unchartered territory, the Court will consider alternative suggestions on this issue and the parties should be prepared to discuss this matter further at the hearing.

Plaintiff also requests an order for the tax collector to certify information set forth in Code of Civil Procedure section 1260.250. That section provides that “the court shall by order give the tax collector the legal description of the property sought to be taken and direct the tax collector to certify to the court the information required by subdivision (c), and the tax collector shall promptly certify the required information to the court.” (Code Civ. Proc., § 1260.250, subd. (a).) The court order must be made on or before the earliest of (1) the date the court makes an order for possession, (2) the date set for trial, or (3) the date of entry of judgment. (Id., subd. (b).) The court order shall require certification of the following information:

1. The current assessed value of the property together with its assessed identification number.

2. All unpaid taxes on the property, and any penalties and costs that have accrued thereon while on the secured roll, levied for prior tax years that constitute a lien on the property.

3. All unpaid taxes on the property, and any penalties and costs that have accrued thereon while on the secured roll, levied for the current tax year that constitute a lien on the property prorated to, but not including, the date of apportionment determined pursuant to Section 5082 of the Revenue and Taxation Code or the date of trial, whichever is earlier. If the amount of the current taxes is not ascertainable at the time of proration, the amount shall be estimated and computer based on the assessed value for the current assessment year and the tax rate levied on the property for the immediately prior tax year.

4. The actual or estimated amount of taxes on the property that are or will become a lien on the property in the next succeeding tax year prorated to, but not including, the date of apportionment determined pursuant to Section 5082 of the Revenue and Taxation Code or the date of trial, whichever is earlier. Any estimated amount of taxes shall be computed based on the assessed value of the property for the current assessment year and the tax rate levied on the property for the current tax year.

5. The amount of the taxes, penalties, and costs allocable to one day of the current tax year, and where applicable, the amount allocable to one day of the next succeeding tax year, hereinafter referred to as the “daily prorate.”

“If the property sought to be taken does not have a separate valuation on the assessment roll, the information required by this section shall be for the larger parcel of which the property is a part.” (Id. at subd. (d).)

As the court is making a conditional order for possession, a court order pursuant to section 1260.250 is appropriate. The request is tentatively granted pursuant to the above condition.

[1] Section 1240.030 sets forth the conditions precedent to an entity exercising its eminent domain power.

[2] If Defendant is challenging the Resolution, it has not met its burden. “[O]nce a defendant property owner establishes by substantial evidence that the resolution of necessity was invalidly adopted and because of a gross abuse of discretion is not entitled to its ordinary conclusive effect, the burden of providing the elements for a particular taking must rest on the government agency.” (Norms, supra, 173 Cal.App.3d at p. 1128.) Defendant only cites to a parallel proceeding in a different Department of this Court wherein it requests declaratory relief and breach of contract. This does not challenge the Resolution of Necessity.

Department 58