City’s Voluntary Acquisition of Properties Did Not Create Condemnation Blight

In City of Los Angeles v. Superior Court of Los Angeles County, (— Cal.Rptr.3d —-, Cal.App. 2 Dist., April 12, 2011), a court of appeal considered whether landowners proved that city’s voluntary acquisition of properties created “condemnation blight” such that the landowners were entitled to compensation from the city for inverse condemnation. The court of appeal held that the landowners failed to state a claim for inverse condemnation because they failed to show that the city either had a plan to use the land it acquired for a public purpose or intended to acquire the landowners’ property or any other properties in the area through condemnation.

Facts

Several landowners (“Landowners”) brought a lawsuit for inverse condemnation and damages against the City of Los Angeles (“City”). Landowners alleged City had announced a plan to expand the Los Angeles International Airport (“LAX”) into two nearby neighborhoods, Belford and Manchester Square, where Landowners owned property. Landowners alleged “City had ‘gone beyond merely planning’ and had acquired most of the properties in the area.” Landowners claimed that after City purchased a property its “practice was to raze any structures on it, or vacate and fence it.” City also allowed some properties to be used by the fire department for practice or for filming special effects involving explosions and fires. Landowners claimed City “‘gained de facto control over [their] property,’ that it was ‘effectively the only buyer and market for the property,’ and that it was ‘squeezing [Landowners]’ in order to ‘acquire [their] property on its own terms, on its own schedule and at its own convenience.'” Landowners asked for damages but did not ask the court to require City to purchase their properties.

City had paid over $40 million dollars to acquire properties in Belford and over $225 million dollars to acquire properties in Manchester Square. City had acquired 72 percent of multi-family dwellings in the two neighborhoods and 265 out of the 279 single-family dwellings. By August 2008, City had demolished 50 percent of the structures it had acquired in the two neighborhoods. In March 2009, City notified residents that demolition of City-owned properties would be complete by May.

Landowners argued City deliberately intended to create blight and encourage flight from the neighborhoods so that property values in the area would be reduced and then City could acquire the remaining land, including the land owned by Landowners, for reduced rates. They asserted City could have left the residents of the area in place until City’s “own plans were firmed up” and that City could end the blight by restoring the area to use by renting buildings instead of demolishing them. Landowners also argued City did not keep its properties free from debris and trash or provide adequate landscaping for the properties. Landowners had not attempted to sell their properties. City claimed it had no plans to develop or use the properties it had acquired through its voluntary acquisition program.

The trial court found that Landowners “had established that the City’s creation of ‘condemnation blight’ resulted in a ‘constitutional duty to pay just compensation to [Landowners].'” The court ruled in favor of the Landowners.

Decision

The court of appeal reversed the decision of the trial court and found Landowners failed to establish they were entitled to summary adjudication of their claim for inverse condemnation. “To establish a cause of action for inverse condemnation, the property owner must show there was an invasion or appropriation (a ‘taking’ or ‘damaging’) of some valuable property right which the property owner possesses by a public entity and the invasion or appropriation directly and specially affected the proper owner to his injury.” The government is obligated to pay an owner for property that the government takes or damages for “public use” or damages while constructing “public improvements.”

A property owner who merely establishes that property damage resulted from negligence by a public entity or employee does not have a claim for inverse condemnation. However, acts by a public entity that constitute a direct legal restraint on the use of the property or a physical invasion may “amount to a ‘de facto taking of the property’ for purposes of an inverse condemnation claim, even where the entity does not formally condemn or intend to condemn.” In this case, City did not physically invade Landowners’ property or place any legal restraints on their property.

Conduct that falls short of a legal restraint or physical invasion may lead to a viable claim for inverse condemnation. However, in order to establish such a claim, the condemnee must show “(1) the public authority acted improperly either by unreasonably delaying eminent domain action following an announcement of intent to condemn or by other unreasonable conduct prior to condemnation; and (2) as a result of such action the property in question suffered a diminution in market value.” Landowners’ claim would have to arise, if at all, under this legal theory.

To assert such a claim, the property owner “must establish first, that the public entity engaged in unreasonable activity, either by excessively delaying initiation of an eminent domain action or by other oppressive conduct; and second, that the offensive conduct was a precursor to the entity’s condemnation of the [owner’s] property for a public purpose.” Landowners presented no facts that City intended to acquire their properties through condemnation or had a plan to use their property in the future in a way that would require condemnation of their property or any property in Belford or Manchester Square. Landowners also failed to show that “City engaged in any unreasonable actions geared toward devaluing their property so that the City could acquire it at a discounted price.” Accordingly, the court held summary adjudication should not have been granted to Landowners on their claim for inverse condemnation.

Questions

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Jeffrey L. Massey or William T. Chisum | 916.321.4500

Jon E. Goetz | 805.786.4302