Case Name: Santa Clara Valley Transportation Authority v. Schmidt, et al.

Case No.: 1-14-CV-261828

In this eminent domain case, Plaintiff Santa Clara Valley Transportation Authority moves for prejudgment possession of property located at 2301 Trade Zone Boulevard, San Jose, consisting of approximately 26,527 square feet. Plaintiff seeks a Partial Fee interest, a Temporary Construction Easement (“TCE”) interest and a Permanent Ingress/Egress Easement (“IEE”) interest. Plaintiff also moves for certification of taxes. Defendants Dieter Schmidt and Simin F. Schmidt, co-trustees of the Schmidt 1980 Trust, own the property, and oppose the motion.

According to the motion, the Partial Fee interest is needed to construct, monitor, and maintain a new pump station within the BART corridor immediately adjacent to the subject property. A PG&E transformer will also be on the property to support the subject property, as will a parking area, a fence and gate, and other appurtenances. The proposed Partial Fee interest will be 1,390 square feet, currently a part of Defendants’ parking lot. The TCE of 336 square feet will last for one month to allow Plaintiff to construct a fence around the equipment. The IEE of 2,709 square feet is required for ingress/egress of BART construction and maintenance vehicles that will monitor and maintain the pump station facility. Plaintiff has deposited $181,200, representing the deposit of probable compensation authorized and governed by CCP §§ 1255.010 et seq. The value was based on the appraisal of Partial Fee interest and the damages caused by a loss of parking to Defendants’ business.

I. Judicial Notice

Plaintiff asks for the court to take judicial notice of the Notice of Intent to Adopt Resolution of Necessity, the Resolution of Necessity, a Copy of Certified Transcript of Hearing on the Intent to Adopt a Resolution of Necessity, and Defendants’ Answer.

Official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States may be judicial noticed. Evid. Code, § 452(c). “Official acts” include reports, records, files, and notices maintained by local governments. Cruz v. County of Los Angeles (1985) 173 Cal.App.3d 1131, 1134. Records of any court of the state may be judicially noticed. Evid. Code, §452(d).

The Notice of Intent to Adopt Resolution of Necessity, the Resolution of Necessity, and the Transcript of Hearing are all official records of the Santa Clara Valley Transportation Authority, a local government agency. Therefore, those documents are judicially noticed. Defendants’ Answer is also a record of the state court, and is thus judicially noticed as well.

II. Motion for Prejudgment Possession

In a prejudgment possession motion, Plaintiffs must demonstrate (1) that the plaintiff is entitled to take the property by eminent domain and (2) has deposited the probable compensation for the property to be acquired. Code of Civil Procedure section 1255.410(a)(all statutory references are to the Code of Civil Procedure unless indicated otherwise). If the motion is opposed, then the plaintiff must also prove (3) that there is an overriding need for the plaintiff to possess the property prior to the issuance of final judgment, and (4) that the plaintiff will suffer if possession is denied outweighs any hardship on the defendant that would be caused by the granting of the motion. Section 1255.410(d)(2).

a. Authority to Take Property

Defendants assert that the right to take is an issue that must first be resolved before possession.

Plaintiff asserts that findings by its Board of Directors in its resolution of necessity are deemed conclusive by statute. The Board of Directors adopted a resolution of necessity that establishes (1) the public interest and necessity require the project; (2) the project is planned in the manner that will be most compatible with the greatest public good and the least private injury; (3) the property sought to be acquired is necessary for the project; and (4) an offer has been made to the owner or owners of records, or the offer has not been made because the owner cannot be located with reasonable diligence pursuant to section 1245.230(c). Although they were sent notice of the hearing and of their rights to object, Defendants failed to appear at the hearing.

Section 1240.030 addresses the manner of exercise of the power of eminent domain. According to section 1245.250(a), a resolution of necessity adopted by a governing body of a public entity conclusively establishes the matters referred to in section 1240.030. A valid resolution precludes judicial review [. . .] of the matters specified in section 1240.030. Legislative Committee Comment to Section 1245.250. If a party fails to object to an adoption of a resolution of necessity, despite having notice, the party is precluded from challenging these findings on the grounds of failure to exhaust its administrative remedies. People ex rel Dept. of Transportation v. Cole (1992) 7 CalApp.4th 1281, 1284-86.

Because Defendants, after notice, failed to object to an adoption of the resolution of necessity, the resolution of necessity is valid and precludes Defendants from objecting to the findings. See id. As a result, the resolution of necessity establishes that eminent domain may be exercised in this case. See Cal. Code Civ. Proc., § 1245.250(a).

b. Deposit

Defendants assert that the deposit of probable compensation is inadequate because (1) the deposit does not address the impact on Defendants’ business other than the loss of parking, and (2) the appraisal occurred on June 10, 2013. Defendants claim that the appraisal does not consider the side yard’s use for industrial uses, nor does it analyze turning movements of trucks delivering materials for fabrication of picking up finished product shipment.

Plaintiff claims that it has followed the proper procedure outlined in section 1255.010 and that Defendants failed to request an increase of the deposit. Plaintiff also states that if Defendants believe that the deposit is still too low, then they have a right to a jury trial to determine the compensation to be awarded.

An eminent domain plaintiff may deposit with the State Treasury the probable amount of compensation, based on an appraisal, that will be awarded in the proceeding at any time before entry of judgment. Section 1255.010(a). The court may redetermine the probable amount of compensation upon motion of any party having an interest in the property for which the deposit is made. Section 1255.030(a).

No motion for redetermining the probable amount of compensation has been filed by Defendants or any other party with an interest in the property. Therefore, Plaintiff has satisfied its requirement of making a deposit of the probable compensation in this case.

c. Plaintiff has Overriding Need to Possess Property Prior to the Issuance of Final Judgment

Defendants claim that no facts have been provided by Plaintiff to support its claim because no specifics have been given as to what costs would increase, the percentage of the increase, the likelihood of the cost increases, etc.

Plaintiff responds by showing that the Declaration of Mark T. Massman, a registered civil engineer in the state of California and the Project Director for the BART Silicon Valley Berryessa Extension Project, points out that the project has its activities sequenced because project activities are inter-related and dependent on predecessor activities. A delay in one activity will have a domino effect on other activities. The contractor schedule currently shows a need date of August 2014 for the property, which would be a much earlier date than the issuance of the final judgment.

Before the amendment of section 1255.410 in 2006, the eminent domain law allowed the plaintiff to take property before judgment when there was an “urgent need” for plaintiff to take property. Israni v. Superior Court (2001) 88 Cal.App.4th 621, 637-38 (“Israni”). The current statute requires that, when a motion for prejudgment possession is opposed, the plaintiff must show that there is an “overriding need” for plaintiff to possess the property and that plaintiff would be prejudiced if the motion were denied. Section 1255.410(d)(2)(C).

Even though Israni was decided before the 2006 amendments, those amendments do not make Israni inapplicable to a determination of whether Plaintiff has a overriding need to possess the property prejudgment. 2006 Cal. Legis. Serv. Ch. 594 (S.B. 1210) (WEST). In Israni, the petitioner owned land that was leased out for homeless services for veterans. (Israni, supra, 88 Cal.App.4th at 627.) The City of San Diego wanted the land for its Homeless Assistance Element of the San Diego Naval Training Center Reuse Plan. (Ibid. at 628.) The City passed a resolution of necessity stating the need for the property. (Ibid.) The lessee of the land declined to extend the contract with the landlord, creating the risk that the homeless services would disappear. Ibid. at 639-40. If the homeless services ceased, the rehabilitation of those who used the services would be jeopardized. (Ibid. at 639.) The court ruled that because the lessee may cease the operations of the homeless services, there was an urgent need for prejudgment possession so that the city could ensure that no disruption would occur. (Ibid.) The court also ruled that the facts supported the inference that the delivery of the homeless services must be done according to a schedule or plan of operation inherent in a public necessity. (Ibid.)

In this case, Plaintiff needs the property as part of the BART extension to San Jose. Plaintiff has shown facts that there is an overriding need for the property because the cost of delay would burden the project and create the risk that the expected public transportation would not occur, which is similar to the risk that the homeless services would possibly disappear if the operations of the homeless services ceased. (See ibid. at 639-40.) Although in Israni the operations actually existed and in this case the operations are expected to exist, this difference does not affect Plaintiff’s overriding need for the property because this extension project had been approved before Plaintiffs sought the land and Plaintiff’s Board of Directors passed an uncontested resolution of necessity. Those facts are similar to Israni because the city had a public interest in maintaining the operations and a resolution of necessity was also passed. (See ibid. at 628.) In addition, the transfer of the property must be done according to a schedule to prevent delays, which is similar to Israni in that the delivery of the homeless services must have been done according to a schedule to prevent risk to those who used the homeless services. (See ibid. at 639.)

Therefore, because Plaintiff has shown facts that prove that Plaintiffs need the property in August 2014, Plaintiff does have an overriding need to possess the property prior to the issuance of final judgment.

d. Hardship on Plaintiff without Issuance is Greater than Hardship on Defendants with Issuance

Defendants claim a hardship, stating that once Plaintiff obtains possession, the operations of Defendants’ business, FIVE X, will be substantially diminished or lost. In addition, Defendants say that this will be a hardship because they need additional time to find an alternative operation plan or to close the business. Plaintiff has been in contact with Defendants regarding the acquisition since before the filing of the Complaint, and Defendants state that it was always their intention to explore alternatives. Defendants provide no numbers as to how much money Defendants make each year and provide no projections as to how much money will be lost if the motion were granted.

Plaintiff responds that the majority of the area needed in fee is currently located in an already landscaped area of the side yard, and that the fee acquisition will only displace two parking spaces with no effect on the ability of large trucks to turn into the property. In addition, Plaintiff has an exhibit which shows that the largest truck on the market, the WB-62, would be able to turn into the property and would not be impeded by either the pump station or the transformer. Plaintiff contends that if possession of the property does not occur by August 2014, delay damages may exceed $75,000, possibly up to $100,000, per day. Plaintiff also argues that Defendants knew about the potential acquisition and had two years to plan for it.

Before the 2006 amendments, section 1255.420 stated that a defendant or property owner could stay the issuance of the order if substantial hardship would result. Although those amendments repealed section 1255.420, the word “hardship” still appears in sections 1255.410(c) and (d)(2)(D). These sections state that a defendant or property owner may defeat a motion of prejudgment possession by showing that there is a hardship to defendant if the motion were granted and that such hardship would be greater than the hardship to the plaintiff if the motion were denied. Section 1255.410(d)(2)(D). The legislative comments to that section state that the law would provide a method for defendants to oppose a motion without showing that a “substantial” hardship would result if the motion were granted. 2006 Cal. Legis. Serv. Ch. 594 (S.B. 1210) (WEST). Therefore, the law has changed from a threshold test of hardship to a balancing test of hardship. Section 1255.410(c) requires that if a defendant or property owner claims a hardship, then the defendant or property owner must file a declaration with facts supporting the hardship.

The parties have not cited, nor is the court aware of, a case addressing the balancing of hardships. In the absence of more specific authority, Israni provides guidance on the question of what would constitute a hardship in a prejudgment possession issue. The court held that “substantial hardship” is one that has a “specific relationship to the particular interval between the application for the [order of immediate possession] and its proposed effective date.” (Israni, supra, 88 Cal.App.4th at 642.) In Israni, the court suggests that losses under the lease as a result of condemnation would be considerations to determine if a hardship would occur. (Ibid.)

In this case, Defendants have claimed that the business will lose substantial amount of money if the motion were granted. However, Defendants have not produced any numbers or income statements to support that, as required by section 1255.410(c). Defendants rely on photographs of the parking lot showing that Defendants need a large amount of space in the lot to conduct its business. The fact that Defendants may have to spend additional money to conduct its operations is a hardship that the court can consider. (See Israni, 88 Cal.App.4th at 642.) Plaintiff, though, has created a study that shows that even the biggest of trucks could enter the lot and have enough space for Defendants to conduct business after the Partial Fee take. Also, the permanent IEE would not impede Defendants’ ability to conduct their business. Therefore, any hardship to Defendants if the motion were granted is minimal, and that the hardship to Plaintiff if the motion were denied outweighs Defendants’ hardship.

Therefore, the motion for prejudgment possession is GRANTED. The TCE is effective August 1, 2014, for a period of thirty days.

III. Uncollected Tax Order

Defendant does not dispute the claim for an uncollected tax order. Therefore, pursuant to section 1260.250, the tax collector of the County of Santa Clara is directed to certify information as to the taxes on the subject property.

The motion for an order for certifying unpaid taxes is GRANTED.