As we have previously reported, the California Supreme Court in Property Reserve, Inc. v. Superior Court (2016) 1 Cal.5th 151, ruled that the California statutes allowing precondemnation entry by the government to test and inspect property (Code Civ. Proc., §§1245.010 et seq.) are constitutionally valid, subject to reformation to permit a landowner to obtain a jury determination of damage caused by the entry.  Having dealt with the issue of constitutionality of the precondemnation entry statutes, the Supreme Court remanded the matter to the Court of Appeal to resolve several remaining procedural issues.

The Court of Appeal’s opinion on remand, filed December 16, 2016, addresses those procedural issues and provides guidance as to how the Supreme Court’s holding will work in practice.  The opinion on remand clarifies (i) that a landowner may seek discovery in connection with a petition for precondemnation entry, and the concurring opinion by Justice Blease (who dissented from the original Court of Appeal opinion) clarifies (ii) that in the event the government proceeds with acquisition of the property, the claim for precondemnation damage may be asserted by means of a cross-complaint in the main condemnation action.

• The Landowner has a Right to Discovery in Precondemnation Entry Proceedings

First, the Court of Appeal on remand addressed the issue of whether or not discovery is permissible in a precondemnation entry proceeding.  The trial court had denied the landowner the right to conduct discovery, relying instead on a multitude of affidavits submitted by both sides, as well as several evidentiary and legal hearings prior to issuance of the entry order.  The Court of Appeal held that discovery was appropriate and available in a precondemnation entry proceeding, both under the Eminent Domain Law and the Civil Discovery Act.  With respect to the Eminent Domain Law, discovery is available in “eminent domain proceedings” (Code Civ. Proc., §1230.040) and in its opinion in Property Reserve, the California Supreme Court had characterized the precondemnation entry process as an “eminent domain proceeding.” In addition, the Court of Appeal determined that the precondemnation entry proceeding is a “special proceeding” within the meaning of the Civil Discovery Act, and the discovery provisions of the Civil Discovery Act apply to “special proceedings of a civil nature.”  (Code Civ. Proc., §2016.020, subd. (d)(a).)

Thus, the precondemnation entry proceeding is not exempt from discovery, and the landowner is entitled to conduct discovery in such a proceeding.  However, the Court of Appeal held that in the case before it, the denial of the right to conduct discovery by the trial court did not result in prejudicial error, because the landowner had not demonstrated how the ability to conduct discovery would have led to a different result.  Therefore, the trial court’s denial of discovery was affirmed.

Justice Blease concurred in the result, but did not agree that discovery was available as a matter of right in a precondemnation proceeding.  Justice Blease reasoned that the relevant issue presented at a trial relative to the precondemnation entry process—i.e., actual damage to the property resulting from the entry—is not yet joined at the pre-entry stage.  Thus, when no actual damage or interference has occurred, no relevant discovery can meaningfully be conducted.  However, if the matter went to trial to determine the actual damage resulting from the entry, discovery would be appropriate.

In this way, Justice Blease distinguished between the pre- and post-entry stage of the proceeding, and reasoned that at the pre-entry stage (up to and including the hearing at which the entry order is issued), the need for expediency and the lack of any actual damage having yet occurred precludes the right to discovery.  (Justice Blease did not explain how this latter rationale was consistent with the pre-impact valuations and determinations that are routinely made in condemnation actions; it seems preserving the expediency of the entry proceeding was the driving consideration.)

The opinion did not discuss appropriate areas of discovery, but they presumably may include the nature and extent of the entry proposed, and valuation issues. Of course, the holding is a double-edged sword for the landowner, since the government will also presumably be entitled to discovery in the proceeding. Importantly, the opinion noted that the court always has the inherent power to control the conduct of discovery, allowing it to tailor the discovery requested to the issues in the case.

• Claims Regarding Precondemnation Damage can be Asserted by Cross-Complaint in the Main Condemnation Action

Justice Blease in his concurring opinion appeared to tie up some procedural “loose ends” left by the Supreme Court’s opinion.  After the Supreme Court opinion, there is a question as to how the right to a jury trial with respect to damage caused by precondemnation entry interrelates with the right to a jury trial on the claim for just compensation for the property taken.  In other words, would two separate jury trials occur, one for the precondemnation damage and another for the main condemnation proceeding, or would the claims be consolidated for trial by one jury?  In the course of analyzing the issues regarding right to discovery, Justice Blease appeared to answer that question.

Justice Blease identified three possible outcomes with respect to a precondemnation proceeding:  (1) “the condemnor decides not to use the property for its project and the property owner is satisfied that the preliminary deposit of money is satisfactory compensation for the damage and use of the property; (2) the condemnor decides not to use the property for its project and the property owner, not being satisfied with the preliminary deposit, requests a jury trial on the issue of damage or use of the property; or (3) the condemnor decides to take the property for its project after conducting tests.”  Justice Blease noted that only under the second scenario would the jury trial procedure under the precondemnation statutes be utilized.  This is because “in the first scenario there is no need for a jury trial because the owner simply accepts the deposit as satisfactory payment [and] in the third scenario, the owner’s remedy if damage occurs that is not recoverable as the fair market value of the property is to file a compulsory cross-complaint within the classic eminent domain action.”

Thus, in the event that a jury trial is demanded with respect to the precondemnation entry and the government proceeds with condemnation of the property, the damages claimed for the precondemnation entry may be sought by cross-complaint in the main action, meaning that one jury will resolve all of the compensation issues.  Justice Blease analogized the procedure to a cross-complaint for precondemnation damages not otherwise recoverable as a component of “fair market value.”

The opinion on remand thus clarifies several issues of practical importance in applying the Property Reserve holding:  First, a landowner is likely entitled to discovery in the precondemnation entry proceeding, and second, in the event that the landowner claims damages resulting from the precondemnation entry and the government proceeds with the underlying acquisition, the damages for the precondemnation entry may be asserted by means of cross-complaint in the main condemnation action.  These clarifications suggest that Property Reserve’s holding that a landowner has a right to a jury trial in a precondemnation entry proceeding has practical import primarily where a landowner seeks a jury trial on damages for the precondemnation entry, and the government does not proceed with condemnation of the property, in which case the landowner would have the right to demand a previously unavailable jury trial.