People ex rel. Department of Public Works v. Glen Arms Estate, Inc.

In this eminent domain proceeding brought to acquire certain real property for state highway purposes, defendant owner appeals from a judgment entered upon a jury verdict awarding compensation in the sum of $55,000 together with severance damages in the sum of $2,500. We are called upon to determine two questions: (1) Whether the trial court erred in excluding from evidence the appraisal report of the state’s employee Nowieki on the ground that it was protected by the attorney-client privilege; and (2) whether the court erred in excluding from evidence certain statements of the state’s employee Schlarmann made in the course of certain settlement negotiations but claimed to be admissions independent of any offer in compromise. As we shall hereafter explain, we have concluded that the ruling of the learned trial judge was correct in each instance and that the judgment should be affirmed.

We set forth the pertinent facts. On the second day of the trial in proceedings outside the presence of the jury, defendant’s counsel made known to the court his intention to call plaintiff’s appraiser Nowieki as a witness and to offer in evidence a certain appraisal report prepared by the latter. Plaintiff’s counsel thereupon asserted the attorney-client privilege but suggested to the court that the appraisal report be submitted by plaintiff to the court in camera without waiving any matter of confidentiality insofar as its contents were concerned.^[1] The record discloses that neither defendant nor

Nowicki testified in substance as follows: He was a right-of-way agent for the State Division of Highways and a public employee. He made an appraisal dated August 30, 1961, of the property subject of the condemnation proceedings. This appraisal was communicated to plaintiff’s attorneys and was considered confidential.

The witness further testified that the purpose of the appraisal was as stated in the report: “The appraisals contained herein have been prepared for departmental use only and for the sole purpose of carrying on negotiations with the owners thereof, and as a basis upon which offers of settlement may be made which are considered to be fair and equitable to both the owners and the Department. In the event of a trial involving any issue of value, damages (severance or consequential), or benefits, then each and every, all and singular, matter, fact or thing specified, set forth and referred to in these appraisals, shall be deemed to have been made solely by way of an offer of settlement of pending litigation, and not otherwise.”^[2]

Nowicki stated that he made the report to one Daniels, the Metropolitan District right-of-way agent. Both Nowicki and Daniels signed the report. Eventually the report was disapproved.

On cross-examination Nowicki testified that in the process of appraising the property he talked with Armstrong, defendant’s president, and that his final valuation of the property was “affected” by such conversations.

During the ensuing colloquy between court and counsel

It developed during cross-examination of Hr. Robinson that Schlarmann had subsequently left the employ of the state and that counsel for defendant had taken his deposition. A copy of the deposition was thereupon submitted to the court. In its reply brief and at oral argument before us defendant contended that the trial court was precluded from considering Schlarmann’s deposition because it was never actually introduced in evidence. The point is utterly devoid of merit. We have carefully examined the record which discloses that defendant’s counsel declared he had no objection to the use of the deposition and its consideration by the judge. Indeed defendant’s counsel furnished the judge with his copy of the deposition and upon the subsequent announcement by the court of its rulings based inter alia on the deposition not only failed to interpose an objection but even stated that he had no objection to it being part of the record. It is abundantly clear to us that defendant’s counsel waived any defect there may have been in the procedure relevant to the deposition. (Seale v. Carr (1909) 155 Cal. 577 , 578 [ 102 P. 262 ]; Grunsky v. Field (1905) 1 Cal.App. 623 , 626 [ 82 P. 979 ].)

In his deposition taken on July 3, 1962, Schlarmann testified as follows: He was and for about four years had been a right-of-way agent for the Division of Highways. While he had done both appraising and negotiating for the state, during all times here pertinent he was acting as a negotiator. He never at any time made an appraisal of the subject property. At first he dealt with Armstrong alone who, presumably then acting without counsel, made certain demands for settlement. Thereafter he had a meeting with both Armstrong and Robinson. He did not recall “whether or not we got into any discussion of settlement or anything like that at

At the conclusion of these proceedings outside of the jury’s presence the court ruled (1) that defendant was entitled to call Nowieki as a witness and elicit from him his opinion as to value; (2) that Nowieki’s appraisal report was not admissible because, having been made for the sole purpose of preparing for litigation, it was privileged; and (3) that the statements allegedly made by Schlarmann both as to the amount of the state’s appraisal and as to his own opinion of value were not admissible since Schlarmann’s proposals were tentative and any statements in connection therewith “were made ‘to buy peace in contemplation of mutual concessions. ’ ’ ’

Subsequently in the jury’s presence defendant called Nowieki pursuant to Code of Civil Procedure section 2055. He testified as follows: He was a right-of-way agent for the Division of Highways. During July and August 1961 he worked in the appraisal department and made an appraisal of the subject property.^[7] The purpose of the appraisal was to furnish the negotiating right-of-way agent with the best possible estimate of market value. In making his appraisal he looked at the property, attempted to study the area, looked for comparable information, talked to Armstrong, talked to various realtors in the area and, based on the assembled information, prepared his appraisal report. The fair market value of the property as set forth in the report was $95,950. He never showed the report to, or discussed it with, Mr. Armstrong.

The Nowieki report.

It is clear that the trial court excluded Nowieki’s appraisal report on the ground that it was made for the sole purpose of preparing for litigation and was therefore protected under the attorney-client privilege.^[8] On this appeal the contradictory

Before we discuss the cases on which the present issue turns, it will be helpful to advert to a few basic principles. The general principle of the attorney-client privilege expressed in terms of its essential elements, has been articulated by Wigmore thusly: “(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived.” (8 Wigmore on Evidence (McNaughton Rev. 1961) § 2292, p. 554.) This privilege is grounded on a policy which, according to its modern concept, declares that ‘1 [i] n order to promote freedom of consultation of legal advisers by clients, the apprehension of compelled disclosure by the legal advisers must be removed; hence the law must prohibit such disclosure except on the client’s consent.” (8 Wigmore, op. cit., §2291, p. 545.) It is “strictly construed, since it suppresses relevant facts that may be necessary for a just

We have such an application in the instant ease, our task being to determine the extent of the privilege where the client is the state. In reality the problem is the same where the client is a body politic as where the client is a corporation. (Suezaki v. Superior Court (1962) 58 Cal.2d 166 , 174 [ 23 Cal.Rptr. 368 , 373 P.2d 432 , 95 A.L.R.2d 1073 ].) It is from this point of view that we proceed to survey the pertinent cases.^[10]

In Holm v. Superior Court, supra, 42 Cal.2d 500 the court concluded that a written report made to the city by an

In view of the denial of privilege to the written witness statement there involved, Chadbourne may not be helpful for the purpose of applying its own end result to the Nowicki report here but, in its attempt to answer many questions on the subject of privilege theretofore “unanswered by any California decision” (60 Cal.2d at p. 735), Chadbourne does state a number of principles which, we think, are applicable to and determinative of the instant problem. Its basic philosophy is that “the public policy behind the attorney-client privilege requires that an artificial person be given equal opportunity with a natural person to communicate with its attorney, within the professional relationship, without fear that its communication will be made public. . . . But reason dictates that the corporation not be given greater privileges than are enjoyed by a natural person merely because it must utilize a person in order to speak.” (P. 736.) Giving full expression to this philosophy and adapting the rules of privi

“2. When ... an employee [of a defendant corporation] is not a codefendant (or person who may be charged with liability), his communication should not be . . . privileged unless, under all of the circumstances of the ease, he is the natural person to be speaking for the corporation; that is to say, that the privilege will not attach in such case unless the communication constitutes information which emanates from the corporation (as distinct from the nonlitigant employee), and the communicating employee is such a person who would ordinarily be utilized for communication to the corporation’s attorney; . . .

‘‘4. Where the employee’s connection with the matter grows out of his employment to the extent that his report or statement is required in the ordinary course of the corporation’s business, the employee is no longer an independent witness, and his statement or report is that of the employer;

“5. If, in the case of the employee last mentioned, the employer requires . . . that the employee make a report, the privilege of that report is to be determined by the employer’s purpose in requiring the same; that is to say, if the employer directs the making of the report for confidential transmittal to its attorney, the communication may be privileged ;

“6. When the corporate employer has more than one purpose in directing such an employee to make such report or statement, the dominant purpose will control, unless the secondary use is such that confidentiality has been waived ;^[13]

“7. If otherwise privileged under the rules stated

We apply these principles to the facts of the case before us. The evidence relevant to the nature of Nowicki’s duties and to the purpose of his report consists principally of Nowicki’s testimony and the portion of the report read into the record by plaintiff's counsel. We are not presented with a situation where the employee (Nowicki) is a codefendant or a person chargeable with liability. Nor is Nowicki’s personal frame of mind of significance (see fn. 13, ante) since it is reasonably inferable from the evidence that he was required by the State Division of Highways to make the appraisal and prepare the report in the ordinary course of his duties and did so as the “speaking agent” of the division and therefore of the plaintiff.^[14] The report was therefore that of said division.

What therefore was the purpose of the division in requiring the report? Prom the evidence summarized by us above it appears that the report was prepared for the purpose of carrying on negotiations with the owners of property sought to be acquired by eminent domain and as a basis for making offers of settlement to such owners. As we have pointed out, the trial judge concluded that this meant for the purpose of preparing for litigation. We think that he was warranted in arriving at this conclusion. The report was transmitted to the state’s attorneys although the record does not disclose when or how. Nevertheless it is a reasonable inference that this was done so that they could be consulted on the matter of acquiring defendant’s property and to that end of instituting legal action should that be necessary. In this sense the report was in preparation for litigation. It was nonetheless so because the litigation had not yet commenced ; it was sufficient that it was contemplated. (Cf. Holm v. Superior Court, supra, 42 Cal.2d 500 .) Indeed it seems to us that, as in litigation generally, such a report by evaluating the claim of the “money demanding party” (here the

It must be noted therefore that the report was unprivileged because the trial court found on substantial evidence that it was not a communication from the client to the attorneys but from a third person to the attorneys, the information contained therein in no way emanating from the client. “ Whether the facts of an individual case support a conclusion that an expert's report did or did not emanate from the client as a confidential communication to his attorney, is a question for the trial court in the first instance. ’ ’ (58 Cal.2d at p. 202.)

Defendant argues that both Oceanside and San Diego Professional Assn, are applicable to the instant case; that on the basis of certain language appearing in Oceanside,^[15] the question of privilege here is essentially the same as in that case; that Nowicki's testimony shows that he not only conferred with Armstrong, defendant’s president, but that his opinion as to value was affected by that conversation; and that Nowicki’s report actually emanated from defendant.

We find no merit in the foregoing argument because both Oceanside and San Diego Professional Assn, are distinguishable on their facts from the case before us. In each of the above two eases the communication sought to he protected from disclosure was made by an independent expert and not by a corporate employee. The “dominant purpose” doctrine enunciated in Holm was therefore not applicable (Suezaki v. Superior Court, supra, 58 Cal.2d 166 , 174-175; Oceanside Union School Dist. v. Superior Court, supra, 58 Cal.2d 180 , 188) and the dominant purpose of the expert’s report being already known, the only factual determination to be made

We have at the beginning of this opinion set forth in detail the evidence received by the trial court relevant to the question of the admissibility of Schlarmann’s statements. As we there made clear, this evidence included the deposition of Schlarmann which was considered by the court in ruling on the question. Defendant’s position therefore that we should review the court’s ruling in the light of only the testimony of Mr. Armstrong and Mr. Robinson is erroneous. We must, as did the trial court, consider Schlarmann’s deposition testimony as well. Prom our examination of all the pertinent evidence we are satisfied that the court’s ruling is supported by the evidence; that although there is a conflict between the testimony of Mr. Armstrong and Mr. Robinson on the one hand and Mr. Schlarmann on the other, the trial court’s resolution of this conflict is conclusive on appeal; and that, under the applicable legal principles stated above, the court properly excluded Schlarmann’s statements.

The judgment is affirmed.

Molinari, J., and Bray, J.,^[16] concurred.

Appellant’s petition for a hearing by the Supreme Court was denied January 20, 1965.