Aeta Life & Casualty Co. v. City of Los Angeles

Thirty-eight homeowners, eight insurance companies, and the Great Western Council of the Boy Scouts of America brought the instant suit against the City of Los Angeles and its Department of Water and Power. They prayed for compensation for damages resulting from the Mandeville Canyon Fire of October 1978, which, they alleged, was caused by sparks from defendants’ electrical power transmission lines along Mulholland Drive. Plaintiffs pleaded causes of action for negligent maintenance of a dangerous condition of public property and for inverse condemnation.

The trial was bifurcated to permit a determination of liability before introduction of evidence of damages. Pursuant to agreement of the parties the trial court sat as trier of fact on the inverse condemnation issue, while a jury heard the same evidence to determine the question of negligence. After five weeks of trial the trial court rendered judgment for plaintiffs on the inverse condemnation issue. The jury returned a verdict in favor of defendants on the negligence issue. Subsequently, when the defense failed to produce any evidence to contradict plaintiffs’ case for damages, the trial court directed a verdict on damages, and dismissed the somewhat bewildered jury. Plaintiffs’ motions for a judgment notwithstanding the verdict and for a new trial on the negligence cause of action were granted. The court fixed interest on the damages at the market rate and awarded attorneys fees to plaintiffs. The total judgment was approximately $10.7 million. Defendants have appealed.

The evidence may be summarized as follows.

In 1973, crews employed by defendants strung several strands of aluminum-wrapped steel cable from poles along a stretch of Mulholland Drive in Los Angeles. After being fastened into position on the pole crossarms, the wires were energized with a current of 4,800 volts. During high winds on October 23, 1978, two or three of the wires swung together, arced, and sent sparks of molten burning aluminum into the dry brush across Mulholland Drive. The brush ignited and the resulting fire spread rapidly until it had consumed thousands of acres and invaded residential areas. Heavy rains in the years following caused additional mudslide damage to residences near the denuded slopes.

The defense sought to show that the fire was of suspicious origin, possibly caused by arson, by introducing partially burned matchbooks recovered near the site of the fire’s origin. The trial court, however, found that the fire was

In the present case the evidence established that the power lines in question were designed to sag 22 inches between poles. As deliberately spaced 26 inches apart on the crossarms, two of the wires sagging 22 inches could be blown into contact with each other by winds blowing at about 42 miles per hour. Clearly, by defendants’ own design standards the construction of these power lines carried some risk of arcing in strong winds. Moreover, the sag of the power lines in question exceeded the defendants’ 22-inch design guideline by approximately 30 inches. The risk that these lines, sagging 51 inches or more, could come into contact with each other in moderate to high winds is much greater than if they had been tightened to a sag of only 22 inches. The evidence showed that the lines were deliberately constructed at the greater sag and remained that way through routine semiannual maintenance inspections. Thus the design, construction and maintenance of the sagging high voltage cables permitted intercable contact during windy conditions which resulted in a disastrous fire.

Defendants contend that the plaintiff insurance companies should not be permitted to subrogate to their insureds’ causes of action for inverse condemnation because the policy behind article I, section 19 of the California Constitution is to save property owners from contributing more than their fair share to a public undertaking and not to compensate insurers who are obligated by commercial contracts to pay for damages incurred by their insureds. Because of the commercial and contractual nature of the insurer-insured relationship, they contend plaintiff insurers are not equitably entitled to subrogation in inverse condemnation.

Defendants’ contention that their equities are equal to or greater than that of plaintiff insurers ignores the simple truth that defendants’ acts, negligent or not, caused the fire. (Van Alstyne, Inverse Condemnation: Unintended Physical Damage, supra, at p. 438.)

Although as defendants point out, the insurers were paid premiums to assume liability, there is, in our opinion, no appeal to equity in requiring a third party, uninvolved in causing the damage, to bear the burden of compensating the injured parties, when the party that caused the damage is

Defendants argue that because the right to compensation for inverse condemnation of property is constitutionally mandated, it is personal to the homeowners and is therefore not assignable to the insurance companies. The authority they cite in support of this contention is unpersuasive. Broadrick v. Oklahoma (1973) 413 U.S. 601 [ 37 L.Ed.2d 830 , 93 S.Ct. 2908 ], states the general rule that constitutional rights are personal and may not be asserted vicariously (Id. at p. 610 [37 L.Ed.2d at p. 839].) However, the thrust of Broadrick is simply that a litigant has no standing to engage the judicial system to strike down laws that violate the constitutional rights of persons not before the tribunal. In the case at bench plaintiff insurers were parties to the action asserting their own right to compensation. Furthermore, recovery in inverse condemnation requires only that plaintiff have an interest in the property which has been taken by the state. (McMahan’s of Santa Monica v. City of Santa Monica, supra, 146 Cal.App.3d at p. 690.) Insurance companies, as subrogees of the property owners, have such an interest and are entitled to seek compensation for the losses incurred due to the claims of their insureds.

As a practical matter, this holding also avoids the possible expense and delay inherent in any second action by the insurance companies to recover from their insureds under Travelers Indem. Co. v. Ingebretsen, supra, 38 Cal.App.3d 858 , which required landowners compensated for their losses by the government to repay their insurance companies the amounts previously paid out under their insurance policies.

Our decision with regard to plaintiffs’ recovery in inverse condemnation makes it unnecessary for us to discuss the propriety of the judgment notwithstanding the verdict and of the new trial order on the issue of the dangerous condition of public property. (See Agricultural Labor Relations Bd. v. Laflin & Laflin (1979) 89 Cal.App.3d 651 , 662, fn. 11 [ 152 Cal.Rptr. 800 ].) The evidence on both issues was the same. The damages likewise

A jury hearing a condemnation action may not disregard the evidence as to value and render a verdict which either exceeds or falls below the limits established by the testimony of the witnesses. (Redevelopment Agency v. Modell, supra, 177 Cal.App.2d at pp. 326-327; People ex rel. D. of P. Wks. v. McCullough, supra, 100 Cal.App.2d at p. 105.) The trier of fact in an eminent domain action is not an appraiser, and does hot make a determination of market value based on its opinion thereof. Instead it determines the market value of the property, based on the opinions of the valuation witnesses. (South Bay Irr. Dist. v. Califomia-American Water Co. (1976) 61 Cal.App.3d 944 , 1000 [ 133 Cal.Rptr. 166 ].)

The cases cited by defendants to support their contention that the jury could arrive at a verdict at variance with the only evidence offered were not condemnation actions. They are therefore inapposite.

Defendants seek to distinguish inverse condemnation from direct condemnation in order to escape the special evidentiary rules applicable to eminent domain actions. However, it is well established that condemnation and inverse condemnation are merely different forms of the same limitation on governmental power. (City of Oakland v. Oakland Raiders (1982) 32 Cal.3d 60 , 67 [ 183 Cal.Rptr. 673 , 646 P.2d 835 , 30 A.L.R.4th 1208 ]; Breidert v. Southern Pac. Co. (1964) 61 Cal.2d 659 , 663, fn. 1 [ 39 Cal.Rptr. 903 , 394 P.2d 719 ]; McMahan’s of Santa Monica v. City of Santa Monica, supra, 146 Cal.App.3d at p. 700.)

Defendants also seek to distinguish the application of the evidentiary rules to the different kinds of property, real and personal. Decisional law has established, however, that there is no basis for any distinction between kinds of property taken or damaged for public use. (City of Oakland v. Oakland Raiders, supra, 32 Cal.3d at pp. 64-65; Baldwin Park Redevelopment Agency v. Irving (1984) 156 Cal.App.3d 428 , 435 [ 202 Cal.Rptr. 792 ]; McMahan’s of Santa Monica v. City of Santa Monica, supra, 146 Cal.App.3d at p. 700.)

Defendants urge us to consider the legislative committee comment to Evidence Code section 811, which states: “Subdivision (b) of section 811

The legal rate of interest set by the California Constitution was 7 percent when the damages in the present case occurred and was raised by statute to 10 percent as of January 1983. (Code Civ. Proc., § 685.010.) Plaintiffs presented evidence that the average market rate of interest from the date of the property damage to the date of judgment was 12.25 percent.

Defendants argue that the California Constitution, statutes, and decisional law all provide for the award of interest only at the legal rate in inverse condemnation suits, as in any other civil action. However, the right to prejudgment interest in inverse condemnation derives from the Fifth Amendment of the United States Constitution prohibiting the taking of private property for public use without just compensation. The supremacy clause of the United States Constitution binds the courts of this state to require just compensation notwithstanding anything in the Constitution or law of this state to the contrary. (U.S. Const., art. VI, cl. 2.)

If a government pays compensation to a property owner before or at the time property is taken or damaged, no interest is due. (Kirby Forest Indus., Inc. v. United States (1984) 467 U.S. 1 , 10 [ 81 L.Ed.2d 1 , 11, 104 S.Ct. 2187 ].) But if disbursement of the award is delayed, as in the present case, the owner is entitled to interest thereon sufficient to ensure that he is placed in as good a position pecuniarily as he would have occupied if the payment had coincided with the taking. (Ibid.; United States v. Miller (1943) 317 U.S. 369 , 373 [ 87 L.Ed. 336 , 342, 63 S.Ct. 276 , 147 A.L.R. 55 ]; Baldwin Park Redevelopment Agency v. Irving, supra, 56 Cal.App.3d at p. 438.) Because “just compensation” is a concept rooted in the federal Constitution it cannot be abrogated by state law. The process of determining just compensation is purely a judicial function which cannot be circumscribed by the Legislature. When the state takes or damages private property it cannot through its legislative arm limit the price it will pay or the manner of its payment. (Monongahela Navig’n Co. v. United States (1893) 148 U.S. 312 , 327 [ 37 L.Ed. 463 , 468, 13 S.Ct. 622 ]; Baldwin Park Redevelopment Agency v. Irving, supra, 56 Cal.App.3d at p. 439.) We conclude that the award of prejudgment interest at the market rate was proper, and that the evidence supports the correctness of the computations. (Redevelopment Agency of the City of Burbank v. Gilmore (1985) 38 Cal.3d 790 [ 214 Cal.Rptr. 904 , 700 P.2d 794 ].)

In the present case, the trial court found that the attorney fees requested (20 percent of the gross award including costs and attorney fees) was “reasonable, if not low, . . . considering the total complexity of this case, the overall demonstrated ability of counsel, . . . the responsibility involved in managing and handling the number of plaintiffs herein together with the responsibility of seeking the recovery of such a magnitude of amount of the award.” The court refused to allow evidence of the attorneys’ usual hourly rates. It does not appear to have considered the actual amount in dollars of this huge fee (approximately $2.2 million), the actual number of hours worked by plaintiffs’ attorneys, or what relationship the fee award bore to the number of hours worked. This was error.

The starting point of every fee award must be a calculation of the attorney’s services in terms of the time he has expended on the case. (Serrano v. Priest, supra, 20 Cal.3d at p. 48, fn. 23.) Anchoring the analysis of reasonableness to this concept is the only approach that can claim objectivity, a claim which is obviously vital to the prestige of the bar and the courts. (Ibid.)

While the percentage basis of the fee award in the present case (20 percent) may seem low by comparison to other typical contingent fee arrangements, the actual amount was quite high in absolute terms and in relationship to the hours worked. This in itself should have signalled to the court that the fee award was unreasonable.

In addition to the foregoing, we think that the method used to compound the fee was improper. In effect it amounts to a surcharge of 20 percent by plaintiffs’ attorneys upon all elements of the gross award, which, as we have noted, already contained an award of attorney fees. We do not believe that the Legislature ever intended that section 1036 be used this way. Tacking a 20 percent surcharge onto the court costs, expert witness fees and

That portion of the judgment awarding plaintiffs’ attorney fees is reversed. The matter is remanded to the trial court for redetermination of those fees in light of the views expressed herein. In all other respects the judgment is affirmed. Defendants to bear all costs of the appeal.

Beach, J., and Gates, J., concurred.

A petition for a rehearing was denied August 28, 1985, and the petition of defendants and appellants for review by the Supreme Court was denied October 17, 1985. Lucas, J., did not participate therein.