Lake County Sanitation District v. Schultz

Opinion

The property owners, Robert Schultz, Sr., and Robert Schultz, Jr. (Schultz), appeal from an order after judgment granting reimbursement for certain litigation expenses pursuant to former Code of Civil Procedure section 1249.3, incurred when Schultz went to trial on the issue of valuation of their property condemned by Lake County Sanitation District, a subdivision of the County of Lake (Lake County). On their appeal, Schultz contend that the trial court erred by limiting the recovery of their litigation expenses to those incurred within 30 days before the trial; Schultz also seek attorney fees and costs on this appeal. Lake County on its cross-appeal argues that the court erred in finding that its superseded offer of $165,000 constituted a concession that its final offer of $125,875 was unreasonable, and that since no substantial evidence supports the trial court’s finding that its final offer for the Schultz property was unreasonable, no litigation expenses at all should have been awarded to Schultz. For the reasons set forth below, we have concluded that there is no merit to Lake County’s cross-appeal and that the trial court erred in denying Schultz the-litigation expenses sought herein.

The court found the pertinent facts as follows: Lake County filed its complaint on February 20, 1975. The trial date was finally set for March 29, 1976. The latest date which was at least 30 days prior to March 29, 1976, was February 27, 1976.

On March 3, 1976, pursuant to the statute, Lake County filed its final offer of $125,875. On March 24, 1976, Schultz filed a superseded demand for $180,000. On March 24, 1976, Lake County filed its superseded offer of $165,000. On March 31, 1976, after a three-day jury trial, a verdict was entered finding the value of the property taken to be $186,650 and a judgment was entered on the verdict on April 8, 1976.

On April 27, 1976 (and within 30 days after the entry of the judgment), Schultz filed their instant motion for recovery of litigation expenses pursuant to former Code of Civil Procedure section 1249.3.

Lake County’s final offer of $125,875 on March 3, 1976, viewed in the light of the verdict fixing the value of the property at $186,650, was unreasonable. The difference between the final offer and the verdict, which difference was $60,775, amounted to 33 percent of the verdict, or 48 percent of the final offer. Lake County’s superseded offer of $165,000 made on the fifth day prior to trial constituted a concession that its final offer of $125,875 was unreasonable. Lake County’s final offer was predicated upon valuation evidence which was received at the trial and which did not persuasively support the contention that the value of the property was $125,875. Lake County’s evidence was based upon an investigation of the property and its value which was substantially deficient in its thoroughness and objectivity.

The final demand of $210,000 filed by Schultz on March 1, 1976, viewed in the light of the verdict fixing the value of the property at $186,650, was reasonable. The difference between the final demand and the verdict ($23,350) amounted to 12‘A percent of the verdict or 11 percent of the final demand. Schultz’'final demand of $210,000 was predicated upon valuation evidence which was received at the trial and which well supported the contention that the value of the property was

Schultz’ counsel was employed in December 1975, pursuant to a retainer agreement, by which counsel agreed to represent Schultz in this proceeding and Schultz agreed to pay counsel a fraction—one-third in the event of settlement prior to the assignment of a trial date; otherwise, 40 percent of the difference between Lake County’s initial offer of $125,875 and the ultimate recovery. Pursuant to the terms of the retainer agreement, on February 27, 1976 (and on Mar. 3, 1976), the measure of compensation for Schultz’ counsel had already become fixed at 40 percent of the difference between $125,875 and the ultimate recovery. After that date, Schultz did not become obligated to pay their counsel any greater proportion of the difference, notwithstanding it became necessary thereafter for counsel to expend a great deal of time and effort in the preparation and trial of the case. The value of the services performed by counsel after February 27, 1976 (and after Mar. 3, 1976) is substantial and constitutes the greatest part of all services performed by counsel on the case through the conclusion of the trial.

Pursuant to the terms of the retainer agreement, Schultz’ counsel is entitled to a fee for his services amounting to $26,436.80, 40 percent of the sum of $60,775, the amount by which the ultimate recovery exceeded $125,875, plus $5,317, interest which accrued on that portion of the verdict award not deposited in court at the time possession was taken by Lake County. The services necessarily performed by Schultz’ counsel through the trial had a reasonable value of $26,436.80.

The services performed by Schultz’ counsel in the preparation and presentation of the instant motion for recovery of litigation expenses reasonably and necessarily included 91 Vi hours of his time, including research, briefing, motion drafting, travel, preparation of evidence and presentation of evidence and argument on the motion on two separate hearings. Seventy dollars per hour is a reasonable hourly charge for the services of Schultz’ counsel.

Although the product of 91 Vi hours at $70 per hour amounts to $6,405, that sum does not reasonably represent either the value of counsel’s services in presenting the motion or an appropriate allowance to be made to Schultz for such services for the reasons that: 1) much of the legal research done by counsel was on a point reasonably expected to recur in counsel’s specialty practice of eminent domain and the benefit of the

Schultz’ appraiser, Dean Stahr, was employed by them in December . . . 1974, prior to the commencement of this action. His assignment was to make a preliminary estimate of the value of the property taken in this action, for a fee of $1,000. By February 12, 1976, he had completed that assignment and had been paid $1,000, a figure that represents the reasonable value of his services performed prior to that date. On February 12, 1976, he was employed by Schultz to conduct an appraisal and to prepare to give trial testimony. After February 27, 1976, he conducted a competent appraisal, employing commonly accepted appraisal techniques and gave trial testimony which was valuable to Schultz and useful to the jury. The reasonable value of his services necessarily performed after February 27, 1976, and through the trial of the case, is $5,000. The services performed by Stahr in the presentation of this motion for recovery of litigation expenses reasonably and necessarily included his travel to the hearing and his testimony at the hearing and have a reasonable value of $200. In addition to the expenses incurred for their counsel and appraiser, Schultz incurred the expense of $28 for the filing fee paid to the clerk of the trial court upon filing their answer.

The court, however, concluded that: pursuant to former Code of Civil Procedure section 1249.3, Schultz were entitled to recover attorney fees and appraisal fees reasonably and necessarily incurred after February 27, 1976, in preparing for and conducting the condemnation trial, but are not entitled to recovery of any such fees incurred prior to February 27, 1976. The fee of Schultz’ counsel for the preparation and trial of this action was incurred prior to February 27, 1976, and no part was incurred thereafter. Schultz are not entitled to recover any amount for attorney fees incurred in the preparation and trial of the condemnation case. Schultz are entitled to recover from Lake County the sum of $1,200 for the services of their counsel in presenting this motion for recovery of litigation expenses. The fee of Schultz’ appraiser (excepting an initial fee of $1,000 incurred prior to the commencement of the action for which no allowance was made) for the preparation and trial of the action was all incurred after February 27, 1976.

Schultz rely on City of Los Angeles v. Kranz, supra, 65 Cal.App.3d p. 659, which held that under the facts of that case, a settlement offer that was less than 80 percent of the verdict was so “significantly disproportionate to the adjudicated value of the property” that the offer was unreasonable as a matter of law. As both former section 1249.3 and its replacement, section 1250.410, lack specific guidelines, we conclude that the Legislature has rejected a formulaic or otherwise arbitrary approach in favor of a discretionary one based on the factors developed by the courts, set forth above. In view of the statute, we cannot read Kranz as establishing arbitrary schedules divorced from other factors. Accordingly, we hold that the question is one of fact in the instant case (cf. Community Redevelopment Agency v. Friedman, 76 Cal.App.3d 188 [ 143 Cal.Rptr. 160 ]).

The court here found that the absolute difference between the final offer of $125,875 and the verdict of $186,650 was $60,775, a large sum, amounting to 33 percent of the verdict and 48 percent of the final offer. The difference between the final demand and the verdict ($23,350) amounted to 12½ percent of the verdict, or 11 percent of the final demand.

Lake County argues that the fact that its appraisal was made by a licensed appraiser is conclusive. We do not agree. The care and accuracy of Lake County’s appraisal vis-á-vis that of Schultz’ expert, Stahr, was for the trial court. Presumably Stahr was also a competent appraiser. He valued the entire parcel at $210,000; Lake County at $125,875. Both used the market data and cost approach and relied on some of the same sales. Given the unique character of real property, it is a matter of common sense that “[w]hile expert witnesses testifying on behalf of the public authority and those on behalf of the property owner may differ widely on their opinion as to the value of the property taken, this difference usually reflects the elusive nature of the fair market value concept” (Flopping v. City of Whittier, 8 Cal.3d 39 , pp. 43-44 [ 104 Cal.Rptr. 1 , 500 P.2d 1345 ]). There is always an element of bargaining inherent in the adversary

Prior to its 1968 amendment, the last sentence of former Code of Civil Procedure section 1255a, subdivision (c), specifically provided that allowable costs and disbursements were not to include expenses incurred where the condemnation was dismissed 40 days or more from the pretrial conference date or, if not, the date of trial. Prior to its repeal, this sentence had been interpreted by our Supreme Court in LaMesa-Spring Valley School Dist. v. Otsuka, 57 Cal.2d 309 , 313-314 [ 19 Cal.Rptr. 479 , 369 P.2d 7 ], and specifically held applicable only to the condemnee’s entitlement to “expenses incurred in preparing for trial,” i.e., appraisal fees, but not to attorney fees. LaMesa held at page 316 that attorney fees were recoverable for services performed prior to the complaint. In holding that attorney fees incurred prior to the filing were recoverable as reasonably necessary, Justice Peters reasoned as follows at page 316: “It must be kept in mind that attorney’s fees in a condemnation action are in a different category from those in other actions. Eminent domain, so far as the defendant is concerned, is not based upon any activity on his part. There is no voluntary element in such an action. When the public agency announces its intention to take his property, it is telling the owner that he must sell his property whether he wants to or not. (See City of Sacramento v. Swanston, 29 Cal.App. 212 , 220 [ 155 P. 101 ]; 1 Nichols, Eminent Domain (3d ed. 1950) p. 368.) Faced with such a threat, any reasonably prudent property owner would retain an attorney to protect his interests, even before the filing of suit. The careful lawyer, to adequately represent his client in this stage of negotiations, will perform many’ services which will be helpful and necessary if a complaint is filed and the case goes to

Neither of the reasons given by the court below support its findings and the conclusion based thereon. There is no evidence indicating that the issue could reasonably be expected to recur in counsel’s specialty practice of eminent domain. Indeed, as our above discussion of former Code of Civil Procedure section 1249.3 indicates, at the time of the instant motion, the statute was relatively new and had not been construed by any appellate court. It has since been repealed and replaced by several new statutes which contain different language but are substantially similar. Thus, there can be no question that the fees were necessarily incurred.

Further, the potential benefit to other clients of Schultz’ counsel is irrelevant since the attorney fees are awarded to Schultz and not to his counsel (Port San Luis Harbor Dist. v. Port San Luis Transp. Co., 213 Cal.App.2d 689 , 696 [ 29 Cal.Rptr. 136 ]).

The trial court’s second reason is equally without merit. The fact that counsel earned substantial fees for his services in the condemnation action has no bearing on the additional amount earned in the litigation of the instant motion. Further, we cannot agree with Lake County’s contention that the court merely exercised its discretion. We think the question is one of law. As the court found that the fees charged were reasonable, the amount is not in dispute.

Finally, there can be no question that Schultz are also entitled to their costs and attorney fees on this appeal. The statute specifically refers to “any subsequent judicial proceedings” in the condemnation action and the substantially identical language of subdivision (c)(2) of foriher section 1255a has been held to apply to attorney fees on appeal (Decoto School Dist. v. M. & S. Tile Co., 225 Cal.App.2d 310 [ 37 Cal.Rptr. 225 ]; Orange County Mun. Water Dist. v. Anaheim Union Water Co., 247 Cal.App.2d