Transcript The Evolution of Temporary Damages - HOME

The Evolution of Temporary
Damages
Temporary Severance Damages to
Loss of Profits
By
Donna Desmond, ASA
Kirsten R. Bowman, Esq
Donna Desmond, ASA
Donna Desmond Associates
Kirsten R. Bowman, Esq
Richards, Watson & Gershon
Severance Damages
C.C.P. Section 1263.420 (b)
• “The construction and use of the project for
which the property is taken in the manner
proposed by the plaintiff whether or not the
damage is caused by a portion of the project
located on the part taken.”
Loss of Goodwill
C.C.P. Section 1263.510 (a)
• “(a) The owner of a business conducted on the property taken, or
on the remainder if the property is part of a larger parcel, shall be
compensated for loss of goodwill if the owner proves all of the
following:
• (1) The loss is caused by the taking of the property or injury to the
remainder.
• (2) The loss cannot reasonably be prevented by a relocation of the
business or by taking steps and adopting procedures that a
reasonably prudent person would take and adopt in preserving the
goodwill.
• (3) Compensation for the loss will not be included in payments
under Section 7262 of the Government Code.
• (4) Compensation for the loss will not be duplicated in the
compensation otherwise awarded to the owner.”
Interference or Interruption
C.C.P. Section 1263.530
• “Nothing in this article is intended to deal with
compensation for inverse condemnation
claims for temporary interference with or
interruption of business.”
• ????????????????????????????????????????
Heimann v. City of Los Angeles (1947)
30 Cal.2d 746
An unnecessary and
substantial temporary
interference with property
rights or an actual temporary
invasion of the right of
possession of private
property during construction
may be actionable.
Is this Substantial?
No Pedestrian Access to a Jack in the
Box at the San Ysidro Border Crossing
Duration of Construction Interference
with Access – 12 Months
City of San Rafael v. Wood (1956) 144
Cal.App.2d 604
• Silt from construction of
project interfered with
use as a yacht harbor
• A property owner can be
entitled to loss of use of
the property as part of
the severance damages.
• Indirect impacts of a
project: are they
compensable?
o Dirt on auto dealership
cars
o Construction noise
impacting a restaurant
patio
Ayon v. People (1960) 54 Cal.2d 217
•Temporary injury to
abutting property resulting
from actual construction of
public improvements, such
as street improvements, is
generally not compensable.
•A particular business might
be entirely destroyed and
yet not diminish the actual
value of the property for its
highest and best use.
•Personal inconvenience,
annoyance or discomfort in
the use of property are not
compensable.
Pierpont v. State of California (1969)
70 Cal.2d 282
“Items such as view,
access to the beach,
freedom from noise, etc.
are unquestionably
matters which a willing
buyer in the open market
would consider in
determining the price he
would pay for any given
piece of real property…”
Orpheum v. San Francisco Bay Area
Rapid Transit (1978) 80 Cal.App.3d 863
Not all damaging
interferences with property
rights are actionable, and a
determination must be
made as to whether there is
an actionable interference
or substantial impairment of
a property right.
Orange County Flood Control District v. Sunny Crest
Dairy (1978) 77 Cal.3d 742
“Although just compensation requires payment of the fair
market value of the property taken and severance damage to
the remainder, it does not require compensation for losses
sustained by an owner such as lost business opportunities,
expectations, or inconveniences.”
Liontos v. County Sanitation District
(1998) 61 Cal.App.4th 726
“triable issues of material fact concerning the actual
extent, necessity of and substantiality of the
impairment of access to Monk’s restaurant” related
to a 9 month construction delay.
Los Angeles County MTA v. Continental
Development Corp. (1997) 50
Cal.App.4th 410
“The Constitution demands that
the condemnee receive just
compensation for the taking of his
property. The term ‘just
compensation’ includes the fair
market value of the property taken
and the injury if any to the
remainder of the condemnee’s
property.”
“In determining severance
damage, the jury must assume
‘the most serious damage’ which
will be caused to the remainder by
the taking of the interest and
construction of the Project.”
MWD v. Campus Crusade (2007) 41
Cal.4th 954
•Severance damages are not
limited to special and direct
damages, but can be based on
any factor, resulting from the
project, that causes a decline
in the fair market value of the
property.
•Temporary severance
damages resulting from the
construction of a public project
are also compensable.
City of Fremont v. Fisher (2008) 160
Cal.App.4th 666
“The temporary easement or
taking must interfere with the
owner’s actual intended use of
the property.”
Is a hypothetical buyer’s
“discount” on value due to risk of
possible temporary decrease in
income from project construction
appropriate?
City of Livermore v. Baca (2012) 205
Cal.App.4th 1460
“Substantial
impairment is only
required when the
taking interferes with
access to the property
from a public street.”
Do the math
• CCP Section 1263.420: damage based upon the construction and use of
the project…whether or not the damage is caused by a portion of the
project located on the part taken PLUS
• Heimann v. City of Los Angeles
• City of San Rafael v. Wood
• Ayon v. People
• Pierpont v. State
• Orpheum v. San Francisco Bay Area
• Orange County Water District v. Sunny Crest Dairy
• Liontos v. County Sanitation District
• Los Angeles County MTA v. Continental
• MWD v. Campus Crusade
• City of Fremont v. Fisher
• City of Livermore v. Baca
Equals
• If impacts of construction or of a temporary
construction easement are substantial
unreasonable and/or interfered with the
owner’s intended use of the property, then
loss of profits may be an appropriate measure
of temporary severance damages.
Are Temporary Damages Compensable
in a Total Taking?
• Claims for temporary damages incorporated into
goodwill loss analysis:
 Decreased sales in the before condition due to
distraction of owner during search for a relocation site
 Temporary increased costs and/or expenses due to
distraction of owner or inability to make bulk
purchases due to pending relocation
 Temporary downtime due to relocation of the
business
 Temporary loss of efficiencies due to reconfiguring
materials and inventory at the relocation site
 Reasonable steps to mitigate loss of goodwill?
Goodwill Loss Methodology
Business Owner Method to
Include Temporary Damages
• Discounted Cash Flow
Method
 After condition cash flow
projections from date of value
to three to five years into
future, incorporating
construction impacts, owner
distraction, temporary
moving impacts, etc.
 Starting at date of deposit?
Methods to Exclude Temporary
Damages
• Single Stream of Income
Methods (Before Relocation
vs. After Relocation)
 Excess Earnings Capitalization
Method
 Market Based Approaches:
• Revenue Multiplier Method
• EBITDA Multiplier Method
• Owner’s Discretionary Cash
Flow Method
• Unit Multiplier Method