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Ridgewater Associates, LLC, v. Dublin San Ramon Services District
California Court of Appeal, First Appellate District
2010 Cal. App. Lexis 655 (Cal. App. 1st Dist. May 11, 2010)
FACTUAL AND PROCEDURAL BACKGROUND
Ridgewater Associates LLC (hereinafter “Ridgewater”) appealed following a grant of summary adjudication in favor of the Dublin San Ramon Services District (hereinafter “District”) on Ridgewater's claims for inverse condemnation. The claims stemmed from water that Ridgewater contended was seeping onto its property from a neighboring sewage treatment facility operated by the District. The superior court granted summary adjudication and the Court of Appeal affirmed, holding that Ridgewater could not prove damages on its inverse condemnation claim.
In December 2006, Ridgewater purchased a warehouse on a one-acre property that is immediately adjacent to six sludge treatment lagoons that are owned and operated by the District. The District built the lagoons from 1985 to 1999. The six lagoons have a total area of 26.2 acres and the depth of the lagoons is maintained at approximately 15 feet. Inspections of the warehouse prior to Ridgewater's purchase revealed certain water table and water intrusion conditions that Ridgewater believed caused damage to the property that would require repair. As a result of the inspections, the price of the warehouse was reduced from $ 2.65 million to $2.5 million, and a modification to the purchase agreement stated that Ridgewater acquired the property and all rights of the previous owner “as is.” Ridgewater went through with the purchase, and escrow closed in February 2007.
Shortly after close of escrow, Ridgewater sued the District for inverse condemnation – seeking compensation for damage to the warehouse allegedly caused by water seeping from the District's lagoons. The District moved for summary adjudication arguing that any injury to the property occurred before Ridgewater purchased it, such that Ridgewater was not harmed by any possible taking. Ridgewater claimed in retort that operation of the District's lagoons caused “continuous and repeated” damage to its property. Thus, Ridgewater argued that it sought compensation for damage that had occurred since it purchased the property.
Ultimately, the trial court determined that when Ridgewater purchased the property it was aware of all the conditions that were alleged to interfere with its use and enjoyment. Thus, Ridgewater could not demonstrate there was any injury that occurred during its ownership of the property.
LEGAL ANALYSIS BY THE COURT OF APPEAL
Article I, section 19, subdivision (a), of the California Constitution permits private property to be “taken or damaged for a public use … only when just compensation … has first been paid to, or into court for, the owner.” “To state a cause of action for inverse condemnation, the plaintiff must allege the defendant substantially participated in the planning, approval, construction, or operation of a public project or improvement which proximately caused injury to plaintiff's property.” (Wildensten v. East Bay Regional Park Dist. (1991) 231 Cal.App.3d 976, 979–980 [283 Cal. Rptr. 13].)
The Court of Appeal pointed out that when property damage results from an act of condemnation, the normal measure of damages is the difference in the value of the property immediately before and immediately after the injury. However, diminution in value is not the exclusive remedy, and in appropriate situations other measures of damage, such as the cost of making repairs, are appropriate. (Frustuck v. City of Fairfax (1963) 212 Cal.App.2d 345, 367 [28 Cal. Rptr. 357].)
Addressing the facts here, the Court of Appeal recognized that Ridgewater had made no claim that the damage had reduced the property's market value because Ridgewater was aware when it purchased the property that it was affected by certain water intrusion conditions and the price it paid was reduced to take those conditions into account. Thus, the customary damages available for inverse condemnation – diminution in value – were not available to Ridgewater.
Furthermore, the Court of Appeal determined that alternative damages measures – such as cost of making repairs – were likewise not available to Ridgewater:
“Ridgewater purchased a property that was damaged by erosion and subject to periodic flooding. The purchase price was reduced due to the occurrence of these conditions. The evidence shows that it is highly likely the property was damaged for public use, but that Ridgewater was aware of the damage when it purchased the property and was compensated for the damage by the reduced price. Although Ridgewater claims that water which must be pumped from its loading dock is unsightly and contributes to erosion, there is no evidence that Ridgewater suffered uncompensated damages due to these ongoing conditions. A party that knowingly purchases a property subject to conditions that can cause sufficient damage to result in condemnation cannot claim to be the victim of a governmental taking. (See County of Los Angeles v. Berk (1980) 26 Cal.3d 201, 222–224 [161 Cal. Rptr. 742, 605 P.2d 381].) In sum, Ridgewater cannot recover for inverse condemnation because it knowingly bought a property that was subject to periodic water intrusion, and the purchase price reflected the property's condition.” (Emphasis Added.)
Should you have any questions about the contents of this correspondence, or would like more information regarding the recent case law described above, please feel free to contact us through our website: www.sollp.com.
Frank T. Sabaitis
David V. Moore
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