BILL ANALYSIS AB 1770 Page 1 Date of Hearing: April 2, 2002 ASSEMBLY COMMITTEE ON JUDICIARY Ellen M. Corbett, Chair AB 1770 (Papan) - As Introduced: January 9, 2002 SUBJECT : EMINENT DOMAIN: PROCEEDINGS KEY ISSUE : SHOULD EVIDENCE OF A PREJUDGMENT DEPOSIT APPRAISAL BE PERMITTED TO BE USED TO IMPEACH THE WITNESS WHO PREPARED THE APPRAISAL? SYNOPSIS This bill, sponsored by the California Law Revision Commission, codifies case law holding that evidence of the prejudgment deposit appraisal may be used for purposes of impeaching a witness who prepared the appraisal. In support of the bill, the sponsor asserts that a witness who has prepared a prejudgment deposit appraisal and later testifies as to a different value should not be protected from impeachment, as existing law provides, because "a rule that prohibits a landowner from questioning a witness about a prior inconsistent opinion interferes with the constitutional right to compensation in a fundamental way." Opponents of this provision argue, on the other hand, that the bill will force public agencies to "hire a new appraiser and contract for a new appraisal report" rather than using the same appraiser to prepare a later report. According to opponents, this will result in "substantial costs to ratepayers and taxpayers." SUMMARY : Seeks to revise the statutes relating to evidence of the condemnor's prejudgment deposit appraisal. Specifically, this bill : 1)Codifies case law holding that evidence of the prejudgment deposit appraisal may be used for purposes of impeaching a witness who prepared the appraisal. 2)Provides that evidence of the prejudgment deposit may be considered by the court in determining the amount of litigation expenses awarded to a defendant (property owner) when the court finds that the offer of the plaintiff (public entity) was unreasonable and the demand of the defendant was reasonable. AB 1770 Page 2 EXISTING LAW : 1)Permits the plaintiff to deposit the probable amount of compensation, based on an appraisal, at any time before entry of judgment and requires the plaintiff to prepare a written statement of summary of the basis for the appraisal. (Code of Civil Procedure section 1255.010. All further statutory references are to this code.) 2)Provides that, before making a deposit, the plaintiff must have a qualified expert make an appraisal of the property and prepare a written statement of, or summary of the basis for, the appraisal and requires that an appraisal contain specified information sufficient to indicate clearly the basis for the appraisal. (Section 1255.010(b).) 3)Provides that the amount deposited by the plaintiff or withdrawn by the defendant shall not be given in evidence or referred to in the trial on the issue of compensation. (Section 1255.060(a).) 4)Provides that, in the trial on the issue of compensation, a witness may not be impeached by reference to any appraisal report, written statement and summary of an appraisal or other statements made in connection with a deposit or withdrawal, nor shall such a report or statement and summary be considered an admission of a party. (Section 1255.060(b).) 5)Provides that, upon objection of the party at whose request an appraisal report, written statement and summary of the appraisal or other statement was made in connection with a deposit or withdrawal, the person who made the report or statement and summary or other statement may not be called at the trial on the issue of compensation by any other party to give an opinion as to compensation. (Section 1255.060(c).) 6)Provides that, when a condemnor calls an expert witness to testify at trial as to the valuation of a subject property, Section 1255.060(b), noted above, does not prohibit the impeachment of that witness as to an appraisal he or she made in connection with the condemnor's prejudgment deposit. ( County of Contra Costa v. Pinole Point Properties, Inc. , (1994) 27 Cal.App. 4th 1105.) AB 1770 Page 3 7)Provides that if the court finds that the offer of the plaintiff was unreasonable and the demand of the defendant was reasonable, the costs awarded to the defendant shall include the defendant's litigation expenses. In determining the amount of those litigation expenses, the court shall consider the offer required to be made by the plaintiff and any other written offers and demands filed and served prior to or during the trial. (Section 1250.410.) FISCAL EFFECT : The bill as currently in print is not keyed fiscal. COMMENTS : This bill, sponsored by the Law Revision Commission, is intended to address issues that have arisen with respect to existing law governing evidence of the condemnor's prejudgment deposit appraisal. In March of 2001, the California Law Revision Commission published a preprint recommendation entitled "Evidence of Prejudgment Deposit Appraisal in Eminent Domain," suggesting statutory improvements which seek to: 1) Codify case law that evidence of the prejudgment deposit appraisal may be used for purposes of impeaching a witness who prepared the appraisal. 2) Emphasize that the protections against use of prejudgment deposit appraisal evidence apply equally to the property owner and the condemnor. 3) Make clear that evidence of the prejudgment deposit may be used in determining the amount of litigation expenses for which a condemnor may be assessed. Background. In its recommendation, the Commission states the following by way of background: The California Constitution enables the condemnor in an eminent domain proceeding to take immediate possession of the property, even though valuation issues are yet to be tried and just compensation yet to be awarded. ? The Legislature has implemented the constitutional authority by enactment of a detailed procedure governing deposit and withdrawal of probable compensation. As a practical matter, it is routine for the condemnor AB 1770 Page 4 to use the prejudgment procedure. The condemnor in the ordinary case makes a prejudgment deposit of probable compensation. The deposit is based on the condemnor's appraisal of the property. The deposit enables the condemnor to take immediate possession of the property. ? The law protects the condemnor from use of the prejudgment deposit appraisal against it at trial. The intent of the law is to encourage the condemnor to make a fully adequate prejudgment deposit, without fear of prejudicing its position at trial. Need for the bill. The Commission states that certain issues have arisen concerning several aspects of existing law that make this bill necessary, among them: 1) Are the evidentiary rules effective in ensuring adequacy of the deposit, and can they be improved? 2) Does protection of a valuation witness from impeachment by a prejudgment deposit appraisal unduly impair the property owner's ability to prove fair market value? Determination of Litigation Expenses. As noted above, existing law provides that, if the court finds that the offer of the plaintiff was unreasonable and the demand of the defendant was reasonable, the costs awarded to the defendant shall include the defendant's litigation expenses. Existing law further provides that in determining the amount of those litigation expenses, the court shall consider the offer required to be made by the plaintiff and "any other written offers and demands filed and served prior to or during the trial." This bill would add to this list of considerations any deposit made by the plaintiff in order to clarify that the condemnor's prejudgment appraisal and deposit are considered to be "other written offers and demands filed and served prior to or during the trial." Impeachment of a prejudgment deposit appraisal witness: key issue in the bill. Under existing law, an appraisal witness may not be impeached at trial by the witness' own previously-made prejudgment deposit appraisal. According to the sponsor, the intent of this provision was to encourage a condemnor to make a fully adequate prejudgment deposit without fear that this might be held against it later at trial. This bill would codify the AB 1770 Page 5 case of County of Contra Costa v. Pinole Point Properties, Inc. , supra., in which the court held that evidence of the prejudgment deposit appraisal may be used for purposes of impeaching a witness who prepared the appraisal. In explaining the need for this change, the Commission states: The court in Pinole Point Properties was concerned that a literal interpretation of the statute might violate the constitutional guarantee of just compensation. The essence of a condemnation action is to determine the fair market value of condemned property, and a rule that prohibits a landowner from questioning a witness about a prior inconsistent opinion interferes with the constitutional right to compensation in a fundamental way. ? [T]he statute should be revised to allow expressly for impeachment of an appraiser who later testifies as to a different value. An appraiser who testifies under oath at an eminent domain trial should be held to explain why that valuation differs from the valuation of the same property made by the same appraiser earlier in the proceeding. ARGUMENTS IN SUPPORT : Attorney Norman Matteoni wrote in support of the bill, stating, with respect to the bill's provision regarding the impeachment of a valuation witness: It is only logical that an appraiser can be examined on his investigation and any previous opinions relating to value as long as the time of that value is near the valuation date in the condemnation case. Moreover, Government Code sections 7260-7277 (California Relocation Assistance Act) provide directives to public agencies as follows: The condemnors are to obtain an appraisal before negotiations are undertaken. Then, it must offer the amount of that appraisal and negotiate in good faith to bring about a resolution without the necessity of filing a condemnation action. Code of Civil Procedure Section 1245.230 requires a precondemnation offer prior to the adoption of a resolution of condemnation. Obviously, the condemnor needs to put its best position forth based on a fair and honest appraisal. AB 1770 Page 6 ARGUMENTS IN OPPOSITION : The California Association of Sanitation Agencies opposes the bill, unless amended to "delete the provision allowing for impeachment of appraisers based on the appraisal report, statement, and summary," stating: We are concerned that AB 1770 would allow the impeachment of the public entity's appraiser based on the contents of the appraisal report, written statement and summary of an appraisal or other statements made in connection with a deposit or withdrawal of deposit. This change in the law would shift the balance in an eminent domain proceeding unfairly toward the property owner. AB 1770 would essentially give property owners additional tools to negotiate property acquisition prices that are above fair market value. If AB 1770 becomes law, public agencies may have no recourse but to hire a new appraiser and contract for a new appraisal report, resulting in substantial costs to ratepayers and taxpayers, rather than face a loss on the issue of compensation in court due to the impeached credibility of the appraiser. REGISTERED SUPPORT / OPPOSITION : Support California Law Revision Commission Opposition California Association of Sanitation Agencies (unless amended) Analysis Prepared by : Saskia Kim / JUD. / (916) 319-2334