Second District Court of Appeal Ruled City of Los Angeles’ Voluntary Acquisition of Properties Did Not Create Condemnation Blight.

On April 12, 2011, in City of Los Angeles v. Superior Court (2011) 194 Cal.App.4th 210, the Second District Court of Appeal considered whether landowners had shown that the City of Los Angeles’ voluntary acquisition program, adopted in lieu of a sound insulation program in certain neighborhoods near LAX, created “condemnation blight”—therefore entitling the landowners to inverse condemnation compensation. Property owners argued that the City had been purchasing properties in their neighborhoods through a voluntary acquisition program, relocating the residents, and demolishing the structures. Thereafter, the land was left vacant and undeveloped. In ruling against the landowners, the Court of Appeal held that the property owners had failed to establish that the city had either a plan to use the acquired property for a public purpose, or intended to acquire the landowners’ property or any nearby property through condemnation. The landowners, therefore, failed to show they were entitled to summary adjudication on their inverse condemnation claim.

In 1997, the City implemented a “Residential Soundproofing Program” in order to insulate residential dwellings located near the Los Angeles International Airport (LAX) from airport operations noise. Residents in certain neighborhoods, however, indicated that they were not interested in the soundproofing program; rather, residents expressed a preference to be bought out by the city and relocated. In 2008, the City introduced the Voluntary Residential Acquisition and Relocation Program to mitigate incompatible residential land use affected by airport noise. The program provided that, once acquired, residences would be demolished, although no specific use for the properties was intended after demolition. Instead, the program provided that “the parcel would be landscaped and maintained in an undeveloped state.” The program was voluntary, and “if an owner did not voluntarily indicate interest in having his property purchased, the Airport would not seek to purchase that owner’s property.”

By 2009, the City had spent over $265 million acquiring properties within the Manchester Square and Belford neighborhoods, including 72 percent of the multi-family dwellings and 94 percent of the single family dwellings. In July 2009, several Manchester Square and Belford neighborhood property owners brought suit against the City for inverse condemnation and damages due to condemnation blight. The complaint alleged that the City, acting through its Department of Airports, had announced plans to expand LAX into the Manchester Square and Belford neighborhoods. According to the property owners, once purchased, the City allowed the structures to fall into disrepair. Some properties, the parties asserted, were used for fire department practice or for the filming of special effects such as explosions and fires. These actions, the parties argued, were “deliberately intended and designed to result in blight, to encourage flight from these neighborhoods and to reduce property values in the area so that the Airport could acquire the remaining parcels more cheaply,” and “effectively froze the market for property in the Manchester Square and Belford.”

The property owners filed a motion for summary adjudication, which was granted by the trial court. The trial court found that the property owners had established that the City’s creation of condemnation blight resulted in a “constitutional duty to pay just compensation to the property owners. The trial court concluded that although no formal condemnation proceedings had been formally initiated, it was undisputed that the City had acquired a substantial amount of the buildings in the neighborhoods in question, relocated the buildings’ tenants, and demolished the acquired buildings. The court concluded that “inverse condemnation occurs when a gov[ernmental] agency depresses land values in an area near where it wants to acquire before even making its decision to take a particular parcel located in that area. Such will trigger the duty to pay just compensation. No actual taking is required.” The City appealed to the Second District Court of Appeal.

The Court of Appeal reversed the trial court’s decision and found that the property owners had failed to establish that they were entitled to summary adjudication on their inverse condemnation claim. The Court explained that the type of condemnation claims brought by the property owners was for a type of claim known as “unreasonable pre-condemnation delay” or “unreasonable condemnation conduct.” For these types of claim, the California Supreme Court in Klopping v. City of Whittier made clear that “a party must establish first, that the public entity engaged in unreasonable activity, either by excessively delaying initiation of an eminent domain action or by other oppressive conduct; and second, that the offensive conduct was a precursor to the entity’s condemnation of the plaintiff’s property for a public purpose.” ((1972) 8 Cal.3d 39.)

In Klopping, the City of Whittier had made public announcements of its intention to acquire the plaintiff’s land, and then unreasonably delayed in the eminent domain proceedings. The unreasonable delay naturally resulted in the property’s market value severely declining and the property becoming commercially useless. Under Klopping, the California Supreme Court held that a property owner does not necessarily have a claim for inverse condemnation against a public entity merely because the entity acted unreasonably. Rather, to have a claim for inverse condemnation, the unreasonable activity must be a predecessor to the city’s intent to eventually acquire the property.
Comparing the Klopping case to the one before it, the court found that the property owners had failed to establish that the city had either condemned their properties, had intent to eventually acquire their properties through condemnation, or had a plan for future use of their properties that would someday require condemnation of their properties. “To the contrary, the evidence presented indicated that (1) for roughly a decade, the [City] had entered into voluntary agreements with owners to purchase the properties located in Manchester Square and Belford and (2) the City had ‘no plan’ for the properties it had so acquired.”

Moreover, the court noted that the program was entirely voluntary and that prior to the acquisition program, most of the homeowners in the area had expressed desire to take advantage of the program. The court pointed out that even if the parties had established the program as involuntary, the parties failed to show that the land was being acquired for a public purpose. The parties’ evidence that the purpose of the city’s activities was to reduce property values was disputed by evidence showing that the only purpose of the program was to assist residents affected by noise from airport operations.

Lastly, in response to the parties’ contention that the city could have prevented the “blight” by “restoring [the] neighborhoods to use,” “rent[ing] the buildings it is now demolishing,” or “develop[ing] uses on the demolished and vacated properties,” the court pointed out that the purpose of the acquisition program was to protect individuals from living in proximity to airport noise. It would be illogical, the court noted, for a city to spend large sums of money to purchase residences and relocate occupants, and then spend additional sums to refill the buildings with new occupants.