Emeryville Redevelopment Agency v. Harcros Pigments, Inc. (101 Cal. App. 4th 1083, 2002)

Opinion

SEPULVEDA, J.

These consolidated appeals arise from a judgment and posttrial orders in an eminent domain proceeding brought by the Emeryville Redevelopment Agency (Agency or plaintiff) to condemn about 13 acres of chemically contaminated land owned by defendant Elementis Pigments, Inc., formerly Harcros Pigments, Inc. (Elementis or defendant). The appeals, and a cross-appeal by Elementis, present numerous questions of eminent domain law. We have concluded that the judgment must be reversed. Specifically, we hold that (1) the Agency’s own purchases of neighboring properties were inadmissible to establish the value of the condemned property; (2) the jury could not consider, and the appraisal witnesses could not rely upon, a recital in a contract for the purchase of a neighboring property, which purported to “apportion” the overall price for the property between two segments divided by a political boundary; (3) it was error to admit, over objection, evidence concerning specific development plans for the property, since no one disputed the highest and best use for it and no other materiality was shown; (4) because it was undisputed that the property must inevitably be adapted to a higher and more valuable use, and because there was no proper ground for finding a qualifying period of “interim use,” the trial court properly withheld from the jury Elementis’s claim for loss of goodwill; (5) for the same reasons, however, defendant cannot recover for the value of equipment or fixtures “in place, in use.” Our reversal of the judgment, coupled with intervening external events, makes it unnecessary or improper to address other issues, notably whether the trial court erred by excluding evidence of soil remediation costs and staying a corresponding portion of the judgment pending resolution of a federal cost-recovery action, and whether the court erred by awarding Elementis its attorneys fees.

Background

The property in question was originally occupied by a Native American midden, or shellmound, rising to a height of at least 40 feet. In the late 1800’s the property held an amusement park known as Shellmound Park. Sometime in the 1920’s it was leveled and developed for industrial use. At one time part of the property included a pesticide manufacturing operation. In 1987 the property was designated for inclusion in a 270-acre redevelopment project. In 1990, it was acquired by Elementis, which manufactured iron oxide pigments on the property. In 1992 Elementis notified the City of Emeryville (City) that it was permanently laying off 70 of its 85 employees. After that time it apparently continued to manufacture, or at least to blend, iron oxide pigments on a small part of the property.

In January 1996 Elementis indicated to the Agency that it was willing to sell the property to the Agency for fair market value. The Agency expressed interest but stated that “the existence of hazardous materials is of concern and will greatly impact [the property’s] fair market value,” and “at this time the Agency has little understanding as to the extent of contamination on the site and the cost of remediation.” Almost a year later the parties negotiated two right-of-entry agreements permitting the Agency to conduct activities relating to appraisal and environmental testing. Ultimately the soil on the property was found to contain significant levels of contaminants including lead and arsenic. A dispute thereafter arose between the parties concerning, at least ostensibly, who would control the “remediation” (cleanup) of the property and what methodology would be employed.

On February 19, 1998, the Agency filed this action in eminent domain. In May of 1998, the Agency deposited probable compensation of $1,062,000 with the State Treasurer and applied to the court for prejudgment possession and an order for entry. The court ultimately authorized the Agency to take possession of the most contaminated portions of the property by September 30,1998, and the remainder by December 31, 1998. Around the end of 1998, Elementis relocated what remained of its operation to Colton in Southern California. The parties later stipulated that the “valuation date” for purposes of this matter would be November 1, 1998.

On January 11, 1999, after a trial limited to the “right to take,” the court found that the Agency had the right to acquire the property by eminent domain.

In 1999, during demolition and soil remediation, extensive remnants of the original Emeryville shellmound were discovered on the subject property along with the remains of well over 100 humans. These materials constituted a cultural resource protected under the California Environmental Quality Act, Public Resources Code sections 21000 et seq. (CEQA) and triggered certain statutory requirements governing the treatment and disposition of such remains. (Pub. Resources Code, § 5097.98.) The Agency proceeded to take various steps to comply with these provisions. Defendant contended at trial that the Agency’s actions exceeded statutory requirements and, thus, the reasonable cost of such compliance.

On August 4, 1999, the Agency and the City filed a complaint in the United States District Court for the Northern District of California, seeking monetary damages and other relief from Elementis, its predecessors, and others, based on the contamination of the subject property and neighboring properties, the necessity of remediating those properties, and the costs incurred in doing so. (City of Emeryville v. Elementis Pigments, Inc. (N.D.Cal., Aug. 6, 1999) No. C 99-03719 BZ.) The complaint invoked a variety of federal and state laws, most notably the Comprehensive Environmental Response, Compensation, and Liability Act, title 42 United States Code section 9601 et seq. (CERCLA).

On November 8, 1999, with the federal action still pending, trial commenced in this action on the issue of the “just compensation” to be awarded to Elementis. On December 20, 1999, the jury returned a verdict fixing the fair market value of the property at $12,493,283. The trial court entered a judgment condemning the property to the Agency. However the court stayed a portion of the award, equal to the soil remediation costs claimed to have been incurred by the Agency, pending further developments in the federal lawsuit.

The Agency filed a timely appeal from the judgment (case No. A090932), in which Elementis filed a cross-appeal. The Agency appealed separately from postjudgment orders allowing, and fixing the amount of, costs and attorneys fees. (Case Nos. A091716, A093126.) We have already consolidated the first two appeals, and have implicitly granted the plaintiffs unopposed request that all three appeals be considered together.

While the appeals were pending, both parties requested judicial notice of a written settlement agreement reached by them and approved by the court in the federal lawsuit. In the agreement, Elementis promised to compensate the City with (1) “cash consideration” of $3,850,000, and (2) “forbearance consideration” in the form of the relinquishment of claims against the City for over $2,450,800 in relocation benefits. It was further agreed that the cash consideration (plus interest) would “be a credit in Emeryville’s favor against any sums Emeryville may be required to pay Elementis in satisfaction of a final judgment resulting from the Eminent Domain Appeal or subsequent proceeding resulting from that Appeal.”

I.

Agency’s Purchases of Neighboring Properties

The state’s power to take property by eminent domain is conditioned on its obligation to pay “just compensation” to the owner. (U.S. Const., 5th Amend.; Cal. Const., art. I, § 19.) “Just compensation” is defined as “fair market value” (Code Civ. Proc., § 1263.310), which in turn is defined as “the highest price on the date of valuation that would be agreed to by a seller . . . and a buyer . . . each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available” (id., § 1263.320). The constitutional guarantee of “just compensation” is obviously intended to protect the landowner, but it also protects the public by limiting its liability to losses that can fairly be attributed to the taking. “ ‘A landowner is not entitled to be placed in a better position financially than he was before the condemnation; neither is the state required to pay more than land is worth merely because of some theoretical, intangible concept.’ ” (San Diego County Water Authority v. Mireiter (1993) 18 Cal.App.4th 1808, 1817 [23 Cal.Rptr.2d 455] (Mireiter), quoting City of Fresno v. Cloud (1912) 26 Cal.App.3d 113, 123 [102 Cal.Rptr. 874].)

Here both parties sought to establish the fair market value of the subject property through analyses, by expert appraisers, of “comparable sales.” (See Evid. Code, § 816; cf. id., § 819 [capitalized income approach].) Under this method, the appraiser identifies sales of properties deemed to resemble the condemned property in relevant respects, and then derives a market value for the condemned property from the prices paid for these “comparables,” typically adjusting the price to reflect such matters as material differences between the properties and differences in market forces between the time and location of the comparable sale and that of the property being valued.

Prior to trial the Agency moved in limine to bar Elementis from using, as comparables, any “sales of property to the Redevelopment Agency.” The motion asserted that six of the 15 transactions disclosed prior to trial as a basis for the appraisal by defendant’s witness Clevenger were purchases by the Agency, for public use, of property it could have condemned, and were therefore inadmissible under Evidence Code section 822, subdivision (a)(1) (section 822(a)(1)). The court denied the motion. At trial, Clevenger relied on 12 comparables, of which three were purchases by the Agency of properties neighboring the Elementis land.

This evidence should have been excluded under section 822(a)(1), which at the time of trial provided as follows: “(a) In an eminent domain or inverse condemnation proceeding, ... the following matter is inadmissible as evidence and shall not be taken into account as a basis for an opinion as to the value of property: [¶] (1) The price or other terms and circumstances of an acquisition of property or a property interest if the acquisition was for a public use for which the property could have been taken by eminent domain, except that the price or other terms and circumstances of an acquisition of property appropriated to a public use or a property interest so appropriated shall not be excluded under this section if the acquisition was for the same public use for which the property could have been taken by eminent domain.”

We first reject Elementis’s assertion that the decision whether to admit the evidence in question, over an objection based on the foregoing statute, is subject to deferential review as a matter entrusted to the trial court’s discretion. Whatever section 822(a)(1) means, it does not confer a discretionary power on the trial court. It categorically excludes evidence of a specified character, subject to a stated exception. Nor is there any dispute as to the relevant facts. Accordingly we must exercise our independent judgment in reviewing the ruling at issue. “The interpretation of a statute ... is a question of law . . . .” (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 699 [170 Cal.Rptr. 817, 621 P.2d 856].) “A trial court’s interpretation of a statute is reviewed de novo,” and “the application of a statutory standard to undisputed facts is reviewed de novo.” (Harustak v. Wilkins (2000) 84 Cal.App.4th 208, 212 [100 Cal.Rptr.2d 718].)

We also reject any suggestion that the statute was intended only, or primarily, for the protection of property owners, and thus should have little or no effect where, as here, the condemnee offers evidence of other acquisitions for a public use. The only support offered for such a view is a dictum in County of Los Angeles v. American Sav. & Loan Assn. (1972) 26 Cal.App.3d 7, 13 [102 Cal.Rptr. 439], that the purpose of section 822(a)(1) is “to preclude use of the price or other terms that may have been acceded to by the transferor only because of the threat of condemnation.” This statement cannot justify a departure from the language of the statute, which on its face embodies the former court-made rule that “it is not competent for either party in a condemnation proceeding to put in evidence the amount paid by a condemning party to the owners of adjacent lands, however similar they may be to that in controversy, because the price paid under such circumstances ‘is not a reasonable or fair test of market value.’ ” (City of Los Angeles v. Cole (1946) 28 Cal.2d 509, 517-518 [170 P.2d 928], italics added; see Ventura County Flood Control Dist. v. Campbell (1999) 71 Cal.App.4th 211, 222 [83 Cal.Rptr.2d 725]; cf. County of Los Angeles v. Faus (1957) 48 Cal.2d 672, 680 [312 P.2d 680] [arguably overruling Cole on this point, but itself abrogated to that extent by § 822(a)(1)].) As discussed more fully in the following section, the price distortions in such a transaction are at least as likely to favor the seller as the buyer. (See discussion at p. 1107, post.)

We turn to the question whether the Agency’s purchases here fall within the rule declared by the statute, i.e., that evidence of an acquisition of property is categorically inadmissible “if the acquisition was for a public use for which the property could have been taken by eminent domain . . . .” (§ 822(a)(1).) It is undisputed that the evidence here fit this description. The Agency purchased these properties for redevelopment, a public use. Accordingly those purchases were inadmissible unless they came within an exception to the statutory rule of inadmissibility.

As in effect at trial, the statute’s single exception exempted evidence of “an acquisition of property appropriated to a public use ... if the acquisition was for the same public use for which the property could have been taken by eminent domain.” (Former § 822(a)(1); Stats. 1987, ch. 1278, § 1, p. 4548, italics added.) Elementis has never attempted to show that the purchases here fall within this exception, and we are satisfied that they do not. The exception applies only to acquisitions of “property appropriated to a public use,” which generally means property already in public use. This phrase is most commonly used where an entity seeks to condemn property already put to a public use by another entity charged with a public function. (See Code Civ. Proc., § 1235.180 [defining ‘“[property appropriated to public use’ ” as “property either already in use for a public purpose or set aside for a specific public purpose with the intention of using it for such purpose within a reasonable time”]; id., § 1240.510 [one authorized to exercise power of eminent domain may take property “appropriated to public use” where taking will not unduly interfere with existing use]; id., § 1240.610 [entity may take property where new use is “a more necessary public use than the use to which the property is appropriated”]; id., § 1240.650, subd. (a) [new use is deemed more necessary than existing use where second taker is public entity and current holder is not]; Health & Saf. Code, § 33395 [redevelopment agency may take “property already devoted to a public use,” but “[property of a public body shall not be acquired without its consent”].)

That the exception applies only to property already in public use is also evident from the legislative history. Prior to 1986, the statute excluded all evidence of acquisitions for a purpose for which the property could have been taken by eminent domain. (Stats. 1980, ch. 381, § 5, p. 758.) Toward the end of the 1986 session, the Legislature amended the statute, by negative qualification, so that the statute only barred evidence of acquisitions of “property not appropriated to a public use.” (Stats. 1986, ch. 1238, § 2, p. 4349.) In 1987, the Legislature restated this qualification as an affirmative exception and further qualified the exception so that it only applied “if the acquisition was for the same public use for which the property could have been taken by eminent domain.” (Former § 822(a)(1); Stats. 1987, ch. 1278, § 1, P- 4548.)

Contemporaneous evidence of legislative intent establishes that (1) the 1986 amendment was never intended to apply to acquisitions of private property, but was aimed at a very specific category of public utility property; and (2) the 1987 amendment was an attempt to correct a perceived over-breadth in the 1986 amendment by further limiting the class of transactions which would be admissible. An undated “Author’s Statement,” addressed to an unidentified committee (presumably the Assembly Committee on the Judiciary), states that the 1986 amendment “sought to correct a problem for water districts in that the only comparables were other water districts. The intent was to provide comparables, but the language is too broad . . . . [¶] [This bill] will allow the purchase price of a public property to be used as a ‘comparable’ only when the same public use will be continued . . . .” (Assemblyman Harris, Author’s Statement on Assem. Bill No. 616 (1987-1988 Reg. Sess.), p. 1, italics added.) An Assembly committee analysis reports the view of the originating agency that the 1986 amendment permitted evidence of “acquisition^] of comparable property that is already in public use .... [¶] ... [¶] . . . [T]he exception ... is too broad because it permits the use of a price paid for public property . . . without regard [to] whether the acquisition was for a purpose for which the acquiring agency had the power to condemn the property.” (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 616 (1987-1988 Reg. Sess.), for hearing of May 13j 1987, pp. 1-2, italics added.) Similarly, a Senate committee analysis noted that under the 1986 exception, “the admission and use of ... an acquisition of property that is already in public use is permitted .... [T]he price paid by a public entity to a private owner is generally inadmissible but the price paid for public property between public entities may be admissible • • • • [¶] This bill narrows the exception to the general rule . . . .” (Sen. Com. on Judiciary, Analysis of Assem. Bill No. 616 (1987-1988 Reg. Sess.), as amended July 1, 1987, for hearing of July 7, 1987, pp. 1-2, italics added.)

In sum, the statute as in effect at trial prescribed (1) a rule of excluding acquisitions for public use, which rule plainly applied to the purchases in question; (2) an exception for property already in public use, which exception plainly did not apply; and (3) a limitation on the exception, which was irrelevant because the exception was inapplicable by its core terms.

Elementis makes no attempt to explain how the purchases here could be admitted consistent with the statutory language or history. Instead it cites City and County of San Francisco v. Golden Gate Heights Investments (1993) 14 Cal.App.4th 1203 [18 Cal.Rptr.2d 467] (Golden Gate). In that case another division of this court affirmed a judgment despite the trial court’s admission of evidence, over the condemnee’s objection, of a city’s purchase of neighboring properties. The condemnee contended that the 1987 amendment to section 822(a)(1) applied only to utility property. The court seemed to dismiss this interpretation, stating, “We do not read the statute as so limited. Nor does [the condemnee’s] cited authority so state.” (Golden Gate, at p. 1210, citing 1 Matteoni & Veit, Condemnation Practice in Cal. (Cont.Ed.Bar supp. 1992) § 9.49, p. 161.) But the court offered no interpretation of its own. Instead it held that any error in the admission of the evidence was harmless. (Ibid.)

We are uncertain that Golden Gate is properly understood to hold that the evidence there was admissible. Certainly no supporting analysis or rule of decision is provided. So far as we can tell, any attempt to follow that case would read section 822(a)(1) right out of the code. In any event, the matters we have already discussed compel us to conclude that the evidence here fell squarely within the general rule of inadmissibility.

We also note that in 2000 the Legislature again amended the statute. As amended, the statute continues to declare the general inadmissibility of “an acquisition of property ... for a public use for which the property could have been taken by eminent domain.” (§ 822(a)(1).) In place of the confusingly qualified 1987 exception, the statute now provides, “The price or other terms and circumstances shall not be excluded pursuant to this paragraph if the proceeding relates to the valuation of all or part of a water system as defined in Section 240 of the Public Utilities Code.” (Ibid., italics added.)

A Senate floor analysis indicates that the California Law Revision Commission, which sought the 2000 amendment, considered the prior language “confusing,” and believed that the court in Golden Gate had “misconstrued this poorly drafted exemption . . . [by] allowing evidence of prices paid by the same condemnor to acquire adjacent private property for public use.” (Sen. Com. on Judiciary, Office of Floor Analyses, Analysis of Assem. Bill No. 321 (1999-2000 Reg. Sess.) as amended Aug. 16, 1999, pp. 3, 4, at [as of Aug. 9, 2002].) According to the bill’s author, the 1986 and 1987 amendments were “created for the acquisition of property by water districts.” (Ibid.; see also Assem. Floor Analysis of Assem. Bill No. 321 (1999-2000 Reg. Sess.) as amended May 6, 1999, pp. 1-2, at [as of Aug. 9, 2002] [“CLRC recommended this ‘clarification’ after an appeals court misinterpreted Evidence Code Section 822”].)

These amendments postdated the trial in this matter and therefore cannot, of their own force, govern the issue before us. But while the interpretation of existing laws is a quintessentially judicial function, courts may and must give due consideration to the Legislature’s stated views on “the prior import of its statutes.” (Western Security Bank v. Superior Court (1997) 15 Cal.4th 232, 244 [62 Cal.Rptr.2d 243, 933 P.2d 507], quoting California Emp. etc. Com. v. Payne (1947) 31 Cal.2d 210, 213-214 [187 P.2d 702] [“ ‘[A] subsequent expression of the Legislature as to the intent of the prior statute, although not binding on the court, may properly be used in determining the effect of a prior act’ ”]; Hunt v. Superior Court (1999) 21 Cal.4th 984, 1007-1008 [90 Cal.Rptr.2d 236, 987 P.2d 705].) In adopting the 2000 amendment the Legislature confirmed that the statute does not authorize the admission of evidence of acquisitions of property privately held for private use. To this extent, at least, we believe that amendment both declared, and accurately characterized the effect of, existing law.

In sum, section 822(a)(1) has always barred evidence of acquisitions for public use of purely private property. The purchases at issue here fell squarely within this ban, and were inadmissible. Accordingly, it was error to admit evidence of these purchases over the Agency’s objection.

II.

Contractual Recital in Comparable Sale

The expert appraisal witnesses for both sides accepted as a comparable sale, and relied for their valuations upon, the 1997 sale of the “Ikea property,” which straddled the boundary between the cites of Emeryville and Oakland. The purchase price for the property was stated in the governing contract as “$21.00 per foot, which equals $14,148,592.92.” However, in pretrial discovery it emerged that Elementis’s appraiser Clevenger set a per-square-foot value of $27.64 on the Emeryville portion of the property. Asked in deposition how he arrived at this figure, he alluded to a contract provision purporting to “allocate]]” specified proportions of the purchase price between the Emeryville and Oakland portions of the property. When pressed by counsel to explain his reasoning, he merely cited this provision, saying, “That’s what it says. You didn’t read it.”

Based on these facts the Agency moved in limine “[t]o preclude evidence contesting the purchase price of. . . the Barbary/Ikea sale at $21 per square foot, or, in the alternative for judicial determination of the purchase price of that sale as intended by the purchase agreement.” The Agency cited, among other things, the rule against “appraising the comparable,” as codified in Evidence Code section 822, subdivision (a)(4) (see p. 1102, post). Plaintiff asserted that the cited provision of the contract was probably intended to minimize the seller’s liability for Oakland’s real estate property transfer tax, which had no parallel in Emeryville.

The trial court denied the motion, writing: “The plain language of the contract. . . allocates the purchase price between two zones of the property. The trier of fact is entitled to hear and weigh the expert opinions regarding the allocation and whether there is a fair market value difference between the portion of the [Ikea] property located in Emeryville versus the property located in Oakland.”

This was error. The recital as to the “allocation” between the two “zones” of the property was inadmissible both as direct evidence and as a basis for Clevenger’s expert opinion. To begin with, it was inconsistent with the purpose for which comparable sales are admitted, which is to “giv[e] the jury the benefit of some ‘objective ’ market evaluation against which to check an appraiser’s valuation [citation].” (People ex rel. Dept. Pub. Wks. v. Reardon (1971) 4 Cal.3d 507, 515 [93 Cal.Rptr. 852, 483 P.2d 20], italics added.) The objective datum in a real estate sale is the consideration actually given for the property purchased. It is this exchange of values which defines the market and provides an objective benchmark for other exchanges of comparable properties.

The only objectively determinable market price in the Ikea contract was the sum agreed to be paid for the property as a whole, i.e., $14,148,592.92. The “allocation” provision had no effect on the exchange of values between the parties and carried no assurance that it accurately reflected market forces. Nor did it have any discernible effect on the legal relations of the contracting parties. It was not a contractual undertaking, but a declaratory statement on a matter of no apparent consequence as between the signatories. The law has long distinguished between a “covenant” which creates legal rights and obligations, and a “mere recital” which a party inserts for his or her own reasons into a contractual instrument. Recitals are given limited effect even as between the parties.

The recital here does not even concern a matter of fact but states at most the opinion of one or both parties that one part of the property is more valuable than another. Statements of opinion are admissible in evidence only when they satisfy the requirements of Evidence Code section 800 et seq. Evidence Code section 822, subdivision (a)(4) (section 822(a)(4)) renders inadmissible “[a]n opinion as to the value of any property or interest other than that being valued.” The “allocation” provision recited an opinion concerning the relative value of two portions of the Ikea property. Since each such portion was a “property or property interest other than that being valued” (i.e., other than the Elementis property), the recital was an appraisal of the comparable (or a part thereof) and was inadmissible under section 822(a)(4).

Elementis contends that the allocation provision was admissible on a “ ‘zone of value’ ” theory under Mireiter, supra, 18 Cal.App.4th 1808, 1818. The question there was whether an appraiser could permissibly derive a value by dividing the condemned property into three “zones” and analyzing comparable sales for each. The court’s analysis has no bearing on an attempt, such as the one here, to divide a comparable property into “zones” and allocate a purchase price between them. Such an attempt is a patent appraisal of the comparable barred by section 822(a)(4).

Similarly unavailing is Elementis’s citation of People v. University Hill Foundation (1961) 188 Cal.App.2d 327, 333 [10 Cal.Rptr. 437]. The court there found “no prejudicial error” in connection with an appraiser’s testimony purporting to allocate a comparable sale between land and buildings. From the opinion we cannot ascertain the nature of the objection in the trial court or of the point being urged on appeal. In any event the case, like Mireiter, supra, 18 Cal.App.4th 1808, fails to mention the rule against appraising the comparable. “Cases are not authority for propositions not considered.” (City of Oakland v. Public Employees ’ Retirement System (2002) 95 Cal.App.4th 29, 57 [115 Cal.Rptr.2d 151].)

Section 822(a)(4) was duly invoked here. It operated not only to bar direct evidence of the “allocation” recital, but also to prevent its being “taken into account as a basis” for appraisal testimony. (§ 822(a)(4).) The trial court erred by permitting the recital to be admitted in evidence and relied upon by the witness Clevenger.

III.

Evidence of Project

Plaintiff moved in limine to exclude evidence of a development project, generally referred to below as the Emeryville Town Center project, in which it planned, and had agreed with a developer, to include the subject property. Plaintiff cited the rule that evidence of a specific plan or project is inadmissible to show the value of the subject property. (Code Civ. Proc., § 1263.330 [“The fair market value of the property taken shall not include any increase or decrease in the value of the property that is attributable to • • • [¶] (a) The project for which the property is taken . . . .”]; Merced Irrigation Dist. v. Woolstenhulme (1971) 4 Cal.3d 478, 491 [93 Cal.Rptr. 833, 483 P.2d 1] [“the increase in value which a condemned tract gains when it is valued as part of the proposed project. . . could never be considered in determining ‘just compensation’ under the established definition of ‘market value’ ” (italics omitted)].)

The trial court denied the motion. Citing City of Los Angeles v. Decker (1977) 18 Cal.3d 860 [135 Cal.Rptr. 647, 558 P.2d 545] (Decker), the court wrote that “evidence of the Emeryville Town Center project” was admissible “to help demonstrate the highest and best use of the property,” and “to rebut plaintiff[’]s contentions that the property is stigmatized and not suitable for development.”

This ruling cannot be sustained. In Decker, supra, 18 Cal.3d 860, a city sought to condemn land near an airport. The “principal valuation issue at trial” was the highest and best use for the property. (Id. at p. 864.) The landowner’s appraiser testified that the highest and best use was airport-related purposes, “especially parking.” (Ibid.) The city’s appraisers testified that the highest and best use was residential. (Ibid.) In argument to the jury, the city’s attorney denied that there was demand for airport parking. (Id. at pp. 864-865.) The jury found a value based on residential use. (Id. at p. 865.) Shortly after entry of judgment, the city approved an environmental impact report recommending construction of a parking facility on the property. (Ibid.) It was assumed that the city knew, at the time of trial, that the property was going to be used for a parking lot. (Id. at p. 866.)

The court considered the “intersection of. . . two rules” (Decker, supra, 18 Cal.3d 860, 867), i.e., (1) that “condemned property is not to be valued as part of the proposed improvement” (id. at p. 866), and (2) that “ ‘[i]f. . . the condemnor’s proposed use is one of the highest and best uses of the property, the adaptability of the property for that purpose may be shown by the property owner’ ” (id. at p. 867, quoting 12 Cal. Law Revision Com. Rep. (1974) § 1263.330, p. 1834). The court reasoned that “[t]he city’s determination as to the adaptability of the property for airport parking purposes was relevant to show that the property in the hands of defendant and not as part of the project could have been used for airport parking.” (Decker, at p. 869, italics omitted.) Thus “the evidence of the city’s determinations as to the need for airport parking and the suitability of defendant’s property for such purpose would have been admissible to show the highest and best use of the property in the hands of defendant.” (Ibid.) The court held that the city, through its attorney, committed misconduct warranting reversal. (Id. at pp. 871-872.)

The present case bears virtually no resemblance to Decker, supra, 18 Cal.3d 860. There the question of highest and best use was disputed, with the condemnor “den[ying] that the use which it was in fact going to make of the property was the highest and best use,” and “even conceal[ing] such fact from defendant.” (Id. at p. 867.) Here it was undisputed that the highest and best use for the property was mixed commercial use. Nor did the Agency suggest, as the condemner did in Decker, that there was no “need” for mixed commercial property. Rather counsel for the Agency said, in her opening statement, “No one disagrees about the highest and best use of this property. Everyone agrees that ultimately this property can be used for some sort of mixed-use commercial/retail development.” Counsel for Elementis said the same thing in his closing jury argument, referring to the property’s “highest and best use, which everyone is agreeing is a mixed-use shopping center.” The court itself, in ruling on another motion in limine, noted that one of defendant’s experts “agree[d] that the highest and best use of the subject property is mixed commercial uses encompassing retail, food and beverage and entertainment.”

Because these matters were undisputed, the rationale for admitting the evidence in Decker was inapplicable. Other cases cited by defendant are likewise inapposite. In People ex rel. Dept. of Transportation v. Tanczos (1996) 42 Cal.App.4th 1215 [50 Cal.Rptr.2d 70], it was error to exclude evidence of the condemnees’ building plans, because the condemnor made feasibility “the central issue” by contending that the property could not accommodate a use of the type depicted in the plans. (Id. at p. 1219.) Excluding the evidence prevented the condemnees from “defend[ing] their position [or] challenging] the State’s.” (Id. at p. 1220.) In People v. La Macchia (1953) 41 Cal.2d 738 [264 P.2d 15], an unspecified “portion” of testimony concerning the condemnees’ plans was properly admitted “as a description of the uses to which the properties were adaptable,” but the majority of the testimony was objectionable as falling “squarely within the rule which prohibits the admission of evidence concerning an owner’s purposes with regard to his property.” (Id. at p. 752.) The prejudicial effect of the latter evidence, however, was “offset” by other similar evidence received without objection. (Ibid.) In San Diego Metropolitan Transit Development Bd. v. Cushman (1997) 53 Cal.App.4th 918, 929 [62 Cal.Rptr.2d 121], evidence of certain diagrams showing where an existing building might be expanded was held admissible in support of a claim for severance damages where it did not constitute evidence of “a specific plan.”

We believe the lesson of Decker and similar cases is that evidence of specific project plans is inadmissible in the absence of specific facts or points of contention that demonstrably enhance the probative value of the evidence to a point where it outweighs the inherent potential for prejudice. That test is not satisfied merely because the plans “illustrate” or “demonstrate” an undisputed potential use for the property. If evidence of project plans could be introduced on that rationale, it would seem to be admissible in every case, and the rule to which Decker is an exception would cease to exist.

The trial court also indicated that evidence of the Agency’s plans was admissible to rebut the Agency’s evidence that development of the property would encounter barriers such as “stigma” and the costs and risks of hazardous substance remediation and archaeological mitigation. Thus the court said, “I expect there is going to be some expert testimony from the Agency or offered by the Agency that suggests that this is very difficult property, a person or an entity going into the negotiation process for the acquisition of this property would be very concerned about all the downside risks to this property, and it seems to me that it is relevant, [f] And I think Decker permits the defendants in this instance to say, Yes, those are factors to be considered, but it’s also true that good things have happened from the development of similarly situated property in this area or in this vicinity.”

The court thus concluded that evidence of the Agency’s plans, and apparently of its dealings with the proposed developer, had sufficient probative value with respect to the feasibility of development to outweigh the risk that the jury would improperly consider those plans and dealings in determining value. In fact, however, the Agency’s expectation that it (or a developer aided by it) could surmount obstacles to development had little tendency to show how a hypothetical buyer in the open market would have viewed those obstacles. Almost any property can be developed; the question is at what cost. (See Roemer v. Pappas (1988) 203 Cal.App.3d 201, 210 [249 Cal.Rptr. 743] (conc. opn. of Poché, J.) [“Aside from the crater of an active volcano, there is probably no piece of land that cannot be developed, given a big enough investment of money and effort.” (Italics omitted.)].) The very function of a redevelopment agency is to restore to productive use properties suffering from “blight,” which can only be developed to productive use with public assistance. (See Health & Saf. Code, §§ 33030, 33031.) It is thus the declared policy of the state “[t]hat whenever the redevelopment of blighted areas cannot be accomplished by private enterprise alone, without public participation and assistance in the acquisition of land, in planning and in the financing of land assembly, in the work of clearance, and in the making of improvements necessary therefor, it is in the public interest to employ the power of eminent domain, to advance or expend public funds for these purposes, and to provide a means by which blighted areas may be redeveloped or rehabilitated.” (Id., § 33037, subd. (b), italics added.)

The function and powers of redevelopment agencies, as well as the prescribed conditions for exercising those powers, militate distinctly against the supposition that such an agency’s plans for a property tend to show what a buyer on the open market would expect to pay for developing that same property. Agency counsel here asserted that the project was “taking such enormous public subsidies that it could never be built by the private market.” If the landowner were free to rely on evidence of the Agency’s intentions to show economic feasibility, it would seem equally logical for the agency to respond with evidence of all the direct and indirect subsidies and other forms of assistance it and other public entities expected to provide in support of the project. The landowner would presumably counterattack with criticism of the Agency’s decisions, perhaps presenting a sample of unguarded comments from records of agency proceedings. The jury would be drawn into something approaching a referendum on the condemnor’s conduct. When the smoke cleared the jury might be prejudiced in any number of ways for or against either party. The surest outcome is that it would have been grossly distracted from the issue at hand, which is the market value of the property.

The Agency’s plans for the property are admissible only if, and to the extent, they are shown to possess a distinct and substantial probative value other than to establish points on which there is no controversy. Since no such value was ever identified here, it was error to admit evidence of those plans.

IV.

Prejudice

We are satisfied that the foregoing errors require reversal in that, had they not been made, the jury would probably have fixed the fair market value at a figure more favorable to the Agency.

Elementis argues that the evidence of Agency purchases was harmless because, of the 25 sales cited by the appraisal witnesses, only three were Agency purchases. Those three purchases, however, seem to have played a central role in Elementis’s trial strategy. They were the first comparables discussed by counsel in his opening jury summation. They also formed a primary basis for a complex network of prejudicial insinuations concerning the Agency’s conduct before and during trial.

One such insinuation, conveyed through questioning of a member of the Agency’s governing board and a member of its staff, suggested that if the price paid for these properties exceeded fair market value, it constituted a “gift” of “taxpayer funds” or “public funds.” This suggestion was inaccurate at best. California law encourages a condemner to make a generous settlement offer before taking any condemnation case to trial, and exposes the condemner to adverse consequences if the offer is found to be unreasonable. Under the statutory constraints thus imposed, one would expect a prudent condemner to offer its best estimate of fair market value plus some reflection of its own savings from avoiding trial, with a further upward adjustment for elimination of potential liability for the condemnee’s litigation expenses. The chances seem good that such an offer would exceed the fair market value of the property. Indeed courts have recognized that a prospective condemner may well pay a price in lieu of condemnation “more generous than is required under the Constitution.” (Klopping v. City of Whittier (1972) 8 Cal.3d 39, 51-52, fn.. 4 [104 Cal.Rptr. 1, 500 P.2d 1345]; see South Bay Irr. Dist. v. California-American Water Co. (1976) 61 Cal.App.3d 944, 984 [133 Cal.Rptr. 166] [“a public agency may agree upon a price more favorable to the seller than a private investor would agree upon”]; ibid., quoting the trial judge [“ ‘historically governmental agencies have paid a premium over earnings when acquiring utility properties’ ”].)

Counsel’s contrary suggestion apparently rests on the concurring opinion in Redevelopment Agency v. Gilmore (1985) 38 Cal.3d 790, 809 [214 Cal.Rptr. 904, 700 P.2d 794], which Elementis quotes in its brief on appeal. There Justice Mosk wrote that “to assess more than just compensation runs the risk of violating the prohibition against making a gift of public funds. (Art. XVI, § 6.)” (Ibid., italics added.) But he was not speaking of purchases in lieu of condemnation; he was speaking of judicial rules awarding excessive compensation in litigated cases. (Ibid) Indeed it was also Justice Mosk who wrote the opinion in Klopping v. City of Whittier, supra, 8 Cal.3d 39, in which a unanimous court flatly contradicted the premise that the price paid in lieu of condemnation cannot lawfully exceed fair market value.

Counsel’s suggestion to the contrary was not only inaccurate but also highly damaging to the Agency’s position. It created obvious impediments to any inference setting a fair market value below what the Agency had paid for neighboring properties. The denials by Agency witnesses of any “gift of public property” strengthened the inference that the prices paid for these properties were in fact at or below fair market value—the very inference proscribed by section 822(a)(1). Counsel sought to reinforce this inference by arguing that these purchases were “Agency-controlled transactions,” presumably meaning that the prices paid must be low because of “what happens when you go to fight City Hall.” And should the jurors conclude that any of the sums paid exceeded fair market value, they were faced with the unsavory spectacle of a “gift of public funds.” Counsel also suggested that the price paid for these properties, whether above or below market value, should set a minimum level for the jury’s verdict because otherwise the Agency would have succeeded in perniciously discriminating against Elementis by treating it differently from its neighbors.

The evidence of Agency purchases also played an implicit role in counsel’s attempts to paint Elementis as the victim of an Agency strategy to suppress evidence of the subject property’s true value. In this context, the Agency’s failure to itself present evidence of its purchases of neighboring properties—a failure reflecting its correct belief that the evidence was categorically inadmissible—supported the overall attack on the credibility of the Agency’s evidence, and that of its appraiser.

We note that even without these prejudicial inferences, the jury’s finding of fair market value probably rested in significant part on at least one of the subject purchases: the “Sepulveda Property,” which was immediately adjacent to the Elementis property. Elementis’s appraiser Clevenger testified that the Sepulveda sale took place in “November ’98, almost right exactly on [the] valuation date” of the Elementis property. He said that the purchase reflected a negotiated “agreement of the market value.” He said that he understood the purchase documents to reflect a belief by the “parties to that transaction . . . that ... a fair market value was being paid.” He also asserted that the Sepulveda property was “highly contaminated with the same kind of material or chemical that the subject property is contaminated with.” The Agency paid $28.50 per square foot for the Sepulveda property. The jury fixed the value of the Elementis property at $29 per square foot. These nearly identical values strongly suggest that the jury weighed the Sepulveda property heavily in its calculations.

The inference of prejudice that rises from the admission of the Agency purchases takes on added weight from the other errors we have noted. The evidence of the “allocation” provision in the Ikea purchase contract was likely to encourage the jury to fix a higher value by providing a seemingly “hard” number of $27.64 per square foot—much closer to the found value of the Elementis property ($29) than the actual $21 price, which was the only figure properly drawn from the Ikea contract.

Likewise the evidence concerning the Agency’s plans for the condemned property contributed significantly to the overall likelihood that the jury fixed a higher value than it would have allowed in the absence of the errors. In jury argument counsel accused the Agency of using the condemnation of the Elementis property case as a “cost recovery vehicle ... to subsidize its shopping center.” He later returned to this point: “At the end of the day, they’re trying to undercompensate this property owner in order to subsidize their property, pure and simple, and it’s an end-justifies-the-means mentality which ignores the rights of the property owner, which are the only thing at issue here. The question isn’t whether or not they get to build their shopping center on that property. The question is should we get paid the fair market value.” (Italics added.) Elsewhere counsel cited the intended use to trivialize the Agency’s decontamination efforts, referring to “the remediation efforts that the City wanted to pursue for its shopping center . . . .” Similarly counsel mocked an offer to purchase the property as “essentially” saying, “‘Do our demolition, indemnify us, if there’s any cost overruns in our shopping center project, that’s your responsibility.’ ” (Italics added.)

In sum, the improperly admitted evidence had a natural tendency to adversely affect the verdict in a number of respects. Evidence of Agency purchases provided the foundation for raising the issue of a “gift of public funds,” and for all but compelling an inference that the price paid for those properties was no higher than their market value. The Agency’s own failure to rely on those purchases raised an appearance that it was attempting to hide relevant evidence. Those purchases also provided the sole basis for the inflammatory suggestion that Elementis was the victim of unwholesome discrimination which the jury ought to remedy with a generous award. Evidence of the “allocation” of the Ikea purchase price provided an inflated starting point for the comparison of that purchase to the hypothetical sale of the Elementis property. And the evidence of the Agency’s intended plans for the Elementis property provided a foundation for trivializing the Agency’s performance of its fünction and the very substantial hurdles it faced in preparing the subject property for redevelopment. At least in combination, these effects were prejudicial, requiring reversal for a new trial.

V.

Fixtures and Equipment

Plaintiff contends that the trial court erred by permitting Elementis to seek compensation of $1,657,148 for fixtures and equipment situated on the condemned property at the time of the taking. Elementis contends that the issue was properly submitted to the jury and that plaintiff suffered no prejudice because the jury only awarded $466,000. We believe any recovery exceeding the salvage value of the equipment violated the principle of “consistent use,” which was not rendered inapplicable by defendant’s claim of a compensable “interim use.”

Where condemned property includes fixtures or other improvements, they must be “taken into account in determining compensation.” (Code Civ. Proc., § 1263.210, subd. (a) (section 1263.210(a)).) “Taken into account,” however, does not mean—as defendant’s selective quotation would suggest—that improvements must always be “paid for by the condemnor.” (Legis. Com. com., 19A West’s Ann. Code Civ. Proc. (1982 ed.) foil. § 1263.205, p. 24.) Rather, under section 1263.210(a), “[i]f the improvements serve to enhance the value of the property over its unimproved condition, the property receives the enhanced value; if the improvements serve to decrease the value of the property below its unimproved condition, the property suffers the decreased value.” (Cal. Law Revision Com. com., 19A West’s Ann. Code Civ. Proc., supra, foll. § 1263.210, p. 26.)

Although we know of no case so stating, we have little doubt that California law incorporates the principle of “consistent use,” i.e., “that land cannot be valued based on one use while improvements are valued based on another.” (Appraisal Institute, The Appraisal of Real Estate (12th ed. 2001), p. 324; see Spano v. State of New York (1964) 22 A.D.2d 757 [253 N.Y.S.2d 730] [“It was error ... to award anything for the value of the buildings while at the same time fixing the land value for commercial usage since the two bases are entirely inconsistent”].) Thus a landowner cannot recover compensation based on a use more valuable than the existing one while simultaneously claiming recovery under section 1263.210(a) for existing improvements that are incompatible with that use. This principle would seem inherent in the Law Review Commission’s recognition that improvements can “decrease the value of the property below its unimproved condition.” (Cal. Law Revision Com. com., 19A West’s Ann. Code Civ. Proc., supra, foil § 1263.210, p. 26; see also 1 Matteoni & Veit, Condemnation Practice in Cal. (Cont.Ed.Bar 2d ed. through June 2002 update) § 4.18, p. 109 [“Often, when property is ready for immediate development, the presence of older improvements may actually reduce the property’s value because of the cost of removal.”]; 2 Smith et al., Cal. Civil Practice Real Property Litigation (1994) § 15:92, p. 115.)

Elementis does not dispute the soundness of this general principle, nor that its factual premise was established here, i.e., the fixtures for which defendant sought compensation were incompatible with the highest and best use on which both parties predicated their appraisals of the property. As defense expert Clevenger conceded, the property could not “be developed for its highest and best use with the equipment in place.” However, Elementis contends that the rule of consistent use does not bar recovery for the fixtures and equipment here because the existing use could have continued temporarily until the property was ready for development. This prospect of “interim use,” Elementis contends, enhanced the overall value of the property. For this proposition defendant quotes another section of the same text on which plaintiff relies: “The use to which a site or improved property is put until it is ready for its highest and best use is called an interim use. Thus, interim use is a current highest and best use that is likely to change in a relatively short time—say, five to seven years.” (Appraisal Institute, The Appraisal of Real Estate, supra, pp. 323-324, first italics in original.)

Elementis’s claim for the “interim use” value of the fixtures and equipment runs afoul of the basic proposition that “in eminent domain actions, ‘elements affecting value which, while possible, are not reasonably probable, should be excluded.’ ” (Humphries Investments, Inc. v. Walsh (1988) 202 Cal.App.3d 766, 772 [248 Cal.Rptr. 800], quoting People v. Ocean Shore Railroad (1948) 32 Cal.2d 406, 426 [196 P.2d 570, 6 A.L.R.2d 1179]; State of Cal. ex rel. State Pub. Wks. Bd. v. Wherity (1969) 275 Cal.App.2d 241, 246 [79 Cal.Rptr. 591].) Thus, in order to justify a finding in Elementis’s favor—or submission of the issue to the jury—there must be substantial evidence that a period of interim use was not only possible, but probable— probable enough, at any rate, to support an inference that a hypothetical buyer and seller on November 1, 1998, would have added something to the price to reflect this supposed value. Neither the evidence of record nor any offer of proof or argument of counsel contains a sufficient basis for such a finding.

A finding of compensable “interim use” will ordinarily require concrete evidence of circumstances that could reasonably cause a buyer of the particular property at issue to view the presence of incompatible improvements as a net economic benefit rather than a net cost. The facts on which Elementis relied did not approach such a showing. Elementis never identified any concrete physical, legal, or economic obstacle, or other particular cause, that would have been reasonably likely to prevent or deter a developer from entering the property on the day title transferred and commencing the physical process of development. At most, defense counsel and witnesses offered generic assertions that the property’s transition to its highest and best use could be delayed by demolition and remediation and by routine steps in development such as planning the project, obtaining “entitlements” (i.e., permits), and financing. Thus when defense expert Gimmy was asked “how would one go about” continuing the existing use while “still pursuing] a shopping center,” he replied, “[Y]ou have to get entitlements and get the property clean.” But in the absence of some showing to the contrary, “getting the property clean” would be incompatible with the continued presence of existing improvements. As for “entitlements,” defendant made no attempt to show the actual duration or likelihood of any regulatory delay that might reasonably be expected to attend a development of this kind. Gimmy’s testimony only established a maximum delay of three years, with an equally possible minimum delay of one year, or perhaps less. (See fn. 10, ante.) Defense expert Clevenger testified that “[i]n a normal course of events, a developer would buy the property and take two, three years to make the plans, get his plans in shape, to get them approved’ (italics added), but he said nothing about why (or for how long) such a developer would delay in entering and clearing the property in order to be ready to carry those plans into effect. Indeed he never explicitly linked these generic periods of delay to the “interim use” claim. His testimony elsewhere cast serious doubt on the substance of that claim by seeming to contemplate a period of interim use intended, at least in part, as an accommodation to the seller, i.e., to permit the orderly shutdown of the existing operation. Nothing in this record supports a belief that such a factor is something for which the buyer would be reasonably likely to pay $1.6 million, or $466,000, or any amount.

Moreover, apart from the ultimate conclusion that a buyer would contemplate a period of interim use, Clevenger like Gimmy failed to identify any reasonably probable reason for the buyer of this property to do so. Indeed none of his testimony asserted that a buyer would be likely to do so; instead he spoke in terms of mere possibility.

Defense counsel argued to both the court and the jury that a finding of “interim use” was supported by various periods of time preceding the valuation date. These arguments appear facially unsound, if only because during the cited periods the property was not in the possession of anyone with the power and inclination to undertake immediate development. It would seem far more telling that as soon as the Agency acquired the right to possession, it set about the demolition and removal of all improvements and the radical remediation of the soil, such that by the time of trial the property was apparently almost clean and ready for construction. It is conceivable that some obstacle would have prevented a hypothetical purchaser from proceeding with similar alacrity, but we are directed to no evidence to that effect, and our review of the record has discovered none.

We conclude that the vague generalities offered by defendant’s experts did not constitute substantial evidence on which to predicate a finding that it was reasonably probable that the prospect of such use would have enhanced, rather than diminished, the value of the land in the eyes of the hypothetical buyer and seller.

We note other dubieties in the claim for interim use. As defendant’s equipment appraiser freely admitted, the figure he gave for the fixtures, and which was adopted in the appraisals of the property as a whole, was predicated on the supposed value of the fixtures “in place, in use”—the same measure that would have applied if the “interim” operation were expected to continue for the life of the fixtures. Gimmy justified his adoption of this figure only by stating that in his opinion, the equipment appraiser’s “average depreciation of 80 percent represented the actual value of that property and its remaining usability.” (Italics added.) But the “interim value” of the fixtures to the buyer of the property would be a reflection not of their “remaining life” as fixtures, but of their remaining usefulness as a source of income from the underlying real property. We see no evidence from which the jury could have derived this latter value. It is therefore no answer to plaintiffs objection to say that the jury reduced defendant’s claim by nearly three-quarters. There was no basis in this record for the jury to calculate any “interim use” value for the fixtures and equipment. On the evidence submitted, the verdict necessarily rested on sheer guesswork.

If defendant’s approach to “interim use” were sustained, such a claim could apparently be submitted in every case where property with existing business-related improvements is taken for redevelopment to a higher and better use. After eliciting generalizations from its experts about possible delays in development, a landowner could recover the value of the real estate at a higher and better use than the one he has made, while adding in a claim for fixtures and improvements which are incompatible with that use.

At its core the concept of interi