When taking real estate by eminent domain, a public agency must pay the landowner for the value of unmined aggregate on the property, the Second District Court of Appeals has ruled. The unanimous three-judge panel ordered the Ventura County Flood Control District to pay owners of 67 acres $2.6 million to compensate for the owners' loss of the aggregate resource. The value of mineral deposits, including sand, clay and gravel, is an element in determining fair market value, which the public agency is required to pay when condemning land, the court said. "Knowledgeable buyers and sellers would not ignore the valuable aggregate any more than they would a gold, diamond or basalt mine," wrote Justice E. Jeffrey Burke, a San Luis Obispo County Superior Court judge temporarily assigned to the Second Appellate District, Division Six. "The value of the aggregate is neither driven by the project nor is it the project, as suggested by District. … As the trial court found, District hoped to pay for the project with royalties it would obtain from the aggregate." The district in 1995 hired Southern Pacific Milling to excavate a basin that would intercept floodwater on the Grubb Ranch, which was owned jointly by Daniel Campbell and James Alger. Under the contract, SP Milling would pay the district $1.3 million for the aggregate from the ranch, located along the Santa Clara River near Oxnard. However, when that SP Milling contract lapsed, Campbell, who owns Truestone Concrete Products, sought to mine the aggregate. County planners said he would need an environmental impact report before getting a permit to mine. The district in November 1995 offered to buy portions of the ranch for $35,000 an acre. Campbell rejected the offer, and the district soon adopted a revised initial study and negative declaration reflecting its plans to obtain the entire ranch. Campbell sought a writ of mandate challenging the project's lack of an EIR, but he lost in Ventura County Superior Court. The district proceeded with its eminent domain action and, after the district deposited $2.4 million, the court on April 8, 1996, ordered possession to the district. Campbell then sued Alger and the district, asserting his right of first refusal to purchase the property. Campbell lost that suit in Superior Court and, in an opinion handed down the same day as the valuation suit, Campbell lost the appeal in the Second District. In October 1996, Alger accepted a stipulated settlement from the district for $1.2 million. Just before Alger accepted the purchase offer, Campbell filed suit seeking declaratory and injunctive relief, and asserting violations of civil rights and unjust enrichment. The trial court rejected all of Campbell's arguments except those regarding unjust enrichment. A jury set the fair market value of the ranch at $5.2 million, awarding $2.6 million to Campbell, plus $150,000 in legal fees. The district appealed the jury's verdict, and Campbell appealed the amount of legal fees. The Flood Control District said the trial court erred by permitting evidence regarding the hypothetical market for aggregate. The land's value should have been based on its agricultural use, the district argued. Furthermore, the district contended the enhanced property value was attributable to the project. In upholding the ruling by Ventura County Superior Court Judge William L. Peck, the appellate court said allowing evidence of an active aggregate market in a rapidly developing area was correct. In fact, the district had solicited proposals to excavate Grubb Ranch and accepted a bid from CalMat Co. for $3 per cubic yard, enough to generate $5 million for the district. "The open bids by SP Milling and CalMat, private building materials companies, establish an existing market for scarce aggregate in the community. The fact that the aggregate was extracted to provide a basin for the flood control project does not change its intrinsic value to the private sector for building material," the court said. The court added, "We admonish district not to suggest to juries, as it did here, that is should consider the liability of taxpayers in valuing the condemned property." The appellate court rejected Campbell's request to recover more legal costs and his civil rights claims. The district may legitimately pursue a project that intercepts floods, protects high groundwater and conserves farmland, the court said. As for Campbell's separate suit regarding his right of first refusal, the appellate court said,"The Legislature has provided that if a public entity is forced into eminent domain litigation, it should settle with as many owners as swiftly as possible to minimize the costs, uncertainties and time to obtain such needed land. Private holders of rights of first refusal may not thwart such public purposes by forcing the owner or the subsequent public entity to sell it to them. (Gov. Code §7267.2; Melamed v. City of Long Beach (1993 15 Cal.App.4th 70, 81-83.)" The Cases: Ventura County Flood Control District v. Campbell, No. B117274, 99 C.D.O.S. 2610, Daily Journal D.A.R. 3347, and Campbell v. Alger, No. B115217, 99 C.D.O.S. 2599, Daily Journal D.A.R. 3333, filed April 7, 1999. The Lawyers: For the Flood Control District and Alger: James L. McBride, Ventura County Counsel, (805) 654-2580. For Campbell: M. Reed Hunter, Crosby, Heafey, Roach & May, (213) 896-6000.