Takings cases involving transportation agencies such as Caltrans typically involve physical occupations of land under the law of eminent domain.  In a twist on such physical occupation, in a case originally filed on December 12, 2018, and published January 11, 2019, the Third District Court of Appeal held, in Prout v. Department of Transportation, 31 Cal.App.5th 200 (2019), that Caltrans’ physical occupation, without compensation, of a strip of land fronting State Highway 12 in the County of Calaveras to make highway improvements was a valid acceptance of an offer of dedication that did not amount to a taking under the law of inverse condemnation.

In 1990, Prout obtained an encroachment permit from Caltrans, as part of a residential development and subdivision project, to connect Highway 12 to a private road.  The encroachment permit required a right-of-way dedication of 1.31 acres of vacant land, consisting of a 20-foot wide strip a little more than 6,000 feet long, for the highway improvements.  The dedication apparently “fell through the cracks,” however, and Prout never executed the deed to convey the land.

Caltrans eventually notified Prout, in preparing to rehabilitate Highway 12, that an appraisal would be required to determine how much the agency would pay for the 1.31 acres of land needed to accomplish the improvements.  But Caltrans later realized the land was supposed to have been dedicated and thus belatedly sent Prout a grant deed to convey the land, which Prout did not sign.

Notwithstanding the unsigned deed, Caltrans physically occupied the land and began the highway improvements.  Prout never revoked the offer of dedication or objected to the dedication before Caltrans’ physical occupation.  Nevertheless, Prout sued Caltrans alleging that the dedication requirement was an illegal exaction, under Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and for inverse condemnation on the ground that Caltrans took his land without just compensation.  Caltrans filed a cross complaint for breach of contract, promissory estoppel, and specific performance, alleging that Prout had accepted the benefit of the encroachment permit years earlier by connecting a private road to a public road and yet refused to finalize the dedication or deed process conveying the strip of land required for the highway improvements.

The trial court ruled in favor of Caltrans and awarded specific performance by ordering Prout to dedicate the strip of land, by deed, to Caltrans.  The Court of Appeal affirmed the trial court decision, holding that Prout’s Nollan challenge is barred by his failure to file a timely petition for writ of mandamus, and his inverse condemnation claim fails because substantial evidence supports the trial court’s finding that Prout made an offer to dedicate the entire strip of land in 1990 and did not revoke the offer before Caltrans accepted it twenty years later by physically using the strip to make highway improvements.

Under Nollan and other leading exactions cases, the government cannot, as a condition for issuance of a development permit, impose a requirement that the landowner dedicate land for public use unless there is an “essential nexus” between the condition and the projected impact of the proposed development.  Interestingly, the Court stated that it does not appear that the highway needed to be widened because of Prout’s subdivision.  Nevertheless, the Court ruled that that Prout’s Nollan challenge is barred under California’s broad “catch-all” four-year statute of limitations established by Code of Civil Procedure section 343, which the Court held began to run when Caltrans issued the encroachment permit in 1990.  The Court also reasoned that it would be unfair to allow Prout to accept the benefits of the permit and then challenge the burdens of the permit more than 20 years later, after Caltrans already validly accepted the offer and used the strip of land for highway improvements.

The Court held that there was no taking requiring compensation under the California Constitution because in 2010 Caltrans validly accepted Prout’s offer through physical occupation.  The Court explained that it was “not sympathetic” to Caltrans for having “dropped the ball” by letting the execution of the deed “fall through the cracks,” but the Court nevertheless ruled against Prout for not revoking the offer before Caltrans accepted it.  The Court noted that private land may be dedicated to public use either under common law principles or under statutes such as the Subdivision Map Act and explained that, under controlling law, an incomplete statutory dedication will, when accepted by the public, operate as a common law dedication.  Under common law, acceptance must occur within a reasonable time after the offer is made.  What constitutes a reasonable time depends on the circumstances.  The Court considered the circumstances the trial court relied on (including (1) that execution of the deed simply “fell through the cracks,” and (2) Prout never exerted any ownership of the strip, never paid taxes on it, and did not fence it in with his subdivision) and held that while 20 years passed before Caltrans accepted Prout’s offer of dedication, the delay was reasonable.

Prout offers a variety of lessons in both public agency record keeping and in the importance of timely challenges to exactions imposed through the development permitting process.  Under a still growing body of case law, a landowner cannot challenge a permit condition after acquiescing to the condition by either specifically agreeing to the condition or failing to challenge its validity, and accepting the benefits of the permit.


Questions? Please contact Bryan W. Wenter, AICP of Miller Starr Regalia.

For more than 50 years, Miller Starr Regalia has served as one of California’s leading real estate law firms. Miller Starr Regalia has expertise in all types of real property matters, including full-service litigation and dispute resolution, transactions, acquisitions, dispositions, leasing, financing, common interest development, construction, management, eminent domain and inverse condemnation, exactions, title insurance, environmental law, and land use. Miller Starr Regalia attorneys also write Miller & Starr, California Real Estate 4th, a 12-volume treatise on California real estate law. “The Book” is the most widely used and judicially recognized real estate treatise in California and is cited by practicing attorneys and courts throughout the state. For more information, visit www.msrlegal.com.