The California Court of Appeal held that a reversionary interest holder must be compensated when an entity obtains a property that is subject to condition subsequent through eminent domain.
If a property is subject to condition subsequent and an entity takes full possession through eminent domain, the reversionary interest holder must be compensated.
An executed will conveyed 30 acres of land to the City of Palm Springs (Plaintiff) on the express condition that the land will always be used as a public park. The deed conveyed, stipulated that if at any moment the land is no longer used as a park then the land would transfer to the Living Desert Reserve (Defendant). Nearly three years later, the Plaintiff made the determination that they would prefer the land to be used as a golf course and attempted to buy the Defendant’s reversionary interest but to no avail. The Plaintiff’s then brought an action in eminent domain and requested immediate possession. The trial court ruled in favor of the plaintiff. A couple of months later, the Defendant’s claim the Plaintiff’s breached the condition on the property that it was to be utilized as a public park only. Trial court ruled against the Defendant and Defendant appeals.
If a property subject to condition subsequent is acquired through eminent domain by an entity, must the entity compensate the party who holds a reversionary interest in the property?
Yes. The court determined that the original deed to the city was a conditional gift. The conditional gift was based on the idea that the land would be used as a public park and if breached a reversion was to be granted to the Defendant. The Court notes that the general rule is that when a conditional gift is taken by means of eminent domain any reversionary interest holder is not compensated. However, the court determined the city’s conduct was unfair because it had obtained the land through eminent domain with the intent to breach the conditional gift. Therefore, the Court determined that the reversionary interest holder is entitled to the fair market value of the property.
The court emphasized that the land was given as a conditional gift and not as a trust contrary to the Plaintiff’s belief.