The Latest Word

Wackehut Follies

The following four legal cases give some insight into the operations of Wackenhut, the private security service for Area 51 that became a large part of Danny Casolaro's research. For more information on Wackenhut and Casolaro, see The Octopus: Secret Government and the Death of Danny Casolaro by Kenn Thomas and the late Jim Keith.

Wackenhut and the Suspended Hallucinogen Provision

Independent Guard Association of Nevada v. United States, 57 F.3d 766 (9th Cir. 06/12/1995)

[1] UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

[2] No. 93-15769

[3] 1995.C09.42154 ; 57 F.3d 766

[4] filed: June 12, 1995.

[5] INDEPENDENT GUARD ASSOCIATION OF NEVADA, LOCAL NO. 1, PLAINTIFF-APPELLANT v. HAZEL O'LEARY,*FN1 SECRETARY OF ENERGY OF THE UNITED STATES OF AMERICA, ON BEHALF OF THE UNITED STATES DEPARTMENT OF ENERGY, AN EXECUTIVE DEPARTMENT OF THE UNITED STATES OF AMERICA, DEFENDANT-APPELLEE

[6] Appeal from the United States District Court for the District of Nevada. D.C. No. CV-92-00204-LDG. Lloyd D. George, District Judge, Presiding.

[7] George A. Pappy, Pappy & Davis, Los Angeles, California, for the plaintiff-appellant.

[8] L. Dow Davis and Monte N. Stewart, United States Department of Energy, Washington, D.C., for the defendant-appellee.

[9] Before: Mary M. Schroeder and Pamela Ann Rymer, Circuit Judges, and William L. Dwyer,*fn1 District Judge. Opinion by Judge Schroeder.

[10] Author: Schroeder

[11] SCHROEDER, Circuit Judge:

[12] The Independent Guard Association of Nevada, Local No. 1 ("IGAN"), appeals the district court's grant of summary judgment to the Secretary of Energy in IGAN's suit to enjoin the application of the Department of Energy's ("DOE" or "agency") Nuclear Explosive Safety Order 5610.11 (Oct. 10, 1990) ("Order"). IGAN objected to the DOE's promulgation of the Order, which is an extensive personnel regulation, without the prior notice and comment required by the Administrative Procedure Act's ("APA") rulemaking procedures, 5 U.S.C. § 553. The district court held that the "military function" exception, 5 U.S.C. § 553(a)(1), to the APA applied. We reverse because our law requires APA exceptions to be construed narrowly, and the record fails to disclose that these guards perform any function directly related to the manufacture or development of military weapons by the DOE.

[13] BACKGROUND

[14] IGAN is a union representing the armed civilian guards employed by Wackenhut Services, Inc. The DOE contracted with Wackenhut to guard its facilities at the Nevada Test Site near Mercury, Nevada, and its support facilities in Las Vegas, Nevada. At these sites, the DOE researches, produces and tests nuclear explosive devices for use by the military. Wackenhut, not the DOE, hires and supervises the guards.

[15] On October 10, 1990, the DOE issued the Order pursuant to its statutory authority to maintain security and safety standards for its defense programs. See, e.g., 42 U.S.C. §§ 2165, 2201. The Order applies to all activities and operations involving nuclear explosives and nuclear weapons conducted under the Department's nuclear program. The DOE did not comply in full with the APA's normal rulemaking procedures, which would have entailed prior notice and comment of the entire Order. See 42 U.S.C. § 7191.

[16] The Order provides management policy guidance for the selection and certification of personnel; sets forth nuclear explosive safety standards and rules; and provides for nuclear explosive safety studies and surveys. In the portion relevant here, the Order establishes a Personnel Assurance Program ("PAP") applicable to all DOE and contractor employees assigned nuclear explosive duties. The PAP provides detailed certification requirements for the DOE and its contractor personnel who are certified to guard nuclear explosive devices in Nevada. For example, PAP disqualifies persons from such duties who fail to comply with any of its provisions, which include submission to laboratory testing, random drug testing, and a certification review procedure. PAP also provides for permanent disqualification from duty for any employee who has ever used hallucinogens, regardless of quantity consumed or remoteness in time.

[17] The Order superseded an earlier safety program promulgated in 1980 that had delegated more responsibility for contractor employee qualification review to the contractor itself. See "Program to Prevent Accidental or Unauthorized Nuclear Explosive Detonations," DOE Order 5610.3 (Dec. 18, 1980).*fn1 Shortly after the Order went into effect, it resulted in the disqualification of four employees because of prior use of an "hallucinogen." DOE subsequently "suspended" the hallucinogen provision, and all four employees were certified for nuclear explosive safety duties.

[18] On March 10, 1992, IGAN filed a complaint seeking declaratory and injunctive relief, pending compliance with notice and comment procedures.*fn2 The case came before the district court on cross-motions for summary judgment. The DOE invoked the "military function" exception to the APA's notice and comment provisions. This exception provides:

[19] (a) This section applies, according to the provisions thereof, except to the extent that there is involved -

[20] (1) a military or foreign affairs function of the United States;

[21] 5 U.S.C. § 553(a)(1). Because the parties agreed on the material facts, the case turned on a legal question: the proper scope of this exception.

[22] In granting the DOE's motion for summary judgment, the district court determined that the DOE's authorization to conduct the research and production of nuclear weapons constituted a military function. The court further found that "the proper conduct of a military function often requires essential, though non-military, support functions," and that "such military functions cannot proceed absent full regulation and control of the support function." The district court did not find that the guards themselves performed a military function. Rather, the district court concluded that the exception applied because the Order deals with "an essential integral support program that is required for the proper conduct of the DOE's military function of researching and testing nuclear weapons."

[23] Discussion

[24] The Secretary initially stresses that DOE has "suspended" the "hallucinogen" provision, the only portion of the Order IGAN protested, and that it has certified for nuclear explosive safety duties the four individuals who had been temporarily disqualified pursuant to this provision. The Secretary also advises that DOE has committed to publish for notice and comment the hallucinogen rule should it ever be reimplemented. Thus, the Secretary argues, IGAN has sustained no legally cognizable injury from the Order, and the district court should have dismissed the case. We agree with the district court that the Secretary's suspension of the provision, and subsequent certification of the affected personnel, does not wholly resolve IGAN's problem. As IGAN notes, the APA makes no provision for "suspension" of rules. Consequently, despite reassurances that lack the force and effect of law, the DOE could, at some future date, reinstate the "hallucinogen" provision without notice and comment if we were not to rule on the issue. We thus conclude that IGAN has standing to maintain this suit.

[25] The district court's interpretation of the scope of the "military function" exception is a question of law that we review de novo. See United States v. Yacoubian, 24 F.3d 1, 3 (9th Cir. 1994). Section 553(a)(1) provides an exception to the APA "to the extent" that a military function is involved. The statute never defines the term, but its language contemplates that "military function" has measurable contours. The statute's text strongly suggests that those contours are defined by the specific function being regulated.

[26] Our inquiry therefore is not advanced by IGAN's threshold contention that the DOE's status as a "civilian" agency is dispositive. The DOE's statutory mandate includes responsibility for research and development of all energy resource applications, as well as national security functions relating to nuclear weapons research and development. 42 U.S.C. § 7112, 7133. The DOE can and does perform both "civilian" and "military" functions. The agency's dual nature reinforces the critical importance of the statutory language that instructs us to look not to whether the overall nature of the agency promulgating a regulation is "civilian" or "military," but to the function being regulated. Legislative history confirms this view. See S. Rep. No. 752, 79th Cong., 1st Sess. 13 (1945) (noting the suggestion that all functions of the War and Navy Department as well as the Army and Navy should be exempted, but finding that "since the bill relates to functions, rather than agencies, it would seem better to define functions"). The district court correctly concluded that the DOE engages in a military function when it researches and develops nuclear weapons. See 42 U.S.C. § 2121 (authorizing the Atomic Energy Commission, precursor to the Energy Research and Development Administration, whose functions were subsequently assumed by the DOE, to engage in the research and development of nuclear weaponry).

[27] We thus agree with the Secretary that the exception applies to predominately civilian agencies such as DOE when they are performing a "military function". The issue before us, however, is whether the civilian guards who are the subject of this challenged regulation fall within the military function exception. The Secretary does not seriously argue that the Wackenhut guards themselves are performing a military function. Instead, she argues that the military function exception logically should be seen to encompass IGAN's contractor support function because the DOE "could not safely and securely accomplish its military function" without the safety policies embodied in the Order. In short, the Secretary argues for a broad interpretation of the exception.

[28] The legislative history of the APA is contrary to the Secretary's view. Congress intended the military function exception to have a narrow scope. The Report of the Senate Judiciary Committee emphasized that "the exceptions apply only 'to the extent' that the excepted subjects are directly involved." S. Doc. No. 248, 79th Cong., 2d Sess. 199 (1946) (emphasis added). The Judiciary Committee continued:

[29] The exemption of situations of emergency or necessity is not an "escape clause" in the sense that any agency has discretion to disregard its terms or the facts. A true and supported or supportable finding of necessity or emergency must be made and published. "Impracticable" means a situation in which the due and required execution of the agency functions would be unavoidably prevented by its undertaking public rule-making proceedings.

[30] Id. at 200.

[31] Consistent with congressional intent, this Circuit has ruled that exceptions to the APA must be narrowly construed:

[32] The exceptions to section 553 will be "narrowly construed and only reluctantly countenanced." This is consistent, of course, with Congress's clear intent to preserve the statutory purpose of informal rulemaking by making sure those exceptions did not become "escape clauses," . . . which an agency could utilize at its whim.

[33] Alcaraz v. Block, 746 F.2d 593, 612 (9th Cir. 1984) (citations omitted).

[34] To our knowledge, no court has ever considered whether the military function exception applies to civilian contractors. The dearth of authority discussing the applications of the military function exemption suggests it has not been widely invoked.

[35] The two cases cited in the district court's decision are, as the district court itself correctly recognized, inapposite. In McDonald v. McLucas, 371 F. Supp. 837 (S.D.N.Y. 1973), plaintiffs challenged as violative of the APA the procedures by which the armed forces declare American servicemen missing in action to be dead. The court summarily ruled that the military function exception applied to the regulation, and the APA was thus inapplicable. Id. at 840. McDonald involves a military determination concerning military personnel who had participated in a military conflict, and did not speak to contractor support functions.

[36] County of Seneca v. Cheney, 806 F. Supp. 387 (W.D.N.Y. 1992), vacated, 992 F.2d 320 (2d Cir.), opinion reported in 12 F.3d 8 (2d Cir. 1993), is even less authoritative. The vacated district court opinion simply cited a House Conference Report's unexceptionable statement that the decision to close and realign military bases is a military function. Cheney, 806 F. Supp. at 399 n.9.

[37] The legislative history and relevant case law direct that exceptions to the APA be narrowly construed, and that the exception can be invoked only where the activities being regulated directly involve a military function. If the Secretary's position were adopted, and contractor support activities held to be within the scope of the military function exception, maintenance staff, custodial help, food service workers and even window washers could find their undoubtedly necessary support tasks swept within the exception's ambit, and DOE regulations affecting their employment exempt from notice and comment. Neither the statute, nor common sense, requires such a result.

[38] We do not mean to imply that the military function exception can never apply to a contractor's services. Indeed, at argument IGAN conceded that contractor employees could perform a military function within the meaning of the APA. For example, if they were making military weapons, they might well be performing such a function. The record in this case, however, does not contain any evidence that the military has ever exercised any direct supervisorial control over the activities of these civilian contract guards. The record shows that the guards employed and supervised by Wackenhut were performing duties similar to those performed by civilian security guards everywhere. They were no more performing a "military function" than civilian contract guards employed to guard judges are performing a "judicial function." The exemption should not be stretched to encompass civilian support services.

[39] Finally, we note that, as a practical matter, compliance with the APA imposes costs on the Secretary that are minimal in nature. Following publication of the proposed rule in the Federal Register, the Secretary need only provide 30 days for notice and comment. 42 U.S.C. § 7191(b)(1). After this notice and comment period, the Secretary may publish the proposed rule or modification of it with an accompanying "explanation responding to the major comments, criticisms, and alternatives offered during the comment period." Id. § 7191(d).

[40] We REVERSE the district court's judgment that the DOE properly availed itself of the military function exemption. The district court did not consider the other exemptions to the APA proffered by the Secretary, see 5 U.S.C. §§ 553(a)(2), (b)(3)(A), and we REMAND for that purpose.

[41] REVERSED and REMANDED.

General Footnotes

[42] *fn1 Hazel O'Leary, the current Secretary of Energy, is substituted for former Secretary James D. Watkins. See Fed. R. App. Pro. 43(c)(1).

Judges Footnotes

[43] *fn1 Honorable William L. Dwyer, United States District Judge for the District of Western Washington, sitting by designation.

Opinion Footnotes

[44] *fn2 IGAN also sought to enjoin implementation of "Personnel Security Assurance Program," DOE Order 5631.6 (Jan. 19, 1989). This claim had been mooted, however, by the DOE's 1989 Notice of Proposed Rulemaking on that program, known as the PSAP.

[45] *fn1 The Order also superseded those portions of a 1979 DOE order addressing nuclear explosives. See "Packaging and Transporting of Nuclear Explosives, Nuclear Components, and Special Assemblies," DOE Order 5610.1 (Sept. 11, 1979).

Wackenhut Meets Bon Jovi

Carlsen v. Wackenhut Corp., 868 P.2d 882, 73 Wash. App. 247 (Wash.App. 03/08/1994)

[1] Washington Court of Appeals

[2] No. 15332-7-II

[3] 868 P.2d 882, 73 Wash. App. 247, 1994.WA.41041

[4] Filed: March 8, 1994.

[5] RONDA CARLSEN, APPELLANT v. THE WACKENHUT CORPORATION, RESPONDENT

[6] A. Robert E. Thomson, for appellant.

[7] Mark J. Dynan and David A. Larson, P.S., for respondent.

[8] Alexander, J. Morgan, C.J., and Seinfeld, J., concur.

[9] Alexander

[10] Ronda Carlsen appeals an order of the Pierce County Superior Court granting summary judgment to the Wackenhut Corporation, dismissing Carlsen's claims against Wackenhut for Wackenhut's alleged negligence in hiring and supervising an employee. We reverse.

[11] On May 10, 1989, two 16-year-old girls, Ronda Carlsen and her friend, Heather, attended a rock concert at the Tacoma Dome with some acquaintances. The concert featured a group of musicians known as "Bon Jovi". During the course of the concert, Carlsen and Heather became separated from their companions. Consequently, they sought assistance from someone in authority to "help us find our friends". Toward that end, they approached a man who they believed was a "security guard".

[12] The man, William Futi, indicated his willingness to help the two girls. After speaking with them for a short time, he asked them if they wanted to get closer to the stage and perhaps even meet the band members. The two girls were eager to meet the entertainers, so they accompanied Futi toward the stage of the Tacoma Dome. Their route required them to go under the bleachers. Carlsen indicated that "[n]either Heather or I wanted to go under the bleachers with him but since we were together and he was a security guard, we felt reasonably comfortable in proceeding." Part way to the stage, Futi mentioned that he could only take them one at a time. After Futi took Heather to the stage and returned, he told Carlsen that they would have to travel a different way back. As Futi led Carlsen under a set of bleachers, he threw her down and attempted to rape her. Carlsen screamed but she was not heard over the noise of the concert. Futi was eventually frightened away when the music ended and the lights came on.

[13] Futi was charged in Pierce County Superior Court with second degree attempted rape. He later pleaded guilty to an amended charge of indecent liberties.*fn1

[14] Carlsen brought suit against the Wackenhut Corporation, the company that had employed Futi at the Tacoma Dome. She claimed that Wackenhut had been negligent in its hiring of Futi in that it knew or should have known that Futi, who had a prior conviction for robbery, was unfit for employment with Wackenhut. She also claimed that Wackenhut was negligent in its supervision of Futi and that it was liable for Futi's actions under the theory of respondeat superior.

[15] Wackenhut moved for summary judgment of dismissal. Before the hearing on Wackenhut's motion, Wackenhut filed the affidavit of Monty L. Laughlin, the assistant manager of public service for the City of Tacoma. Laughlin, who was also "working the Bon Jovi concert" that evening, described the degree to which Futi's background was checked by Wackenhut before he was hired as what Laughlin described as a "T-shirt employee".*fn2 Laughlin stated:

[16] 2. William A. Futi was hired by Wackenhut Corporation on March 8, 1989. He did not indicate any other middle initial or name on his application. He worked four events (30.5) hours as a T-shirt employee prior to the Bon Jovi concert.

[17] 3. I reviewed his personnel file at the time of the incident. No derogatory comments or remarks were found in his personnel file.

[18] 4. No additional background checks were done because there was no indication that it would be necessary. Mr. Futi did not report any criminal record or work-related misconduct on his job application.

[19] 5. Because of the large number of part-time employees hired who may work only one event every two months, formal background checks are not done unless there is evidence of a criminal record or problems with work habits, demeanor, or personality. If there is evidence of any such problem, then additional steps are taken to investigate an applicant.

[20] 7. During the Bon Jovi concert, he failed to follow the instructions of his lead supervisor, and was absent from his post without permission. Mr. Futi abandoned his assigned post, and evaded searches that were being performed to locate him.

[21] 8. Mr. Futi left the Tacoma Dome at approximately 10:20 p.m. when he checked in his jacket and T-shirt.

[22] Lynn Diane Lyscio, Wackenhut's lead T-shirt supervisor at the Tacoma Dome on May 10, also submitted her affidavit in which she stated:

[23] 2. I supervised the taking of tickets as well as pat-down search and metal searches. T-shirt employees are utilized to perform these searches as well as ticket takers and ushers. A majority of these employees work one event every two months.

[24] 3. Beginning at approximately 6:00 p.m., Mr. William A. Futi was under my supervision. I assigned Mr. Futi to the F Door to perform metal searches.

[25] 4. At approximately 8:30 p.m., I was instructed to stop admitting patrons through the Upper F Door. When I went to that door, I found that Mr. Futi left his assigned post at 8:30 p.m.; he was the only person absent from the post. He was absent without permission.

[26] 5. Between 9:00 and 9:15 p.m. I searched in the office and breakroom for Mr. Futi. Also, between 9:30 and 9:45 p.m. I searched again for Mr. Futi.

[27] 6. Mr. Futi left the Tacoma Dome without following established check-out procedures at approximately 10:20 p.m. Mr. Futi had been scheduled to work until approximately 11:15 p.m. Mr. Futi did not have permission to leave work early.

[28] 7. Prior to the evening of the Bon Jovi concert, Mr. Futi had been an alert employee. He did not have problems with my explaining what his duties [were], and he was willing to carry out these instructions.

[29] 8. Mr. Futi did need instruction about the duration of his assigned breaks. I clarified break procedures with Mr. Futi. Once the procedures were clarified, there were no other situations which would cause me to question his ability to do his job or anything that would require additional training.

[30] Carlsen submitted her affidavit in response. She stated that, according to court records her attorney had obtained from King County, Futi: has been convicted of third degree theft, criminal trespass, no valid operators license, third degree theft and he was also charged with first degree robbery but a later review of the file showed that he plead [ sic ] guilty to second degree robbery.

[31] She also provided the court with documents that revealed there were arrest warrants outstanding for Futi's failure to appear in court on two traffic offenses and for first degree criminal trespass.

[32] In addition, Carlsen also made the following observations about the applications Futi gave to Wackenhut in an effort to obtain employment:*fn3

[33] (1) First, he says that he was a college graduate on page one but only has completed 12 years of high school. This indicates some sort of untruthfulness on his part.

[34] (2) They asked him to list all of the jobs which he had had for the last seven years. He did not list any jobs. Why would that not be an indication that he did not want to disclose his prior history and therefore had something to hide?

[35] (3) They did not ask him for any references related to prior supervisors. They did ask him for three people who are not related to him and who are not former employees. However, by their own admission, they did not contact any of these people to see what kind of history Mr. Futi had. Presumably, one out of the three, at least, would have told the truth. They could have also asked his mother or cousin who are also listed on the application. Would all five have lied to protect Mr. Futi?

[36] (4) They did not ask him for his addresses for the previous five or six years. Had they asked him for his addresses (or had they asked any of the references for his previous addresses) they probably would have found out that he resided in King County. Armed with that information, they could have reviewed the juvenile court records, as my attorney did, and found Mr. Futi's lengthy criminal record including his history of violence (robbery) to which he pled guilty . . ..

[37] (5) They did not ask him where he had graduated from high school or what schools he had attended. Had they done so, they might have determined that he had lived in King County.

[38] (6) They asked him if he was presently employed and he indicated that he was but he did not answer the question about whether The Wackenhut Corporation could contact his present employer. That certainly indicates that he has something to hide. It also indicates that he is not willing to disclose his present employer. Of course, that might be because he doesn't want his present employer to know that he is looking for another job but that seems unlikely when he is applying for a minimum wage, part-time position as a security guard and most of the work would be done at night.

[39] The trial court granted Wackenhut's motion, and dismissed Carlsen's claims "(a) [that] Wackenhut negligently supervised its employee; and (b) that Wackenhut Corporation was negligent in its hiring practice".*fn4

[40] [1] Summary judgment is reviewed by the appellate court de novo. Mains Farm Homeowners Ass'n v. Worthington, 121 Wash. 2d 810, 813, 854 P.2d 1072 (1993). Like the trial court, the appellate court must consider all facts submitted and all reasonable inferences from the facts in the light most favorable to the nonmoving party. Mason v. Kenyon Zero Storage, 71 Wash. App. 5, 8-9, 856 P.2d 410 (1993). Absent a genuine issue as to any material fact, the moving party is entitled to summary judgment as a matter of law. Condor Enters., Inc. v. Boise Cascade Corp., 71 Wash. App. 48, 54, 856 P.2d 713 (1993). Summary judgment is proper "only if reasonable persons could reach only one conclusion from all of the evidence." Hansen v. Friend, 118 Wash. 2d 476, 485, 824 P.2d 483 (1992).

[41] [2] To prove negligent hiring in Washington, the plaintiff must demonstrate that (1) the employer knew or, in the exercise of ordinary care, should have known of its employee's unfitness at the time of hiring, Peck v. Siau, 65 Wash. App. 285, 288, 827 P.2d 1108, review denied, 120 Wash. 2d 1005 (1992); Guild v. St. Martin's College, 64 Wash. App. 491, 498, 827 P.2d 286, review denied, 119 Wash. 2d 1016 (1992); Banks v. Nordstrom, Inc., 57 Wash. App. 251, 263, 787 P.2d 953, review denied, 115 Wash. 2d 1008 (1990); and (2) the negligently hired employee proximately caused the resulting injuries. Guild, 64 Wash. App. at 498-99. Here, there is no question about the fact that Futi caused Carlsen's injuries. Thus, we will focus on the same record the trial court examined to determine whether material factual issues exist concerning whether Wackenhut knew or should have known of Futi's unfitness when it hired him.

[42] Wackenhut asserts that, at the time it hired Futi, there were no indications in his applications that Futi was unfit for employment as a "T-shirt employee". Wackenhut stresses that it had no knowledge of Futi's criminal record, pointing to Futi's employment applications in which he indicated that he had never "been convicted for the violation of any law in a military or criminal court which has not been sealed, annulled, or deleted from the record" and had never "been dismissed, or asked to resign from employment". There is, indeed, nothing in the record to suggest that Wackenhut's employees knew of Futi's prior criminal record before Futi was hired. That fact, however, does not justify entry of summary judgment in favor of Wackenhut if a reasonable trier of fact could nonetheless conclude that Wackenhut should have known that Futi was unfit for employment.

[43] Wackenhut cites Peck as support for its position that, as a matter of law, it was not negligent in hiring Futi. In Peck, this court determined that a trial court did not err in determining on summary judgment that a school district was not negligent in hiring a high school librarian who later wrongfully engaged in sexual relations with a student. We concluded that, because the school district had checked the librarian's teaching certificate and background when it hired him, there was no evidence that at the time of hiring the school district knew or, in the exercise of ordinary care, should have known that he was unfit for employment as a librarian. Peck, 65 Wash. App. at 289. In our judgment, Peck is of little help to Wackenhut. Unlike the employer in Peck, Wackenhut did not check into Futi's background after receiving his applications. It did not, for example, contact Futi's references to determine if he had a criminal record. These failures seem particularly significant in light of the dearth of information provided by Futi and the fact that there were inconsistencies on the face of his applications. We are satisfied that a reasonable person might well infer that the lack of information provided by Futi and the inconsistencies on the applications should have alerted Wackenhut to make further inquiries. In particular, Futi indicated on both of his applications that he possessed a college degree and, yet, in a different location on one of the applications, he indicated that he had only a high school diploma. He also gave different home addresses on his two applications, although they were completed within 5 days of each other. In addition, Futi failed to state who his present and previous employers were. The latter omission, arguably, should have aroused concern because Futi was, according to his applications, 20 years of age. It seems unlikely, therefore, that this was his first employment. If it was, that fact alone would be significant.

[44] Wackenhut's omissions stand in stark contrast with the steps taken by the employer in Scott v. Blanchet High Sch., 50 Wash. App. 37, 747 P.2d 1124 (1987), review denied, 110 Wash. 2d 1016 (1988). In that case, Division One of this court determined that a high school took reasonable steps in hiring a teacher who was subsequently accused of becoming sexually involved with a student. Scott, at 43. There, the employer contacted the teacher's previous employers and conducted two personal interviews with the applicant prior to hiring him. The court determined that, "[a]lthough certain specific questions . . . were not asked, the process appears sufficient as a matter of law to discover whether an individual is fit to teach". Scott, at 43.

[45] Unlike Scott, the procedures employed here consisted solely of having the applicant answer several pages of questions on two applications. Although Wackenhut concedes that no background check was performed before Futi was hired, it asserts that it had no duty to investigate further because Futi was merely a so-called "T-shirt" employee, not a full-fledged security guard; Futi's applications did not suggest he had any propensity for assaultive behavior, and failure to conduct a background check was not negligence per se. Carlsen responds by citing cases from two other jurisdictions to support her argument that Wackenhut had a duty to investigate Futi's background.

[46] In Welsh Mfg., Div. of Textron, Inc. v. Pinkerton's, Inc., 474 A.2d 436 (R.I. 1984), a security guard helped two others rob over $200,000 from a store he was employed to guard. The Rhode Island Supreme Court noted that, although the employer had checked the employee's criminal record prior to hiring him, it did not contact the employee's character references. Welsh, at 442-43. The only phone call the employer made was to a previous Navy superior who had known the security guard for only 2 months. In upholding the trial court, the Supreme Court found that the security company's "cursory investigation prior to [the security guard's] employment provided it with little current intelligence on him and could well support an inference of negligence in hiring for such a sensitive assignment as the guarding of gold." Welsh, at 442-43.

[47] Similarly, in Easley v. Apollo Detective Agency, Inc., 69 Ill. App. 3d 920, 387 N.E.2d 1241 (1979), an Illinois appellate court upheld a trial court decision finding a security company guilty of willful and wanton misconduct in hiring an armed security guard who used his passkey to gain entrance to an apartment and attempted to rape the occupant. The security company had not checked the security guard's prior addresses, personal references, or criminal history prior to hiring him, and the guard was not required to take any intelligence or psychological tests.

[48] Although Futi's responsibilities were, arguably, not so great as those delegated to the employees in Easley or Welsh, in that he was not guarding valuable personal property and was not authorized to carry a weapon, Futi was, in a real sense, responsible for protecting young concert goers. Viewing the evidence most favorably to Carlsen, as we must, there is at least an inference that Wackenhut held Futi out as more than a mere ticket taker. According to Wackenhut's lead supervisor, as a T-shirt employee Futi was responsible for performing pat-down searches and metal searches of incoming patrons. He was also responsible for ushering patrons to their seats. More importantly, he was placed in a position where patrons could reasonably view him as an authority figure. This is manifested by Carlsen's statement that "[n]either Heather or I wanted to go under the bleachers with [Futi] but since . . . he was a security guard, we felt reasonably comfortable in proceeding."

[49] Past Washington decisions tend to employ a type of balancing test to determine if the given employment warrants the extra burden of a thorough background check. See, e.g., La Lone v. Smith, 39 Wash. 2d 167, 172, 234 P.2d 893 (1951) ("One may normally assume that another who offers to perform simple work is competent. If, however, the work is likely to subject third persons to serious risk of great harm, there is a special duty of investigation.") (quoting Restatement of Agency § 213, at 465 (1936); see also Welsh, 474 A.2d at 440 ("[t]he greater the risk of harm, the higher the degree of care necessary to constitute ordinary care").

[50] [3] Although Futi's job was not high paying, the circumstances of his employment put him in a position of responsibility. A jury might well conclude that it was reasonable for concert patrons to look upon Futi as one authorized to perform security functions, and that, therefore, Wackenhut should have more extensively examined Futi's background before hiring him. The need for such a determination by a jury seems especially compelling in light of the limited information and inconsistencies in Futi's applications for employment. This additional investigation might well have disclosed Futi's prior juvenile record.

[51] [4] Wackenhut argues, finally, that even if it had performed a check of Futi's criminal record, nothing in that record indicated a propensity for sexual violence. Carlsen responds that robbery (only one of Futi's four convictions) involves the use of force or a threat of force which is indicative of a propensity toward violence. We agree with Carlsen that robbery is a crime of violence.*fn5 Upon discovery of a prior robbery conviction, a prospective employer would be on notice that the prospective employee has a propensity for violent behavior. In short, we conclude that, although Wackenhut did not have actual knowledge that Futi was potentially dangerous, a trier of fact could find that the corporation breached its duty of ordinary care by not doing more to determine whether Futi was fit to work in the job he performed for Wackenhut.

[52] Finally, Wackenhut asks this court to award it costs and attorney fees pursuant to RAP 18 and RCW 4.28.185(5). Because of our ruling reversing summary judgment, Wackenhut cannot, at this time, be said to be a party who "prevails in the action". Wackenhut, therefore, is not entitled to costs and fees.

[53] Disposition

[54] Holding that there were genuine issues of material fact as to the employer's negligence in hiring the guard, the court reverses the judgment.

Opinion Footnotes

[55] *fn1 According to Carlsen, Futi was sentenced to serve 30 months in prison.

[56] *fn2 Laughlin's affidavit does not indicate why an employee of the City of Tacoma possessed knowledge about Wackenhut's method of hiring its employees. Presumably, Laughlin had this information because the Tacoma Dome is owned by the City of Tacoma.

[57] *fn3 The record contains two applications by Futi for employment with Wackenhut. One is dated March 6, which is 2 days before the date he was first hired by Wackenhut. The other is dated March 11.

[58] *fn4 The trial court's order on summary judgment did not dismiss Carlsen's lawsuit against Wackenhut. Neither did it indicate that there was no just reason to delay an appeal. Although Wackenhut's counsel state in its brief that Carlsen's lawsuit, insofar as it was based on respondeat superior, had been dismissed, it does not cite to the record to support that statement. Furthermore, the trial court's order belies that assertion. Therefore, we presume Carlsen's claim against Wackenhut based on respondeat superior is still pending. The order, therefore, is not appealable pursuant to RAP 2.2(d); see also CR 54(b); Fox v. Sunmaster Prods., Inc., 115 Wash. 2d 498, 798 P.2d 808 (1990); Pepper v. King Cy., 61 Wash. App. 339, 810 P.2d 527 (1991). Nevertheless, we have chosen to review the trial court's order pursuant to the provisions of RAP 2.3.

[59] *fn5 See RCW 9.94A.030(34) which includes second degree robbery in the definition of "violent offense".

Wackenhut Prison Property Grab

County of San Diego v. Rancho Vista Del Mar Inc., 16 Cal. App. 4th 1046, 20 Cal. Rptr. 2d 675 (Cal.App.Dist.4 06/23/1993)

[1] COURT OF APPEAL OF CALIFORNIA, FOURTH APPELLATE DISTRICT, DIVISION ONE

[2] No. D014096

[3] 1993.CA.44177 ; 20 Cal. Rptr. 2d 675; 16 Cal. App. 4th 1046

[4] Decided: June 23, 1993.

[5] COUNTY OF SAN DIEGO, PLAINTIFF AND APPELLANT, v. RANCHO VISTA DEL MAR, INC., ET AL., DEFENDANTS AND APPELLANTS.

[6] Superior Court of San Diego County, No. 590455, Jeffrey T. Miller, Judge.

[7] Lloyd M. Harmon, Jr., County Counsel, Diane Bardsley, Chief Deputy County Counsel, Lewis P. Zollinger, Deputy County Counsel, Matteoni, Saxe & Nanda, Norman E. Matteoni, Peggy M. O'Laughlin, Endeman, Lincoln, Turek & Heater, Ronald L. Endeman, Donald R. Lincoln and David Semelsberger for Plaintiff and Appellant.

[8] Daniel E. Lungren, Attorney General, Marvin Goldsmith, Assistant Attorney General, Robert H. Francis and Marsha S. Miller, Deputy Attorneys General, B.C. Barmann, County Counsel (Kern) and Mark L. Nations as Amici Curiae on behalf of Plaintiff and Appellant.

[9] Thorsnes, Bartolotta, McGuire & Padilla, Michael T. Thorsnes, Vincent J. Bartolotta, Jr., Haskins, Nugent & Newnham, Michael H. Fish, Crosby, Heafey, Roach & May, Gideon Kanner, Hufstedler, Kaus & Ettinger and Otto M. Kaus for Defendants and Appellants.

[10] Opinion by Kremer, P. J., with Benke and Froehlich, JJ., concurring.

[11] Kremer [16 CalApp4th Page 1049]

[12] The primary issue presented by this case is whether a property owner whose land is condemned for a jail may value his property [16 CalApp4th Page 1050]

[13] based on a highest and best use as a private detention facility. We conclude the answer is no and therefore reverse.

[14] FACTS

[15] The property here is a parcel of about 525 acres of primarily vacant, undeveloped property in the Otay Mesa area of San Diego County. About 200 acres had a grade change of less than 25 percent and were considered "usable"; the remaining land had a grade change of over 25 percent. The property was zoned as a holding zone for future residential development requiring minimum lot sizes of two to twenty acres depending on the percentage of slope on the particular lot. Access to the property was on a graded dirt road. The property lacked a sewer connection.

[16] Roque De La Fuente bought the property at a bankruptcy sale as part of a larger parcel of about 3,900 acres bought in 1982 for $13 million.*fn1 He believed he was purchasing the property for 20 to 30 percent of its true value. At the time he bought the property, the State of California was interested in locating a state prison in the Otay Mesa area. De La Fuente offered to sell the property to the state. The state preferred a site separated from the subject property by a canyon. In 1983, De La Fuente exchanged some of his property for state-owned property located near the Mexican border. Some cash was also involved in the transaction. De La Fuente eventually constructed an industrial business park on the property obtained from the state near the Mexican border. In 1985, a border crossing opened in Otay Mesa.

[17] In April 1985, De La Fuente entered into an agreement with Wackenhut Services, Incorporated (Wackenhut) to submit a proposal to the Immigration and Naturalization Service (INS) for a 200-bed facility to temporarily house illegal immigrants on 20 acres of De La Fuente's property. This property was different from the land condemned in this case. De La Fuente agreed to construct the facility on his property and Wackenhut agreed to manage the facility. The parties agreed to grant each other first right of refusal for five years to participate in any further detention projects located in San Diego or California in which the other was involved. INS rejected the De La Fuente/Wackenhut proposal because the property did not have sewer facilities and De La Fuente did not anticipate a sewer connection until after the state prison connected to the sewer, which was about a year away. [16 CalApp4th Page 1051]

[18] In late 1986, De La Fuente and Wackenhut proposed the same 200-bed detention facility to temporarily house parole violators (a "Return to Custody" or RTC facility) to the California Department of Corrections to be built on De La Fuente's land not involved in this case. After the state approved the initial proposal in early 1987, De La Fuente and Wackenhut submitted a formal proposal. In April 1987, the state wrote Wackenhut that "recent political developments in the area have dictated that we wait until this fall to resume our activities."

[19] During 1987, the County of San Diego (county), state and Wackenhut entered negotiations for a 200-bed RTC facility to be operated on 4 acres of property which the county proposed to take from De La Fuente. There was a proposal the county charge the state $180,000 for a ground lease if a 200-bed facility were built and $280,000 for a ground lease if a 400-bed facility were built. The county also wanted the state and Wackenhut to construct the facility and turn over ownership of the building(s) to the county at the end of 10 years. The state did not accept the county's proposal because financing was not available and because "they wanted to get more for using the same type of land" and had objections to the county retaining the building at the end of 10 years.

[20] During the mid-1980's, the county selected the Otay Mesa area as a possible site for a new detention facility. In 1984 or 1985 De La Fuente approached county officials and sought to sell some of his property to the county for a jail site. By 1986, the county had chosen De La Fuente's property for a future jail. After negotiations to purchase the property from De La Fuente failed, the county board of supervisors passed a resolution of necessity to acquire De La Fuente's property in June 1987. On September 16, 1987, the county filed this proceeding for eminent domain and deposited $6.4 million as probable compensation so it could obtain immediate possession of the property.*fn2 The county's plan was to build a facility with space for 1,040 inmates in phase one and another 1,040 inmates in phase two. The second phase was not yet funded at the time of trial. The environmental impact report (EIR) for the facility considered a 6,000-bed facility on the site but the county had no plans to build a 6,000-bed facility.

[21] In January 1988, Wackenhut wrote De La Fuente, noting the California Department of Corrections had rejected the proposal and had indicated they [16 CalApp4th Page 1052]

[22] might "be willing to support a project involving county owned property." Wackenhut, citing the lack of "opportunity in this Proposal for private land," suggested it was not a project De La Fuente would want to become involved with and asked to be released from its agreement to participate in such a project with De La Fuente. Since the county had taken his land, De La Fuente released Wackenhut from its obligation under the contract.

[23] In March 1990, the city and county issued a memorandum of understanding under which the county would lease a site at the East Otay Mesa Detention Facility for $1 per year to the City of San Diego and the city would sublease the site to a private firm to construct and operate a 200-bed prearraignment detention facility. The memorandum of understanding also provided the facility could be expanded to 400 beds.

[24] In July 1990, De La Fuente sought to conduct additional discovery and to add a witness, Charles Thomas, an expert in private detention facilities, to his expert witness list.

[25] Trial commenced in September 1990.

[26] At trial, De La Fuente testified his property was worth $79,635,925 or $3.45 per square foot based on highest and best use as a 6,000-bed private detention facility. In particular, De La Fuente valued the usable portion of the property at about $6.50 per square foot.

[27] De La Fuente testified there was a demand for detention facilities, noting, for example, that while "INS had had a need for 200 beds--today the need is 1000 beds" and that there was a short supply of sites for detention facilities. He believed he had "a unique site" for a detention facility because it was adjacent to a state prison and therefore there was "another place next door so in case of an emergency they might be able to share certain services." The site also had the necessary infrastructure (partially based on the construction of the nearby prison), contained natural barriers (mountains, a canyon), was close to the metropolitan area, was compatible with other uses on the remainder of De La Fuente's property (i.e., off-road vehicle park, race track), would face no opposition from nearby residents since the nearest residence was two miles distant, faced no political opposition and was permitted under the current zoning with a major use permit.

[28] De La Fuente testified about sales of surrounding property in the area around the time of valuation which ranged in size from six to two hundred forty-five acres. These properties which were primarily vacant, industrial or future industrial land, sold at prices ranging from $1.06 per square foot to [16 CalApp4th Page 1053]

[29] $2.06 per square foot. De La Fuente also testified about the sale of a 65-acre property which involved improvements. The parties in that transaction allocated $5 per square foot to the land costs. De La Fuente believed a property which sold for $2.06 per square foot and a 245-acre property which sold for $1.50 per square foot were the most comparable to his property. He believed his property was worth more than any of these industrial properties and, in particular, more than the 245-acre property which was restricted under an agricultural preserve agreement and would require archaeological studies be completed before development. He believed this 245-acre property showed him "the floor, the bottom of the market" for his property.

[30] De La Fuente testified he believed his valuation was reasonable in light of the county's proposed land lease to the state of 4 acres for a 200- or 400-bed RTC facility. De La Fuente explained that using the county's figures, the land was worth $8.33 per square foot for a 200-bed facility and $14.06 per square foot for a 400-bed facility, considerably more than his valuation of $6.50 per square foot for the usable portion.

[31] During cross-examination, De La Fuente admitted he had valued the property from September 1987 to February 1990 using a highest and best use of industrial or private detention facility at $27,478,000, based on valuing the unusable property at $.18 per square foot and the usable property at $2.13 per square foot. He explained he changed his valuations because he had not done "the economics to see what that use would bring," a deposition of the Director of Office of Special Projects for San Diego County, Richard Robinson, had revealed "this particular land had the necessary infrastructure to be able to hold 6,000 beds, and that was a number that [he] had not quantified before," he learned of the county's proposed land lease for a 200- or 400-bed facility and he had consulted an expert in private detention facilities, Thomas, who "gave us the supply and demand side equation" and "explained to us the economics."

[32] Thomas testified about his evaluation of the property as a potential site for a 6,000-bed privately operated detention facility and about private detention facilities. Thomas testified there was a growing demand for prison space and De La Fuente's property was "ideal" for a private detention facility because of its size, terrain, proximity to the courts and state prison, infrastructure and [16 CalApp4th Page 1054]

[33] its zoning. He testified about the typical operating costs for different detention facilities based on a per inmate per diem basis.*fn3 Thomas also testified about advantages of private detention facilities, including the ability of a private firm to bring a facility "on line" in 12 to 18 months versus 3 to 5 years for the government, the greater ability of a private firm to delete unnecessary components, and the ability of a private firm to provide an improved quality of service at a lower operating cost.

[34] On cross-examination, Thomas admitted there were no 6,000-bed private detention facilities existing anywhere in the world and that in California the largest was a "standardized sort of cookie cutter kind of facility called for by the California Department of Corrections" of 200 beds.

[35] De La Fuente's appraiser, Howard Berkson concluded the property was worth a total of $66,080,000: $63.8 million or $6.56 per square foot for the usable land and $2,280,000 or $.17 per square foot for the unusable land. Berkson first looked at five sales of undeveloped land which were zoned for future industrial use and sold at prices ranging from $1.15 to $1.63 per square foot, plus a sale, sale No. 10, which Berkson calculated involved an allocation of $3.22 per square foot to the land costs.*fn4 Based on using these industrial comparable sales, Berkson valued the property at $2.82 per square foot for the entire property, but he did not believe these sales were truly comparable because the highest and best use of De La Fuente's property was for a private detention facility. Since there were no comparable sales of private detention facilities, Berkson used a rental income and income value rate approach.

[36] Berkson based his analysis on a 6,000-bed facility. He computed an income per inmate per day of $47, subtracted operating costs (including personnel, food, medical, utilities, insurance, etc.) and the industry standard on profit and overhead to arrive at a rental income of $4.58 per inmate per day. Berkson then looked to "the marketplace to see what sort of return a land owner would want on his land, knowing that he was going to get this sort of income" and capitalized this income at about 10 percent.

[37] Berkson compared his figures to the county's proposed ground lease to the state of four acres for $180,000 if there was a two hundred-bed facility, and

[38] concluded the value of the property, using the county's figures, would be about $77 million.

[39] On cross-examination, Berkson admitted he had initially valued the property in early 1990 at $22,370,000.

[40] The county's appraiser, David Yerke, appraised the property at $5,129,897: $20,700 per acre or $.48 per square foot for the usable portion and $2,300 per acre or $.05 per square foot for the unusable portion based on a highest and best use as future residential, a use consistent with the property's zoning. Yerke testified about 6 sales of property zoned residential or future residential (including De La Fuente's 1982 purchase of the property) which ranged in size from 321 to 3,912 acres and in sales price from $.07 per square foot to $.34 per square foot. Yerke also testified about sales of 3 other properties with industrial potential ranging in size from 81 to 240 acres, which sold at $1.15, $1.22, and $1.49 per square foot.

[41] On cross-examination, Yerke admitted he would not choose to live next to a state prison.

[42] The county also presented evidence there were extended discussions before De La Fuente's land was zoned for future residential use and it was unlikely De La Fuente would have been able to obtain a permit for industrial development within a reasonable time after the valuation date because the community plan contemplated only interim uses rather than extensive investment in permanent structures.

[43] During the trial, there was also evidence brought out that previous county appraisers had valued De La Fuente's property based on a highest and best use as industrial land.

[44] The jury returned a verdict of $55,661,480. A juror declaration indicated the jury had valued the usable property at $6.50 per square foot, subtracted $2 per square foot for infrastructure and arrived at a total of $4.50 per square foot for the usable portion and valued the unusable portion of the property at $.18 per square foot.

[45] The county moved for a new trial based on the erroneous admission of evidence relating to the highest and best use of the property as a private detention facility, juror misconduct, De La Fuente's arguments relating to

[46] the county's "deception,"*fn5 insufficiency of the evidence and excessive damages. The court rejected the county's arguments a new trial was justified based generally on the admission of evidence and instructions about the highest and best use of the land for a private detention facility, juror misconduct and the references to the county's deception.

[47] In addressing the sufficiency of the evidence and excessive damages, grounds which the court treated as reaching the same issue, the court specifically disagreed with the county's position the highest and best use of the land was residential. The court noted the county's own expert stated he would not like to live in a home overlooking the state prison and admitted he did not investigate whether his premise of residential use (based on the current zoning) was correct. The court also responded on the basis of its viewing of the property during the jury's visit to the site, specifically pointing to the view of the prison "within its barbed wire and lit up like a facility [the court had] never seen lit up before."

[48] At the hearing on the new trial motion, the court expressed skepticism about the change in valuation of De La Fuente and Berkson a few months before trial, which had been $18 million to $30 million, to $64 million to $79 million at the time of trial. The court stated, "I must ask myself, is this reasonable for people as sophisticated as Mr. De La Fuente and Mr. Berkson to apparently have so little understanding of the fair market value of the subject property as of an earlier point in time, just a few months before trial . . .." The court indicated it required more time to reach a decision.

[49] The court eventually concluded, in a written statement, that the verdict was excessive. The court believed the most relevant market data for determining the fair market value of the property were Berkson's sales. The court found Berkson's first five sales were inferior to De La Fuente's properties as to highest and best use because De La Fuente's property was suitable for those same uses as well as for a private detention facility.

[50] The court found Berkson's sale No. 10, which involved a property which Berkson calculated sold at $3.22 per square foot,*fn6 was "clearly superior to the subject property" because of its location, topography, size and shape. The court also erroneously stated sale No. 10 was commercially zoned (the property was industrially zoned). The court found Berkson

[51] had supplied no "credible reason" to support his conclusion De La Fuente's property "was worth at least twice as much as his sale 10, or, for that matter, why the subject property was worth several times the value of the industrial sales in the area."

[52] The court also found Berkson's rental income or capitalization approach was "not believable as it lacked a proper foundation and was highly speculative." The court explained: "Initially, it should be noted that the experts of the property owners testified that because the 'privatization' of penal facilities is such a new and developing field there exists no market data anywhere in the country representing fair market value of property devoted to such a use. Applying a reasonable rental income or capitalization approach to value an improved property never devoted to such a use by deducting anticipated operating costs, cost of construction, and land and construction carrying costs from anticipated rental income per inmate is highly speculative and, in the instant case, shed no light on the fair market value of the subject property. Further, Mr. Berkson's assumption of a 6,000 inmate population predicated upon criminal inmate population increases of 1,000 per year was speculative."

[53] The court, "after weighing the evidence" was "convinced from the entire record" that the verdict was excessive and not supported by the evidence. The court determined $22,886,200 represented the fair market value of the property. The court issued an order granting a new trial unless De La Fuente accepted a remittitur to $22,886,200. De La Fuente declined the reduced amount and elected to appeal the new trial order.

[54] After trial, the court, on De La Fuente's motion, ordered the county to increase the deposit of probable compensation by $16,486,200 plus interest. The county deposited an additional $21,564,594.38 pursuant to the court's order.

[55] On appeal, De La Fuente challenges the trial court's order of a new trial. The county contends the judgment should be reversed based on the improper admission of evidence relating to valuation of the property as a detention center, De La Fuente's attempt to "inflame" the jury and turn it into "a tort case for 'deception,' " the improper refusal of its jury instructions, the improper restriction of Yerke's testimony and on all the grounds raised in its motion for a new trial. The county also contends the court erred in increasing the amount of probable compensation.

[56] I VALUATION BASED ON USE AS A PRIVATE DETENTION FACILITY

[57] When the government takes property by exercising its power of eminent domain, it must pay "just compensation" to the property owner for the property taken. (U.S. Const., 5th Amend.; Cal. Const., art. I, § 19.) " 'The principle sought to be achieved by this concept [of just compensation] "is to reimburse the owner for the property interest taken and to place the owner in as good a position pecuniarily as if the property had not been taken." [Citation].' " (People ex rel. Dept. of Water Resources v. Andresen (1987) 193 Cal. App. 3d 1144, 1163 [238 Cal. Rptr. 826].) Fair market value is the measure of just compensation for property taken in eminent domain. (Code Civ. Proc., § 1263.310; Redevelopment Agency v. Tobriner (1989) 215 Cal. App. 3d 1087, 1101 [264 Cal. Rptr. 481].) As a general rule, the "fair market value of the property taken is the highest price on the date of valuation that would be agreed to by a seller, being willing to sell but under no particular or urgent necessity for so doing, nor obliged to sell, and a buyer, being ready, willing, and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available." (Code Civ. Proc., § 1263.320, subd. (a).)

[58] The property taken is valued based on the highest and best use for which it is geographically and economically adaptable. (City of Los Angeles v. Decker (1977) 18 Cal. 3d 860, 867 [135 Cal. Rptr. 647, 558 P.2d 545].) A determination of the property's highest and best use is not necessarily limited to the current zoning or land use restrictions imposed on the property; the property owner "is entitled to show a reasonable probability of a zoning [or other change] in the near future and thus to establish such use as the highest and best use of the property. [Citations.]" (Ibid. ; People ex rel. Dept. of Public Works v. Donovan (1962) 57 Cal. 2d 346, 352-353 [19 Cal. Rptr. 473, 369 P.2d 1]; City of Pleasant Hill v. First Baptist Church (1969) 1 Cal. App. 3d 384, 416 [82 Cal. Rptr. 1].) The property owner has the burden of showing a reasonable probability of a change in the restrictions on the property. (City of Los Angeles v. Decker, supra, 18 Cal. 3d 860, 868.)

[59] It is long settled that the condemned property may not be valued based on its special value to the property owner. (United States v. Cors (1949) 337 U.S. 325, 333 [93 L.Ed. 1392, 1399, 69 S.Ct. 1086]; City of Los Angeles v. Decker, supra, 18 Cal. 3d 860, 866; San Diego Land etc. Co. v. Neale (1888) 78 Cal. 63, 74-75 [20 P. 372]; City of Stockton v. Vote (1926)

[60] 76 Cal. App. 369, 403 [244 P. 609].) "Mere frustration of the owner's plans is not generally compensable . . .." (City of Pleasant Hill v. First Baptist Church, supra, 1 Cal. App. 3d 384, 404.) "Evidence of the owner's plan of development is not admissible where its purpose is to show loss of profit or enhanced damages which would be suffered by being prevented from carrying out a particular scheme of improvement. [Citations.]" (San Bernardino County Flood Control Dist. v. Sweet (1967) 255 Cal. App. 2d 889, 899 [63 Cal. Rptr. 640].) "Speculative and conjectural calculations of prospective receipts and expenditures and consequent profits to be derived from a prospective enterprise not only throw no light on the issue of the market value of the land to be used in the enterprise, but operate to confuse and mislead the mind of the jurors. [Citation.]" (East Bay Mun. Utility Dist. v. Kieffer (1929) 99 Cal. App. 240, 250-251 [278 P. 476], overruled on other grounds in County of San Diego v. Miller (1975) 13 Cal. 3d 684, 693 [119 Cal. Rptr. 491, 532 P.2d 139].) Thus, the cases have generally held that a property owner may not value his property based upon its use for a projected special purpose or for a hypothetical business. (See City of Los Angeles v. Retlaw Enterprises, Inc. (1976) 16 Cal. 3d 473, 488 [128 Cal. Rptr. 436, 546 P.2d 1380]; People ex rel. Dept. of Water Resources v. Andresen, supra, 193 Cal. App. 3d 1144, 1161; San Bernardino County Flood Control Dist. v. Sweet, supra, 255 Cal. App. 2d 889, 899-900; Laguna Salada etc. Dist. v. Pac. Dev. Co. (1953) 119 Cal. App. 2d 470, 476 [259 P.2d 498]; City of Stockton v. Vote, supra, 76 Cal. App. 369, 403.) "The hypothetical business rule . . . follows a line of authority beginning with Sacramento etc. R. R. Co. v. Heilbron (1909) 156 Cal. 408 . . . that holds valuation of property based on hypothetical businesses to be too speculative to determine a realistic fair market value for the property on which the potential business is located. The prohibition against capitalization earnings for hypothetical businesses is a practical rule applied where property has many possible uses. Where property has several potential uses, condemnees could pick and choose the most profitable hypothetical use for their property and evaluate the property at inflated rates." (People ex rel. Dept. of Water Resources v. Andresen, supra, 193 Cal. App. 3d 1144, 1161.)

[61] While a property owner may not generally present evidence of the value of his property " 'in terms of money' " that the property would bring for a special purpose (see City of Stockton v. Vote, supra, 76 Cal. App. 369, 403), evidence of a particular use may be relevant to establishing the highest and best use since such evidence may tend to establish the property's adaptability for that kind of use (see City of Los Angeles v. Retlaw Enterprises, Inc., supra, 16 Cal. 3d 473, 488; Spring Valley W.W. v. Drinkhouse (1891) 92 Cal. 528, 533-534 [28 P. 681], overruled on other grounds in County of Los

[62] Angeles v. Faus (1957) 48 Cal. 2d 672, 680 [312 P.2d 680]; San Bernardino County Flood Control Dist. v. Sweet, supra, 255 Cal. App. 2d at pp. 899-900).

[63] The law also recognizes that when the government takes property (either by eminent domain or inverse condemnation) which has a preexisting special use, it may be required to compensate the owner for taking or damaging the owner's use. (See, e.g., Inyo Chemical Co. v. City of Los Angeles (1936) 5 Cal. 2d 525 [55 P.2d 850] [inverse condemnation action; compensation based on damage flooding caused to preexisting mining business held proper]; Natural Soda Prod. Co. v. City of L.A. (1943) 23 Cal. 2d 193 [143 P.2d 12], cert. den. 322 U.S. 768 [88 L.Ed. 1594, 64 S.Ct. 942] [inverse condemnation action; compensation based on damage flooding caused to preexisting mining business held proper]; People ex rel. Dept. of Water Resources v. Andresen, supra, 193 Cal. App. 3d 1144, 1160-1164 [eminent domain action, valuation based on preexisting quarry held proper]; City of Commerce v. National Starch & Chemical Corp. (1981) 118 Cal. App. 3d 1 [173 Cal. Rptr. 176] [eminent domain action; severance damages based on accelerated depreciation of fixtures and loss of expansion ability of existing adhesive manufacturing facility held proper]; Ventura County Flood Control Dist. v. Security First Nat. Bank (1971) 15 Cal. App. 3d 996 [93 Cal. Rptr. 653] [eminent domain action; severance damages due to loss of productivity of preexisting lemon grove on remainder due to taking of trees which served as windbreak held proper]; City of Pleasant Hill v. First Baptist Church, supra, 1 Cal. App. 3d 384 [eminent domain action, severance damages based on loss for future growth of preexisting church held proper].)

[64] Finally, the law recognizes there are some special purpose properties such as schools, churches, cemeteries, parks and utilities for which there is no relevant market and therefore these properties may be valued on any basis which is " 'just and equitable.' " (Redevelopment Agency v. Tobriner, supra, 215 Cal. App. 3d 1087, 1101-1102; Pacific Gas & Electric Co. v. Zuckerman (1987) 189 Cal. App. 3d 1113, 1135 [234 Cal. Rptr. 630]; Code Civ. Proc., § 1263.320, subd. (b); Evid. Code, § 823.)

[65] As the comment to subdivision (b) of Code of Civil Procedure section 1263.320 explains: "subdivision (b) has been added to the definition because there may be no relevant market for some types of special purpose properties such as schools, churches, cemeteries, parks, utilities, and similar properties. All properties, special as well as general, are valued subject to the limits of Article 2 (commencing with Section 810) of Chapter 1 of Division 7 of the Evidence Code. The Evidence Code provides that, regardless of whether there is a relevant market for property, its fair market value may be determined by reference to matters of a type that reasonably may be relied upon

[66] by an expert in forming an opinion as to the value of property including where appropriate, but not limited to, (1) the market data (or comparable sales) approach, (2) the income (or capitalization) method, and (3) the cost analysis (or reproduction less depreciation) formula." (Legis. committee com., 19A West's Ann. Code Civ. Proc. (1982) § 1263.320, p. 39.)

[67] Just as the property may not be valued based on its special value to the owner, the property may not be valued on the basis of its special value to the government. (Merced Irrigation Dist. v. Woolstenhulme (1971) 4 Cal. 3d 478, 487-491 [93 Cal. Rptr. 833, 483 P.2d 1].) "The California Supreme Court early stated 'it seems monstrous to say that the benefit arising from the proposed improvement is to be taken into consideration as an element of the value of the land.' (San Diego Land etc. Co. v. Neale, supra, 78 Cal. 63, 75 . . ..)" (Pacific Gas & Electric Co. v. Zuckerman, supra, 189 Cal. App. 3d 1113, 1127.) It has been held that the government's purpose in condemning the land "is wholy [ sic ] irrelevant." (People v. La Macchia (1953) 41 Cal. 2d 738, 754 [264 P.2d 15], overruled on other grounds in County of Los Angeles v. Faus, supra, 48 Cal. 2d 672, 680, see also Merced Irrigation Dist. v. Woolstenhulme, supra, 4 Cal. 3d 478, 491.) The general rule is designed to prevent "[p]urchasers of property that is known to be condemned . . . from inflating the value of the property by conjecturing what the condemner will actually pay for the property. [Citation.]" (People ex rel. Dept. of Water Resources v. Andresen, supra, 193 Cal. App. 3d 1144, 1156.)

[68] The courts, however, have recognized some proposed uses of the property may be carried out by either a public entity or by a private individual and that sometimes the government's proposed use of the property is also the highest and best use of the property in the hands of a private property owner. In such situations, the property owner is allowed to value the property based on a highest and best use which also happens to be the use proposed by the government entity. Thus, in some early cases, property owners whose land was sought to be condemned for reservoir purposes, were permitted to present evidence that the highest and best use of the land was as a reservoir site. (See, e.g., San Diego Land etc. Co. v. Neale, supra, 78 Cal. 63, 71; City of Stockton v. Vote, supra, 76 Cal. App. 369, 404- 405.) More recently, a property owner whose land was condemned for a rock quarry to provide material to repair a dam was allowed to value the property based on a highest and best use as a rock quarry although the quarry had not been used since the original construction of the dam and the land had been used as pasturage in the interim. (People ex rel. Dept. of Water Resources v. Andresen, supra, 193 Cal. App. 3d 1144, 1159-1160.)

[69] Finally, in City of Los Angeles v. Decker, supra, 18 Cal. 3d 860, a property owner whose residential property was condemned was allowed to show the

[70] highest and best use of the property was for airport parking although the city's intended use for the property was also airport parking. As the Supreme Court explained in the Decker case: "[The] admissibility [of the property owner's evidence that airport parking was the highest and best use of the land] would seem to be a natural corollary to the well established rule that 'if, however, 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.' [Citation.] Woolstenhulme does not bar such evidence, since it only precludes the valuation of the condemned property as part of the proposed improvement. The 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. In other words, this evidence buttressed the testimony of defendant's witness that there was a present need for airport parking and that her land was in a suitable location to fulfill that need." (City of Los Angeles v. Decker, supra, 18 Cal. 3d 860, 869, italics in original.)

[71] Cases where the property owner was allowed to show the highest and best use of property was the same use as the condemner's proposed use must be distinguished from those cases where the government provides the only market or demand for the proposed use. In situations where the market or demand is created by the government, then valuing the property on that basis is improper; such a valuation is tantamount to a valuation of the property in the hands of the condemner.

[72] Thus, in one of its earliest cases the California Supreme Court held inadmissible evidence valuing property as a fortification since the government provided the only market for that use. (Gilmer v. Lime Point (1861) 19 Cal. 47.) On similar grounds, the court in City of Redding v. Diestelhorst (1936) 15 Cal. App. 2d 184, 193-194 [59 P.2d 177] rejected the property owner's attempt to value the land as a bridge site, explaining: "It is practically conceded by the two witnesses called by defendant that the demand for bridge sites is very limited and that available sites are numerous, and that outside of the state or municipality they knew of no prospective buyers for bridge sites in the vicinity of Redding. It seems, therefore, the witnesses were basing their estimate of market value of the land sought to be condemned in this action solely upon the ground that the City of Redding needed it to carry out the terms of its contract with the California Highway Commission, and that there was no potential demand for bridge sites from any other source. Such testimony is inadmissible. [Citation.] This situation is analogous to that presented in Gilmer v. Lime Point, 19 Cal. 47, where the owner attempted to prove the value of the premises as a site for a government fortification. Such evidence was held inadmissible because there was

[73] no market for the land for such purposes, competition being essential to a market and the government being of necessity without a competitor for the purchase of land for purposes of fortification."

[74] The United States Supreme Court has recognized this problem in the context of a government-created demand for tug boats in the time of war:

[75] "In time of war or other national emergency the demand of the government for an article or commodity often causes the market to be an unfair indication of value. The special needs of the government create a demand that outruns the supply. The market, sensitive to the bullish pressure, responds with a spiraling of prices. The normal market price for the commodity becomes inflated. And so the market value of the commodity is enhanced by the special need which the government has for it.

[76] "

[77] "It is not fair that the government be required to pay the enhanced price which its demand alone has created. That enhancement reflects elements of the value that was created by the urgency of its need for the article. It does not reflect what 'a willing buyer would pay in cash to a willing seller,' [citation], in a fair market. It represents what can be exacted from the government whose demands in the emergency have created a sellers' market. In this situation, as in the case of land included in a proposed project of the government, the enhanced value reflects speculation as to what the government can be compelled to pay. That is a hold-up value, not a fair market value. That is a value which the government itself created and hence in fairness should not be required to pay." (United States v. Cors, supra, 337 U.S. 325, 333-334 [93 L.Ed. 1392, 1399-1400]; see also Merced Irrigation Dist. v. Woolstenhulme, supra, 4 Cal. 3d 478, 491, holding a property owner is not entitled to " 'project enhanced value' " based on the likelihood his property will become part of the government's project.)

[78] What can be gleaned from the statements of the United States Supreme Court and the few California cases is that the "market" for determining "fair market value" and just compensation is the private marketplace, i.e., what willing, knowledgeable nongovernmental buyers and sellers would pay for property to be used for a nongovernmental purpose. Thus, remote desert property which is essentially valueless to the private marketplace may not be based on its use for such strictly governmental uses as a nuclear testing site, military base or detention facility; it must be valued on private uses such as agriculture, recreation, residential, commercial or industrial. To value property based on a market where the government is the only potential buyer is

[79] to engage in improperly valuing the property based on its value to the condemner rather than based on the loss suffered by the property owner. It is the loss suffered by the property owner which provides the guide for just compensation, a loss measured by the private marketplace; the loss may not be measured by the benefit to the condemner. (See Merced Irrigation Dist. v. Woolstenhulme, supra, 4 Cal. 3d 478, 492 ["Almost all courts universally agree . . . an increase in value, based on a purchaser's conjecture of what the condemner may ultimately be required to pay, is not a proper element of 'fair market value' for 'just compensation' purposes. [Citations.]".)

[80] Here, not only was De La Fuente's proposed use as a detention facility the same as the county's proposed use of the land but it was also a use which is uniquely governmental, that is, only the government provides a market for detention facilities. De La Fuente's valuation based on "supply and demand" was a valuation based solely on the government's supply of inmates and demand for prison/jail beds. There is no equivalent private sector "supply and demand." Whether a detention facility is directly constructed by the government and operated by government employees or is indirectly constructed and operated by the government through a lease payment and a contract with a private company to operate the facility, a detention facility remains a governmental function with no private sector equivalent.*fn7

[81] The fact the market for detention facilities is limited to the government is demonstrated by De La Fuente's own evidence. De La Fuente and his expert, Berkson, rejected a comparable sales approach for valuing the land used as a private detention facility because of the lack of market and sales for detention facilities. Instead, they used an approach based on what the government would pay for detention facilities. They referred to figures in negotiations between the county and state governments for a 200- or 400-bed facility and to figures of what the government would pay for inmates on a per diem basis. De La Fuente's evidence of value and use was premised on a government use of the facilities.

[82] De La Fuente's valuation based on a private detention facility is not like the airport parking lot in City of Los Angeles v. Decker, supra, 18 Cal. 3d 860,

[83] where the property owner wanted the same use in different hands (i.e., in the hands of the property owner rather than the city). De La Fuente's valuation is based on showing the same use (a detention facility) in the same hands, that is, he wanted to value the property based on the government's use of the property for detention purposes through a lease from De La Fuente and contract with a private company for management purposes. This valuation was improperly based on the value of the property to the condemner.

[84] We further note the property here was not "special purpose" property like those involving schools, cemeteries or churches or like those properties involving a preexisting special business. The land here was vacant, undeveloped land suitable for a variety of uses, including agricultural, residential or industrial. There was a market for this property in the private marketplace as demonstrated by the evidence De La Fuente, Berkson and Yerke presented of sales of comparable property in the area. The "uniqueness" of De La Fuente's property resulted only when the property was valued based on its value to the government for a uniquely governmental use.

[85] We conclude the court erred in allowing De La Fuente to value the property based on its highest and best use as a detention facility. Accordingly, we must reverse the judgment. Because we reverse the judgment, we need not discuss the county's various challenges to the evidence and instructions relating to the use of the property as a detention facility nor do we need to discuss De La Fuente's challenges to the trial court's grant of a new trial; these issues are mooted by our decision that evidence relating to the use of the property for a detention facility should have been excluded.*fn8

[86] II INCREASE IN THE DEPOSIT OF PROBABLE COMPENSATION

[87] The county contends the court erred in ordering an increase in its deposit of probable compensation because the court erroneously calculated the

[88] probable compensation of $22,886,200 by relying on Berkson's sale Noo. 10, which the county contends was not comparable because it was a sale of improved property, and by adopting Berkson's conclusion sale No. 10 resulted in a sales price of $3.22 per square foot,*fn9 and erred in requiring a deposit of interest.

[89] As to the county's contention the court improperly required the county to deposit prejudgment interest, the county cites no authority holding such an order is improper.

[90] Under the Eminent Domain Law (Code Civ. Proc., § 1230.010 et seq.), "[a]t any time before entry of judgment, the [public entity] may deposit with the court the probable amount of compensation, based on an appraisal, that will be awarded in the proceeding." (Code Civ. Proc., § 1255.010, former subd. (a).)*fn10 The public entity must give notice of the deposit and the basis of the appraisal to the parties in the action. (Code Civ. Proc., § 1255.020, subds. (a) & (b).) "At any time after a deposit has been made . . . the court shall, upon motion of the [public entity] or of any party having an interest in the property for which the deposit was made, determine or redetermine whether the amount deposited is the probable amount of compensation that will be awarded in the proceeding." (Code Civ. Proc., § 1255.030, subd. (a).) If the court determines the amount of probable compensation exceeds the deposit, the court may order the public entity to increase the amount of the deposit. (Code Civ. Proc., § 1255.030, subds. (b) & (c).)

[91] Code of Civil Procedure, section 1268.110 addresses deposits made following the entry of judgment:

[92] "(a) Except as provided in subdivision (b), the plaintiff may, at any time after entry of judgment, deposit with the court for the persons entitled thereto the full amount of the award, together with interest then due thereon, less any amounts previously paid directly to the defendants or deposited pursuant to Article 1 (commencing with Section 1255.010) of Chapter 6 [addressing deposits of probable compensation].

[93] "(b) A deposit may be made under this section notwithstanding an appeal, a motion for a new trial, or a motion to vacate or set aside the judgment but may not be made after the judgment has been reversed, vacated, or set aside.

[94] "(c) Any amount deposited pursuant to this article on a judgment that is later reversed, vacated, or set aside shall be deemed to be an amount deposited pursuant to Article 1 (commencing with Section 1255.010) of Chapter 6."

[95] Code of Civil Procedure section 1268.130 gives the court authority to increase the amount of the postjudgment deposit: "At any time after the plaintiff has made a deposit upon the award pursuant to Section 1268.110, the court may, upon motion of any defendant, order the plaintiff to deposit such additional amount as the court determines to be necessary to secure payment of any further compensation, costs, or interest that may be recovered in the proceeding. After the making of such an order, the court may, on motion of any party, order an increase or a decrease in such additional amount. . . ."

[96] While the statutory scheme mentions interest as part of the postjudgment deposit and not as part of a prejudgment deposit, that does not lead to a conclusion an increase in the deposit to include interest before judgment or after an order granting a new trial is improper. The amount of the deposit is intended to reflect the amount of probable compensation which will be awarded in the eminent domain proceeding. Just compensation under the California and federal Constitutions may require an award of interest so that the property owner receives the " 'full and perfect' monetary equivalent of the fair market value of the land" if payment of the full amount of compensation is not contemporaneous with the taking. (Redevelopment Agency v. Gilmore (1985) 38 Cal. 3d 790, 801 [214 Cal. Rptr. 904, 700 P.2d 794]; Salton Bay Marina, Inc. v. Imperial Irrigation Dist. (1985) 172 Cal. App. 3d 914, 959 [218 Cal. Rptr. 839].) It therefore follows that a court may order an increase in a deposit of "probable compensation" when it appears the original deposit was inadequate and the passage of time indicates an award of interest will be necessary to provide the property owner with the " 'full and perfect' monetary equivalent of the fair market value of the land." (Redevelopment Agency v. Gilmore, supra, 38 Cal. 3d at p. 801.)

[97] We find no abuse of discretion in the court's inclusion of interest in its order increasing the amount of the county's deposit. The amount of interest, however, will have to be recalculated in light of our conclusion the property should not have been valued based on a highest and best use as a detention facility.

[98] The judgment is reversed. The county is awarded costs on appeal.

[99] Benke, J., and Froehlich, J., concurred.

[100] A petition for a rehearing was denied July 13, 1993, and the petition of defendants and appellants for review by the Supreme Court was denied September 16, 1993.

[101] Disposition

[102] Reversed. Appellant awarded costs on appeal.

Opinion Footnotes

[103] *fn1 The property was actually purchased by two corporations (Rancho Vista Del Mar, Inc., and Rancho De La Fuente) which are closely held by the De La Fuente family. Roque De La Fuente is the principal of these entities and he testified as the property owner in giving a valuation of the property. We refer to De La Fuente both as an individual and to represent the property owners.

[104] *fn2 Named as defendants were Rancho Vista Del Mar, Inc., Rancho De La Fuente, Inc., Border Business Park, Inc., American International Racing, Inc. and D' & D', corporations all closely held by the De La Fuente family, as well as Home Federal Savings & Loan Association.

[105] *fn3 Thomas testified the per diem operating costs for an inmate were about $30/day in a minimum security facility, about $50 to $55/day in a medium security facility and about $55 to $60/day in a maximum security facility.

[106] *fn4 As the county points out in its briefs, Berkson may have miscalculated the price per square foot allocated to sale No. 10. Berkson's data indicate this property sold for $18,038,412 and that the "Ratio of land to total price is 19.2%%." If one multiplies $18,038,412 by 19.2 percent, the allocation to the land was $3,463,375.10, which when divided by the net square feet of the property (1,644,390), equals a price of $2.11 per square foot.

[107] *fn5 These arguments related to the county's negotiations with Wackenhut to construct detention facilities on the subject property and the county's failure to tell its appraiser. Yerke, about previous appraisals based on a highest and best use as industrial property or to tell him about the negotiations with Wackenhut.

[108] *fn6 See footnote, 4 ante, page 1054.

[109] *fn7 De La Fuente contends we may not reverse the judgment based on a conclusion the property should not have been valued as a private detention facility because the county stipulated "that the subject property is feasible, suitable and reasonably probable for the use of a private detention facility as of the date of value." The stipulation is not a concession by the county that De La Fuente's property could be valued based on use as a private detention facility. In context, the stipulation is no more than an abandonment of the county's earlier untenable, and in this context irrelevant, position that private detention facilities are illegal per se.

[110] *fn8 We note the trial court's decision to grant a new trial based on its conclusion Berkson's valuation opinion was based on conjecture and speculation was within its discretion. The county's description of De La Fuente's proposed 6,000-bed detention facility as a "fantasy jail" is not inapt. While there was evidence the property could support such a large facility, other evidence showed there were no 6,000-bed facilities existing anywhere in the world and the largest facility in California was a "standardized sort of cookie cutter kind of facility" of 200 beds. Further, while there was evidence showing a potential inmate population to fill 6,000 beds, there was no evidence showing any governmental entity had a reasonable probability of financing such a facility any time in the near future. The county itself lacked funding for phase two of its proposed project which was intended to add an additional 1,040 beds to the 1,040 completed in phase one.

[111] *fn9 See footnote 4, ante, pages 1054.

[112] *fn10 In 1990, the Legislature amended Code of Civil Procedure section 1255.010, subdivision (a) to provide for deposit of the amount of probable compensation with the State Treasury rather than with the court. (Stats. 1990, ch. 1491, § 9.)

Puerto Rico, 1964

11/24/64 Montague Fred RAYNE, v. The WACKENHUT CORPORATION,

[Editor's note: footnotes (if any) trail the opinion]

[1] DISTRICT COURT OF APPEAL OF FLORIDA, THIRD DISTRICT.

[2] Montague Fred RAYNE, Appellant,

v.

[3] The WACKENHUT CORPORATION, a Florida corporation, and

[4] George R. Wackenhut, Appellees.

[5] No. 64-146.

[6] November 24, 1964

[7] Rehearing Denied December 16, 1964.

BLUE BOOK CITATION FORM: 1964.FL.885

[8] APPELLATE PANEL:

[9] Before BARKDULL, C.J., and CARROLL and TILLMAN PEARSON, JJ.

[10] DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE PEARSON

[11] Montague Fred Rayne, who is the appellant here, was an employee of the defendant, The Wackenhut Corporation. The defendant, George R. Wackenhut, is the founder and president of the defendant corporation. Rayne, who had previously been the resident manager of The Wackenhut Corporation in the territory of Puerto Rico, entered into a contract with the corporation by which he agreed to become a vice president of the corporation for a period of three years.

[12] Rayne's compensation was set in the agreement with the provision that, for the period ending December 31, 1961, he was to receive 50% of the net profits of the Puerto Rican Corporation, and for the periods commencing January 1, 1962, he was to receive a certain salary but not less than the compensation received for the period ending December 31, 1961.

[13] Eighteen months prior to the expiration of the contract of employment, Rayne was discharged. The contract provided that he could be discharged only under certain circumstances, one of which was "just cause." Shortly after his discharge Rayne instituted the suit, with which we are concerned, in equity. In so doing, he elected not to proceed at common law for the balance of his salary claimed but added this claim to his suit in equity in which he alleged that he was entitled to an accounting to determine whether or not the compensation he had received, and to which he claimed to be entitled, was actually as much as 50% of the net profits from the business in Puerto Rico in 1961. His complaint not only alleged that the plaintiff was discharged prior to the expiration of his contract but that he was wrongfully discharged. The defendants answered denying that the plaintiff was wrongfully discharged.

[14] The chancellor took testimony and received evidence of the plaintiff and at the conclusion thereof, granted a motion of the defendants in the nature of a motion for directed verdict and entered a final decree and final judgment in which he found as follows:

[15] 1. The plaintiff has failed to prove by competent evidence the material allegations of his complaint.

[16] 2. Under the contract between the Plaintiff and the Defendant The Wackenhut Corporation, the Plaintiff is entitled to salary to and including July 25, 1963, which the court finds to be in the sum of $2,300.00.

[17] 3. The Defendant The Wackenhut Corporation has proved by competent evidence the material allegations of Count I of its counterclaim (seeking an order requiring Plaintiff to return to Defendant all documents or copies thereof, or other properties belonging to the Defendant which the Plaintiff has in his possession or control).

[18] 4. The Defendant The Wackenhut Corporation has failed to prove by competent evidence the material allegations of Count II of its counterclaim (seeking the return of the sum of $4,885.88), the court finding that the payment of said sum to the Plaintiff was not a loan but was in the nature of an advance against future profits which cannot be recovered by the Wackenhut Corporation.

[19] 5. The Defendant The Wackenhut Corporation orally moved for an order authorizing it to hold in abeyance proof on Counts III (seeking the return of $13,000.00 paid by the Defendant to the Plaintiff), Count IV (seeking any sums due the Defendant if an accounting was ordered), Count V (seeking an order enjoining Plaintiff from making false and derogatory [20] statements about the Defendant corporation and otherwise interfering with its peaceful operations in Puerto Rico, and awarding compensatory damages), Count VI (seeking an order enjoining the Plaintiff from making false, defamatory, libelous and slanderous statements about the Defendant and awarding compensatory damages), of its counterclaim, or in the alternative to enter an order authorizing a voluntary dismissal as to said Counts without prejudice. The Defendant George R. Wackenhut similarly moved as to its counterclaim (seeking an order enjoining the Plaintiff from uttering false, defamatory, slanderous and libelous statements about the said Defendant). The court finds that these motions should be denied and that Counts III, IV, V and VI of the corporate Defendant's counterclaim and the counterclaim of George R Wackenhut should be dismissed with prejudice.

[20] 6. The court finds that the Defendant The Wackenhut Corporation has voluntarily dismissed Count VII of its counterclaim (seeking an order enjoining the Plaintiff from engaging in business competitive with that engaged in by the Defendant) and the court finds that the Defendant should be permitted to do so.

[21] 7. Each of the parties should bear his or its own cost.

[22] Based upon these findings the court made the following decree:

[23] "IT IS ORDERED, ADJUDGED AND DECREED that

[24] "A. Defendants' motion for Judgment in their favor be and the same is hereby granted; and Final Judgment be and the same is hereby entered in favor of the Defendants The Wackenhut Corporation, a Florida corporation, and George R. Wackenhut, sine die, and against the Plaintiff Montague Fred Rayne with prejudice.

[25] "B. Final Judgment be and the same is hereby entered in favor of the Plaintiff Montague Fred Rayne against the Defendant The Wackenhut Corporation, in the sum of $2,300.00 for which sum let execution issue.

[26] "C. JUDGMENT be and the same is hereby entered in favor of the Defendant The Wackenhut Corporation and against the Plaintiff Montague Fred Rayne on Count I of Defendant's counterclaim, and Plaintiff Montague Fred Rayne be and he is hereby ordered and required to deposit with the court to be marked for identification and subsequently delivered to the Defendant The Wackenhut Corporation, all documents and other items in his possession or under his control which belong to The Wackenhut Corporation as business records. The Court reserves jurisdiction of this matter for the purpose of entering any subsequent order or orders pertaining to said documents it deems proper.

[27] "D. Final Judgment be and the same is hereby entered in favor of the Plaintiff Montague Fred Rayne, sine die, and against the Defendant The Wackenhut Corporation with prejudice on Count II of the Defendant The Wackenhut Corporation's counterclaim.

[28] "E. The motion of the Defendants to hold in abeyance Counts III, IV, V and VI of the corporate Defendant's counterclaim, and the counterclaim of George R. Wackenhut be and the same is hereby denied; and Final Judgment be and the same is hereby entered in favor of the Plaintiff Montague Fred Rayne, sine die, and against the Defendants The Wackenhut Corporation, a Florida corporation and George R. Wackenhut with prejudice as to Counts III, IV, V and VI of the corporate Defendant's counterclaim and the counterclaim of George R. Wackenhut.

[29] "F. The motion of The Wackenhut Corporation to voluntarily dismiss without prejudice Count VII of its counterclaim be and the same is hereby granted.

[30] "G. The parties hereto shall each bear his or its own costs."

[31] The appellant Rayne has appealed the final decree and urges the reversal thereof and the return of the cause to the trial court for the completion of the trial upon two points: first, that the chancellor entered the decree upon an erroneous rule of law in that the chancellor held that under the pleadings in this case the burden of proving discharge for other than a good cause was upon the plaintiff, appellant; second, that the chancellor erroneously held that the plaintiff was not entitled to an accounting upon the question of the true profits of the business in Puerto Rico subsequent to 1958.

[32] Inasmuch as neither of the points presented by the appellant claim error as to certain portions of the decree, the portions not contested will stand affirmed upon this appeal. See 2 Fla.Jur., Appeals § 382; Cf. Grand Union Super Markets, Inc. v. De Aquinos, Fla.App.1961, 135 So.2d 754. Under this provision we must affirm the decree insofar as it granted a final judgment in favor of the defendant George R. Wackenhut, individually. In addition paragraph "B" of the final decree which provided for a judgment in favor of the plaintiff Rayne against the defendant, The Wackenhut Corporation, in the sum of $2300 is affirmed. By way of clarification it may be stated that this judgment represents 30 day severance pay which the corporation concedes is due.

[33] In addition, paragraph "C" of the final decree is affirmed upon the same basis. This paragraph provides for the return to the defendant, The Wackenhut Corporation, all documents and other items in the possession or under his control which belonged to The Wackenhut Corporation as business records.

[34] Paragraphs "D" and "F" concern counterclaims brought against the plaintiff by the defendants. Inasmuch as no cross assignments of error have been filed, these paragraphs are affirmed.

[35] Inasmuch as it affirmatively appears that appellant's complaint claiming wrongful discharge was dismissed because the chancellor found that all of the evidence before him demonstrated that the plaintiff was discharged for good cause and inasmuch as this conclusion is supported by the record, the chancellor's dismissal of this portion of the complaint is affirmed. We find that appellant's contention that the decree of the chancellor was based on an erroneous rule of law, is not well-taken. It is apparent that the plaintiff having alleged absence of good cause proceeded to attempt to prove this claimed absence of a basis for his discharge. He produced many witnesses and a great deal of documentary evidence. The examination and cross examination of the witnesses consumed over 500 pages of transcript. The evidence was to a large extent upon this determinative issue. At the conclusion of the evidence of the plaintiff, the chancellor was of the opinion that good cause for the discharge had been shown. Under these circumstances it would be a waste of judicial labor to take further testimony from the defendant on this issue. Routh v. Richards, 103 Fla. 757, 138 So. 72.

[36] Appellant's second point presents a question as to whether, under the testimony presented and the allegations of his complaint, he was entitled to an accounting from the corporation as to the business done in his former territory of Puerto Rico during the years 1960, 1961 and 1962. His claim is that he is entitled to additional compensation because of the provision in the employment contract which provides that this compensation shall not in any year commencing after January 1, 1962, be less than the compensation received for the period ending December 31, 1961.

[37] The evidence shows that the appellant was furnished an annual statement by the accounting firm retained by the corporation. If this statement is accepted as correct, there are no additional sums due to the plaintiff, appellant, for the period that he worked.

[38] The plaintiff has attacked the financial statement furnished him in several particulars. He presented some evidence from an expert witness that certain items were improperly included as expenses in the annual statement for the year 1961. This testimony was not refuted inasmuch as the defendants produced no witnesses. Under this condition of the record, we think that the plaintiff appellant is entitled to a determination of the question as to whether a proper method of accounting was used in the preparation of the annual statement which the corporation used in determining his compensation. We therefore conclude that this issue must be tried and that the decree must be reversed insofar as it denies at this stage to the plaintiff his prayer for an accounting.

[39] A reference to paragraph designated "E" of the final decree will reveal that the chancellor denied the motion of the defendant, The Wackenhut Corporation, to hold in abeyance Count IV of its counterclaim. This counterclaim was for any sums due The Wackenhut Corporation if an accounting was ordered. The chancellor denied the motion and found for the plaintiff on the counterclaim. It is apparent that the basis of this action was the chancellor's previous finding that the plaintiff, appellant, was not entitled to an accounting. Because we hold this last finding to be error, we must, in order to allow the chancellor to do equity, also reverse the ruling on the designated counterclaim. Therefore, we affirm paragraph "E" of the final decree except as to the ruling on Count IV of the counterclaim of the defendant, The Wackenhut Corporation, and reverse the ruling on Count IV.

[40] The final decree is therefore affirmed in part and reversed in part, and the cause remanded with directions to proceed with the trial of the issue of the entitlement of the plaintiff to an accounting, and, if proper, to a determination of said accounting.

[41] Affirmed in part, reversed in part and remanded.

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