A public agency that loses an inverse condemnation case must pay all reasonable legal costs that the property owner incurred, even if there is a second round of litigation, the Second District Court of Appeal has ruled. The decision came in a case in which the Hawaiian Gardens Redevelopment Agency delayed payment of litigation expenses and then refused to pay later costs incurred by the owners of an automobile dealership. In 1993, the city's Redevelopment Agency purchased the site on which Mary and Dave Downen operated Lakewood Suzuki. The following year, the city served the Downens with a 90-day notice to vacate the property. The Downens could not find a suitable new location and were forced to liquidate the business. In September 1994, the Downens filed an inverse condemnation lawsuit seeking compensation for the loss of their leasehold interest in the property and damage to their business. Two years later, the sides settled the case by stipulation, with the city agreeing to pay $650,000, plus interest, and litigation expenses. A trial court entered judgment in January 1997, and the agency deposited with the court or paid the Downens $776,000. However, the parties disagreed on the amount of litigation expenses. Two months later, the trial court awarded the Downens $414,000, an amount added to the earlier judgment. However, the city neither paid the balance of the judgment nor appealed the ruling. Instead, it asked the court to allow installment payments, a request the court denied. The Downens then sought payment for additional legal expenses, and the court awarded them another $47,000. Again, the city did not appeal the decision or pay up. So the Downens filed a petition for writ of mandate seeking to enforce the unpaid portion of the judgment. Los Angeles Superior Court Judge David Yaffe granted the petition and entered a new judgment in December 1998. Downens then sought another $84,000 in attorney fees and $2,100 in costs. But at the city's request, Yaffe refused to award the latest attorneys fees and most of the costs because he could find no statutory authority. The Downens appealed and a three-judge panel of the Second District, Division Six, reversed the lower court and awarded the Downens the last $86,000, too. The Downens cited Code of Civil Procedure § 1036, which states that a public entity that loses an inverse condemnation case shall pay reasonable costs and expenses "incurred because of that proceeding in the trial court or in any appellate proceeding in which the plaintiff prevails on any issue in that proceeding." The appellate court read that section broadly. "The purpose of the statutory scheme is clear — ‘to prevent property owners from being forced to bear the cost of expensive litigation in order to protect their property interests against unreasonable government conduct,'" Justice Arthur Gilbert wrote, citing Tilem v. City of Los Angeles, (1983) 142 Cal.App.3d 694, 710. "Here the public agency's actions necessitated the filing of a separate proceeding to enforce the unpaid inverse condemnation judgment. By construing § 1036 to permit plaintiffs to recover their litigation expenses, we implement the Legislature's purpose." The Legislature has made clear that victorious property owners in an inverse condemnation proceeding must be made economically whole, the court ruled. "It would be anomalous to conclude the Legislature did not intend that inverse condemnees recover their litigation expenses when a public agency's conduct requires them to bring a proceeding to enforce the underlying inverse condemnation judgment," Gilbert wrote. The Case: Downen's Inc. v. City of Hawaiian Gardens Redevelopment Agency, No. B132012, 01 C.D.O.S. 880, filed January 30, 2001. The Lawyers: For Downen's: Michael Leifer, Palmieri, Tyler, Wiener, Wilhelm & Waldron, (949) 851-9400. For the city: John Cavanaugh, Woodruff, Spradlin & Smart, (714) 558-7000.