City in Good Position to Admit Liability in Hospital Lawsuit

By Cari Hachmann

The city of San Clemente has motioned in federal court to file an “amended answer” on whether it will admit liability in a lawsuit with Memorial Health Services.

City Attorney Scott Smith said, “The council decided that it would not be a bad outcome.”

If the city admits to Memorial Health Services’ claim for inverse condemnation of the 6.63 acre-parcel on which the former hospital, Saddleback Memorial Medical Center, sits, it would likely owe the nonprofit-public benefit corporation just over $13 million in damages.

Inverse condemnation is a legal term that describes a situation in which the government takes private property, but fails to pay the compensation required by the 5th Amendment of the Constitution.

In such a case, the property’s owner has to sue to obtain the required just compensation.

According to a notice of motion filed on April 30 by attorneys representing the City of San Clemente, the city informed courts that “it does not intend to oppose” the plaintiffs’ claim for inverse condemnation.

“The city therefore seeks leave to file an amended answer admitting liability, contingent upon this Court also ordering that the City shall take title to the Property upon payment of $13,060,000—the Plaintiff’s expert witness appraiser’s full market value of the Property—in damages…” court documents stated.

In a hearing May 8, Smith said the judge was not ready to consider (the amended answer) yet, but he wanted to give the city time to discuss again a voluntary sale of the property.

A trial is set to take place June 18, Smith said.

Two months ago, Federal Judge David O. Carter ruled that the city did not violate the law when it zoned the land on which its last and only hospital sits at 654 Camino de Los Mares.

“The Property at issue is a 6.63-acre parcel that is small enough under California law to be subject to spot zoning,” the federal judge stated in his ruling.

Memorial Health Services sued the city after it claimed the zoning was unfair and that they could not financially support the hospital, which closed in May 2016.

At the time, they demanded $42.5 million in retribution, but since then, that number has dropped to an “expert witness appraiser’s full fair market value of the property,” court documents stated.

While the city defended itself on the zoning changes portion of the lawsuit, as of February, it had yet to be decided whether Memorial Health Services would be granted compensation.

At this point, it looks as though the city may be shelling out over $13 million in exchange for the former hospital’s property title.

“By obtaining title to the Property, the City will be in a good position to achieve the ultimate objective it has pursued long before the litigation was initiated: a functioning hospital with an emergency room in the City of San Clemente that can serve the most urgent healthcare needs of its residents…” the April 30 court document stated.