The Commission regulates development in the California coastal zone, which is defined as an area extending inland 1000 yards. This encompasses much land that is extremely valuable development land, of course. Landowners are required to obtain a permit from the Commission before developing property in this area. Often, as we know from the Nolan decision, the permit is granted only after the landowner agrees to significant exactions to assest the Commission in its work of preserving the coastline.
This case involves one of the many "hot" areas within Commission jurisdiction - the hillside and canyon property in the area of Malibu, California (including, for instance, a good part of the campus of Pepperdine University). Developer in this case (in the court's words) in an "act of environmental piracy," with "brazen disdain for the law," proceeded to clear and terrace property within the zone for residential development without applying for a permit. Developer had achieved enough before being detected and stopped by the Commission that significant restoration work was necessary to protect the area from erosion.
Developer then undertook negotiations with the Commission for a restoration plan. Simultaneously, developer borrowed $800,000 against the property from a group of private individuals, made a single payment, and then defaulted. The mortgagees promptly foreclosed on the property and bought at the foreclosure sale, thus becoming foreclosure owners within nine months of the original loan. The court comments that it is suspicious that the whole transaction was a "disguised sale," but indicates that the issue was not raised below, and does not pursue the question.
The Commission demanded that the new owners complete the restoration, but they refused. The Commission then pursued an action for injunctive relief, civil penalties and exemplary damages against them.
Held: Summary judgment for landowners. They have no "affirmative liability" to remediate environmental depradation carried out by their predecessor in title.
Under the court's analysis, the Coastal Zone Act provides for remedies only for persons who violate the Act, and the Act prohibits solely the carrying out of any "development" without a prior permit from the Commission. Since the current landowners have not undertaken any development, the Commission has no enforcement authority over them.
The Commission argued that the environmental damages were a "continuing wrong, analagous to a nuisance." The court ruled that the statute does not support statutory relief on this basis. It left open the possibility that others might be able to bring a common nuisance claim, but of course such claim would not have the "teeth" of the Commission's enforcement powers.
The court noted that the Commission could still issue an order compelling the original developer to remediate the site, if the current owners would let him on it, and can still fine the original developer in any event.
Is the opinion limited to the foreclosure purchaser context? Certainly the court's statutory analysis provides no basis on which to conclude that the ruling should not apply equally to any buyer of the property who had no direct or vicarious participation in the original violation.
Although it says nothing to indicate why the opinion should be narrowed only to foreclosure purchasers, the court goes on to so limit the scope. It states that the case does not apply to lenders whose mortgage predates the violation of the Coastal Zone Act in question, nor purchasers or grantees whose interests derived from a transaction occurring after the recording of a notice of violation. Finally, the court excludes any purchasers who have an knowledge of the prior unlawful development.
Comment 1: There is not a shred of analysis in the court's interpretation of the statute that would justify any of the exceptions to the coverage of its ruling described in the preceding paragraph. Ultimately, one would expect that such parties will benefit from the court's interpretation, unless the statute or the interpretation is changed.
Comment 2: The comment above should not be construed to mean that the editor believes that the ruling should apply to these other parties - only that the editor has difficulty seeing how the court can draw the line where it does.
Remember that this is not the kind of case in which an "innocent" or "bona fide" purchaser normally would receive protection. Innocent purchasers frequently are stuck with difficult land use requirements or environmental clean up duties. They normally are not protected either by recording acts or equitable notions. (The Commission argued that a rule analogous to the CERCLA definition of "innocent purcheser" ought to apply - that buyers should have a duty to inspect - but the court rejected even that standard, which is hardly a universal one.) Further, there is no question of Constitutional "vested rights" here. In prior years, one assumes that a California court might have extended the interpretation of the Coastal Zone Act to reach this situation. Times change.
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