Daily Development for Monday, November 1, 1999

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

We are grateful to DIRTer Stephen Abraham for volunteering this DD while the editor's systems are incapacitated. The editor, however, has edited the piece, so don't blame Stephen.

CONSTITUTIONAL LAW; TAKINGS; REGULATORY TAKINGS; TEMPORARY TAKINGS : City's 20-year delay in the adoption of zoning, required before the property could be developed, was sufficient to state a claim for a temporary taking

Mills Land & Water Co. v. City of Huntington Beach. 75 Cal. App. LEXIS 873; 89 Cal. Rptr. 2d 52, 99 Cal. Daily Op. Service 8005, 99 Daily Journal DAR 10151 (4th Dist. September 27, 1999).

Under the California Coastal Act of 1976 (Cal. Pub. Resources Code, § 30000 et seq.), local governments were required to prepare Local Coastal Programs (LCPs) to govern the development of property in their respective coastal zones. LCPs consist of a Land Use Plan (LUP), the general plan for the zone, and the Local Implementation Plan (LIP), that includes the zoning, zoning maps, and implementing actions for the coastal zone. Under the Act, the local government would adopt its LUP, then the LIP, and forward each in turn to the California Coastal Commission for certification. The deadline for submission of the LIP was 30 days after certification of the LUP, with the possibility of an extension by the Commission of up to one year. Without certification, both the local government and Commission would retain concurrent jurisdiction for granting development permits. In such cases, a land use application would require the concurrence of both the local government and the Commission. However, if the LCP were approved, jurisdiction over local land use permits would reside wholly with the local government.

Mills owned approximately 51 acres of undeveloped land in the City of Huntington Beach (City). The property was located on the inland side of Pacific Coast Highway but within a coastal zone. Because of its inclusion in the zone, any development of the land was subject to restrictions of the Coastal Act. Of the 51 acres, Mills sold 28 in 1965 to the State of California for freeway use. The state subsequently abandoned its plans and granted Mills an option to reacquire the 28 acres. Of the 28 acres, approximately seven were designated for "visitor-serving commercial" uses and development in the City's zoning and in its LUP.

In 1978, Mills applied to the City for an amendment to the City's general plan to accommodate development of its property (both its 23 acres and the optioned 28 acres) for residential and commercial uses. That application sparked a 20-year history of bureaucratic maneuvering. Initially, the City, after more than one year, denied the application, partly on the grounds that the City had not yet completed its LUP. The following year, the California Department of Fish and Game (DFG) concluded Mills' property consisted of restorable wetlands, prompting additional studies and hearings by the City.

In 1980, the City submitted its LUP to the Commission, but it was denied on the basis of the DFG wetland study. The Commission indicated that it would certify the LUP if the Mills property were designated for conservation uses only. The City did very little until 1986 when it adopted a revised LUP. In it, all but seven acres of the Mills property were designed for conservation. It would be four years before the City would approve zoning changes consistent with the conservation designation.

In 1989, Mills had applied to the city for approval of a light-industrial office project. Although this proposal was consistent with existing zoning, the City informed Mills that the project would not be approved unless the LUP were amended because of the conservation designation. So long as an inconsistency existed between the LUP's land use designations and the City's zoning, an inconsistency that the City itself created, the City would not process Mills' application. However, in 1988, the City's planning staff had told Mills not to bother seeking any change of the LUP or wetlands designation.

In 1992, the Commission approved the City's zoning change, subject to the adoption of a conservation overlay zoning that would have required that Mills dedicate the remainder of its property in exchange for developing the seven-acre parcel. However, the City never acted on the Commissions offer and the zoning change failed to become effective. Repeating the process two years later, the City finally resubmitted the zoning change with modifications for review and certification.

Mills filed its lawsuit in 1994, while the zoning certification was pending before the Commission, from which the trial court sustained the City's demurrers three times, finally without leave to amend. While the suit was pending, the City and Commission finally ended the seemingly endless cycle of conflicting decisions, mooting much of Mill's challenge. Remaining nonetheless was Mills' claim that the unreasonable delay in establishing the zoning had deprived it of all use of its property.

For the Court of Appeal, the sole issue was whether the delay of 20 years constituted a temporary taking of its property for which it would be entitled to payment of just compensation. The Court relied in part on the California Supreme Court's decision in Kavanau v. Santa Monica Rent Control Bd. (1997) 16 Cal.4th 761, for the proposition that a regulation depriving an owner of all beneficial or productive use of land could constitute a taking requiring compensation, and upon Chandis Securities Co. v. City of Dana Point (1996) 52 Cal.App.4th 475, a case in which the Court of Appeal failed to find a compensable taking for a delay of a couple of years. However, unlike Chandis, in this case, the Court had far less difficulty determining that Mills' development application had been unduly delayed by the planning process. "The alleged delay in the present case far exceeds that presented in Chandis."

The Court also rejected the City's contention that Mills' claim was not ripe for adjudication because Mills had not obtained a final determination of what use could be made of its property. Relying on Healing v. California Coastal Com. (1994) 22 Cal.App.4th 1158, the court concluded that this argument was irrelevant "given the nature of Mills' claim that the failure of the City to adopt zoning regulations within a reasonable time under which it could submit a meaningful development application constituted the taking."

The Court specifically rejected the City's attempted reliance upon MacDonald, Sommer & Frates v. Yolo County477 U.S. 340 (1986). In that case, the Supreme Court held the takings claim to be unripe because the planning commission had not yet determined the extent to which property could be used. However, in this case, Mills pled - and the court accepted as true for purposes of reviewing the demurrer - that any such application would have been futile, based on information from the City's planning staff in 1988. Citing Milagra Ridge Partners, Ltd. v. City of Pacifica 62 Cal.App.4th 108, 120 (1998) the Court undoubtedly intended to signal to Mills that, for purposes of the demurrer, the allegation that any development applications would have been a futile exercise but that it would have to demonstrate futility, as a factual matter, if it were to prevail on the merits later on in the case. The Court noted, however, "The City concedes that it took almost 20 years to complete its LCP. For most of that period, Mills was forced to stand by while the City and the Commission procrastinated as to what, if any, development would be allowed."

Reporter's Comment: This decision raises (at least) three issues. First, while the Court ultimately reaches the correct decision on the ripeness issue, it is probably not strictly correct in referring to this issue as "irrelevant." Ripeness is a preliminary issue that may be decided so as to confer or reject jurisdiction over a matter but it may not be perfunctorily disregarded. Rather, as the Court expressly noted, this was an instance where the first ripeness requirement was satisfied (application would be futile); and the second (seeking just compensation) was the subject at hand and therefore not an impediment to suit.

Second, it will be interesting to see what if anything comes of this case in light of the California Supreme Court's recent decision in Landgate, Inc. v. California Coastal Com'n. 73 Cal.Rptr.2d 841 (1998) where the court held that a two-year delay resulting from the erroneous assertion of jurisdiction by the California Coastal Commission, during which time it categorically refused to grant the property owner a land use permit, did not constitute a compensable temporary taking.

Third, this opinion stands uncomfortably between two competing forces in the temporary takings arena. In First English Evangelical Lutheran Church of Glendale v. Los Angeles County 107 S.Ct. 2378 (1987), the Supreme Court limited its holding on whether the property owner suffered a temporary taking for which it was entitled to payment of just compensation "to the facts presented, and of course do not deal with the quite different questions that would arise in the case of normal delays in obtaining building permits." Id., at 321, 107 S.Ct. 2389.

While it might have been understood, consistent with the Supreme Court's ripeness jurisprudence that the dispositive issue is certainty or finality and that the time during which no development is permitted merely represents the starting and ending point for the taking, Landgate suggests that time and not certainty is the determinative element to which the First English court was referring when it spoke of normal delays when it finds no taking for a two-year delay. Mills Land appears to adopt this approach, but finding nevertheless that 20 years is just too long. The Court in Landgate, however, may well have overlooked or disregarded the point that despite the relatively short period of time, the case raised a final decision that no development would be permitted. On the other hand, Mills Land did not have a final decision as much as it had no decision.

Unless or until the Supreme Court addresses the question of which factor, time or certainty, will determine whether there has been a temporary taking of property for which just compensation must be paid, it seems that the courts will be left to base their decisions on essentially ad hoc, "gut-check" grounds.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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