Mandel2

MEMORANDUM

TO: MidCoast Community Council

Resident, El Granada

RE: Legal Opinion re: development of Parcel Nos. 047-330-010 and 047-331-010

DA: October 28, 1997

This memorandum is in response to a request to me by a number of residents of communities on the Coast to assess and address the legal "opinion" provided by counsel retained by the Task Force, Shute, Mihaly & Weinberger. This memorandum is based on a review of the relevant legal decisions and on information presented to the public by the El Granada Waterfront Task Force, as well as a legal opinion by the law firm of Shute, Mihaly & Weinberger ("Shute"). This memorandum is being provided "pro bono" without charge.

I invite you to provide this to Shute, your own counsel and any other individuals for their input. Indeed, I urge you to study this and review the relevant cases themselves (the Supreme Court decisions in Penn Central and Agins v. Tiburon are being made available) and to discuss it so that decisions regarding the Mirada Surf Project are based on relevant facts and law, and not the just the opinion of any one attorney. Please recognize that this is my opinion and is not intended as a guarantee of what a Court would decide.

Brief Summary of Conclusions
Application of legal precedent to the current facts do not support a takings claim by the owners of Parcel Nos. 047-330-010 and 047-331-010 ("the Parcels") if the County of San Mateo declines to approve an application for developing 35 or more homes on parcel number 047-330-010, east of Hwy. 1 ("the Project site"). There has been no change in the designations and regulations of the parcels during the ownership by the current owners that would constitute a "taking," and there is no indication that the County has acted or will act to prevent "any reasonable development," of the parcels.

Before responding to specific statements in the communications from Shute, Mihaly & Weinberger, this memorandum will set forth the facts and the law, as well as my analysis of the proper application of the controlling legal precedent to the facts.

Background

The parcels in question have a history of zoning and land use designations that clearly demonstrate an interest expressed by the County of San Mateo in restricted development on the properties. The project site is designated RM/CZ (resource management/coastal zone) and is part of the Coastal Open Space plan. The RM/CZ designation permits numerous allowable uses including agricultural, nurseries, greenhouses, dog breeding facilities, single family residences, schools, public recreational facilities, commercial recreation facilities, wineries, exotic animal preserves, and other use, provided these uses are at an intensity consistent with limits imposed by the RM/CZ district designation. The project site qualifies for two (2) density credits.

The owners of the project site have applied in the past for various development projects on the Parcels. The record is not clear whether all or some of these applications were denied by the County of San Mateo or whether limitations were to be imposed and the applicants simply withdrew the applications or decided not to proceed. In any event, the owners of the Parcels have recently submitted a Planning Permit Application for the "Mirada Surf Project" to the County of San Mateo proposing 35 "dwelling units" with "full suburban infrastructure" rezoning of the property from RM/CZ to "P.U.D" and to amend the General Plan designation from "Public Recreation Community Park" to "Medium Low Density Residential," (2.1 to 6.0 dwelling units per acre). The applicants state that the amendment is justified where "[R]esidential use is a viable option where neither agricultural or commercial uses are compatible with existing surrounding school and residential land uses."

The Relevant Legal Precedent

The seminal decision is the holding by the U.S. Supreme Court, in Penn Central Transp. Co. v. New York City, 438 U.S. 104 (Sup. Ct. 1978), which sets forth the law regarding taking of property without just compensation under the Fifth and Fourteenth Amendments of the U.S. Constitution. This decision has not been eroded in any way since it issued. A copy of the opinion is available on request. Because of the importance of the findings in the Penn Central case which establish the criteria for determining a legal taking of property, I have chosen to go into some detail on the findings set forth in that opinion.

In Penn Central, New York City had applied the Landmarks Law (designating a portion of the property there in question as a historic landmark) and denied development of a multistory office building over the Penn Central terminal. The Supreme Court affirmed the decision of the New York Court of Appeals finding no taking because 1) the application of the Landmarks Law had not transferred control of the property to the City, "but only restricted appellants' exploitation of it'" and 2) there was no denial of due process because "the same use of the Terminal was permitted as before..." and "appellants had not shown that they could not earn a reasonable return on their investment in the Terminal itself." (438 U.S. 104 at 105). The Supreme Court made a number of important statements in this case that are pertinent to the facts regarding the Mirada Surf Project. Following are some of these statements which serve as guidelines to the Courts in establishing whether a taking has occurred:

1. "A 'taking' may more readily be found when the interference with property can be characterized as a physical invasion by government [citation omittedFootnotes] than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the public good" [emphasis added].

2. Where "a state tribunal reasonably concluded that "the health, safety, morals or general welfare" would be promoted by prohibiting particular contemplated uses of land, this Court has upheld land-use regulations that destroyed or adversely affected recognized real property interests [citations omitted]." "Zoning laws are, of course, the classic example," [citations omitted], "which have been viewed as permissible governmental action even when prohibiting the most beneficial use of the property."

The Supreme Court also clarified that "taking" challenges have also been found to be without merit even when the challenged governmental actions "prohibited a beneficial use to which individual parcels had previously been devoted and thus caused substantial individualized harm" [citation omitted]. The Court noted that the appellants' arguments that they could establish a "taking" merely by showing that they had been denied the ability to exploit a property interest that they had heretofore believed was available for development was "simply untenable."

The Court also found without merit the appellants' arguments that the application of the Landmarks Law by the City of New York was discriminatory because it did not impose "identical or similar restrictions" on all structures located in specific communities. The Court clarified that the fact that application of legislation that has a more severe impact on some landowners than on others, does not mean that the legislation effects a taking. The Court noted that legislation to promote the general welfare "commonly burdens some more than others."

When considering whether the "interference" with the appellants' property was of a magnitude demanding compensation, the Court concluded no compensation was required in part because the New York City law did "not interfere in any way with the present uses of the Terminal" such that the owners could "continue to use the property precisely as it has been used for the past 65 years..." and as such did "not interfere with what must be regarded as Penn Central's primary expectation concerning the use of the parcel." The Court concluded that the New York City legislation permitted Penn Central to profit from use of the property and to obtain a reasonable return on its investment.

There are a number of decisions of the U.S. Supreme Court which precede and follow the decision in Penn Central (e.g. Goldblatt v. Hempstead, 360 U.S. 590 (1962); Keystone Bituminous Coal Assn. V. DeBenedictis, 480 U.S. 470 (1987) (noting that challenging a zoning regulation as unconstitutional and a taking of property is "an uphill battle," and that one alleging a regulatory taking bears "a heavy burden."); . The Courts in California follow this precedence as seen in decisions of the 9th Circuit Court of Appeals. (See, e.g. William C. Haas & Co., Inc. V. City and County of San Francisco, 605 F.2d 1117 (9th Cir. 1979), cert. denied 445 U.S. 928 (1980) (imposition of regulatory ordinance that merely diminish the value of property does not constitute a taking).

These decisions are consistent with and follow the holdings in Penn Central, including the case of Agins v. Tiburon, 447 U.S. 255 (1980), argued by Mr. Shute of Shute, Mihaly & Weinberger and cited in his opinion letters to the MidCoast Community Council. Indeed, Agins v. Tiburon provides facts substantially similar to those in the Mirada Surf Project. In Agins v. Tiburon, the Court held that the zoning ordinances in question which restricted the use of the land and were adopted by the city after the property owners had acquired the land for residential development, were not a taking of the property without just compensation. The Supreme Court of California had decided that the appellants could build up to five houses on five acres. The Court stated that "application of a general zoning law to a particular property effects a taking if the ordinance does not substantially advance legitimate state interests [citation omitted] or denies an owner economically viable use of his land [citing Penn Central]." The Court elaborated that the "State of California has determined that the development of local open-space plans will discourage the 'premature and unnecessary conversion of open-space land to urban uses." (Cal. Govt. Code Ann. 65561(b) (West. Supp. 1979: "The State also recognizes that the preservation of open space is necessary 'for the assurance of the continued availability of land for the production of food and fiber, for the enjoyment of scenic beauty, for recreation and for the use of natural resources."). The Court further noted that the zoning ordinances benefitted the appellants as well as the public by "assuring careful and orderly development of residential property with provision for open-space areas." Thus, the appellants would share with other property owners both the "benefits and burdens of the city's exercise of its police power. In assessing the fairness of the zoning ordinances, these benefits must be considered along with any diminution in market value that the appellants might suffer." The Court also asserted that although the ordinances limited development "they neither prevent the best use of appellants' land [citation omitted] nor extinguish a fundamental attribute of ownership [citation omitted]. Supreme Court concluded that the impact of the general land-use regulations did not deny the appellants justice and fairness under the Constitution. [citing Penn Central].

Analysis

For this analysis it is important to focus on what the action would be that would be subject to an alleged "taking" of property by the owners of the project site for the Mirada Surf Project. This memorandum presumes the following potential action by the County of San Mateo: application of the existing zoning and land use regulations to deny the application by the property owners for 35 homes on the project site but permit a lower number of homes, for example 2-6 homes as considered by Shute, Mihaly & Weinberger in its opinion (or the appropriate number of homes/development for the two (2) density credits allotted to the property). It is extremely unlikely, and there is absolutely no indication that the County would decide not to permit any reasonable use consistent with the current zoning and land use regulations. It is not clear how many homes (and depending on size of each home) would be consistent with the permitted use, but it is logical to assume that the County would take the path of least resistance and legal exposure which is simply to act to permit development consistent with the permitted use and not to grant an amendment to existing plans or any zoning changes. Any other action in view of the controlling legal precedent would be irresponsible.

Applying the clear legal precedent to the instant facts of the Mirada Surf Project, if the County of San Mateo or other city or state agencies deny an application for 35 homes on the project site, but permit use/development consistent with existing regulations it is likely that a Court in the State of California would not find that a taking had occurred. This is because there has been no change in the regulations affecting the project site property during the ownership of the property that would lead to a substantial change in the reasonable expectations of permitted use by the owners, or a decrease in the value of the property. That is to say, in all of the cases reviewed for this memorandum, the application of a restrictive use occurred after the complaining owner took title of the property. The weight of legal authority is such that the County might even prevail in Superior Court on a demurrer for failure of the claimants (the property owners) to state a cause of action for a "taking" (this would mean the case would be dismissed with the County prevailing, but the case could be appealed by the property owners) (as was the case in Agins v. Tiburon).

The present property owners of the project site took possession (including repossession several times) and have continued possession with the land use restrictions already in place such that they could not have had a reasonable expectation of development exceeding the existing restrictions (see Penn Central, supra). Moreover, while the land use designations and zoning limit development they "neither prevent the best use of [the owners'] land nor extinguish a fundamental attribute of ownership," (Agins v. Tiburon, supra).

Arguments by the developers that they could not receive sufficient "profits" (value) from development of a low number of residences would not be dispositive of whether or not the owners of the property had suffered a taking of property by application of the existing ordinances by the County (Agins v. Tiburon). A diminution in the value of property as a result of the application of legislation for the public welfare is not a taking. (Id. and numerous other cases).

Under this analysis, there is simply no reason to consider whether the County will remove the park designation or other restrictions to avoid purchasing the project site. This, as well as any concerns about interim damages for denial of development by the County are "red herrings." I am unaware of any legal reason why the County of San Mateo must consider purchasing the project site as a park or otherwise if it denies the application of the property owners to build 35 residential units. The County must only provide compensation to the owners under the law if there is a taking. In fact, if the County adheres to permitting use that is consistent with the present regulations restricting the land use of the project site, because those restrictions were 1) existing and known to the owners when they purchased the property (including repurchases), and 2) do not deprive the owners of the permitted reasonable uses of the land, the County is likely to prevail on any litigation brought by the property owners.

The next portion of this memorandum briefly addresses the questions and answers posed in the "Summary of Legal Opinions by Shute," dated September 12, 1997 and presented by Shute, Mihaly & Weinberger to the MidCoast Community Council.

1. Question 1- If the County were to deny any development on the property because of the "Park" designation, would the [property] owners have a takings claim?

Answer provided by Shute, Mihaly & Weinberger: "The owners would have a very substantial case against the County for interim damages if the County were to deny development based on the "Park" designation."

Mandel Opinion: The wording of this and the other questions is critical. The questions presumes a denial of "any" development, presumably because of the "park" designation. The regulations regarding the use of the project site property are complex, and not simply a function of a park designation, but also congruent with an overall plan that was painstakingly developed for the coastside to preserve open space for the public welfare. There is no reason to presume that the County would deny "any and all" development of the project site, but would take the more reasonable approach of simply denying uses that exceeded the permitted density credits and use. This would most likely result in a negotiation for a much lower number of residential units. There is no legal basis for predicting that the County would lose if litigation were instituted based on adherence to the existing land use restrictions and permission for limited development consistent with the land use restrictions. Such action would not be found to have deprived the property owners of "all reasonable uses" of the property so as to constitute a taking requiring compensation. In my opinion, the County would be acting consistent with its police powers for the public welfare.

Question 1: If the County perceive a legal risk from defending the "Park" designation, what is likely to happen?

Answer provided by Shute, Mihaly & Weinberger: The county would not be likely to defend its "Park" designation and instead would be willing to entertain development on the property to avoid a takings claim. The amount of development the County would allow would be a product of planning considerations as well as the relative political power of the developer as compared to the opponents.

Mandel Opinion: Again the question contains terminology that is troublesome. At what stage of a proper review by a County agency would the agency be likely to consider the legal "risks" of defending the "Park" designation? If this question presupposes that the County makes its decisions on development applications, and amendments to existing land use regulations, but determining whether there is any "legal risk" then there is something very wrong with the review process. However, as set forth in this memorandum, the County is in a very strong position for defending a restriction of use of the project site property consistent with existing regulations affecting the property, so long as use is permitted consistent with these regulations and/or a reasonable use that takes into account the objectives of the regulations for the public welfare (i.e. the preservation of open space on the Coastside, etc.). The amount of development permitted is determined by the existing regulations, period, whether or not the applicants are politically powerful and their "opponents" are not, or vice versa. (Presumably the County is intent on acting in the interests of the public welfare and its constituents in preserving land use regulations that were enacted by the State.)

Question 3: If the County were to allow 2 to 6 homes based on the existing zoning, would the owners have a strong takings case?

Answer provided by Shute, Mihaly & Weinberger: This question involves legal and factual issues. Experts for the County and owners would give their opinions as to whether 2 to 6 homes would cost the developer more to develop than the developer would receive from the sale of the homes. The outcome of this battle of experts can not be predicted. But, given the cost of such litigation, it is likely that some effort would be made to settle the case by having the County amend its planning documents to allow more development. The amount of development which might be allowed would be a function of which side (the developer or the opponents) had the most political power.

Mandel Opinion: This is of course the most reasonably predicted action of the County under the present circumstances. There are land use designations in place on the project site, which have mandated that the owners of the project site, whoever they might be, would be subject to restricted development. There have been few justifications offered for changing these land use designations. If the property owners can convince the appropriate legislative body that the land use designations should be changed because of changed circumstances, that is their right. However, the County is under no legal obligation to approve a change in zoning or land use designation on a property, so long as it permits the designated uses (reasonable uses of the land). As set forth in this memorandum, the County's denial of development exceeding the existing regulations, and denial of a change in the regulations would not constitute a taking (note that denial of a change of regulations is not considered a taking). While litigation might be initiated by the property owners if the application is denied, if 2 to 6 homes are permitted it is likely that the County would prevail in any such litigation and might do so early on (e.g. by a demurrer) which would keep the litigation costs to a minimum. It is expensive for both sides to litigate and one cannot presume that the property owners are anxious to litigate any decision of the County regardless of anything said on that point before the County decision. Therefore, suggesting that the County should "amend its planning documents to allow more development" to avoid litigation, where such litigation is likely to result in a victory for the County, is simply unfounded and unfair to the public affected by the application to change the land use restrictions and amend the general plan on the project site. Again, the County is charged with acting in the interests of the public, not in furthering profits from real estate speculation in protected areas of the State.

Question 4: Would a citizens group have a good lawsuit to require the County to maintain the "Park" designation and/or the existing low density zoning?

Answer provided by Shute, Mihaly & Weinberger: No. The County would be able to present a reasonable basis for allowing more development which a court would not reject. And, courts can not order the County to maintain or adopt particular legislation. The citizens group would have a very weak case.

Mandel Opinion: Even presuming that it was clear what type of cause of action by the "citizens group" was contemplated in this question, this question and answer are additional red herrings. Concerned members of the public have a number of means at their disposal to assure that a State agency is acting fairly and with "due process" under the United States Constitution, short of "suing" the County for changing a land use designation. While I have not researched at this time potential causes of actions for concerned citizens, it is certain that the County must act in the public interest and if any State agency can be shown to have acted improperly, concerned citizens may be able to seek redress.

Conclusions
This memorandum attempts to clarify the prevailing legal precedent on the question of what acts of government constitute a "taking" of property under the Fifth Amendment of the U.S. Constitution. Application of that precedent to the facts surrounding the Mirada Surf Project application to the County of San Mateo mandate leads to the conclusion than that the weight of legal authority supports a decision of the County to uphold the existing land use designations and restrictions on the project site, limiting development to a "reasonable use" of the property consistent with the current land use permitted. The County would be likely to prevail in any litigation initiated by the property owners if the County permits some reasonable development. There is no reason to conclude that 35, 75 or any number of residential units exceeding the permitted density credits are the number of units that must be approved by the County to constitute "reasonable use" sufficient to defeat a takings claim. In fact, the property owners might well lose early on in any such litigation based on a motion by the County to dismiss the action based on failure to state a proper claim of taking.

What seems to be potentially lost in the discussions of the legal risks to the County, the developers or the community, is that agencies of the State cannot base their decisions on whether or not to uphold land use designations by whether or not they will have to spend money on litigation. Certainly that is a factor that must be taken into consideration, but it should not be considered before there is sufficient presentation and review of facts supporting a change to land use designations that were put in place by concerned citizens and their government to protect the natural beauty of our State's shoreline and its flora and fauna. The County must follow proper procedures and give credence to public input. The interests of a group of property owners in developing property for profit have never been found to outweigh the public interest in preserving land in the state of California, as clearly set forth in numerous state and federal Court opinions controlled by no less a legal authority than the U.S. Supreme Court. The weight of authority supports the County in upholding land use restrictions, particularly where such restrictions were already in place when the current property owners took and retook possession.

I welcome questions and invite you to review the cases for yourself.

SaraLynn Mandel <[email protected]>

Footnotes