County’s Interpretation Of General Plan Amendment Amounted To Regulatory Taking

A county interpreted a voter-enacted amendment to its general plan to prohibit the completion of a self-storage facility on property owned by Lockaway Storage, a project that was in the works before the amendment went into effect.  The county’s position was an “about face” from its previous position.  The court of appeal held that the county’s change of position “was an unreasonable and unjust interpretation of the measure that effectuated a regulatory taking.”  (Lockaway Storage v. County of Alameda (--- Cal.Rptr.3d ----, Cal.App. 1 Dist., May 9, 2013).  As a result of this ruling, the County was required to pay substantial damages as well as the owner’s attorney’s fees.

Facts

In 2000, Lockaway Storage (“Lockaway”) purchased property in Alameda County (“County”).  In 1999, County had approved a conditional use permit (“CUP”) for the property that authorized its use as a storage facility for recreational vehicles and boats.  The 1999 CUP required that it must be implemented by September 22, 2002.  Lockaway entered into a contract to purchase the property in May 2000.  Before escrow closed, the County zoning administrator confirmed that Lockaway could use the property as a boat and RV self-storage facility.  Lockaway assumed the rights and obligations of the seller in the 1999 CUP.   

Alameda County voters enacted Measure D in November 2000, which prohibits the development of a storage facility in the area where Lockaway’s property is located, except by public vote.  Measure D provides that it “does not affect existing parcels, development, structures, and uses that are legal at the time it becomes effective.”  Lockaway continued to pursue its project after Measure D became effective.  A County administrator and a planning department employee acknowledged that Lockaway had already implemented the 1999 CUP.  The planning department employee told Lockaway that, if grading and building permits were not issued by September 22, 2002, he would prepare a formal letter stating the CUP had been implemented.  However, the County informed Lockaway on August 30, 2002, that unless it obtained a new CUP, it could not proceed with the project after September 22nd.  County denied a request for an extension of the 1999 CUP.  At that time, Lockaway had spent $800,000 to purchase the property and $400,000 on the storage facility project.  Lockaway applied for a new CUP under protest before the deadline but County did not issue a building permit before the 1999 CUP expired. 

After the 1999 CUP expired, County took the position that Lockaway’s project was prohibited by Measure D and it stopped work on the project.  Lockaway filed a lawsuit against County alleging inverse condemnation and civil rights violations.  The trial court found that Measure D did not apply to Lockaway’s project because the project fell within Measure D’s exception for uses that were legal at the time it became effective.  The trial court found that County’s conduct amounted to a temporary taking under the Fifth Amendment and awarded Lockaway $989,640.96 on its inverse condemnation cause of action and $728,015.50 for attorney fees.

Decision

County stipulated that the CUP for Lockaway’s project was obtained before Measure D went into effect.  Although the grading permit was not issued until after Measure D went into effect, it was a ministerial permit.  County conceded the building permit was a ministerial permit.  The court of appeal concluded County failed to establish that the trial court erred in finding the project was exempt from Measure D’s requirements. 

The court rejected County’s argument that the temporary suspension of Lockaway’s project did not amount to a constitutional taking.  The Fifth Amendment to the United States Constitution prohibits the taking of private property by the government for public use without just compensation.  A takings claim does not have to be based on a physical invasion of the property.  While use of a property may be regulated by the government, “if regulation goes too far it will be considered as a taking.”  The court concluded the applicable test to determine whether County’s conduct amounted to a taking was articulated by the United States Supreme Court in Penn Central Transp. Co. v. New York City (1978) 438 U.S. 104.  This test requires a court to consider the following factors:  “(1) the ‘economic impact’ of the regulation on the claimant, (2) the extent to which the regulation interfered with ‘distinct investment-backed expectations,’ and (3) the ‘character of the governmental action.’” 

Based upon their application of the Penn Central factors, the court concluded County’s application of Measure D was a temporary regulatory taking and County is required to pay Lockaway just compensation.  Although County’s decision to deny Lockaway the right to finish the project did not render the property worthless, “Lockaway always intended to develop the property as a storage facility, and requiring it to pursue some different authorized use would have deprived Lockaway of the return on its investment that it ‘reasonably expected from the intended use.’”  The regulation interfered with Lockaway’s distinct investment-backed expectations because Lockaway purchased the property only after County confirmed that it could rely on the 1999 CUP.  County worked with Lockaway for a few years regarding the property’s development as a storage facility and told Lockaway the CUP had been implemented.  It was not until the September 22, 2002, expiration date had passed that County changed its position and proceeded to shut down Lockaway’s project.  Based on these facts, the court found “that Lockaway had a reasonable investment backed expectation its project could proceed from the time it purchased the property in 2000, until the County changed its position in 2002.”  As to the character of County’s action, the court found that “County’s regulatory about face was manifestly unreasonable, not just because of its devastating economic impact on Lockaway, but also because it deprived Lockaway of a meaningful opportunity to attempt to protect its property rights.” 

The court rejected County’s argument that the test found in Landgate Inc. v. California Coastal Com. (1998) 17 Cal.4th 1006, should be applied to overturn the trial court’s decision.  The issue in Landgate was “whether a legally erroneous decision of a government agency during the development approval process resulting in delay constitutes a temporary taking of property.”  The court concluded that a delay “alone does not amount to a taking when it is ‘part of a reasonable regulatory process designed to advance legitimate government interests.’”  However, “a government agency may not evade the takings clause by fabricating a dispute . . . or by otherwise arbitrarily imposing conditions on development in order to delay or discourage that development.  The government agency’s assertion of authority, whether or not erroneous, must advance some legitimate government purpose.”

Landgate was decided before Penn Central.  Even if Landgate remains good law, the “complete holding is that a delay in the development process caused by an agency’s mistaken though plausible assertion of jurisdiction is a ‘normal delay’ that, by itself, does not constitute a temporary taking, but such a taking may result from patently unreasonable or arbitrary governmental action.”  Here, the trial court considered the rule set out in Landgate when it applied the third Penn Central factor and concluded County’s conduct was not a delay but a “‘doctrinal shift’ in the County’s interpretation of Measure D [that] ‘takes the case out of the ‘normal-if-mistaken-regulatory-activity’ paradigm and turns it into a taking.’”

The court of appeal upheld the award of attorney fees and rejected County’s argument that the award for fees related to Lockaway’s unsuccessful civil rights claims must be separated from the fees relating to the inverse condemnation claim.  The court of appeal concluded “that the trial court made an implicit finding that Lockaway was entitled to fees incurred on the civil rights claims because that work was relevant to its inverse condemnation cause of action.”

Questions

If you have any questions concerning the content of this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.

William T. Chisum or Jeffrey L. Massey | 916.321.4500

Jon E. Goetz | 805.786.4302

Topics:  Attorney's Fees, Ballot Measures, Condemnation, Fifth Amendment, Takings

Published In: Civil Remedies Updates, Constitutional Law Updates, Elections & Politics Updates, Commercial Real Estate Updates, Zoning, Planning & Land Use Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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