Mitracos v. City of Tracy CA3 ( 2022 )

Filed 5/16/22 Mitracos v. City of Tracy CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(San Joaquin)
----
MARY MITRACOS, C093383
Plaintiff and Respondent, (Super. Ct. No. STK-CV-
UWM-2018-0005531)
v.
CITY OF TRACY,
Defendant and Appellant;
SURLAND COMMUNITIES, LLC,
Real Party in Interest and Appellant.
Defendant City of Tracy and real party in interest Surland Communities, LLC
(Surland) jointly appeal from the judgment on plaintiff Mary Mitracos’ petition for writ
of mandate ordering the city to vacate and set aside the adoption and approval of the
“Second Amendment to Amended and Restated Development Agreement” between the
city and Surland (hereafter the Second Amendment).
1
The city and Surland contend that the judgment should be reversed, because (1)
the trial court wrongly found that sections 1.07(b)(ii) and 1.07(h) of the Second
Amendment, allowing property to be added to the city’s development agreement with
Surland, violated Government Code sections 65865, subdivision (a), and 65865.2;1 and
(2) the court should have severed sections 1.07(b)(ii) and 1.07(h), rather than invalidating
the entire Second Amendment.
We will remand to the trial court to determine the amount of attorney fees
Mitracos reasonably incurred defending against this appeal. We will otherwise affirm the
judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In 2009, the city recorded a development agreement with Surland. Under the
vested rights provisions of the agreement, the city’s land use “rules, regulations,
ordinances, policies, standards, specifications, practices and standard operating
procedures” relating to Surland’s development of property in the Ellis Specific Plan area
were frozen as of December 1, 2008. In return, Surland committed to provide $10
million towards design, maintenance, operation and construction of a local community
swim center and to offer to dedicate up to 16 acres for the swim center site. The term of
the agreement was 25 years.
1 Government Code section 65865, subdivision (a), provides: “Any city, county, or
city and county, may enter into a development agreement with any person having a legal
or equitable interest in real property for the development of the property as provided in
this article.”
Government Code section 65865.2 provides in relevant part: “A development
agreement shall specify the duration of the agreement, the permitted uses of the property,
the density or intensity of use, the maximum height and size of proposed buildings, and
provisions for reservation or dedication of land for public purposes.”
All undesignated statutory references are to the Government Code.
2
The agreement further provided that Surland was eligible to receive 2,250
“Residential Growth Allotments” (RGAs) from the city. An RGA, as defined by the
city’s Growth Management Ordinance, “is an allotment made by the City . . . which must
be obtained by a developer . . . before each residential building permit is issued by the
City . . . . One RGA is required for each dwelling unit to be constructed.” (Tracy Mun.
Code, ch. 10.12, § 10.12.030.) The first 500 RGAs were dedicated to development
within the Ellis Specific Plan area.2 All remaining RGAs could be used within the Ellis
Specific Plan area or applied to other Surland-owned property authorized for
development. The agreement required that “[a]s to all property . . . Owner [Surland]
must have a legal or equitable interest in such property before this Agreement can be
recorded against such property.”
On October 31, 2011, the trial court issued a statement of decision on a petition for
writ of mandate filed by the Tracy Region Alliance for a Quality Community to enjoin
the city from proceeding under the 2009 development agreement. The court found that
(1) “the Development Agreement in this case is a reservation of future development
rights for Surland . . . contrary to the plain language and objectives of Section 65865(a)”;
and (2) the agreement applied to property outside the Ellis Specific Plan area, thus “there
can be no reference to existing regulations or zoning ordinances which can satisfy the
requirements of Government Code § 65865.2.”
In 2013, the city recorded an “Amended and Restated Development Agreement”
with Surland (hereafter the 2013 DA). The 2013 DA provided that the 2,250 RGAs that
Surland was eligible to apply for and potentially receive were for development of all the
property within the Ellis Specific Plan area that Surland owned or had enforceable
contracts to purchase.
2 At the time, Surland did not own all the property in the Ellis Specific Plan area.
3
On May 18, 2018, the city recorded the Second Amendment to the 2013 DA.3
Under the Second Amendment, Surland would assume an increased obligation to design
and construct the swim center and the city would adopt a process for Surland to apply for
and the city to approve the addition of property subject to the 2013 DA. Section
1.07(b)(ii) of the Second Amendment provided in relevant part: “This amendment is
designed to permit additional property to be added to and incorporated in to the
Development Agreement and therefore become Property of the Development Agreement,
and Owner [Surland] may apply for RGAs for Projects and home builders within the
Property (whether or not annexed to the [Ellis Specific Plan]) area. Owner shall not
apply RGAs subject to this Agreement to other real property unless this property has been
added to the Development Agreement as Property pursuant to subsection 1.07(h).”
Section 1.07(h) gave Surland the right to request approval from the city to record
the development agreement against additional property if: (1) the property “has been
annexed” to the city; (2) Surland has an enforceable right to purchase the property
“within the meaning of ‘legal and equitable interest in real property’ as used in current
Government Code Section 65865(a)”; (3) Surland agrees to annex the property into the
Ellis Specific Plan owners’ association, finance district and finance plan; (4) the
development agreement as amended or modified includes a description of the property;
and (5) the city adopts a finding that the property description is not inconsistent with the
city’s Growth Management Ordinance in the form that existed on the effective date of the
2013 DA.
On May 11, 2018, Mitracos filed a petition for writ of mandate and complaint for
declaratory relief against the city, naming Surland as real party in interest, alleging that
3 The first amendment to the 2013 DA extended the time (1) for Surland to make
the first installment payment to fund the swim center, and (2) for the city to accept
Surland’s land dedication offer.
4
the Second Amendment violated sections 65865, subdivision (a), and 65865.2 and was
therefore void.4 Surland and the city filed answers to the petition and the parties
submitted a brief. The matter proceeded to a court trial, essentially a writ hearing, which
was not reported. Mitracos requested a statement of decision.
In the statement of decision, the court found the Second Amendment “could be
recorded against and currently allocated Residential Growth Allotments applied to real
property in which [Surland] has no ‘legal or equitable interest’ ” as required by section
65865. The court further found “that the fact the 2018 amendments allow for the
annexation of Real Party’s after acquired property, and the application of allotted RGAs
only upon city council action does not meet the Government Code requirements which
exist at the inception of Development Agreements.” The court also found that the
Second Amendment did not meet the requirements of section 65865.2 as it “allows RGAs
to be used on other unknown projects and unknown parcels which may or may not have
the Ellis Specific Plan design and planning standards for all infrastructure and site
improvements.”
The court entered judgment finding that the city committed a prejudicial abuse of
discretion in adopting the Second Amendment, which did not comply with sections
65865, subdivision (a), and 65865.2, and was therefore void, and ordering the city to set
aside, rescind and vacate the Second Amendment and ordinance adopting it.
The city and Surland moved for a new trial, or, in the alternative, to set aside and
vacate the judgment and enter a new and different judgment. The trial court failed to rule
on the motion within the statutorily prescribed time, resulting in its denial by operation of
4 Mitracos also alleged a claim for civil contempt, contending that the city and
Surland willfully disobeyed the trial court’s 2011 order by entering into and
implementing the Second Amendment. The city and Surland have not appealed the trial
court’s rulings on contempt.
5
law. (Hersey v. Vopava (2019) 38 Cal.App.5th 792, 797, fn. 2; Code Civ. Proc., §§ 660,
subd. (c), 663a, subd. (b).)
The city and Surland filed timely appeals.
DISCUSSION
I
Section 68685
The city and Surland contend that the trial court’s interpretation of sections
1.07(b)(ii) and 1.07(h) of the Second Amendment as violating section 65865 is incorrect.
We disagree.
The standard of review we apply in reviewing the validity of a development
agreement is in fact two standards of review, as the court explained in Santa Margarita
Area Residents Together v. San Luis Obispo County Bd. of Supervisors (2000)
84 Cal.App.4th 221 (Santa Margarita): “A development agreement is a legislative act
(§ 65867.5) and [the city] has the discretion to determine what legislation is necessary
and appropriate. A reviewing court will not set aside a legislative act unless it is
arbitrary, capricious, or unlawful. [Citations.] On the other hand, courts independently
decide purely legal issues such as statutory interpretation.” (Id. at pp. 227-228.) Thus, a
court reviews a development agreement “to determine if it enlarges or impairs the terms
of the authorizing statute without deference” to the local legislative body. (Id. at p. 228.)
The city and Surland argue that the Second Amendment did not violate section
65865, subdivision (a), because (1) section 1.07(b)(ii) of the Second Amendment only
allows property to be added to the 2013 DA if Surland owns or has an enforceable right
to purchase property within the meaning of the “ ‘legal and equitable interest in real
property’ ” language in section 65865, and (2) section 1.07(h)(iv) of the Second
Amendment requires that the 2013 DA contain an amended description of property
subject to the agreement that includes the newly added property. The city and Surland
6
argue that sections 1.07(b)(ii) and 1.07(h) were drafted to address the issues that
prompted invalidation of the 2009 development agreement.
However, the 2009 development agreement also contained a provision requiring
Surland to have an interest in newly acquired property that complied with section 65865,
subdivision (a). The difference between the 2009 development agreement and the
Second Amendment to the 2013 DA is only that the latter requires amendment of the
property description. The city and Surland deem this requirement to mandate an
amendment of the 2013 DA under section 65868.5 The 2013 DA states: “This
Agreement may be amended from time to time in accordance with California
Government Code section 65868 . . . .”
An amendment requirement does not obviate the core problem under section
65865, subdivision (a), the Second Amendment, which gives Surland vested rights as of
the effective date of the 2013 DA for property Surland might acquire in the future. This
is not permissible under section 65865, subdivision (a), nor is it consistent with the
purpose of the development agreement statute.
In Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes (2010)
191 Cal.App.4th 435 (Mammoth Lakes), we summarized the history and purpose of the
development agreement statute: “A development agreement is a statutorily authorized
agreement between a municipal government . . . and a property owner for the
5 Section 65868 provides: “A development agreement may be amended, or
canceled in whole or in part, by mutual consent of the parties to the agreement or their
successors in interest. Notice of intention to amend or cancel any portion of the
agreement shall be given in the manner provided by Section 65867. An amendment to an
agreement shall be subject to the provisions of Section 65867.5.” Section 65867 requires
public notice and hearing by the local government planning commission and legislative
body on a proposal to adopt a development agreement. Section 65867.5, subdivision (a)
provides: “A development agreement is a legislative act that shall be approved by
ordinance and is subject to referendum.”
7
development of the property. (Gov. Code, § 65865, subd. (a).) One of the main
components of a development agreement is a provision freezing the municipality’s rules,
regulations, and policies governing permitted uses of land and density of the land use, as
well as standards and specifications for design, improvement, and construction. (Gov.
Code, § 65866.) This provision allows a developer to make long-term plans for
development without risking future changes in the municipality’s land use rules,
regulations, and policies.” (Id. at p. 442, citing Santa Margarita, supra, 84 Cal.App.4th
at p. 227.)
“The Legislature enacted the development agreement statutes in response to the
California Supreme Court’s jurisprudence on vested rights. [¶] Before 1976, developers
in California faced changes in land use laws and policies during the course of long-term
development of property. When a change in the land use laws and policies interfered
with development already initiated, some developers argued that they had a ‘vested right’
to complete the development despite the changes in the land use laws and policies.”
(Mammoth Lakes, supra, 191 Cal.App.4th at p. 443, citing Avco Community Developers,
Inc. v. South Coast Regional Com. (1976) 17 Cal.3d 785, 791.) “In 1976, the California
Supreme Court, in Avco, decided that no right to complete the work vested until the
developer obtained a building permit, even if the developer had already performed
substantial work and incurred substantial liabilities on the project.” (Mammoth Lakes, at
p. 443, citing Avco, at p. 793.)
“In 1979, the Legislature’s enactment of the development agreement statutes
provided a way for the municipality and developer to depart from the common law rule
of vested rights.” (Mammoth Lakes, supra, 191 Cal.App.4th at p. 443.) “The agreements
allowed the developer to proceed with a project with the assurance that the project would
be approved based on rules, regulations, and policies existing at the time the development
agreement was approved, even if those rules, regulations, and policies changed over the
course of the development project. (Gov. Code, § 65864, subd. (b).)” (Ibid.)
8
In sum, under the development agreement statute, a municipality could
contractually assure a developer embarking on a long-term development project that local
land use regulations and standards would not change before the developer completed the
project. (See Citizens for Responsible Government v. City of Albany (1997)
56 Cal.App.4th 1199, 1213 (Citizens for Responsible Government) [“Development
agreements are creatures of legislation intended to provide developers with an assurance
of their right to carry a project to completion and for which they need to make initial
commitments”]; Neighbors in Support of Appropriate Land Use v. County of Tuolumne
(2007) 157 Cal.App.4th 997, 1013 [“the main purpose of a development agreement is to
freeze existing regulations in order to give the developer assurance that the project will
not be blocked by future regulatory changes”]; North Murrieta Community, LLC v. City
of Murrieta (2020) 50 Cal.App.5th 31, 41 [“entering a development agreement allows a
builder to rely on the regulations, conditions, and fees that exist at the planning stage
when assessing the economics of completing a development that may take years or even
decades to complete”]; Sigg, California’s Development Agreement Statute (1985)
15 Sw.U. L.Rev. 695, 707 [“Development agreements grant builders a critical benefit
which the traditional vested rights rule withheld: they allow a builder to acquire by
contract the equivalent of a vested right at an early stage of the project”].)
The language of section 65865, subdivision (a), reflects the Legislature’s intent to
allow a municipality to enter into an agreement to freeze land use regulations for a
developer to complete a project: “Any city, county, or city and county, may enter into a
development agreement with any person having a legal or equitable interest in real
property for the development of the property as provided in this article.” (§ 65865, subd.
(a), italics added.) The statute speaks in terms of a developer “having” an interest in
“the” real property at the inception of the development agreement. It is axiomatic that
our primary task in interpreting the development agreement statute, as with any statute, is
to determine the Legislature’s intent, giving effect to the statutory purpose, of which the
9
words of the statute are the most reliable indicator. (Center for Community Action &
Environmental Justice v. City of Moreno Valley (2018) 26 Cal.App.5th 689, 698 (Center
for Community Action).)
The Legislature’s declaration in section 65864, subdivision (b), underscores that
the purpose of the statute is to facilitate completion of development projects: “The
Legislature finds and declares that: [¶] . . . (b) Assurance to the applicant for a
development project that upon approval of the project, the applicant may proceed with
the project in accordance with existing policies, rules and regulations, and subject to
conditions of approval, will strengthen the public planning process, encourage private
participation in comprehensive planning, and reduce the economic costs of
development.” (§ 65864, subd. (b); see also Sigg, supra, 15 Sw.U. L.Rev. at p. 708
[“Perhaps the primary attraction development agreements hold for builders is their
potential for reducing the uncertainty over whether the builder will be able to complete a
large-scale project”].)
In service of the statutory objective to facilitate completion of projects, section
65865, subdivision (a), imposes the threshold requirement that the developer actually
have a legal or equitable interest in the property to be developed. Put another way, the
statute is not designed to facilitate development speculation.
The amendment provisions of the development agreement statutes do not alter or
expand the limited purpose of the statutes to freeze land use regulation for a developer to
complete a project. The city and Surland argue that “sections 65867.5(a) and 65868 . . .
authorize cities to amend development agreements via duly-adopted ordinance, without
any limitation on the nature and scope of the amendment.” Not so. While these statutes
are content neutral, describing only the parties’ ability to amend the agreement by mutual
consent and the process to do so, that does not mean a municipality has free rein to do by
amendment what it cannot do in the initial agreement in compliance with section 65865,
subdivision (a). The provisions of the development agreement statutes must be
10
interpreted “ ‘consistent with the purpose of the statute and statutory framework.’ ”
(Center for Community Action, supra, 26 Cal.App.5th at p. 698.) The limitation imposed
by section 65865, subdivision (a), applies equally to an amendment under section 65868
as to the initial agreement.
Both sides cite National Parks & Conservation Assn. v. County of Riverside
(1996) 42 Cal.App.4th 1505 (National Parks), in support of their respective positions. In
National Parks, the court upheld the validity of a development agreement where the
developer did not have fee title to all of the land under the agreement. (Id. at p. 1521.)
The city and Surland argue National Parks concluded that a development agreement is
consistent with section 65865, subdivision (a), if “ ‘it does not bind the use of the land
unless and until the land transfer is accomplished,’ ” quoting National Parks, at page
1523. Mitracos argues that, “[i]n National Parks, the [development agreement] was NOT
effective until the developer identified the property to be included and acquired an
interest in all of that property. [Citation.] In National Parks there was no [development
agreement] and no vested rights conveyed to any property until those conditions
precedent occurred.” Mitracos has the better argument.
In National Parks, the challenger to a development agreement between a
developer proposing to site a landfill in a former mine and the county contended that the
former could not enter into the agreement, because part of the landfill site was owned by
the federal Bureau of Land Management (BLM), which had agreed to a land exchange
that had yet to be completed. (National Parks, supra, 42 Cal.App.4th at p. 1512.) The
trial court held that the development agreement was valid under section 65865,
subdivision (a), because the agreement by its terms would not become effective until the
developer acquired a fee interest in the BLM property, the developer already owned the
bulk of the land, and it was reasonably foreseeable the developer would acquire the BLM
land. (National Parks, at p. 1513.) The appellate court agreed. The development
agreement expressly provided that it was not effective until the developer acquired fee
11
interest in the BLM property. (Id. at p. 1521.) The court observed: “The record shows
the County has a policy not to execute development agreements until the developer has
the requisite interest in the land. The condition of [the developer] acquiring the fee
interest in the property was required by the County to comply with the terms of the
Government Code section 65865, subdivision (a).” (Ibid.)
There is no similar delay in the effective date of the 2013 DA under the Second
Amendment. Surland did not need to acquire fee title, or any other legal or equitable
interest, in land to be added to the 2013 DA for the agreement to become effective.
Under the Second Amendment, the 2013 DA was immediately effective and recorded as
of March 2013, giving Surland vested rights for property that Surland had not acquired,
was not in the process of acquiring, or had even identified.
We conclude the Second Amendment was not in compliance with section 65865,
subdivision (a), and the city abused its discretion in adopting the ordinance approving the
Second Amendment.
II
Section 65865.2
Section 65865.2 “identifies the necessary terms in a development agreement,
including duration, permitted uses, density of development, size of buildings and
dedication of land for public purposes.” (Citizens to Enforce CEQA v. City of Rohnert
Park (2005) 131 Cal.App.4th 1594, 1599; see Citizens for Responsible Government,
supra, 56 Cal.App.4th at p. 1214.)
The 2013 DA states that it complies with the requirements of section 65865.2:
“The duration of this Agreement is set forth in Section 1.06 of this Agreement, and this
Agreement sets forth provisions for the permitted uses, the density and intensity of use,
the maximum height and size of proposed buildings, and the dedication of land for public
purposes in the Applicable Law provisions of this Agreement, either by its terms or
through its incorporation of the General Plan and the 2013 Ellis Specific Plan.”
12
The Second Amendment states that Surland “intends to annex to the Ellis Property
Owners Association all real property which is subsequently subject to the Development
Agreement,” and “such other real property may adopt the Ellis Specific Plan design and
planning standards for all infrastructure and site improvements.” (Italics added.)
Thus, with respect to property added to the 2013 DA, the Second Amendment
does not set forth the permitted uses, density of development, and size of buildings
mandated by section 65865.2 for property subject to the development agreement. In
effect, no standards were specified for after-acquired property but only an intention to
consider the Ellis Specific Plan specifications. The Second Amendment thus does not
comply with section 65865.2.
The city and Surland argue that the section 65865.2 compliance issue is not ripe
because no additional property has been acquired by Surland and added to the 2013 DA
by the process set forth in sections 1.07(b)(ii) and 1.07(h) of the Second Amendment.
We disagree. Whether a development agreement contains required terms is an issue ripe
for decision at the time the agreement was adopted. (See Trancas Property Owners Assn.
v. City of Malibu (2006) 138 Cal.App.4th 172, 182-183 [rejecting the argument that
agreement between the city and developer exempting development from compliance with
zoning density restrictions was not ripe for review because the development had yet to
occur, as the city “has already made impermissible promises and commitments”].)
The city and Surland also claim that the city is entitled to a presumption that an
amendment to the property description of the 2013 DA under sections 1.07(b)(ii) and
1.07(h) of the Second Amendment will comply with section 65865.2. “Amendments to
development agreements are subject to the provisions of Government Code section
65867.5. (Gov. Code, § 65868.) Legislative enactments such as these ‘are presumed to
be valid; to overcome this presumption the petitioner must bring forth evidence
compelling the conclusion that the ordinance is unreasonable and invalid.’ [Citation.]”
(Citizens for Amending Proposition L v. City of Pomona (2018) 28 Cal.App.5th 1159,
13
1187.) We have already concluded sections 1.07(b)(ii) and 1.07(h) of the Second
Amendment are not in compliance with section 65865 and the city abused its discretion
in adopting the ordinance approving the Second Amendment. Any presumption of
validity has been overcome. (See Citizens for Amending Proposition L, at p. 1187
[evidence that city ordinance and contract it authorized violated Prop. L prohibiting new
or structurally altered billboards overcame presumption of validity].)
We conclude that the Second Amendment did not comply with the mandatory
requirements of section 65865.2 and, for this reason as well, the city abused its discretion
in approving the Second Amendment.
III
Severance
The city and Surland contend that, “[a]ssuming, arguendo, the challenged
provisions of the Second Amendment are unlawful, the trial court committed prejudicial
error by rejecting Appellant’s argument that they should be severed,” and “invalidating
the entirety of the City’s legislative approval and the Second Amendment.” They argue
that the trial court should have severed sections 1.07(b)(ii) and 1.07(h) for three reasons:
“(1) Mitracos failed to exhaust administrative remedies as to the other sections; (2) the
overbroad ruling violates the separation of powers doctrine; and (3) Sections 1.07(b)(ii)
and (h) are severable from the remainder of the Second Amendment and 2013 DA.”
In fact, the trial court did not reject the severance argument. Rather, the court
simply did not address severance in the statement of decision because it was not raised in
the answers Surland and the city filed or their brief in opposition to the petition. The city
and Surland first proposed severance in a footnote in their objections to the proposed
statement of decision and then again in their motion for new trial.
We conclude that the city and Surland have forfeited the severance issue on
appeal. The trial court was not obligated to address objections to the proposed statement
of decision premised on new arguments not litigated in the case. (Starcevic v. Pentech
14
Financial Services, Inc. (2021) 66 Cal.App.5th 365, 382; Colony Ins. Co. v. Crusader
Ins. Co. (2010) 188 Cal.App.4th 743, 750 [“A statement of decision . . . covers only
issues litigated in the case”].) Nor is this court. “ ‘It is a firmly entrenched principle of
appellate practice that litigants must adhere to the theory on which a case was tried.’
[Citation.]” (Colony, at p. 751.)
A motion for a new trial is also not a vehicle to preserve new theories for appeal.
(See Insurance Co. of State of Pennsylvania v. American Safety Indemnity Co. (2019)
32 Cal.App.5th 898, 922 [“New theories that could have been raised, but were not, is not
one of the causes that permits a new trial”]; Green v. Healthcare Services, Inc. (2021)
68 Cal.App.5th 407, 419 [“ ‘Appellate courts are loath to reverse a judgment on grounds
that the opposing party did not have an opportunity to argue and the trial court did not
have an opportunity to consider . . . . Bait and switch on appeal not only subjects the
parties to avoidable expense, but also wreaks havoc on a judicial system too burdened to
retry cases on theories that could have been raised earlier’ ”].)
Moreover, “[w]hether a contract is severable is ‘equitable and fact specific, and its
application is appropriately directed to the sound discretion of the . . . trial courts in the
first instance.’ [Citation.] Accordingly, it cannot be raised for the first time on
appeal . . . .” (In re Acknowledgment Cases (2015) 239 Cal.App.4th 1498, 1509, quoting
Marathon Entertainment, Inc. v. Blasi (2008) 42 Cal.4th 974, 998 (Marathon); see also
Samaniego v. Empire Today, LLC (2012) 205 Cal.App.4th 1138, 1149.)
In their reply brief, the city and Surland counter “the Court should consider the
severance issue regardless of the timing at which it was raised below,” because “[i]t is
well established that pure questions of law based on undisputed facts may be raised for
the first time on appeal.” The city and Surland argue two of their severance arguments
involve “pure questions of law,” i.e., (1) violation of the separation of powers doctrine
based on the contents of the writ and the Second Amendment, and (2) contract law
severance based on the language of the Second Amendment. While this court has
15
discretion “to consider forfeited arguments that raise pure questions of law,” it has no
mandatory duty to do so. (Wittenberg v. Bornstein (2020) 51 Cal.App.5th 556, 567;
Meridian Financial Services, Inc. v. Phan (2021) 67 Cal.App.5th 657, 700.) Assuming,
for argument’s sake, that these are pure questions of law, neither separation of powers
principles nor contract law require severance.
Regarding separation of powers, the city and Surland argue that trial court violated
separation of powers by interfering with legislative action, i.e., by ordering the city to
rescind the ordinance approving the Second Amendment “when the less invasive remedy
of invalidating or voiding the ordinance, to the extent it violates the law, is available.”
(City of Palo Alto v. Public Employment Relations Bd. (2016) 5 Cal.App.5th 1271, 1310
[“ ‘Generally, a court is without power to interfere with purely legislative action, in the
sense that it may not command or prohibit legislative acts, whether the act contemplated
or done be at the state level [citation] or the local level [citation]. The reason for this is a
fundamental one—it would violate the basic constitutional concept of the separation of
powers among the three coequal branches of the government’ ”].) They assert “the trial
court should have voided and severed Sections 1.07(b)(ii) and (h) from the Second
Amendment . . . .” We conclude that these provisions do not meet the ultimate
determination of severability that the city council still would have adopted the remainder
of Second Amendment had it foreseen that these provisions would be invalidated.
“If an invalid provision of an initiative or ordinance is severable, it is stricken
from the ordinance and the remaining provisions are given effect. [Citations.] When the
ordinance contains a severability clause, an invalid provision is severable if it is
grammatically, functionally, and volitionally separable. [Citations.] ‘An enactment
passes the grammatical test “ ‘where the language of the statute is mechanically
severable, that is, where the valid and invalid parts can be separated by paragraph,
sentence, clause, phrase, or even single words. [Citations.].’ ” [Citation.]’ [Citation.] A
provision is functionally severable if it is ‘capable of independent application. In order to
16
pass this test “[t]he remaining provisions must stand on their own, unaided by the invalid
provisions nor rendered vague by their absence nor inextricably connected to them by
policy considerations.” [Citation.]’ [Citations.] The volitional requirement for
severability is met if the voters [or legislative body] likely would have adopted the
initiative without the invalid provisions. [Citations.]” (MHC Financing Limited
Partnership Two v. City of Santee (2005) 125 Cal.App.4th 1372, 1393; see also Rental
Housing Assn. of Northern Alameda County v. City of Oakland (2009) 171 Cal.App.4th
741, 770 [“ ‘ “Although not conclusive, a severability clause normally calls for sustaining
the valid part of the enactment, especially when the invalid part is mechanically
severable. . . . The final determination depends on whether the remainder . . . is complete
in itself and would have been adopted by the legislative body had the latter foreseen the
partial invalidity of the statute . . . or constitutes a completely operative expression of the
legislative intent . . . [and is not] so connected with the rest of the statute as to be
inseparable” ’ ”].)
Neither Ordinance No. 1253 approving the Second Amendment, nor the Second
6
Amendment itself, contain a severability clause. The 2013 DA, however, does.
Assuming, for argument’s sake, that this clause is applicable, it is highly questionable
whether the city council would have even been afforded the opportunity to adopt an
ordinance approving an amendment that required Surland to build the swim center, if the
parties foresaw that sections 1.07(b)(ii) and 1.07(h) would be invalidated. The Second
Amendment was a trade-off of a very substantial increase in Surland’s commitment to
6 The 2013 DA states: “Should any part, term or provision of this Agreement or any
document required herein to be executed or delivered be declared invalid, void or
unenforceable, all remaining parts, terms and provisions hereof shall remain in full force
and effect and shall no way be invalidated, impaired or affected thereby.”
17
7
build the swim center for vested rights for development of property yet to be acquired.
The Second Amendment expressly stated that its purpose was “to expand the scope of the
proposed Development Agreement amendment to provide for Owner [Surland] to assume
the obligation to design and construct the proposed Swim Center, and to describe a
process by which other real property could become subject to the Development
Agreement . . . .” Surland agreed to design and construct the swim center and increase its
funding commitment to $35 million, over and above the $8 million second installment
payment required by the 2013 DA, plus a contingency fund of up to 20 percent of the $45
million total estimated costs to complete the center. In return, Surland received vested
rights to add property to the 2013 DA and use the RGAs allocated in the 2013 DA
outside the Ellis Specific Plan property. To be sure, Surland has joined with the city in
advocating severance on appeal, but the notion that Surland intends to undertake a more
than four-fold increase in expense to build the swim center without the vested rights
conferred by sections 1.07(b)(ii) and 1.07(h) is inconsistent with the fundamental
structure of the Second Amendment.
Application of contract law severance principles yields the same result for a
similar reason: the vested rights illegal under the statute are central to the agreement.
“ ‘ “Courts are to look to the various purposes of the contract. If the central purpose of
the contract is tainted with illegality, then the contract as a whole cannot be enforced. If
the illegality is collateral to the main purpose of the contract, and the illegal provision can
7 “In 1984, the Legislature added a declaration that development agreements would
also allow municipalities to extract promises from the developers concerning financing
and construction of necessary infrastructure.” (Mammoth Lakes, supra, 191 Cal.App.4th
at pp. 443-444; see also Miller & Starr, Cal. Real Estate (4th ed. 2021) § 21:29 [“In
effect, the public entity agrees to ‘freeze’ the zoning, planning, and other ordinances
applicable to the property and allow development to proceed under the then-existing laws
and ordinances, and in exchange the public entity may bargain for financial and other
concessions and public benefits from the developer parties”].)
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be extirpated from the contract by means of severance or restriction, then such severance
and restriction are appropriate.” ’ ” (Koenig v. Warner Unified School Dist. (2019)
41 Cal.App.5th 43, 56 (Koenig), quoting Marathon, supra, 42 Cal.4th at p. 996.)
Here, “ ‘ “the central purpose of the contract is tainted with illegality.” ’ ”
(Koenig, supra, 41 Cal.App.5th at p. 56.) The exchange of design and construction
services and increased funding for the swim center from Surland in return for vested
rights to add property to the 2013 DA and to use RGAs outside the Ellis Specific Plan
area constitutes the central purpose of the Second Amendment. Indeed, the Second
Amendment states: “This amendment is designed to permit additional property to be
added to and incorporated in to the Development Agreement and therefore become
Property of the Development Agreement, and Owner [Surland] may apply for RGAs for
Projects and home builders within the Property (whether or not annexed to the [Ellis
Specific Plan]) area.” (Italics added.) Thus, the central purpose of the Second
Amendment, and the consideration Surland received under the amendment, were illegal
under sections 65865 and 65865.2. Accordingly, the Second Amendment was not
severable.
IV
Attorney Fees Incurred on Appeal
In the statement of decision, the trial court determined that Mitracos should
recover attorney fees under Code of Civil Procedure section 1021.5. Mitracos contends
she is also entitled to recover attorney fees connected with this appeal under the same
statute.
“When a contract or a statute authorizes the prevailing party to recover attorney
fees, that party is entitled to attorney fees incurred at trial and on appeal. [Citations.]”
(Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230, 250
(Barnhart); Del Cerro Mobile Estates v. Proffer (2001) 87 Cal.App.4th 943, 951.)
Courts have awarded under Code of Civil Procedure section 1021.5 attorney fees
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incurred on an appeal, even though that statute does not expressly state that the prevailing
party is entitled to attorney fees on appeal. (Morcos v. Board of Retirement (1990)
51 Cal.3d 924, 927, 928, fn. 5; Serrano v. Unruh (1982) 32 Cal.3d 621, 637, 639.)
Therefore, on remand, the trial shall determine the amount of attorney fees
reasonably incurred in defending this appeal, and include that amount in its order
awarding Mitracos attorney fees. (Barnhart, supra, 211 Cal.App.4th at p. 250.)
DISPOSITION
The matter is remanded to the trial court to determine the amount of attorney fees
Mitracos reasonably incurred in defending against this appeal and include that amount in
the fees award under Code of Civil Procedure section 1021.5. The judgment is otherwise
affirmed. Mitracos shall also recover her costs on appeal. (Cal. Rules of Court, rule
8.278(a)(1) & (2).)
/s/
RAYE, P. J.
We concur:
/s/
BLEASE, J.
/s/
KRAUSE, J.
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