Felkay v. City of Santa Barbara ( 2021 )

Filed 3/18/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
THOMAS FELKAY, as 2d Civil No. B304964
Trustee, etc., (Super. Ct. No. 17CV03351)
(Santa Barbara County)
Plaintiff and Respondent,
v.
CITY OF SANTA BARBARA,
Defendant and Appellant.
Before seeking damages for a governmental taking of
property through inverse condemnation, the property owner must
generally submit more than one proposal to the permitting
authority seeking zoning variances or reducing environmental
impacts to the extent necessary to allow at least some
economically beneficial or productive use of the property. Here
we hold that multiple applications are not required where the
permit denial makes clear that no development of the property
would be allowed under any circumstance.
The City of Santa Barbara appeals from a judgment
following jury trial awarding Thomas Felkay, as trustee of the
Emprise Trust (Felkay), damages for inverse condemnation, and
an order after judgment awarding attorney and expert fees. The
city contends Felkay’s claim was not ripe for adjudication and
that he failed to exhaust his administrative and judicial
remedies. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Application for Coastal Development Permit
In 2006, Felkay purchased an ocean-front residential
lot in Santa Barbara (“the property”) for $850,000. The property
was a “flag lot” consisting of a narrow driveway from the street to
the remainder of the property, which then sloped downward
toward the ocean, ending in a sheer cliff above the beach.
Felkay submitted a proposal to build a 3,101 square
foot single-family residence to the city’s Pre-Application Review
Team. He submitted studies that concluded that the top of the
bluff was located at 51 feet of elevation. After receiving
comments from the city’s Single Family Design Board, he applied
for a coastal development permit for a slightly smaller residence
of 2,789 square feet.
A city planning commission staff report concluded
that the bluff top was located at 127 feet of elevation. Because
the proposed construction site was located seaward of this
elevation, the proposal was inconsistent with City of Santa
Barbara Local Coastal Plan Policy 8.2, which prohibits, with
exceptions not relevant here, development on a bluff face. Staff
concluded that except for Policy 8.2, the proposed project would
conform to all applicable zoning and building ordinances.
The report also concluded that the area above 127
feet was “not developable.” The report stated that an area above
the 127-foot elevation and adjacent to the driveway “does not
meet factors of safety for geologic stability” and “there is no
2
feasible alternative location on the property for the proposed level
of development.”
Staff recommended that the planning commission
approve the application notwithstanding the inconsistency with
Policy 8.2 to avoid an unconstitutional taking. The planning
commission rejected the permit because it violated Policy 8.2.
City council appeal
Felkay appealed to the city council. He agreed to
mitigation measures recommended by city staff. He contested
the city’s determination as to the location of the top of the bluff.
He also contended that the refusal to approve the project
deprived him of all economic use of the property.1
The Council Agenda Report included an option to
approve the permit to avoid a taking, despite the inconsistency
with Policy 8.2. The city council rejected this option and denied
the permit. The council declined to state that its denial was
without prejudice.
The council made factual findings that Felkay failed
to show that the proposed development: (1) was not on a bluff
face, (2) was compatible with the prevailing character of the
neighborhood (it was substantially closer to the ocean), (3) would
be geologically stable, and (4) was based on a reasonable
investment-backed expectation. It also found that a takings
1 Planning division staff advised the city council that
a small residence could be built in the area above the 127-foot
elevation and adjacent to the driveway with about 200 square
feet of living area on the ground floor and 600 square feet on the
second floor. A third floor of 600 square feet potentially could be
added but would require modification of parking requirements
and might be incompatible with the neighborhood and reduce
public ocean views.
3
determination was not ripe because Felkay had not investigated
other potential uses of the land including development of the area
above the 127-foot elevation, agricultural or educational uses, or
merging the property with the adjoining lot he owned.
Petition for administrative mandamus and complaint
Felkay filed a consolidated petition for writ of
administrative mandamus (Code Civ. Proc., § 1094.5) and
complaint for inverse condemnation. He alleged four causes of
action: (1) administrative mandamus, (2) inverse condemnation
by regulatory action, (3) temporary inverse condemnation by
regulatory action, and (4) inverse condemnation by physical
taking. The first cause of action sought an order compelling the
city to approve the project. It did not assert that the city acted
unlawfully or abused its discretion when it declined to excuse
compliance with Policy 8.2 to avoid a taking. The inverse
condemnation causes of action sought monetary damages.
The city demurred to the second, third, and fourth
causes of action. The trial court overruled the demurrer to the
second and third causes of action, rejecting the city’s contentions
that the claims were not ripe and that Felkay had not exhausted
his administrative remedies. The court sustained the demurrer
to the fourth cause of action for inverse condemnation by a
physical taking.
The parties stipulated, and the court ordered, that
“the matters to be adjudicated by the Court on the hearing on the
Writ of Mandate shall be those specific issues set forth” in the
Determinations and Conclusions of Law section of the city
council’s resolution denying the appeal, namely, whether the
project: (a) is consistent with the policies of the California
Coastal Act and the Local Coastal Plan, (b) will be located on the
4
bluff face where it will have adverse effects on coastal resources,
(c) minimizes risks in an area of high geologic hazard and assures
stability and structural integrity, (d) is compatible with the
prevailing character of the neighborhood, and (e) is inconsistent
with Policy 8.2. The stipulated order provided that all issues
pertaining to the second and third causes of action for inverse
condemnation be determined at trial following hearing on the
writ of mandate.
Writ proceedings
The trial court denied the petition for writ of
mandate. After a hearing, it concluded that substantial evidence
supported the finding that the top of the bluff was located at the
127-foot elevation. The court noted that Public Resources Code2
section 30010 authorizes a local government to approve a project
that violates coastal restrictions in order to avoid an
unconstitutional taking. The court noted that Felkay had not
presented evidence supporting the factors noted in McAllister v.
California Coastal Com. (2008) 169 Cal.App.4th 912, 940
(McAllister), i.e., “‘that the property was purchased with the
expectation of residential use, that such expectation was
reasonable, that the investment was substantial, and that the
proposed development was commensurate with the reasonable
investment-backed expectations for the site.’” Accordingly, the
Court deemed the taking claim abandoned for purposes of the
writ petition.
Trial
Pursuant to the parties’ stipulation, the court then
commenced the liability phase of the inverse condemnation
2All subsequent undesignated statutory references
are to the Public Resources Code.
5
claims.
A land surveyor testified that based on the city’s
determination of the location of the bluff top, construction would
be allowed in only a 265-square-foot area above the 127-foot
elevation and below a sewer easement. A geotechnical
engineer/geophysicist testified that even that area was not
buildable because stabilizing the property would require cement
caissons that could damage the sewer line, and tiebacks that
would intrude into neighboring properties. A land use consultant
testified that the area above the 127-foot elevation was
unbuildable.
Project Planner Kathleen Kennedy testified as an
expert for the city. She authored “most or all” of the planning
commission staff report for the project. She said that the
proposed project violated Policy 8.2, which prohibits any
development on the bluff face regardless of size, and that Felkay
had asked the city council to invoke section 30010 and approve
the project to avoid a taking. She testified that “since we have
been telling the Applicant all along that development was not
allowed on the bluff face for years,” the city would not anticipate
that he would return with another proposal to build below the
127-foot line. When asked whether, “as you sit here today,” it
was “the City’s position . . . that there can be no development . . .
below the bluff edge,” she replied, “I would say that they received
a denial for that, so that’s the case.” The court later asked
Kennedy why the city did not just tell Felkay at the beginning
that “8.2 trumps whatever you might submit. We’re not going to
allow anything on the bluff face. Don’t submit anything. . . . [¶]
Sounds to me that’s where the City was at . . . I’m puzzled.”
Notwithstanding this expression of the court’s interpretation of
6
the evidence, the city did not present any witness to testify
otherwise.
The court issued a statement of decision that found:
(1) Felkay’s claims were ripe, (2) he sought a variance or
modification pursuant to section 30010, (3) he was not required to
pursue futile applications, (4) denial of the permit rendered the
property unbuildable and deprived Felkay of all economic benefit
of the property, and (5) the denial constituted a total taking of
the property. The court held that a de facto taking occurred
because the only remaining use of the property was as vacant
land for recreation, parking, or to preserve views. The trial court
rejected the city’s argument that “there must be more than one
reasonable opportunity for a public agency to consider a
meaningful project,” and concluded that there would have been
no point in Felkay going back to the city to pursue a different
project.
After the court found there had been a taking, it
afforded the city the opportunity to either (1) rescind the decision
denying the permit, or (2) proceed to jury trial on the amount of
damages as just compensation for permanent taking of the
property. The city chose the second option, stating it elected to
“‘treat this matter as a permanent taking of the value of the
property and not rescind its Permit denial to constitute a
temporary taking.’”
After a damages trial, a jury found the city was liable
to Felkay for the fair market value of $2.4 million. After
judgment, the trial court ordered the city to pay attorney and
expert fees of $1,007,397. (Code Civ. Proc., § 1036.)
7
DISCUSSION
Inverse condemnation
The state and federal constitutions prohibit the
government from taking private property without payment of just
compensation. (U.S. Const., 5th Amend.; Cal. Const., art. I, § 19.)
A government taking occurs when application of a “regulation
denies all economically beneficial or productive use of land.”
(Lucas v. South Carolina Coastal Council (1992) 505 U.S. 1003,
1015; Healing v. California Coastal Com. (1994) 22 Cal.App.4th
1158, 1169.)
The California Coastal Act (Pub. Resources Code, div.
20 (§ 30000 et seq.)) governs land use planning for the coastal
zone. (Pacific Palisades Bowl Mobile Estates, LLC v. City of Los
Angeles (2012) 55 Cal.4th 783, 793.) Because the city had a
certified local coastal program, it had the authority to review
applications for new development in its coastal area. (§ 30519,
subd. (a).)
Section 30010 “establish[es] a narrow exception to
strict compliance with restrictions on uses in habitat areas based
on constitutional considerations.” (McAllister, supra, 169
Cal.App.4th at p. 939.) The statute provides: “The Legislature
hereby finds and declares that this division is not intended, and
shall not be construed as authorizing the commission, port
governing body, or local government acting pursuant to this
division to exercise their power to grant or deny a permit in a
manner which will take or damage private property for public
use, without the payment of just compensation therefor. This
section is not intended to increase or decrease the rights of any
owner of property under the Constitution of the State of
California or the United States.”
8
Pursuant to section 30010, where a restriction would
require denial of a permit that would deprive the owner of the
economic benefit or productive use of the property, the local
agency “has two options: deny the permit and pay just
compensation; or grant the permit with conditions that mitigate
the impacts that limitations were designed to prevent.”
(McAllister, supra, 169 Cal.App.4th at p. 939.) The government
entity may “‘limit application of the resource protection policies to
the extent necessary to allow a property owner a constitutionally
reasonable economic use of his or her property.’” (Ibid.)
Ripeness
The city contends that the inverse condemnation
claim was not ripe because after the city denied his permit
application, Felkay did not submit a revised application. We
disagree.
“‘[A] claim that the application of government
regulations effects a taking of a property interest is not ripe until
the government entity charged with implementing the
regulations has reached a final decision regarding the application
of the regulations to the property at issue,’” i.e., when “there has
been a ‘final, definitive position regarding’ how the regulations
will be applied to the land.” (Hensler v. City of Glendale (1994) 8
Cal.4th 1, 10 (Hensler).) Ripeness is a question of law we review
de novo. (Communities for a Better Environment v. State Energy
Resources Conservation & Development Com. (2017) 19
Cal.App.5th 725, 732.)
“[B]efore an inverse condemnation action is ripe, a
landowner must have made at least one development proposal
that has been thoroughly rejected by land use authorities and
have prosecuted at least one meaningful application for a zoning
9
variance, which has been finally denied.” (County of Alameda v.
Superior Court (2005) 133 Cal.App.4th 558, 567-568.) The
landowner must follow “reasonable and necessary steps to allow
regulatory agencies to exercise their full discretion in considering
development plans for the property, including the opportunity to
grant any variances or waivers allowed by law.” (Palazzolo v.
Rhode Island (2001) 533 U.S. 606, 620-621 (Palazzolo).) As we
held in Long Beach Equities, Inc. v. County of Ventura (1991) 231
Cal.App.3d 1016, 1032, ripeness requires “at least one
meaningful application for a zoning variance, or something
similar, which has been finally denied.” Once “the permissible
uses of the property are known to a reasonable degree of
certainty, a takings claim is likely to have ripened.” (Palazzolo,
at p. 620; Howard v. County of San Diego (2010) 184 Cal.App.4th
1422, 1430 (Howard).)
In Palazzolo, the claim was ripe based on the city’s
decisions that “ma[de] plain” that the landowner could not fill or
develop any of the wetlands property. (Palazzolo, supra, 533 U.S.
at p. 621.) Similarly here, the city rejected a variance or waiver
based on section 30010, and “made plain” that no development
would be permitted below the 127-foot elevation. Accordingly,
the claim was ripe.
“[U]nder the ‘futility exception’ to the requirement of
a final decision . . . the submission of another development plan is
excused if such an application would be an ‘“idle and futile act.”’”
(Toigo v. Town of Ross (1998) 70 Cal.App.4th 309, 327.) “‘[T]he
futility exception . . . relieves a developer from submitting
“multiple applications when the manner in which the first
application was rejected makes it clear that no project will be
approved.”’” (County of Alameda v. Superior Court, supra, 133
10
Cal.App.4th at pp. 568-569, italics omitted.)
Whether submission of an additional application
would have been futile is a question of fact we review for
substantial evidence. (Howard, supra, 184 Cal.App.4th at p.
1431.) “Under this deferential standard of review . . . we consider
the evidence in the light most favorable to the prevailing party,
drawing all reasonable inferences in support of the findings.”
(Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981.)
The trial court found the city’s expert, Kennedy, to be
“a defining witness in the case” who “convinced [the court] that
there would be NO POINT in going back to seek mitigation.” The
court did not err in crediting her testimony. (Cf. Benson v.
California Coastal Com. (2006) 139 Cal.App.4th 348 [commission
not estopped by staff member’s telephone call that applicant need
not attend hearing].) Felkay was not required to submit a second
proposal because the city “made plain” it would not allow any
development below the 127-foot elevation, and because the area
above that elevation was “not buildable.”
This case is not like Toigo v. Town of Ross, supra, 70
Cal.App.4th 309. There, after denial of a five-lot subdivision
application, the applicant failed to show that it would have been
futile to propose an alternative plan that would reduce the
adverse environmental impacts. (Id. at pp. 324-332.) Here,
substantial evidence established that the city would not permit
any development below the 127-foot elevation, and that the
limited area above that elevation was unbuildable.
Exhaustion of administrative remedies
Closely related to ripeness is the requirement that
applicants exhaust their administrative remedies unless it would
be futile to do so. “A final administrative decision includes
11
exhaustion of any available review mechanism.” (Hensler, supra,
8 Cal.4th at p. 12.) We review for substantial evidence whether
Felkay’s actions exhausted his administrative remedies. (SJCBC
LLC v. Horwedel (2011) 201 Cal.App.4th 339, 345.)
Felkay appealed the planning commission’s denial of
the permit to the city council. As discussed above, substantial
evidence establishes that it would have been futile to submit
modified plans because “the agency’s decision [was] certain to be
adverse.” (Howard, supra, 184 Cal.App.4th at p. 1430.)
The city was not denied “the opportunity to amend
the agency decision and/or grant a variance” to avoid liability for
taking private property. (Hensler, supra, 8 Cal.4th at p. 11.) The
planning commission and the city council were presented with
the option to waive the full impact of Policy 8.2 by invoking
section 30010. They declined to do so. As provided in Hensler,
after the court found a taking occurred, it again gave the city
both options. (Id. at pp. 13-14.) The city again declined to issue a
permit, with or without conditions, and chose to proceed to trial
on damages.
Exhaustion of judicial remedies
The city contends that Felkay failed to litigate his
writ petition to conclusion because he did not argue the section
30010 claim in those proceedings. We disagree.
“Failure to obtain judicial review of a discretionary
administrative action by a petition for a writ of administrative
mandate renders the administrative action immune from
collateral attack, either by inverse condemnation action or by any
other action.” (Patrick Media Group, Inc. v. California Coastal
Com. (1992) 9 Cal.App.4th 592, 608.) The writ requirement
applies whether the petitioner claims the agency’s action was
12
invalid and should be cancelled, or seeks compensation for taking
of property. (Ibid.) Felkay filed his petition for writ of
administrative mandamus together with his inverse
condemnation complaint. (Hensler, supra, 8 Cal.4th at p. 14.)
In the writ proceedings, Felkay challenged the city’s
determination of the location of the bluff top. On administrative
mandamus, the court may review a decision whether to waive an
environmental policy pursuant to section 30010 for abuse of
discretion. (Code Civ. Proc., § 1094.5, subd. (b); Topanga Assn.
for a Scenic Community v. County of Los Angeles (1974) 11 Cal.3d
506, 514-515.) The city argues that Felkay’s failure to challenge
on mandamus the city’s decision declining to waive the
requirements of Policy 8.2 pursuant to section 30010 estopped
him from seeking damages for inverse condemnation. (See Mola
Development Corp. v. City of Seal Beach (1997) 57 Cal.App.4th
405, 410-413 (Mola) [plaintiff’s dismissal of mandamus petition
made city’s denial of proposal res judicata and precluded action
for damages]; Briggs v. City of Rolling Hills Estates (1995) 40
Cal.App.4th 637, 645-646 [failure to seek administrative
mandamus to challenge permit condition precluded action for
injunction or civil rights damages].)
The city is estopped from making this argument by
its stipulation that limited the issues to be heard on mandamus,
which reserved the inverse condemnation claims for trial. “Trial
courts have inherent and statutory authority to devise and utilize
procedures appropriate to the specific litigation before them.”
(Weiss v. People ex rel. Department of Transportation (2020) 9
Cal.5th 840, 863; Code Civ. Proc., § 187.) The city forfeited the
issue by failing to object to the apportionment of issues between
the writ proceedings and trial. (Bains v. Department of
13
Industrial Relations (2016) 244 Cal.App.4th 1120, 1126-1128.)
The city may not gain an advantage by taking a position
incompatible with the stipulation it entered in the trial court.
(Civ. Code, § 3512; People v. Castillo (2010) 49 Cal.4th 145, 154-
155.)
Following the ruling on mandamus, and by virtue of
the parties’ stipulation, Felkay had the right to proceed to trial to
determine if the city was liable for a taking, and, if so, a jury trial
on the amount of compensation. (Cal. Const., art. I, § 19, subd.
(a); Hensler, supra, 8 Cal.4th at p. 15; Weiss v. People ex rel.
Department of Transportation, supra, 9 Cal.5th at pp. 853-855 &
fn. 4.)
This case is unlike Hensler, in which the landowner
did not seek a variance, did not pursue an administrative appeal,
and did not seek administrative mandamus. (Hensler, supra, 8
Cal.4th at pp. 25-26.) It is also unlike Mola, where the plaintiff
filed a petition for writ of administrative mandamus but
dismissed it before hearing. (Mola, supra, 57 Cal.App.4th at p.
410.)
Here, the administrative mandamus petition
proceeded to a ruling, and the city proceeded to trial without
objecting that a trial was barred by a deficiency in the mandamus
proceedings. The city was not prejudiced by the failure to litigate
denial of the variance in the writ proceedings, because the issue
was heard immediately thereafter by the same judge in the court
trial. Unlike Hensler and Mola, the court gave the city the
opportunity to rescind its denial of the permit (Hensler, supra, 8
Cal.4th at p. 26) and “to change its mind ‘rather than pay
compensation for a taking.’” (Mola, supra, 57 Cal.App.4th at p.
14
410.) There was no failure to exhaust judicial remedies.3
DISPOSITION
The judgment and fee award are affirmed.
Respondent shall recover his costs on appeal.
CERTIFIED FOR PUBLICATION.
TANGEMAN, J.
We concur:
GILBERT, P. J.
YEGAN, J.
3The city appealed from the award of attorney and
expert fees in the event it prevailed on the merits of the appeal.
Because we affirm the judgment and the city does not otherwise
challenge the fee award, it too is affirmed.
15
Thomas P. Anderle, Judge
Superior Court County of Santa Barbara
______________________________
Ariel Pierre Calonne, City Attorney, Tom R. Shapiro
and Philip A. Seymour, Assistant City Attorneys; Best, Best &
Krieger and Bruce W. Beach for Defendant and Appellant.
Xavier Becerra, Attorney General, Daniel A. Olivas,
Assistant Attorney General, Andrew M. Vogel and Steven W.
Kerns, Deputy Attorneys General, for California Coastal
Commission as Amicus Curiae on behalf of Defendant and
Appellant.
Law Offices of Joseph Liebman and Joseph Liebman
for Plaintiff and Respondent.