Redln Enterprises v. City of
Filed 4/15/13
Redln Enterprises v. City of San Diego CA4/1
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
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publication or ordered published for purposes of rule 8.1115
COURT
OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION
ONE
STATE
OF CALIFORNIA
REDLN ENTERPRISES, INC. et al.,
Plaintiffs and Appellants,
v.
CITY OF SAN DIEGO et al.,
Defendants and Respondents.
D060164
(Super.
Ct. No. 37-2009-00085820-CU-EI-CTL)
APPEAL from a judgment of the Superior
Court of
County, Timothy Taylor , Judge. Affirmed.
Appellants Redln Enterprises, Inc.
and Daniel Kullberg, the president and majority shareholder of Redln (collectively
Redln), appeal the successful demurrer of respondents
City of San
Diego (City) and William Zounes, a development project
manager of the City (Zounes), to Redln's second amended complaint (SAC). Redln contends the court erred when it found
the SAC did not state facts sufficient to support claims for inverse
condemnation or takings (first cause of action) and for violation of
States Code section 1983 (section 1983) for regulatory taking (second cause of
action).
discretion by not granting Redln leave to amend the SAC to state a new cause of
action for selective enforcement.
Affirmed.
BACKGROUND
Because this is an appeal following a successful
judicially noticed.
title="">[2] (Gu v. BMW of North
America, LLC (2005) 132 Cal.App.4th 195, 200.)
The SAC alleges that Redln, doing business as "All in One,"
obtained a business license from the City in 1997 to sell used cars wholesale
to dealers on property generally located at 943-949A Heritage
Road, San Diego (the
property). (SAC, ¶¶ 10, 12.) Redln that same year received the required
approval from the Department of Motor Vehicles (DMV) to operate this business.
The SAC further alleges that in July 1999, doing business as
"Vehicle Storage Auction Pool" (VSAP), Redln obtained written
approval from the City to operate a vehicle wholesale auction business on the
property. (SAC, ¶¶ 13-15.) The following month, the DMV issued Redln an
occupational vehicle dealer's wholesale license.
In 2005, personnel from the County
of San Diego (County) suggested
Redln submit a bid to provide auction services for the County. Redln, in turn, contacted the City and
explained it needed different licenses than the ones it then possessed in order
to sell equipment and vehicles directly to the public, as contemplated under a
proposed agreement with the County.
Redln was referred to Zounes.
The SAC alleges that in February 2006, Zounes responded to Redln on
behalf of the City. Zounes advised Redln
that its then present wholesale auction activity conducted by VSAP was
property as set forth in section 103.1103 of the SDMC and that Redln needed to
obtain a conditional use permit (CUP) to operate that business. (SAC, ¶ 17.)
Zounes also advised Redln that due to "sensitive vegetation"
on portions of the property, Redln also was required to obtain a site
development permit (SDP). In March 2006,
the City's zoning project officer notified Redln that an auction facility was
not a permitted use on the property because "it was not 'wholesaling.'" (SAC, ¶ 19.)
Redln disputed it was required to obtain either permit.
Beginning in May 2006, Redln ceased conducting wholesale auctions on
the property. (SAC, ¶ 20.) Redln "thereafter transported the
vehicles it periodically had for
sale" to another wholesale auction house located nearby. (Ibid.,
italics added.) Redln continued to sell
used cars wholesale to dealers from the property.
The SAC alleges that in October 2007, City code enforcement
coordinator Melody Negrete served Redln with a civil penalty and notice order
(civil penalty order) "stating that [Redln] required a CUP and
SDP . . . to operate the auto auction business, that the
[p]roperty was no longer being used as an auto dismantling facility, and that
the prior CUP had 'expired.'" (SAC,
¶ 22.) The civil penalty order also
cited Redln for violating various provisions of the SDMC for unlawfully
erecting and using buildings and structures without the proper permit and
inspection approvals. The civil penalty
order gave Redln until November 9, 2007 to correct the violations.
The appeal of the civil penalty order commenced in January 2008 before
administrative law judge Nancy Beardsley (ALJ).
After several days of testimony, the ALJ on May 10, 2008 issued a
19-page administrative enforcement order (enforcement order) ruling that Redln
did not need a CUP but that it did need an SDP because according to the ALJ,
Redln began operating its auction business after the new land development code
requiring an SDP became effective on January 1, 2000. The ALJ also ruled that Redln could stay on
the property if it applied for an SDP by no later than August 31, 2008 and that
until the SDP application was deemed complete and was approved by the City,
Redln was not entitled to conduct any automobile auctions (as opposed to sales) from the property.
Alternatively, if Redln did not apply for an SDP within the
appropriate time frame, the ALJ ruled Redln was to cease all business activities on, and clear and vacate all business
operations from, the property.
Following the enforcement order, Redln sought clarification regarding
whether All in One could continue its business operations on the property while
VSAP applied for an SDP. The SAC alleges
that the ALJ referred the matter to Zounes, who responded by letter on August
5, 2008 that Redln could not conduct any "development" on the
property, as defined under the SDMC, until an SDP was approved.
belief that SDP compliance could have taken up to two years and cost several
hundred thousand dollars. As set forth
in its SAC, based on Zounes's response Redln determined it could not conduct
sought an SDP.
Rather than move forward with an SDP application, Redln filed a writ
of mandamus in the Superior Court, County of San Diego (case No.
37-2008-00089656-CU-WM-CTL; writ petition) and discontinued business operations
on the property. The SAC alleges that
the court subsequently granted Redln's motion to augment the administrative
record to include auction receipts that predated January 1, 2000 and remanded
the matter to the administrative hearing officer with instructions to hold a
further evidentiary hearing regarding when Redln commenced business operations
on the property. (SAC, ¶ 33.)
A further evidentiary hearing
was held by the same ALJ in April 2010.
The ALJ in June 2010 issued a supplemental findings of fact and
determination of issues on remand (supplemental enforcement order), finding
that Redln commenced business operations in September 1999 and therefore that
an SDP was not needed.
Redln filed a complaint in March 2009 in the Superior Court, County of
San Diego (case No. 37-2009-00085820-CU-EI-CTL) against the City and
Zounes for inverse condemnation and for violation of section 1983. After Redln amended its complaint, the court
in response to respondents' demurrer sustained the demurrer with leave to amend
and issued a stay pending the outcome of the writ petition. In so doing, the court noted the taking issue
and the alleged civil rights violations by Zounes were not then ripe because
Redln first was required to pursue its administrative
remedies.
After the evidentiary hearing following remand, the court dismissed
the writ petition, lifted the stay and granted Redln leave to amend its
complaint. Respondents demurred to
Redln's SAC, which the court sustained without leave to amend.
DISCUSSION
I
Inverse Condemnation
A.
On appeal from the dismissal of an action after a demurrer has been
sustained, we exercise our independent
judgment to determine whether the complaint states a cause of action under
any theory. (City of Morgan Hill v.
Bay Area Air Quality Management Dist. (2004) 118 Cal.App.4th 861,
869.) We accept as true
all properly pleaded material
facts, all facts that may be inferred from the allegations and all matters
judicially noticed, but do not accept the truth of contentions, deductions or
conclusions of law. (Aubry v.
Tri–City Hospital Dist. (1992) 2 Cal.4th 962, 967.)
When a demurrer has been sustained without leave to amend, we review
the decision to deny amendment for abuse of discretion. (Careau & Co. v. Security Pacific
Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1386.) The court abuses its discretion when it
denies leave to amend if there is a reasonable possibility an amendment would
cure the defects. It is, however, the
plaintiff's burden to show how the complaint could be amended. (Ibid.)
B.
The federal and state
Constitutions guarantee real property owners "just compensation"
when their land is "taken . . . for public use . . . ." (U.S.
Const., 5th Amend.; Cal. Const., art. I, § 19.) "The Fifth Amendment's Takings Clause,
made applicable to the states through the Fourteenth Amendment, does not
prohibit the taking of private property, but instead places a condition on the
exercise of that power." (
Imperial (2006) 138 Cal.App.4th 1261, 1270 (Allegretti), citing Lingle
v. Chevron U.S.A. Inc. (2005) 544 U.S. 528, 536-537 (Lingle).) "In other
words, it 'is designed not to limit the governmental interference with property
rights per se, but rather to secure
proper interference amounting to a taking.'
[Citation.]" (
"The paradigmatic taking requiring just compensation is a direct
government appropriation or physical invasion of private property." (Lingle, supra, 544 U.S. at p. 537.) However, as relevant to the case at bar,
"government regulation of private property may, in some instances, be so
onerous that its effect is tantamount to a direct appropriation or ouster
and . . . such 'regulatory takings' may be
compensable" as well. (
Supreme Court precedent generally recognizes two "relatively
narrow categories" (Lingle,
regulatory action that will be deemed per se
takings: "First, where government
requires an owner to suffer a permanent physical invasion of [his or] her
property—however minor—it must provide just compensation." (Ibid.) Second, compensation is required when
regulations "completely deprive an owner of 'all economically
beneficial use' of [his or] her property."
(Ibid., quoting Lucas v.
South Carolina Coastal Council (1992) 505 U.S. 1003, 1019 (Lucas).)
When there has been a "'total regulatory taking,'" the
government is required to pay just compensation except to the extent that
"'background principles of nuisance and property law' independently
restrict the owner's intended use of the property." (Lingle, at p. 538, quoting Lucas,
at pp. 1026-1032.)
governed by the 'essentially ad hoc, factual inquiries' set forth in Penn
Central [Transp. Co. v. New
York City (1978)] 438 U.S. 104 [(Penn
Central)]. [Citations.] There is no set formula, but '"several
factors . . . have particular significance." [Citation.]
Primary among those factors are "[t]he economic impact of the
regulation on the claimant and, particularly, the extent to which the
regulation has interfered
with distinct investment-backed expectations." [Citation.]
In addition, the "character of the governmental action"—for
instance whether it amounts to a physical invasion or instead merely affects
property interests through "some public program adjusting the benefits and
burdens of economic life to promote the common good"—may be relevant in
discerning whether a taking has occurred.
[Citation.] The Penn Central
factors—though each has given rise to vexing subsidiary questions—have served
as the principal guidelines for resolving regulatory
claims that do not fall within the physical takings or Lucas
rules.'" (Allegretti, supra, 138
Cal.App.4th at pp. 1270-1271, quoting Lingle, supra, 544 U.S. at
pp. 538-539.)
"Each of these Penn Central inquiries aims to 'identify
regulatory actions that are functionally equivalent to the classic taking in
which the government directly appropriates private property or ousts the owner
from his domain. Accordingly, each of
these tests focuses directly upon the severity of the burden that government
imposes upon private property rights.'"
(Allegretti,
quoting Lingle, supra,
544 U.S. at p. 539.)
Redln contends the court erred in sustaining the demurrer to its
inverse condemnation cause of action because a regulatory taking occurred when
respondents "improperly subjected [Redln] to permitting jurisdiction in
bad faith contrary to others operating in the same zoning area without the
permits [r]espondents wrongfully alleged were required, leading to [Redln's]
loss of its business." Redln
further contends that between 2006 and 2008 a regulatory taking occurred under
the Penn Central "ad hoc"
test and that between 2008 and 2010 a taking occurred under the
1.
Here, the SAC alleges that during this time period, Redln continued to
use the property to operate (through All in One) its business of selling used
vehicles wholesale. (See, e.g., SAC, ¶¶
20 & 31.) In addition, the SAC
alleges that even after the City
notified Redln that it needed additional permits to operate its auto auction
business on the property, Redln entered into an agreement with a co-owner of
the property to purchase an undivided one-half interest in the property. (SAC, ¶ 21.)
Moreover, after the City
served Redln with the civil penalty order which gave Redln until November 9,
2007 to correct the violations on the property or face civil penalties, the SAC
alleges Redln entered into a new lease for use of a reduced portion of the
property with one of the owners of the property. (See SAC, ¶ 24.)
Based on these allegations in the SAC, among others, we independently
conclude under the Penn Central test
that the regulatory changes proposed by the City during this period of time did
not interfere with Redln's "investment-backed expectations" for use
of the property such that it amounted to the "'functional[]
equivalent'" of a "classic taking in which the government directly
appropriates private property or ousts the owner from his domain.'" (See Allegretti,
supra, 138 Cal.App.4th at
p. 1271, quoting Lingle,
supra, 544 U.S. at p. 539.)
That is, from the allegations in the SAC there clearly was sufficient
and substantial economic value remaining in Redln's other use(s) of the property that led Redln to attempt to purchase an
undivided one-half interest in the property, and when that fell through, to
enter into a new lease on the property despite the regulatory changes required
by the City. (See Buckley v.
California Coastal Com. (1998) 68 Cal.App.4th 178, 193 [in determining
whether there has been a regulatory taking under the Penn Central
analysis, the inquiry requires an evaluation of the "owner's entire
property holdings at the time of the alleged taking, not just the adversely
affected portion"], citing Keystone Bituminous Coal Assn. v.
DeBenedictis (1987) 480 U.S. 470, 497.)
As such, we conclude under Penn
Central there was no regulatory taking of the property between 2006 and May
2008, when the ALJ issued the 19-page enforcement order.
2.
Redln next contends there was a categorical taking under
ALJ determined that Redln was required to apply for an SDP to operate its
automobile auction business on the property.
Redln alleges in its SAC that respondents acted in bad faith in
insisting Redln needed to obtain such a permit and that as a result, it was
deprived of all economically beneficial use of the property because to obtain
an SDP allegedly would have taken up to two years and cost hundreds of thousands
of dollars. (SAC, ¶¶ 18, 46.)
Regarding Redln's contention that respondents acted in bad faith in
requiring Redln to obtain an SDP before continuing its business operations,
Redln fails to recognize
that an agency's subjective motives are for the most part irrelevant. (See Shaw
v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 281.) "The proper inquiry is not into the
subjective motive of the government agency, but whether there is, objectively,
sufficient connection between the land use regulation in question and a
legitimate governmental purpose so that the former may be said to substantially
advance the latter." (See
(1998) 17 Cal.4th 1006, 1022 (Landgate),
citing Nollan v. California Coastal Com. (1987) 483 U.S. 825,
836-837 and Dolan v. City of Tigard (1994) 512 U.S. 374, 391.)
Here, Redln
does not contend there was an objectively insufficient "connection
between the land use regulation in question and a legitimate governmental
purpose . . . ."
(See Landgate,
regarding the requirement it obtain an SDP was when Redln began its wholesale auction business on the property.
Exercising our
independent judgment, we agree with the trial court that there was no
categorical taking because respondents gave Redln the option to apply for a
permit instead of vacating the property.
(See SAC, ¶ 31.) The law is
"quite clear" (see United
States v. Riverside Bayview Homes (1985) 474 U.S. 121, 127) that "the
mere assertion of regulatory jurisdiction by a governmental body does not
constitute a regulatory taking.
[Citation.] The reasons are
obvious. A requirement that a person
obtain a permit before engaging in a certain use of his or her property does
not itself 'take' the property in any sense: after all, the very existence of a
permit system implies that permission may be granted, leaving the landowner
free to use the property as desired. Moreover, even if the permit is denied,
there may be other viable uses available to the owner. Only
when a permit is denied and the effect of the denial is to prevent
'economically viable' use of the land in question can it be said that a taking
has occurred." (
applied for an SDP. As such, it follows
there was no regulatory taking.
If
the rule was otherwise, as proposed by Redln, a total regulatory taking would
result each time a governmental agency sought to regulate land use via a
"permit system." (See
Inc., supra, 474 U.S. at
p. 127.) Clearly, we cannot
countenance such a rule.
Moreover,
although Redln contends in its SAC that it was prevented from conducting
for and obtained an SDP, and thus that there was a categorical regulatory
taking (because it further alleges on
information and belief such a permit would have taken up to two years to
obtain and cost potentially hundreds of thousands of dollars), we note from
exhibit 4 of the SAC that what Zounes actually stated was there could be no
As noted, ante, in addition
to the factual allegations of the complaint we may also consider matters which
have been or may be judicially noticed.
(See Sacramento Brewing Co. v. Desmond, Miller & Desmond
(1999) 75 Cal.App.4th 1082, 1085, fn. 3.)
"The complaint should be read as containing
the judicially noticeable facts, 'even when the pleading contains an express
[Citation.] A plaintiff may not
avoid a demurrer by . . . suppressing facts which prove
the pleaded facts false.
[Citation.]" (Cantu v.
Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 877, italics omitted; see
also Hendy v. Losse (1991) 54 Cal.3d 723, 742–743.)
Here, on our own motion, we take judicial notice of SDMC section
113.0103. (See Stockton Citizens for Sensible Planning v. City of Stockton (2012)
210 Cal.App.4th 1484, 1488, fn. 3 [citing Evid. Code, §§ 452, subds. (b) &
(c), 459 when taking judicial notice of City of Stockton's municipal
code].) The word "development" as then and now defined in
SDMC section 113.0103 is very broad. It
means: "the act, process, or result of dividing a parcel of land
into two or more parcels; of erecting, placing, constructing, reconstructing,
converting, establishing, altering, maintaining, relocating, demolishing,
using, or enlarging any building, structure,
improvement, lot, or premises; of clearing, grubbing,
excavating, embanking, filling,
managing brush, or agricultural clearing
on public or private property including the construction of slopes
and facilities incidental to such work; or of disturbing any existing
vegetation." (Italics omitted.)
It is abundantly clear from the broad definition of "development"
in SDMC section 113.0103 that Redln was not
precluded from conducting any business
SAC, or even some business. SDMC section 113.0103 instead plainly speaks
to development of property, including division of property and alteration of
structures and the property itself. (See
Robert F. Kennedy Medical Center v. Belshe (1996) 13 Cal.4th 748, 756
[noting that where the words are clear, "'we may not add to or alter them
to accomplish a purpose that does not appear on the face of the statute'"
or regulation].)
Moreover, there is nothing in the record suggesting that Redln sought
clarification of what it could and could not do in connection with the property
if it had applied for an SDP. For this
separate reason, we independently conclude under Lucas there was not a total regulatory taking of the property
between May 2008 and 2010.
name="_ftnref6" title="">[6]
II
Violation of Civil Rights for Unlawful Policy/Custom -- Section 1983
"Section 1983 provides in relevant
part: 'Every person who, under color of
any statute, ordinance, regulation, custom, or usage, of any State subjects, or
causes to be subjected, any citizen of the United States or other person within
the jurisdiction thereof to the deprivation of any rights, privileges, or
immunities secured by the Constitution and laws, shall be liable to the party
injured in an action at law, suit in equity, or other proper proceeding for
redress. . . .'"
the court erred in sustaining respondents' demurrer to Redln's second cause of
action when it ruled that neither development project manager Zounes nor code
enforcement coordinator Negrete was "at the apex of the authority for the
action in question." (
Francisco (2006) 136 Cal.App.4th 1279, 1298.) Instead, the court ruled that the ALJ was the
"apex of authority" on whether an SDP was required. According to Redln, the court erred in ruling
the ALJ was the "apex of authority" because among other things, the
ALJ was not delegated policymaking authority by the City. We agree.
(See Harman v. City and County of
San Francisco, supra, at p. 1298
[noting that the U.S. Supreme Court has emphasized "that the delegation of
authority must relate to policy,
which 'generally implies a course of action consciously chosen from among
various alternatives'"], quoting Oklahoma
City v. Tuttle (1985) 471 U.S. 808, 823.)
However,
that does not end our discussion.
Because we conclude ante there
was no regulatory taking of Redln's property under Penn Central and Lucas,
we further independently conclude there was no constitutional injury for liability to attach under section
1983. (See Monell v. New York City Dept. of Soc. Serv. (1978) 436 U.S. 658,
690 [to be liable under section 1983, a plaintiff must prove an official policy
or custom caused plaintiff to suffer a constitutional injury].)
III
Leave
to Amend to State a Cause of Action for "Selective Enforcement"
During
oral argument on the demurrer, the court refused Redln's request to amend its
SAC to add a cause of action for selective enforcement, noting it had never
heard of such a claim. Redln contends
the trial court abused its discretion when it denied Redln leave to amend the
SAC to add this claim. We disagree.
"Unequal
treatment which results simply from laxity of enforcement or which reflects a
nonarbitrary basis for selective enforcement of a statute does not deny equal
protection and is not constitutionally prohibited discriminatory
enforcement." (Baluyut v.
Superior Court (1996) 12 Cal.4th 826, 832.)
"Unequal
rule to persons entitled to be treated alike is not a denial of equal
protection 'unless there is shown to be present in it an element of intentional
or purposeful discrimination.' (Snowden
v. Hughes (1944) 321 U.S. 1, 8.)"
(Cilderman v. City of
Los Angeles (1998) 67 Cal.App.4th 1466, 1470.) "What the equal protection guarantee
prohibits is state officials 'purposefully and intentionally singling out
individuals for disparate treatment on an invidiously discriminatory basis.' (Murgia v. Municipal Court (1975) 15
Cal.3d 286, 297.)" (
Here,
we note from the SAC that it was Redln who initiated regulatory review by the
City when it contacted the City in late 2005 or early 2006 about additional
permits Redln would need if it was to
conduct auctions on the property under a proposed agreement with the
County. (SAC, ¶ 16.) This allegation in the SAC undermines Redln's
contention it was subjected to selective enforcement by the City.
In
any event, other than general allegations of alleged bad faith and retaliation
by the City and Zounes in connection with the requirement that Redln obtain a
CUP and an SDP, there is no evidence in the record of any intentional or
purposeful discrimination by respondents, despite the fact this dispute between
the parties is now almost seven years old, has been the subject of two
administrative hearings, a writ of mandate proceeding and two demurrers. We thus conclude, albeit for reasons different
than those articulated by the trial court, that there was no abuse of
discretion in rejecting Redln's last-minute attempt to amend its SAC to add a
selective enforcement cause of action.
DISPOSITION
The
judgment is affirmed. Respondents to
recover their costs of appeal.
BENKE, Acting P. J.
WE CONCUR:
O'ROURKE,
J.
AARON,
J.
name="_ftn1" title="">[1] We note from the record that Redln's complaint asserts four
causes of action, including two additional causes of action based on section
1983 (e.g., third cause of action for unlawful policy/custom and fourth cause
of action for failure to train employees).
On appeal, however, Redln challenges only the demurrer to its first and
second causes of action.
name="_ftn2" title="">[2] Respondents' unopposed request for judicial notice of
various sections of the San Diego Municipal Code (SDMC) is granted.
