Filed 7/17/12 Sterling Park v. City of Palo Alto CA6
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
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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opinion has not been certified for publication or ordered published for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
SIXTH
APPELLATE DISTRICT
STERLING
PARK, L.P. et al.,
Plaintiffs and
Appellants,
v.
CITY OF PALO
ALTO,
Defendant and
Respondent.
H036663
(Santa Clara
County
Super. Ct. No. 1-09-CV154134)
Defendant City of Palo Alto (City) conditions its approval of certain
residential development applications upon the developer’s compliance with
City’s below market rate (BMR) housing program.
Plaintiffs Sterling Park, L.P. and Classic Communities, Inc., sued
City, challenging the BMR housing exactions City required for approval of their
development. The trial court granted
the complaint was time-barred.
Plaintiffs had argued that the action was governed by a portion of the
Mitigation Fee Act (Gov. Code, §§ 66020, 66021),
which allows a developer to obtain reimbursement of certain development fees
paid under protest. Under those
sections, the statute of limitations
does not begin to run until City gives the developer notice of the amount of
the fees and the right to file a protest.
(§ 66060, subd. (d)(1).)
Plaintiffs claimed that City never gave them the notice required to
trigger the running of the statute and, therefore, their suit was filed timely.
The
trial court rejected plaintiffs’ position and accepted City’s contention that
the applicable statute of limitations is section 66499.37, which gives a
plaintiff 90 days from the date of the “decision . . . concerning a subdivision”
to challenge the decision. Since the
decision conditioning plaintiffs’ subdivision upon compliance with the BMR
program occurred well over a year before suit was filed, the time to file suit
had expired. The court allowed the
defense even though City had not cited section 66499.37 in its answer. We shall affirm.
I.
Factual and Procedural
Background
Plaintiffs owned two lots totaling 6.5 acres on
West Bayshore Road in Palo Alto.
Plaintiffs planned to demolish existing commercial improvements and
construct 96 residential condominiums on the site. The proposed development was subject to
City’s BMR housing program, which is set forth in the Palo Alto Municipal Code
(PAMC). PAMC section 18.14.030,
subdivision (a) provides, “Developers of projects with five or more units must
comply with the requirements set forth in Program H-36 of the City of Palo Alto
Comprehensive Plan.” Program H-36 of
City’s Comprehensive Plan appears in the plan’s Housing Element, Chapter 4 (hereafter,
Program H-36). As pertinent here,
Program H-36 requires that housing projects involving the development of five
or more acres must provide at least 20 percent of all units as BMR units. “For an
application to be determined complete,
the developer must agree to one or a combination of the following
requirements or equivalent alternatives that are acceptable to the City.” (Program H-36, p. 26, italics added.) One of the requirements applicable to
plaintiffs’ project is that three fourths of the BMR units “be affordable to
households in the 80 to 100 percent of median income range, and one-fourth may
be in the higher price range of between 100 to 120 percent of the County’s
median income.” (Ibid.) The developer may
provide off-site units or vacant land if providing on-site units is not
feasible. If no other alternative is
feasible, “a cash payment to the City’s Housing Development Fund, in lieu of
providing BMR units or land, may be accepted.”
(Id. at p. 27.) The in-lieu payment for projects of five
acres or more is 10 percent of the greater of the actual sales price or fair
market value of each unit. (
Plaintiffs submitted their initial application
for approval of the project in 2005.
City’s planning staff found the project would not cause any significant
adverse environment impact and recommended a negative declaration as allowed by
the California Environmental Quality Act.
(See Cal. Code Regs., tit. 14, § 15020.)
City’s Architectural Review Board (ARB) recommended approval of the
design and site plan in March 2006.
In a letter dated June 16, 2006 (the BMR
letter), City set forth the terms of an agreement between plaintiffs and City’s
planning staff pursuant to which plaintiffs agreed to provide 10 BMR units on
the project site and pay in-lieu fees of 5.3488 percent of the actual selling
price or fair market value of the market-rate units, whichever was higher. The BMR letter contains an estimate of the
anticipated sales price for the BMR units and states that the price may increase
or decrease depending upon the market at the time of the actual sale. The opening paragraph of the BMR letter
states: “This letter summarizes the
agreement between Classic Communities, Inc. . . . and the Director of the
Department of Planning and Community Environment . . . regarding satisfaction
of the provisions of the City of Palo Alto’s [BMR] Program for the [ARB]
application for the 96-unit residential condominium development . . . . [¶] . .
. You and Planning Division staff have
discussed and negotiated the terms of this agreement, and the signature of
Classics corporate officers on this letter confirms that Classics agrees to
these terms and conditions. On March 23,
2006 the Director issued a conditional approval letter of the ARB’s approval of
the Project, with execution of the BMR agreement listed as one of the Project’s
conditions. The Director’s action was
appealed and the appeals will be considered by the City Council in June
2006. You have also submitted an
application for a vesting tentative subdivision map to allow the residential
units to be sold separately as condominiums.
The provisions of this BMR letter agreement must be referenced in the
subdivision map conditions and incorporated into a formal BMR agreement to be
recorded concurrently with the final subdivision map agreement, if the
Director’s approval is upheld by Council.”
Scott Ward, vice president of plaintiff, Classic Communities, Inc.,
executed the BMR letter on June 19, 2006, the same day the city council upheld
the ARB’s approval of the project.
City approved plaintiffs’ application for a
tentative subdivision map on November 13, 2006.
In recommending approval of the application for a final subdivision map
City staff noted, “The map satisfies all approval conditions for the Tentative
Map, including the preparation of a Subdivision Improvement Agreement and BMR
Agreement.” The application for a final
subdivision map was approved September 10, 2007. A document entitled “Regulatory Agreement
Between Sterling Park, LP and City of Palo Alto Regarding [BMR] Units” was
executed on September 11, 2007 and recorded November 16, 2007. This document referred to and attached the
2006 BMR letter.
Over a year later, when the new units were
being finished, City began requesting conveyance of the BMR designated
homes. On July 13, 2009, plaintiffs
submitted a “notice of protest” to City, claiming the prior agreements were
signed under duress and arguing that the BMR housing requirements are
invalid. When City failed to respond to
the protest, plaintiffs filed this case on October 5, 2009. Plaintiffs sought an injunction and a
judicial declaration that the BMR requirements are invalid and “that the City
may not lawfully impose such BMR affordable housing fees or exactions as a
condition of providing building permits or other approvals for the
Project.” Plaintiffs’ third cause of
action cited sections 66020 and 66021 and sought “restitution or equitable
relief for the compelled conveyance of houses under restrictive terms.”
City at first demurred to the complaint,
arguing that the third cause of action was barred by the time limit found in
section 66020 and that the entire action was barred by Code of Civil Procedure
section 338, subdivision (a), which applies a three-year time limit to actions
based upon “a liability created by statute.”
The trial court overruled the demurrer.
Thereafter, City filed an answer, including as its fifth affirmative
defense, “the applicable statutes of limitation,” again citing Code of Civil
Procedure section 338 and section 66020.
Later, City’s answers to form interrogatories also cited these two code
sections as bases for City’s defense.
City did not mention section 66499.37 in any of these documents.
Trial was set for September 27, 2010. At City’s request, time was shortened for
notice of cross motions for summary
judgment. City moved for summary
judgment on statute of limitations grounds, this time adding section 66499.37
to its argument that the case was filed too late. Plaintiffs’ cross-motion for summary judgment
argued that City’s BMR housing program was invalid as a matter of law. Plaintiffs’ opposition to City’s motion
maintained that section 66499.37 did not apply and that City was barred from
relying upon that code section because it had not raised the defense in its
answer.
The trial court granted City’s summary judgment
motion and denied plaintiffs’ cross-motion.
In a footnote, the trial court acknowledged that City had not raised
section 66499.37 in its answer. Citing Cruey
v. Gannett Co. (1998) 64 Cal.App.4th 356, 367 (Cruey) and FPI Development,
367, 385, the trial court concluded that it would allow the defense because
plaintiffs “will not suffer any prejudice thereby.”
Plaintiffs moved for a new trial or for an
order vacating the trial court’s prior order arguing, in more detail than it
had in its summary judgment papers, that City was barred from relying upon
section 66499.37. The trial court denied
the motions and entered judgment in favor of City. Plaintiffs have timely appealed from the
judgment.
II.
Contentions
The two statutes of limitations that we will
consider, section 66020 and section 66499.37, are found, respectively, in the
Mitigation Fee Act (§ 66000 et seq.) and the Subdivision Map Act (§ 66410 et
seq.). Both impose short time periods
for filing an action to challenge specified development fees. Section 66020 imposes a 180-day time period
and section 66499.37 is a 90-day statute.
Given the differing procedural requirements of the two code sections,
this action might be timely under section 66020 but not under section
66499.37. Not surprisingly, plaintiffs
maintain that section 66020 is the applicable statute and that section 66499.37
is inapplicable. Plaintiffs also argue
that even if section 66499.37 is the applicable statute of limitations, City
was not entitled to rely upon it because it had failed to raise it at any time
prior to filing its summary judgment motion.
III.
Standard of Review
“An appellate court reviewing a judgment of
dismissal after an order granting summary judgment must review the record de
novo to determine whether the moving party is entitled to summary judgment as a
matter of law or whether there exist genuine issues of material facts. [Citation.] [¶] Code of Civil Procedure
section 437c, subdivision (o)(2), mandates a burden-shifting which requires
defendant to show a complete defense to the action or that one or more elements
of the cause of action cannot be established.
If defendant makes this showing, the burden shifts to the plaintiff to
show that a triable issue of one or more material facts exists as to that cause
of action or defense thereto.” (
p. 361.)
With regard to plaintiffs’ claim that the trial
court erred in considering the defense of section 66499.37, we view that
decision as we would a grant of leave to amend the answer. The grant or denial of leave to amend is an
exercise of discretion that should not be disturbed on appeal unless it has
been clearly abused. (Mesler v. Bragg
Management Co. (1985) 39 Cal.3d 290, 296-297.)
IV.
Discussion
A.
Applicability of sections 66020 and 66021
We begin with plaintiffs’ argument that this
case is subject to section 66020.
Sections 66020 and 66021 allow a developer to protest the imposition of
“a fee, tax, assessment,
dedication, reservation, or other exaction . . . the payment or performance of
which is required to obtain
governmental approval of a development . . .” (§ 66021, subd. (a)) and
to obtain a refund of any overpayments (§ 66020, subd. (e)). Protest is effected by paying the fees and
serving a written notice of protest upon the local agency. (Id.
subd. (a).) The local agency must
provide the applicant written notice of the amount of the fees when imposing
them and notice that the applicant has 90 days to file a protest. (Id.
subd. (d)(1).) An applicant who has
filed a protest then has 180 days to file an action “to attack, review, set
aside, void, or annul the imposition of the fees, dedications, reservations, or
other exactions imposed . . . .” (Id.
subd. (d)(2), italics added.)
Plaintiffs argue that the phrase “other
exactions” as used in these code sections applies to the BMR housing
requirements imposed upon them here. The
argument is identical to one raised in Trinity
Park, L.P. v. City of Sunnyvale (2011)
(including one of the plaintiffs in this case) challenged another city’s BMR
housing requirements. In
and tentative subdivision map upon compliance with that city’s BMR housing
ordinance. (Id. at p. 1021.) The developers signed an agreement with the
city, promising to sell five units at specified below market prices but about a
year later the developers sent the city a notice protesting the requirements
under sections 66020 and 66021. (
invalidate the BMR agreement, which they maintained had been executed under
duress. The trial court sustained the
city’s demurrer citing section 66499.37.
(Trinity Park,
On appeal, the developers argued that the BMR
requirements fell within the meaning of sections 66020 and 66021. Since the city had never provided notice of
the right to protest, their protest and subsequent civil suit were timely. This court rejected the argument, holding
that these code sections did not apply.
The phrase “other exactions” as used in sections 66020 and 66021 does not
refer to the universe of exactions that may be imposed in connection with a
development. Rather, “the statutory
language of the relevant provisions of the Mitigation Fee Act and the
legislative history of sections 66020 and 66021 demonstrate that the
Legislature intended that the exactions that may be protested under the
Mitigation Fee Act are those exactions imposed for the purpose of
of the cost
of public facilities
related to the
development project.’ ” (Trinity
Park, supra, 193 Cal.App.4th at p. 1043, quoting § 66000, subd. (b) and citing
696.) Because the Sunnyvale municipal
code stated that the purpose of the BMR requirement was to “ ‘enhance the
public welfare by ensuring
that future housing development contributes to the attainment of the housing
goals,’ ” and, because there was no suggestion in the material under review
that the BMR requirements were designed to defray
to the development,
this court concluded that sections 66020 and 66021 were inapplicable to the BMR
housing concessions imposed in that case.
(Trinity Park,
The present case is almost identical to
“[City’s] BMR program is intended to increase the supply of for-sale housing
and rental housing for individuals and families whose incomes are insufficient
to afford market rate housing.” (Program
H-36, at p. 26.) PAMC section 18.14.020
states that the purposes of the BMR housing program are to “[e]ncourage the
development and availability of housing affordable to a broad range of
households with varying income levels . . . . [¶] . . . [p]romote the city’s
goal to add affordable housing units to the city’s housing stock . . . . [¶] .
. . [o]ffset the demand on housing that is created by new development. . . .
[¶] . . . [m]itigate environmental and other impacts that accompany new
residential and commercial development . . . . [and] [¶] . . . increase the
supply of for-sale and rental housing for families and individuals employed in
Palo Alto whose incomes are insufficient to afford market rate housing. . .
.” These listed purposes do not describe
an attempt to defray the cost of public facilities necessitated in a
development project. The purpose is to
increase the number of residences in the City where people of modest means can
afford to live. Under
Plaintiffs argue that Trinity Park was wrongly decided and that demands for affordable
housing units or in-lieu fees are “exactions” subject to sections 66020 and
66021. Plaintiffs repeat many of the
same arguments raised in the Trinity Park
case. We decline to revisit the
issue. Plaintiffs also argue that even
if Trinity Park’s interpretation of “other exaction” is correct, it is
distinguishable because plaintiffs were required to pay in-lieu fees whereas
the Trinity Park plaintiffs were not
required to pay fees. The distinction
makes no difference that we can see. The
in-lieu fees are imposed if City determines that BMR designation of the
required number of on-site units, off-site units, or vacant land is not
feasible. Fees are payable to City’s
Housing Development Fund. There is no
evidence that the fees go to defray the cost of public facilities necessitated
by the new development.
Plaintiffs further argue that Trinity Park is distinguishable because PAMC section 18.14.020,
subdivisions (c) and (d) indicate that City’s BMR exactions are intended for
the purposes Trinity Park described
Subdivision (d) of PAMC section 18.14.020 describes one purpose of the
ordinance, which is to “[m]itigate environmental and other impacts that
accompany new residential and commercial development by protecting the economic
diversity of the city’s housing stock, with the goal of reducing traffic,
transit and related air quality impacts, promoting jobs/housing balance and
reducing the demands placed on transportation infrastructure in the
region.” That is, one purpose of the BMR
housing program is to improve air quality and reduce demand on regional
transportation infrastructure by insuring that people of all economic levels
can afford to live and work within the city limits rather than commute. This has nothing to do with defraying the
cost of public facilities necessitated by the new development itself.
Subdivision (c) of PAMC section 18.14.020, states
that another purpose of the BMR housing ordinance is to “[o]ffset the demand on
housing that is created by new development.”
The only way a housing development could create a demand for housing
would be if the new development eliminated existing housing. We need not decide whether an exaction
imposed to offset lost housing could be subject to sections 66020 and 66021
because plaintiffs’ project did not demolish existing housing; the BMR
exactions imposed upon them had nothing to do with replacement housing.
Given the express purposes of City’s BMR housing
program, and for all the reasons set forth in Trinity Park, supra,
sections 66020 and 66021 do not apply to the BMR housing concessions exacted
from plaintiffs in this case.
B.
Applicability of Section 66499.37
We now turn to section 66499.37, which
provides, “Any action or proceeding to attack, review, set aside, void, or
annul the decision of [a] . . . legislative body concerning a subdivision, or
of any of the proceedings, acts, or determinations taken, done, or made prior
to the decision, or to determine the reasonableness, legality, or validity of
any condition attached thereto, including, but not limited to, the approval of
a tentative map or final map, shall not be maintained by any person unless the action
or proceeding is commenced and service of summons effected within 90 days after
the date of the decision. . . .” As the
court stated in Timberidge Enterprises, Inc. v. City of Santa Rosa (1978) 86 Cal.App.3d 873,
886, section 66499.37 “manifests a legislative purpose that a decision
such as that of the City, approving a subdivision map and attaching a condition
thereto, shall be judicially attacked within 180 days [now 90 days] of that
decision, or not at all.” (See also,
(2011) 201 Cal.App.4th 1347, 1357 [facial challenge to BMR ordinance subject to
§ 66499.37; time began to run when the ordinance was passed].)
In reviewing the trial court’s conclusion that
section 66499.37 applies to this action, we again turn to Trinity Park, supra,
this court
concluded that section 66499.37 applied to the BMR housing concession imposed
in that case because the action challenged “a condition of subdivision approval
. . . .” (Trinity Park, supra,
with City’s BMR housing program before City would even consider the
project. Plaintiffs’ project called for
the merger of two lots into a 6.5 acre parcel and the subdivision of that
parcel into 96 separate condominiums.
characterize the action as anything but a challenge to City’s decision to make
compliance with its BMR program a condition of subdivision approval.
Plaintiffs argue that because the conditions
were part of an agreement or had something to do with ARB approval, there was
no “decision . . . on a subdivision.”
Plaintiffs also maintain that compliance with the BMR housing program is
“a gateway condition” for having any development application accepted for
processing, whether or not it involved a subdivision. This, according to plaintiffs, means that BMR
conditions are imposed independently of the Subdivision Map Act and, thus,
section 66499.37 does not apply. But
plaintiffs challenge the application of the BMR housing program
Plaintiffs’ project involved the subdivision of the property and,
therefore, required approval of a subdivision map pursuant to the Subdivision
Map Act. City’s approval of the final
subdivision map was conditioned upon plaintiffs’ agreement to the terms
contained in the BMR letter. The case
clearly challenges the “validity of any condition attached” to City’s “decision
. . . concerning a subdivision.” The
90-day limitations period of section 66499.37 runs from the date of the
decision being challenged. Here, the
decision being challenged is City’s decision imposing the BMR exactions with
which plaintiffs would have to comply for approval of their subdivision. Whether we consider the date of that decision
to be June 2006, when City issued the BMR letter, November 2006, when City
approved the tentative subdivision map, or September 2007, when the final
subdivision map application was approved, plaintiffs’ 2009 complaint was
untimely.
C.
City’s Failure
to Plead Section 66499.37
Having concluded that section 66499.37 applies
to make this case time-barred, we now consider whether the trial court abused
its discretion in considering it. The
court acknowledged that City had not named that code section in its answer but
concluded, citing Cruey,
supra, 64 Cal.App.4th 356, that City could raise the defense
on summary judgment because plaintiffs would not be prejudiced.
Cruey was a defamation case in which the defendant moved for summary
judgment based upon the affirmative defense of privilege, which he had not
raised in his answer. (Cruey, supra, 64 Cal.App.4th at pp.
366-367.) The Court of Appeal observed:
“Although the general
rule is that
be pled as
[citation], recent California
authority suggests an
exception where the
complaint alleges facts
indicating applicability
raised during a
summary judgment proceeding. [Citations.] . . . Given
California court policy
of exercising liberality
in permitting amendments
to pleadings at
any stage of
and of disregarding
errors or defects
in pleadings unless
substantial rights are
affected [citation],
of privilege in a summary
judgment procedure so
long as the
adequate notice and
opportunity to respond.
Here,
in the opening
brief in the
judgment. [The plaintiff] took
respond by arguing
the inapplicability
He
process.” (Id. at p. 367; accord,
& Health Ins. Co. (2010) 181 Cal.App.4th 60, 75.) The same reasoning applies here.
set the boundaries of the issues to be resolved at summary judgment.” (Oakland
Raiders v. National Football League (2005) 131 Cal.App.4th 621, 648.) Thus, where the exclusive remedy of the
Workers’ Compensation statutes (Lab. Code, § 3600 et seq.) did not appear in
the answer, the defendant could not rely upon it to support a motion for
summary judgment. (Dorado v. Knudsen Corp. (1980) 103 Cal.App.3d 605, 611.) In such a case, the judgment must be reversed
and the defendant “permitted to amend to raise this defense.” (Ibid.) The Dorado
court noted that the defendant would not necessarily be “entitled to a
summary judgment on the basis of the showing already made.” (Ibid.)
In this case, City raised the question of
timeliness from its very first pleading.
By citing FPI Development,
page 385, the trial court referred to that court’s concern that “it would be
unfair to ground a ruling on the inadequacy of the pleadings if the
pleadings, read in the light of the facts adduced in the summary judgment
proceeding, give notice to the plaintiffs of a potentially meritorious
defense.” Given City’s persistent focus
on timeliness, plaintiffs necessarily had notice of the potential defense. And, unlike the situation in
already made. Had the trial court denied
the motion based upon City’s failure to plead section 66499.37, given the
courts’ policy of liberality in allowing amendments to a pleading, City would
have amended its answer and then succeeded, either by way of another summary
judgment motion or at trial, on the statute of limitations defense. Indeed, the lack of prejudice to which the
trial court referred here meant that plaintiffs’ action would fail in the long
run, even if the court rejected City’s defense on summary judgment. Under the circumstances, the exception to the
waiver rule described by Cruey applies. There was nothing to be gained by denying the
motion. Accordingly, the trial court did
not abuse its discretion in allowing the defense.
Plaintiffs’ reliance upon County of Los Angeles v. Commission on State Mandates (2007) 150
Cal.App.4th 898, 912-913, and Minton v.
Cavaney (1961) 56 Cal.2d 576, 581, is misplaced. Both cases concern a statute of limitations
that was raised for the first time on appeal.
That is not the case here; the issue was fully litigated below. Mitchell
v. County Sanitation Dist. (1957) 150 Cal.App.2d 366, is equally unavailing
because that case involved the public entity’s express, intentional waiver of
the statute and the appellate court’s refusal to allow the defense on
appeal. (Id. at p. 369.)
Plaintiffs also argue that due to its delay in
raising section 66499.37, City is estopped from relying upon it
altogether. We reject that argument as
well. “The sine
claiming it relied to its detriment on the conduct of the party to be estopped.” (Orange County Water Dist. v. Association
of Cal. Water etc. Authority (1997) 54 Cal.App.4th 772, 780.) Plaintiffs cannot show reliance, let alone
detrimental reliance. The estoppel
doctrine does not apply.
We conclude that the trial court did not abuse
its discretion in allowing City the defense of section 66499.37 in its motion
for summary judgment. Section 66499.37
bars the instant action as a matter of
law.
V.
Disposition
The judgment is affirmed. Respondent is entitled to its costs on
appeal.
Premo, J.
WE CONCUR:
Rushing, P.J.
Elia, J.
name="_ftn1" title=""> [1]
Hereafter all unspecified section references are to the Government Code.
name="_ftn2" title=""> [2]
In its summary judgment motion City also cited the statute of limitations
contained in section 65009, another code section it had not listed in its
answer. City relies upon that section as
well as section 66499.37 on appeal.
Since we conclude that section 66499.37 applies, we do not consider the
alternative argument.
