Regents of Univ. of Cal. v. Super. Ct. of City & Cty. of S.F.

322 Cal.Rptr.3d 114

The REGENTS OF the UNIVERSITY OF CALIFORNIA, Petitioner,

v.The SUPERIOR COURT OF the CITY AND COUNTY OF SAN FRANCISCO, Respondent;

Parnassus Neighborhood Coalition, Real Party in Interest.

A169318

Court of Appeal, First District, Division 3.

Filed June 13, 2024

As Modified on Denial of Rehearing July 2, 2024

San Francisco County Superior Court, Hon, Charles F. Haines. (City & County of San Francisco Super. Ct. No. CGC-23-605307)

Reed Smith, Raymond A. Cardozo, Sarah Johansen, San Francisco; University of California, Anagha Dandekar Clifford; Lubin Olson & Niewiadomski, Charles Olson, Philip Sciranka and Carolyn Lee, San Francisco, for Petitioner.

No appearance for Respondent.

Soluri Meserve, Patrick M. Soluri and Osha R. Meserve, Sacramento, for Real Party in Interest.

RODRÍGUEZ, J.

The Regents of the University of California (Regents) approved the construction of a new hospital at its University of California San Francisco (UCSF) Parnassus Heights campus (Parnassus); the hospital will allegedly exceed local building height and bulk restrictions. Parnassus Neighborhood Coalition (the Coalition) — a group of property owners residing near the proposed hospital — sued to enjoin the construction, a "threatened nuisance per se." In a demurrer, the Regents argued they are a state entity immune from complying with local building and zoning regulations when engaging in a governmental activity such as constructing university buildings. The trial court disagreed, concluding the Regents’ immunity hinged on a question of fact — whether the proposed construction constituted a governmental or proprietary activity — that could not be resolved on a demurrer.

The Regents petitioned for a writ of mandate to vacate the trial court’s order. Assuming the truth of facts pled by the Coalition, we conclude the proposed hospital would facilitate the provision of clinical services, thereby advancing UCSF’s academic mission and the Regents’ educational purpose — i.e., governmental activity. Because the project falls within the Regents’ broad public purpose, we hold the Regents are exempt from the local regulations at issue, and the demurrer should have been sustained. (Same v. City of Del Mar (2001) 86 Cal.App.4th 1346, 1358, 104 Cal.Rptr.2d 183 (Bame).) Accordingly, we issue the writ of mandate.

BACKGROUND

The Regents own and operate UCSF, a medical complex, research center, and professional school in San Francisco (City), with an educational mission. In 2014, the Regents approved a long-range development plan for UCSF. It consisted of renovating several of UCSF’s campuses, including Parnassus. The plan primarily would have involved construction of a hospital to provide clinical services to advance UCSF’s academic mission. UCSF ultimately did not move forward with this proposed change.

Instead, the Regents approved the "Comprehensive Parnassus Heights Plan" in 2021. The plan contemplates the construction of a larger hospital (the New Hospital), approximately 900,000 gross square feet. Although the project’s size would allegedly violate the City’s property and zoning regulations, it would provide more beds for inpatients and increase the campus’s hospital capacity. This was part of the Regents’ plan to advance its mission, which includes identifying unmet community needs and making new investments to satisfy those needs.

In March 2023, the Coalition filed a complaint against the Regents to enjoin construction of the New Hospital. It alleged the proposed construction violated the City’s height and bulk restrictions and would result in air and noise emissions, creating a nuisance to local residents. The Regents demurred, arguing they are exempt from local building and zoning regulations because they are a state entity with sovereign immunity. According to the Regents, constructing the New Hospital is for patient care, scientific research, and teaching, thus furthering its educational purpose. Specifically, the Regents provide medical education for graduate students in the five medical schools located at Parnassus. That the proposed construction has some additional noneducational purpose does not destroy the Regents’ exemption from local regulations.

In opposition, the Coalition argued the proposed construction would promote the continued expansion of UCSF’s proprietary activities as a healthcare provider rather than exclusively advancing its educational and patient needs. Specifically, UCSF’s revenue doubled from 2015 to 2021. Because the Regents’ proposed construction is not solely for educational purposes, the Coalition argued, they are not exempt from local building codes and zoning restrictions.

The trial court agreed with the Coalition and overruled the demurrer. It concluded the applicability of the City’s zoning and planning regulations requires resolution of a question of fact — "whether the hospital, as currently proposed, is a proprietary activity subject to local regulations" — not appropriate for resolution on demurrer. The court further concluded the Regents failed to cite anything to support their argument that state entities may be entitled to sovereign immunity when their proposed projects involve a mix of proprietary and government activities. According to the court, the exemption only applies when a project is solely for educational purposes.

The Regents petitioned for a writ of mandate, requesting review of the trial court’s demurrer ruling, and seeking a stay. We stayed discovery pending further consideration of the petition and issued an order to show cause why mandate or other appropriate relief should not be granted.

DISCUSSION

The Regents urge us to issue a writ of mandate vacating the trial court’s order overruling their demurrer. According to the Regents, they are exempt from the City’s building and zoning regulations otherwise generally applicable to private businesses. We agree.

[1–3] As a preliminary matter, writ review is warranted. Generally, an order overruling a demurrer is not immediately appealable; it may be reviewed on appeal following a final judgment. (Casterson v. Superior Court (2002) 101 Cal.App.4th 177, 182, 123 Cal.Rptr.2d 637.) But writ review may be granted where the order raises a significant issue of law or "resolution of the issue would result in a final disposition as to the petitioner." (Ibid.) Both considerations apply here. Whether the Regents are entitled to sovereign immunity from local building and zoning regulations when building the New Hospital presents a significant constitutional issue. (City & County of San Francisco v. Regents of University of California (2019) 7 Cal.5th 536, 544, 248 Cal.Rptr.3d 352, 442 P.3d 671 (Hastings) [allocation of authority between a local government and state agency is an issue regarding the constitutional system].) And resolution of this issue in the Regents’ favor will result in a final disposition as to the Coalition’s complaint — it would be dismissed. (Casterson, at p. 182, 123 Cal. Rptr.2d 637.)

[4, 5] We independently review an order overruling a demurrer, assessing whether the complaint states a cause of action under any legal theory. (Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1497, 161 Cal.Rptr.3d 728.) If it does, we assess whether the complaint clearly discloses a defense or bar to recovery. (See’s Candies, Inc. v. Superior Court (2021) 73 Cal.App.5th 66, 76, 288 Cal.Rptr.3d 66.) In doing so, we assume the truth of all facts properly pleaded and those reasonably inferred from the pleadings. (Regents of University of California v. Superior Court. (2013) 220 Cal.App.4th 549, 558, 163 Cal. Rptr.3d 205.) But we do not assume the truth of "contentions, deductions, or conclusions of law." (Steam v. County of San Bernardino (2009) 170 Cal.App.4th 434, 440, 88 Cal.Rptr.3d 330.) Having engaged in that review, we agree the trial court erroneously overruled the demurrer. We conclude the complaint clearly discloses the Regents’ immunity from the City’s planning code, barring the Coalition’s recovery as a matter of law.

I.

[6–8] We begin by providing an overview of the relevant law. The California Constitution establishes the Regents as a "public trust … with full powers of organization and government," including "the legal title and the management and disposition" of university property and "of property held for its benefit." (Cal. Const., art. IX, § 9, subds. (a), (f); Hastings, supra, 7 Cal.5th at p. 545, 248 Cal.Rptr.3d 352, 442 P.3d 671.) As a "constitutionally created arm of the state," the Regents have "virtual autonomy in self-governance," and their power " ‘ "to operate, control, and administer the University is virtually exclusive." ’ " (Regents of University of California v. City of Santa Monica (1978) 77 Cal.App.3d 130, 135, 143 Cal.Rptr. 276 (Santa Monica).) Given this unique status, the Regents have "immunity from local regulation unless the state, through statute or provision of the California Constitution, has [expressly] consented to waive such immunity." (Laidlaw Waste Systems, Inc. v. Bay Cities Services, Inc. (1996) 43 Cal.App.4th 630, 635, 50 Cal.Rptr.2d 824; Hall v. City of Taft, (1956) 47 Cal.2d 177, 182—183, 302 P.2d 574.) Indeed, there are general limits on a "city’s power over ‘municipal affairs’ " as related to state entities. (Hastings, at p. 552, 248 Cal.Rptr.3d 352, 442 P.3d 671; see also In re Means (1939) 14 Cal.2d 254, 256–258, 93 P.2d 105 [municipal plumber certification ordinance could not be applied to state employee because the state acted in an exclusive field when setting qualifications for state employees].)

[9–11] For instance, "regulations that require construction to be overseen by local supervisors ceases to be a municipal affair once they are applied to state buildings." (Hastings, supra, 7 Cal.5th at p. 553, 248 Cal.Rptr.3d 352, 442 P.3d 671.) Generally, when the state "engages in such sovereign activities as the construction and maintenance of its buildings," "it is not subject...