Young v. City of Coronado

1

ARTHUR R. YOUNG et al., as TRUSTEES, etc., Plaintiffs and Respondents, v. CITY OF CORONADO, Defendant and Appellant.

D081111

California Court of Appeals, Fourth District, First Division

May 9, 2024

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of San Diego County No. 37-2018-00002255-CU-EI-CTL James A. Mangione, Judge. Reversed.

McDougal Boehmer Foley Lyon Mitchell &Erickson, Steven E Boehmer, Carrie L. Mitchell and M. Anne Cirina for Defendant and Appellant.

Niddrie Addams Fuller Singh and Rupa Gupta Singh for Plaintiffs and Respondents.

O'ROURKE, Acting P. J.

After the City of Coronado (City) designated their property on Glorietta Boulevard (the property) a historic resource under its municipal code and this court upheld the administrative decision (Young v. City of Coronado (2017) 10 Cal.App.5th 408, 411), plaintiffs and appellants Arthur R. Young and John A. Young, as Trustees and on behalf of the J.S. Abbott Trust, filed an inverse condemnation action alleging City's designation and application of its municipal code-specifically its denial of a demolition permit-effected a regulatory taking of the property. Following a bench trial on liability, the court issued a statement of decision finding City's decision was final and ripe for review, plaintiffs' action was not barred by res judicata and/or collateral estoppel, and City effectively took their property without providing just compensation. Thereafter, a jury awarded plaintiffs $800,000 in damages: the difference between the property's fair market value without the historic designation ($2,750,000) and with the historic designation ($1,950,000), as of November 5, 2021, the start of trial.

City contends the court erred by its rulings because (1) diminution in the value of property due to a valid exercise of police powers through regulation does not constitute a taking as a matter of law; (2) plaintiffs' action was unripe, as City did not make a final determination regarding the extent of permitted development on the property, a prerequisite for an inverse condemnation claim based on a regulatory taking, and there was no basis to apply a futility exception; and (3) plaintiffs were unsuccessful in overturning City's administrative decision, making it immune from collateral attack. City's arguments as to ripeness and futility have merit. Accordingly, we reverse the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

The basic facts and trial court proceedings leading up to City's administrative decision to declare the property a historic resource and our opinion affirming it are recounted in Young v. City of Coronado, supra, 10 Cal.App.5th 408. Some of this background, as well as the proceedings that took place after our decision, were covered in the trial on plaintiffs' inverse condemnation action. Because the court made findings as to plaintiffs' claim of a regulatory taking, as well as on subsidiary issues of ripeness and the futility of proceeding with City to seek alteration of the historic resource, we summarize those facts relevant to the court's findings in the light most favorable to the plaintiffs, who prevailed below. (Felkay v. City of Santa Barbara (2021) 62 Cal.App.5th 30, 40.)

Plaintiffs' Development Efforts and Inverse Condemnation Lawsuit

The plaintiff trustees of the J.S. Abbott Trust have since 1995 been the owners of the property, a small bungalow cottage on a parcel of land across the street from a golf course, built in 1924 by the Hakes Investment Company. Since 1953, when plaintiffs' grandparents acquired the property, it has been used as a rental. From its roof, the property has a panoramic view of the golf course, a lake, and the Coronado Bay. City designated the property a historic resource due to certain distinctive architectural characteristics, as well as being a strong example of the builder's work. Plaintiffs rented the property at about $3,000 to $3,200 per month. Because they anticipated changing the property from its original condition, they only spent money to service and maintain it in a rentable condition. The property is in fair but habitable condition, and it is the smallest house on the street with the least-utilized 7,200 square foot lot.

In 1995, plaintiffs did not have long term plans for the property. But in the early 2000's, they planned to develop then sell it and use the proceeds to improve then sell the next door property, which they also owned at the time. They did not intend to keep any of the bungalow, which did not meet property line setback requirements.

In 2013, plaintiffs found a group of investors who would assist in financing and construction. Before submitting applications, they spoke about the property line setbacks and potential plans with an unidentified person from City's planning department, who told them they would need a demolition permit because the property was over 75 years old and have to have the Historic Resource Commission (the Commission) review the project. According to plaintiff John Young, the individual said, "If they say it's historic, you're finished; the process is over." Plaintiffs did not envision the property would be deemed historic, as it was no different from other bungalows that had been torn down. They obtained an architect's proposal for a development project, which they used to assemble an application to the Commission. They also created a document indicating potential square foot construction costs and profit, depending on the design.

In November 2013, plaintiffs submitted an application for determination of historic significance and notice of intent to demolish the property. Plaintiffs understood that if City declared the property historic and denied their demolition application, they would have to undergo a historic alteration permit process. In January 2014, the Commission conducted a meeting attended by John Young, after which it deemed the property historic because it met certain conditions. Young did not bring a lawyer to that meeting, nor was there opportunity to present or question witnesses or request discovery from City. After filing their notice of intent to demolish the property, plaintiffs never again spoke with anyone from City's planning department.

Plaintiffs appealed to the Coronado City Council (the City Council), which upheld the Commission's decision. They then filed a writ petition, and the matter for three years worked its way through the court system. Plaintiffs' writ petition led to a judgment in City's favor and this court's 2017 decision (Young v. City of Coronado, supra, 10 Cal.App.5th 408) upholding that judgment. During that time, plaintiffs did not apply for a historic alteration permit.

In January 2018, plaintiffs filed an inverse condemnation complaint against City, alleging in part that its denial of their 2013 notice of intent to demolish the property constituted an unconstitutional regulatory taking.^[1]Plaintiffs had not applied for a historic alteration permit as of January 2018 when they filed their inverse condemnation complaint, or even as of June 2019, as they considered it a "last resort" option.^[2]

During the course of litigation, plaintiffs in November 2019 as a "hail mary" submitted a historic alteration permit seeking to demolish the property. The trial court stayed the inverse condemnation action pending City's decision. In response to the historic alteration permit, an assistant City planner informed plaintiffs that because the demolition would result in a potentially significant impact on a cultural resource, they would have to prepare a California Environmental Quality Act (CEQA) environmental impact report (EIR) and deposit $10,000 as well as a $77 service fee. In December 2019, counsel for City explained the CEQA requirement to plaintiffs and advised them that if they wished to design the project so as to make it eligible for a CEQA exemption, they could explore such alterations with an architectural firm in Coronado having expertise in the area.^[3]Plaintiffs ultimately withdrew the application so as to move forward with another plan involving the property's modification, not demolition. The demolition application never went before the Commission.

Plaintiffs then asked a designer to create an alternative so as to present an economically feasible and viable design for the property. Working with City representatives, the designer came up with a plan for a second story and extension to the back of the property. In January 2021, plaintiffs submitted to City's staff preliminary plans that used the existing parapet as part of a balcony to maximize the views. The plan would have added 2,569 square feet for a garage, deck and second story. Staff did not approve the plan, which did not have required renderings, site plan or elevations, and that permit application, which was never submitted to the Commission, was deemed incomplete. Plaintiffs could have submitted the plan to the Commission in any event for review and approval, but they did not. It was John Young's view that because City's staff had already "nixed" the design, "there was no way it was going to go to the . . . Commission." Despite this, he acknowledged that staff merely made recommendations to the Commission, and did not approve or deny historic alteration permit applications.

In April 2021, plaintiffs presented a final alteration permit with plans, by which they lost 600 square feet of space. But City's staff advised them that the application did not comply with Secretary of the Interior standards and thus did not qualify for a categorical CEQA exemption, and staff would not recommend the project's approval "as currently proposed." Staff also deemed the application incomplete listing in a letter issues that needed addressing...