Real Estate and Construction Law Blog

By William M. Flieshhacker

Patel v. Liebermensch (Aug. 21, 2007, D048582 [4^th Dist, Div. 2]) __ Cal.App.4^th __; http://www.courtinfo.ca.gov/cgi-bin/opinions

In this case, the Fourth District Court of Appeal of California addressed the issue of the enforceability of an option contract that did not include essential terms regarding the time and manner of payment.  The court held that the evidence showed that the parties continued to negotiate these terms (and terms related to the amount of the deposit, the escrow period, and the payment of escrow expenses) following the tenant’s notice that he was exercising the option.  The court found that these key terms could not be added by the trial court by implication, thus rendering the option contract unenforceable. 

By Robert J. Uram and Aaron Foxworthy

In Northern California River Watch v. City of Healdsburg, the Ninth Circuit held that a man-made pond that (a) contains and is largely surrounded by wetlands, (b) is separated from a traditionally navigable water only be a levee, and (c) shares a significant nexus with the adjacent navigable water can be considered a regulable water of the United States.  (Case No. 04-15442, slip op. at 9373, August 6, 2007).  The Healdsburg decision revised the court’s August 2006 opinion in the case.  (Earlier opinion at 457 F.3d 1023).

By William M. Fleishhacker

By Stephanie J. Helfrich

U.S. v. Moses, No. 06-30379 (9^th Cir. 2007)

In upholding an 18-month prison sentence, plus monetary fines, under the Clean Water Act (CWA) of an eastern Idaho developer who bulldozed a creek bed, the Ninth Circuit held that a seasonally intermittent stream which ultimately empties into a river that is a water of the United States can, itself, be a water of the United States. The Court further held that deposition of materials into the intermittent stream during the 10-month dry season still constituted a discharge of fill into waters of the United States.

By Elizabeth Sibbett, David Lanferman, and Arthur Friedman

Muzzy Ranch Co. v. Solano County Airport Land Use Commission (2007) __ Cal. __ [http://www.courtinfo.ca.gov/opinions/documents/S13148]

In Muzzy Ranch Co. v. Solano County Airport Land Use Commission, the California Supreme Court unanimously held that the adoption of the Travis Air Force Base Land Use Plan (the "Plan") by the Solano County Airport Land Use Commission (the "Commission") was a "project" for purposes of CEQA.  In this particular case, however, the Court affirmed the Commission's determination that the adoption of the Plan was exempt from CEQA pursuant to the "common sense" exemption since the Plan simply reiterated existing Solano County General Plan land use policies.  This decision is significant in that the Court: (1) upheld the use of the "common sense" exemption from CEQA review, even though "legitimate questions were raised" about the possible environmental impacts of the adoption of the Plan and the Commission had erred by failing to identify substantial evidence in the record in support of its invocation of the exemption; and (2) also acknowledged that CEQA may require lead agencies to consider the effects of "displaced development" resulting from restrictive land use policies where such development can be reasonably anticipated.

United States v. Atlantic Research Corporation (2007) __ U.S. ___ [http://www.supremecourtus.gov/opinions/06pdf/06-562.pdf].

By Randy Visser and Olivier Theard

In a boon to private parties who undertake to voluntarily clean-up contaminated sites, the Supreme Court in United States v. Atlantic Research Corporation established that parties who undertake clean-up efforts may bring cost recovery actions under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) against potentially responsible parties (PRPs).  Before this decision, there was a split in the circuit courts regarding whether private parties could recover costs of clean-up, or whether their exclusive remedy was a contribution action which could only be brought after they were sued by the government.  The Supreme Court, in a unanimous opinion by Justice Thomas, ruled that a private party may sue for cost recovery even if that party has not been sued or paid a judgment or settlement to the government.

LT-WR, L.L.C. v. California Coastal Commission et al, No. B187666 (Cal. Ct. App., 2d Dist. May 25, 2007)

By Jeff Forrest and Mike Hansen

The Second District Court of Appeal of California upheld a trial court decision that the California Coastal Commission (the “Commission”) exceeded its authority when the Commission denied a private landowner a permit for gates and “no trespassing” signs.  The appellate court found that the Commission’s ruling that there was a “potential” to establish prescriptive rights for public use on the property “speculative.”

Like “squatter’s rights”, prescriptive access rights are created when the public openly and repeatedly accesses private property for a sufficient period of time without the landowner’s permission.  The Commission’s denial of the permit in effect decreed the existence of such access rights and was inappropriate because the Coastal Act does not grant the Commission the authority to create prescriptive public access rights.  Only a court has the authority to adjudicate and determine whether prescriptive access rights exist.

By Robert Uram, Ella Foley-Gannon and Aaron Foxworthy

On June 5, 2007, the Army Corps of Engineers (Corps) and the U.S. Environmental Protection Agency (US EPA) published long-awaited guidance on the United States Supreme Court's decisions in Rapanos v. United States and Carabell v. United States Army Corps of Engineers.  Posted on the agencies' respective web sites, the guidance sets out their interpretation of the Rapanos and Carabell decisions, particularly their effects on the agencies' regulatory jurisdiction under Section 404 of the Clean Water Act (CWA Jurisdiction).

By Arthur J. Friedman

On May 22, 2007, the Napa County Superior Court issued its ruling in American Canyon Community United for Responsible Growth et al. v. City of American Canyon et al. (Napa County Superior Court Case No. 26-27462), approving the City’s “addendum” to the previously approved mitigated negative declaration, and thereby authorizing the partially constructed and approved Wal-Mart supercenter in American Canyon to proceed with construction and operations.  The court’s ruling is significant in part because it rejected the petitioners’ novel claim that the City was required to perform “supplemental” environmental review of the project’s potential impacts on climate change in response to the California legislature’s recent enactment of Assembly Bill 32.

Feduniak et al., v. California Coastal Commission (2007) 148 Cal. App. 4th 1346.

By Michael R. Leake

The Sixth District Court of Appeals of California overturned a trial court decision and rejected the claim of a Monterey County coastal property homeowner that the Commission should be estopped from requiring the removal of a three-hole, pitch-and-putt golf course from the property and restoration of the area to its original landscape of native dune vegetation because the Commission failed to take any action regarding the existence of the golf course in violation of restrictions placed on the property by the Commission despite the fact that the golf course was easily visible and had been there for 18 years.

By Bob Uram and Keith Garner

National Wildlife Federation v. National Marine Fisheries Service, No. 06-35011 (9th Cir. 2007)

On April 9, 2007, the Ninth Circuit held that the jeopardy analysis under the Endangered Species Act regulations must consider the effects of an action on a listed species’ chance of recovery in a Section 7 consultation.  The regulations, which were promulgated in 1986, prohibit any agency action “that reasonably would be expected, directly or indirectly, to reduce appreciably the likelihood of both the survival and recovery of a listed species in the wild.”  50 C.F.R. § 402.02.  In a challenge to a biological opinion issued for the proposed operations of the Federal Columbia River Power System dams and related facilities, the National Marine Fisheries Service had argued that the restriction bars only actions that will both reduce the likelihood of survival and recovery of the species.  Because a species may survive without recovering to the point where it is no longer imperiled, the requirement to reduce the species’ chance of both survival and recovery was effectively a survival standard.  The Ninth Circuit upheld a district court’s decision invalidating the biological opinion, noting that the agency’s interpretation “reads ‘and recovery’ entirely out of the text.” The decision also contains important guidance on the definition of discretionary federal actions and rejects the NMFS effort to view the scope of the federal action narrowly.

Shepard v. Edward Mackay Enterprises, Inc., et al., --- Cal. Rptr. 3d ---, No. C052564, 2007 WL 853456 (Cal. Ct. App. Mar. 22, 2007)

By Bryce A. Jensen

While Section 1298.7 of the California Code of Civil Procedure generally allows homebuyers to pursue defect litigation in court regardless of an agreement to arbitrate, the Third District Court of Appeal recently ruled the Federal Arbitration Act preempts California law and binds homebuyers to arbitration provisions when the transaction involves interstate commerce.  Because homes built in California today likely incorporate at least some construction materials originating outside the state and therefore implicate interstate commerce, the court's ruling may effectively preclude homebuyers from relying on this section of the Code of Civil Procedure to avoid arbitration.

Stockton East Water District, et al. v. United States (February 20, 2007) _________; http://www.eswr.com/latest/stocktoneastopcfc.pdf

By Philip Atkins-Pattenson and Katharine Allen

By Robert Uram and Aaron Foxworthy

In San Francisco Baykeeper v. Cargill Salt Division, the Ninth Circuit Court of Appeals provided further guidance on the limits of Clean Water Act (“CWA”) regulatory authority.  ___ F.3d ___; Case No. 05-15051, slip op. at 2666 (9th Cir., filed March 8, 2007).  Cargill argued that a non‑navigable, non‑wetland pond does not fall within the Environmental Protection Agency’s definition of jurisdictional water of the United States simply by virtue of its adjacency to a navigable waterway.  The Court of Appeals agreed, holding that pursuant the agency’s CWA regulations, wetlands are the only waterbodies that  fall within CWA regulatory authority based on their adjacency to navigable waters of the United States.  Since the waterbody in question was a diked pond, not a wetland, the adjacency rule did not apply.  Baykeeper argued that the pond was nevertheless subject to regulatory authority because attendant circumstances indicated it had a “significant nexus” to navigable waters.  The court rejected this argument finding no indication in previous case law that the significant nexus test is intended to apply to waterbodies other than wetlands, and that, in any event, the evidence presented by Baykeeper did not indicate that water ever flowed from the pond to adjacent navigable waters.

By Robert J. Uram and Aaron Foxworthy

District courts for the Northern District of California and the District of Connecticut recently applied the Supreme Court’s 2006 Rapanos decision to decide whether certain intermittent and ephemeral streams and adjacent wetlands were subject to Clean Water Act regulatory jurisdiction.  (Please click for further discussion of Rapanos).  In both instances, the courts found that plaintiffs had not presented sufficient evidence that the streams or wetlands in question had a significant effect on downstream navigable waters.

Kristina Dyer v. Exon Martinez et al. (February 23, 2007, G037423) __ Cal.App.4th__; http://www.courtinfo.ca.gov/opinions

By Katharine Allen

In this action for specific performance of a contract for the purchase of real property, the Court of Appeals found that the physical recordation of a lis pendens in the county recorder's office was insufficient to provide a prospective purchaser with constructive notice of the claim until the recorder properly indexed the lis pendens in the county real property records because a diligent title search would not reveal the existence of the claim unless it was properly indexed.

Friends Of The Sierra Railroad v. Tuolumne Park and Recreation District  (filed January 12, 2007; certified for publication February 8, 2007, F050117) __ Cal.App.4^th__ --http://www.courtinfo.ca.gov/opinions

By Lori Wider

Introduction

In this case plaintiff Friends of the Sierra Railroad (Friends) challenged the approval and sale of land from Tuolumne Park and Recreation District (District) to Tuolumne Band of Me-Wuk Indians (Real Party).  The land sold contained a portion of an historic railroad right‑of‑way.  Friends contended that the sale constituted a “project” under CEQA, requiring prior environmental review.  The Court of Appeal held that the transfer of the land was not a “project” under CEQA under the circumstances of this case.  While some development of the property was reasonably foreseeable, review of possible impacts to the historical resource would be premature in the absence of any specific proposal for development. 

Uphold Our Heritage v. Town of Woodside  (filed January 10, 2007; certified for publication February 2, 2007, A113376) __ Cal.App.4^th__ --http://www.Courtinfo.ca.gov/opinions

By Lori Wider

Introduction

In this case plaintiff Uphold Our Heritage (Heritage) challenged the issuance by the Town of Woodside (Town) of a permit to Steve Jobs (Jobs) to demolish a mansion on his property to enable construction of a new single family residence.  The Court of Appeal held that Town's findings of infeasibility of certain EIR project alternatives involving rehabilitation of the existing structure rather than demolition were not supported by substantial evidence in the record. While the estimated costs of restoration of the mansion were before the Town Council (Council), the record was devoid of any information regarding the likely cost of a new residence (the proposed project). Without the information necessary to compare the restoration costs against the cost of the project, there was insufficient evidence to support the findings of infeasibility of rehabilitation alternatives.

McAllister v.County of Monterey et al.  (January 31, 2007, H028813) __ Cal.App.4^th__ --http://www.courtinfo.ca.gov/opinions

By Lori Wider

Introduction

Concerned McCloud Citizens v. McCloud Community Services District et al.  (Filed January 2, 2007; certified for publication January 31, 2007, C050811) __ Cal.App.4^th__ --http://www.courtinfo.ca.gov/opinions

By Lori Wider

Introduction and Background

The California Court of Appeal, Third Appellate District, reversed the decision of the trial court  granting a petition for writ of mandate brought to challenge approval of an agreement between the McCloud Community Facilities District ("District") and Nestle Waters North America, Inc. ("Nestle") for the sale and purchase of spring water.  The lower court determined that the District had violated CEQA by failing to conduct environmental review prior to approving the agreement.  The appellate court disagreed, finding that approval of the agreement did not trigger the requirement for environmental review prior to District approval because (a) the agreement was expressly conditioned on future CEQA compliance; and (b) it did not commit the District to a course of action or commit it to issuance of any permits or other entitlements to Nestle.

Anne Manderville et al. v. PCG&S Group, Inc. et al. (January 24, 2007, D047285) __ Cal.App.4th__; http://www.courtinfo.ca.gov/opinions

By Katharine E. Allen

National Association of Homebuilders v. U.S. Army Corps of Engineers, 01-274 JR (D. D.C. Jan. 30, 2007)

By Robert J. Uram and Stephanie  J. Helfrich

            On January 30, 2007, U.S. District Judge James Robertson ruled in favor of several major trade associations when he held that a rule jointly issued by the Army Corps of Engineers and the Environmental Protection Agency defining whether “incidental fallback” that can result from activities such as ditch digging and excavation, and subjecting the activity to Section 404 jurisdiction, was invalid.  Judge Robertson held that the rule does not properly address issues raised by a 1998 D.C. Circuit Court of Appeals Decision (National Mining Association v. United States Army Corps of Engineers, 145 F.3d 1399 (D.C. Cir. 1998)) and that the rule violates the Clean Water Act.  This decision coupled with the Supreme Court’s ruling in the Carabell and Rapanos cases leaves the Section 404 program awash with uncertainty.

California Farm Bureau Federation et al. v. California State Water Resources Control Board, (January 17, 2007, C050289) __ Cal.App.4th__ http://www.courtinfo.ca.gov/opinions

By David P. Lanferman and Ella Foley-Gannon

Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) Cal.App.4^th

By Thomas B. Snyder

In this case, Kemp was a prime contractor on two public works projects for the Los Angeles Unified School District ("LAUSD").  It subcontracted the electrical work to Titan Electric on both projects.  Partway through performance, Titan began to struggle with its payroll obligations and Kemp agreed to informally advance payments to Titan to assist in completing the work.  When problems continued, Kemp stopped the advance payments and Titan was unable to meet its payroll.  Kemp then retained another electrical subcontractor who completed the work.  Simultaneously, Kemp requested that the LAUSD approve Titan's substitution as the listed subcontractor under Public Contracts Code Section 4107, arguing that Titan was failing and refusing to perform its work and/or delaying or disrupting the progress of the work.  The LAUSD hearing officer agreed that Titan had been disrupting and delaying the work and therefore determined that Kemp had the statutory right to substitute Titan.

Black Hills Investments, Inc. v. Albertson's, Inc. January 12, 2007

By Thomas B. Snyder

On November 22, 2004, Black Hills entered into a contract to purchase two parcels of real property in a retail shopping center.  At the time of the contract, the two parcels had not yet been created through subdivision of the property.  Black Hills deposited earnest money of $133,000 which was described as non-refundable.  The contracts contained a provision which permitted the seller, Albertson's, to terminate the contract if it failed to obtain the proper governmental approvals for creation of the two parcels.  Black Hills was given no such right.

American Canyon Community United for Responsible Growth v. City of American Canyon et al. (November 17, 2006; certified for partial publication December 18, 2006, A111278) __ Cal.App.4^th__ http://www.courtinfo.ca.gov/opinions

By Lori Wider

City of Goleta v. Superior Court of Santa Barbara County  (December 21, 2006, S129125) __Cal.App.4th__   http://www.courtinfo.ca.gov/opinions

By Maria Pracher

Calvert v. County of Yuba (December 5, 2006, C047857)__Cal.App.4^th__http://www.courtinfo.ca.gov/opinions

By Lori Wider

Wagner Farms, Inc. v. Modesto Irrigation District  (Dec.6, 2006, F049966) __ Cal.App.4th __ http://www.courtinfo.ca.gov/opinions

By Maria Pracher

Divers’ Environmental Conservation Organization v. State Water Resources Control Board (Nov. 29, 2006, D046112) __ Cal.App.4th __ http://www.courtinfo.ca.gov/opinions

By Julie Austin and Ella Foley-Gannon

The Court of Appeals held that a permitting agency under the Clean Water Act is not required to conduct a numeric analysis of individual pollutants in industrial stormwater discharges in order to comply with federal regulations.  In addition, even if a discharge will cause the receiving body of water to violate State water quality standards, the agency is not required to impose numeric “water-quality based effluent limitations” (WQBELs) in a National Pollutant Discharge Elimination System (NPDES) permit.  Rather, to comply with the regulations, the agency may conduct more general, non-numeric tests of stormwater discharges and, if necessary, impose Best Management Practices (BMPs) on the discharger.  This decision is significant because the environmental community has recently pressured permitting agencies to impose numeric limitations on industrial discharges, which include construction discharges.  These numeric limitations, if required, would have presented a huge challenge and risk to permittees, who could violate their permits despite the fact that stormwater pollutants are highly variable and may be beyond their control.  Thus, this decision helps protect permittees by clarifying that permitting agencies are not required to use numeric limitations to regulate industrial stormwater discharges.

Wolfe v. City of Fremont (Oct. 31, 2006, A112386) __ Cal.App.4^th __ <http://www.courtinfo.ca.gov/opinions>

By Julie Austin

Western Placer Citizens for an Agricultural and Rural Environment v. County of Placer (3^rd Dist. Nov. 9, 2006)

By Maria Pracher and Julie Austin

Citizens for Open Government v. City of Lodi (3^rd Dist. Nov. 9, 2006)

By Julie Austin

Two non-profit groups, Citizens for Open Government (Citizens) and Lodi First, opposed the City of Lodi’s certification of a Final Environmental Impact Report (FEIR) and approval of a use permit for a Wal-Mart-anchored shopping center.  The trial court found that Citizens had not exhausted all of its administrative remedies because, even though Lodi First filed an appeal to the City Council, Citizens had not filed its own appeal.  The Court of Appeals reversed this determination and found that Citizens had exhausted its administrative remedies under CEQA and the Municipal Code because Citizens appeared before the City Council to file its own objections and participated in the administrative process.  The court also found that Citizens’ claims were not moot even though a trial court had partially granted Lodi First’s petition and vacated the City Council’s approval of the project.

By John Scheuring

Late in September, the Court of Appeal effectively reversed a judgment against the City of San Diego which, with interest and attorney's fees, was on track to exceed $150 million.  Originally filed in 1995, Border Business Park sued the City on theories of inverse condemnation and breach of contract.  The trial court ruled that the City was liable for (i) publicly announcing that it was considering a proposal for to create an international airport in Otay Mesa (which interfered with sales of property within Border Business Park), and (ii) the City's diversion of truck traffic to a new border crossing with Mexico (which allegedly interfered with access to Border Business Park). The trial court also held the City liable for breach of a development agreement with the Border Business Park (but did grant a motion for new trial on res judicata issues stemming from a previous lawsuit).

By John Scheuring

An en banc panel of the 9th U.S. Circuit Court of Appeals has vacated an earlier decision by a three-judge panel that, pursuant to the minority language provisions of the federal Voting Rights Act ("VRA") (42 USC §1973aa-1a), California recall petitions must be translated into minority languages.  The Ninth Circuit now joins two other circuits that have found voter-circulated petitions need not be translated into other languages to comply with Section 203 of the VRA. The majority held that these petitions were not materials "provided by" the state and, therefore, petition proponents are not required to comply with the minority language provisions of the VRA.  An interesting aspect of the decision is the courts belief that a translation requirement would have a chilling effect on the petition process itself.  The Court reasoned that if a translation were to be required for a petition in Orange County, the petition would have to be printed in English, Spanish, Vietnamese, Korean and Chinese, the costs of which would fall directly on the proponents of the petition, which may deter participation in the electoral process.  This decision will also end speculation that the VRA might also apply to initiative and referendum petitions.

by Robert Uram and Keith Garner

Pursuant to its authority under the Clean Water Act, the U.S. Army Corps of Engineers has issued general permits, called Nationwide Permits, for activities that have minimal effect on the environment. Discharges of dredged or fill material in wetlands and other waters of the U.S. are permitted in connection with these activities upon verification by the Corps that an activity qualifies under a Nationwide Permit. The current Nationwide Permits were issued in January of 2002 and are scheduled to expire on March 19, 2007. The Corps has not yet commenced the rulemaking process that is required to reissue Nationwide Permits, and no announcements have been made concerning the Corps' intention or schedule for doing so. Although activities authorized under Nationwide Permits are supposed to finish before the expiration date, verifications are generally issued with a "grandfather" provision that gives activities that have commenced or are under contract to commence before the expiration date an additional year to be completed. Please contact Robert Uram or Keith Garner if you have specific questions about the expiration of the current Nationwide Permits or activities authorized thereunder.

by Dave Lanferman and Misti Schmidt

Bighorn-Desert View Water Agency v. Verjil, (July 24, 2006, S127535) __ Cal.4th __

On July 24, the California Supreme Court unanimously held that the initiative power reserved to the voters by Article XIII C of the California Constitution permits use of an initiative to reduce or repeal water delivery charges, and suggested that this initiative power extends to all local government levies that are ordinarily understood to be fees or charges. However, the Court also held that XIII C does not permit such initiatives to require voter approval of future increases in those charges, and invalidated the particular initiative proposal on this basis. The Court's decision acknowledged concerns that recognition of the right of local voters to repeal or reduce governmental fees by initiative may result in fiscally irresponsible actions by voters, but invoked the presumption that governing boards and their voters will act reasonably and in good faith to reach financially and legally sound compromises on fee-setting actions.

A Summary of Benson v. California Coastal Commission (2006) 139 Cal. App. 4th 348

by Brenna Moorhead

"Predictions and suggestions from staff may be helpful or misleading to a party with a matter before the Coastal Commission. Therefore a party should take such advice with caution." (Id. at 348.)

John Benson alleged a due process violation by the California Coastal Commission. Benson's project, the expansion of the Baywood Inn in San Luis Obispo County, had been approved by the County's planning commission under a mitigated negative declaration. It was appealed by the Concerned Citizens of Los Osos, first, to the County Board of Supervisors and, upon rejection, to the California Coastal Commission ("Commission"). The Commission sent notice and a copy of the appeal to Benson as well as notice of the hearing date in May 2003. Subsequently, the Commission's staff issued, with a copy sent to Benson, a report on the appeal recommending that that the Commission "open and continue the public hearing to determine whether a substantial issue exists…" (Id. at 351-52.) 

by Michael Wilmar and Misti Schmidt

On May 31, the Court of Appeal for the First Appellate District endorsed the State Water Resources Control Board’s four-part test of whether groundwater is a “subterranean stream flowing through known and definite channels.” The Board first used this new test in its 1999 decision, In re Garrapata Water Co., which expanded the Board’s authority over groundwater.

California courts generally should defer judicial review of ballot initiatives until after the election, the state Supreme Court reaffirmed last week in a holding that limits the scope of pre-election review. The unanimous opinion in Independent Energy Producers Ass'n v. McPherson, S135819 (2006), emphasizes that courts should consider the availability and adequacy of post-election relief in deciding whether to resolve a challenge to a ballot measure before the election. Under this approach, the court made it clear that pre-election review will now be limited primarily to procedural challenges, These are cases challenging whether a measure has properly qualified for the ballot, not the underlying validity of the measure.  Pre-election review of procedural challenges remains because courts have been (and evidently should continue to be) reluctant to overturn the results of an initiative election on procedural grounds.

by Brenna Moorhead

Preciado v. Wilde, California Court of Appeal, Second District, 42 Cal.Rptr.3d 792, 06 Cal. Daily Op. Serv. 3817, 2006 Daily Journal D.A.R. 5563

Tenants in common have equal possessory rights in land, therefore more is required to establish title by adverse possession against a cotenant that by adverse possession against a stranger. In Preciado v. Wilde, Plaintiff Preciado and his wife filed an action to quiet title based on adverse possession against Wilde, Preciado's niece. Preciado and Wilde became tenants in common when Wilde inherited interests in two parcels of real property from her father after his death in 1984. 

Establishing title by adverse possession against a stranger requires:

1. actual possession providing reasonable notice to the owner;
2. possession hostile to the owner's title;
3. a claim to the property under color of title or claim of right;
4. five years of continuous, uninterrupted possession; and
5. payment of taxes levied and assessed upon the property during the period. 

Adverse possession against a cotenant requires more with respect to notice of the intent to oust the co-tenant of its interest in the common property. One tenant cannot by mere exclusive possession acquire title of the property.

by Michael Wilmar and Michael Leake

Wal-Mart Stores, Inc., et al. v. City of Turlock

In Wal-Mart Stores, Inc., et al. v. City of Turlock, (2006) 138 Cal.App.4th 273, the California Court of Appeal for the Fifth Appellate District upheld a City of Turlock zoning ordinance which amended the City's general plan to bar the development of “big box” retail stores containing full service grocery departments. Under the ordinance, the City banned the development of “discount superstores,” which it defined as discount stores that exceed 100,000 square fee of gross floor area and devote at least 5 percent of the total sales floor area to the sale of nontaxable merchandise, often in the form of a full-service grocery department. In Wal-Mart's appeal of its earlier Superior Court defeat, it argued that the ordinance was an unconstitutional use of the City's police power and that the ordinance failed to comply with the California Environmental Quality Act (CEQA).

California LLC Fee Unconstitutional

The limited liability company fee imposed under California law recently was held to be unconstitutional according to the court in Northwest Energetic Services, LLC v. California Franchise Tax Board (Super. Ct. San Francisco County, 2006, No. CGC-05-437721). The decision states that the graduated fee imposed on the "total income" of an LLC (meaning gross income plus the cost of goods sold) under Section 17942 of the California Revenue and Taxation Code is illegal for violating the Commerce Clause and the Due Process Clause of the U.S. Constitution. Such fee currently starts at $900 if total income is $250,000 or more but less than $500,000, and ranges upward, topping out at $11,790 if total income is $5,000,000 or more.

The California Court of Appeal in Trancas Property Owners Association v. City of Malibu, 2006 WL 802483 (Cal.App. 2 Dist.)), upon a rehearing requested by the California League of Cities as Amicus Curiae, recently re-affirmed its decision (discussed in this blog on October 13, 2005) that the City's adoption of a settlement agreement in a closed session violated the Ralph M. Brown Act, Gov't Code section 54950 et seq. (Brown Act).

by Robert J. Uram, Ella Foley-Gannon and Mary C. Klima

 On March 14, 2006, in Center For Biological Diversity v. Bureau of Land Management, et al., 2006 WL 662735 (N.D. Cal.), the United States District Court for the Northern District of California concluded that the U.S. Fish and Wildlife Service (the “Service”) improperly ignored the recovery goal of critical habitat in finding that there were no additional regulatory benefits to be gained by designating critical habitat in areas that were ultimately excluded. Additionally, the Court concluded the Service improperly considered economic impacts of critical habitat designation that are coextensive with restrictions resulting from the listing of milk-vetch in excluding significant areas from the final critical habitat designation.

On February 6, 2006, in National Ass'n of Homebuilders v. U.S. Army Corps of Engineers, Nos. 04-5221 et al., 36 ELR 20032 (D.C. Cir. Feb. 6, 2006), the United States Court of Appeals for the D.C. Circuit issued a unanimous ruling in favor of several major trade associations, holding that the validity of the Army Corps of Engineers regulation of "incidental fallback" that can result from activities such as ditch digging and excavation is ripe for review, and requiring the lower court to consider the legality of permit requirements for this type of discharge of dredged material into waters of the United States.

The recent decision of the California Supreme Court in Barratt-American v. City of Rancho Cucamonga(37 Cal.Rptr.3d 149) [covered in an earlier update on this site] raises serious questions as to the way many jurisdictions calculate, collect, and apply fees from developers for building permits and building inspections. Back in 1993, the California Attorney General published an opinion which concluded that fees for building permits and inspections are required to be based on the actual or reasonable costs of providing such services, rather than on the value of the proposed construction or improvements [76 Ops.Cal.Atty.Gen. 4]. Nevertheless, many (perhaps most) cities and counties continue to charge building permit fees which are based on the valuation of the construction, rather than being based on staff time and costs of providing service. To the extent that such valuation-based fees may exceed the reasonable costs of providing those services, recent court decisions may now hold cities and counties accountable for the excess revenues collected.

In Barratt American, Inc. v. City of Rancho Cucamonga, the California Supreme Court clarified questions of procedure and potential remedies available in actions challenging building permit and inspection fees under the Mitigation Fee Act, California Government Code § 66000 et seq. (the "Act"). Appellant Barratt American had sued the City on the basis that its inspection and permit fees (1) exceeded the City's costs of providing building inspection services; and (2) the City was improperly accumulating excessive fee revenues from its building permit operations. The Court agreed with lower court holdings that, when building inspection and permit fees are at issue, the only statutory relief was an action for invalidation of the resolution pursuant to Gov. Code § 66022. However, the Court disagreed with lower courts that Barratt's action was barred by the 120-day statute of limitations applicable under § 66022, finding instead that the City’s reenactment and minor modification of the building permit fee schedule started a new limitations period. Lastly, the Court held that, when building inspection and permit fees are at issue, the appropriate remedy under the Act was not a refund but rather to reduce the fees going forward.

Former Section 6307 permitted the State Lands Commission to make exchanges of tide and submerged terminating the public trust for commerce, navigation, and fishery in the best interests of the state for the following purposes:

• Improvement of navigation
• Aid in reclamation
• Flood control protection
• To enhance the configuration of the shoreline for the improvement of the water and upland on navigable rivers, sloughs, streams, lakes, bays, estuaries, inlets, or straits

In Endangered Habitats League v. County of Orange, 131 Cal. App. 4th 777 (2005), the California Court of Appeal rejected a development plan in Orange County. The court did so on the grounds that the specific plan approved by the County conflicted with its general plan, and that the County compiled an inadequately detailed environmental impact report (EIR).

Recently, three separate panels of the California Court of Appeal rendered opinions on the availability of attorneys' fees for plaintiffs who bring CEQA challenges. The decisions make clear that courts have considerable latitude in determining who is the "successful party" and whether there has been a "significant benefit" under the private attorney general statute.

On August 4 the California Supreme Court ruled, in Grafton Partners v. Superior Court (Pricewaterhouse Coopers LLP), 2005 DJDAR 9387 that California contractual provisions in which the parties thereto pre-agree to waive the right to a trial by jury are unenforceable. The unanimous opinion stated that a right to a jury trial is a fundamental constitutional entitlement that cannot be waived in advance of a dispute between the contracting parties unless such a waiver is permitted by statute. Thus, the court has left the door open for the legislature to pass a statute allowing such waivers, and the forum for interests pursuing this debate will likely shift to the legislature now.

In the meanwhile, those entities doing business in California who desire such jury trial waivers in their contracts in order to guard against the perceived inordinate expense, time and unpredictability of California jury trials might consider a renewed emphasis on mediation, arbitration and judicial review proceedings to avoid them.

Sheppard Mullin attorneys are happy to discuss the advantages and potential pitfalls of such techniques.

Douglas Van Gessel is a partner in the Real Estate, Land Use and Environmental Practice Group in Sheppard Mullin's San Francicso office.

Lu v. Grewal
(05 C.D.O.S. 5740, June 28, 2005)

A tenant who abandons a commercial leasehold cannot escape all liability for its breach by taking advantage of the landlord's work in restoring the space and making it profitable. In Lu v. Grewal the tenant abandoned a gas station with almost 3 years left on its lease. When the landlords re took the premises, they found that the gas pumps had been torn out of the ground, gasoline was pooling in holes in the ground, computer controls had been ripped off the walls, the premises were vandalized, and the convenience-store items were missing or broken. The landlords worked around the clock to repair the property and operate the business themselves. They sued the tenant for breach of the lease, including damages for removing fixtures and a claim for the rent that was due following abandonment.

Kelo v. City of New London
05 CDOS 5466 No. 04-108 (U.S. Supreme Court, June 23, 2005)

In a 5-4 decision, the U.S. Supreme Court held that economic development constitutes a valid public purpose within the meaning of the U.S. Constitution Fifth Amendment “public use” clause. Relying heavily on previous U.S. Supreme Court takings cases, Justice Stevens, writing for the majority, found that the City's purpose of economic development fit safely within the Court's broad interpretation of public purpose. Justice O'Connor, writing for the dissent, distinguished past U.S. Supreme Court takings cases as involving harmful precondemnation use of the private property whereas in the present case, the precondemnation use was not harmful. The majority only addressed takings under the U.S. Constitution and noted that states may place greater restrictions on its eminent domain power. The majority also rejected Petitioners' argument that the City's economic development plan would provide only purely economic benefits.

In a concurring opinion, Justice Kennedy stated that although the case did not pose such an issue, a higher standard of review may be appropriate for a narrow class of private transfers where a court should presume an impermissible private purpose. He opined that cases where there is suspicion that a private party has been impermissibly favored, for example, may warrant further consideration of this issue.

This decision may have less impact in California than elsewhere because most California cities and counties rely on the California Redevelopment Law when condemning for economic development. The CRL requires a finding of blight before the powers it provides can be invoked. That was not the case in New London.

Michael B. Wilmar is a partner in Sheppard Mullin's San Francisco office.
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Horwitz v. City of Los Angeles (Beglari)
124 Cal. App. 4th 1344 (2d Dist. Dec. 15, 2004) (review filed Jan. 24, 2005)

Trial court properly issued writ commanding the City to revoke all building permits and the certificate of occupancy related to a particular residence where permits were issued in violation of mandatory requirements of zoning ordinance. Los Angeles Planning Commission's ruling in favor of resident - which allowed renovation to the residence to encroach approximately 14 feet into the area of the required front-yard setback - was clearly erroneous because City has no discretion to issue a permit in the absence of compliance with the mandatory set-back requirements.