The City of Rancho Palos Verdes is the site of the ancient Portuguese Bend and Abalone Cove landslides, both of which remain active. In 1978, in response to movement of the Abalone Cove landslide, the City adopted an “urgency ordinance” establishing the “Landslide Moratorium Area,” which generally prohibits new residential development in the landslide area. The moratorium area is divided into eight zones of varying stability. The ordinance and subsequent amendments created various categories of exceptions to and exclusions from the moratorium that have been the subject of extensive litigation.
Resolution No. 2002-43
In 2002, the City Council approved resolution No. 2002-43, which flowed from the City’s study of “Zone 2,” covering approximately 130 acres of subdivided land largely unaffected by the slides within the landslide area. The resolution directed City staff “to continue to deny requests for development permits for new homes in the Zone 2 area . . . until an applicant submits a complete Landslide Moratorium Exclusion application” that establishes a “gross safety factor” (i.e., a geotechnical term explaining the stability of a parcel of land throughout Zone 2) of 1.5 or higher. City officials at the time understood that a geological study to determine the safety factor of Zone 2 land would cost somewhere between $500,000 and $1 million, if not more. To grant an exclusion the City Council must determine, among other things, that “[t]he exclusion shall not aggravate any existing geologic conditions in the area.”
The Monks Litigation
In Monks v. City of Rancho Palos Verdes, (Feb. 23, 2005, Case No. B172698) [nonpub. opn.] (Monks I), the plaintiffs decided not to pursue their then-pending application for an exclusion from the moratorium and argued instead that resolution No. 2002-43 constituted a taking under the California Constitution. The trial court denied the writ petition and determined that the resolution did not constitute a taking.
The Second District Court of Appeal held that the plaintiffs’ takings claim was ripe and that they did not have to exhaust their administrative remedies by applying for development permits with the City given the certainty that the City would deny their applications because the plaintiffs could not show the gross safety factor was 1.5 or higher. The Court concluded that administrative exhaustion would have been futile, reasoning that that the plaintiffs should not be required to pay between $500,000 and $1 million to conduct a study in an attempt to prove what the City would not believe. The Court thus reversed the trial court’s judgment and remanded the case for a trial on the takings claim.
During the trial the parties settled the plaintiffs’ temporary takings claim for the lost use of their properties, for $4.25 million, expressly leaving the permanent takings claim. The trial court concluded that plaintiffs’ claim of a permanent taking failed because, under state nuisance law, “the potential for significant land movement in Zone 2, however minor, can only be deemed to constitute . . . a substantial and reasonable interference [with collective social interests].” The trial court also found that the moratorium did “not go too far in regulating plaintiffs’ . . . interests’ in light of its important nature, its negligible effect on permitted uses, and its lack of interference with plaintiffs’ reasonable investment-backed expectations.”
In Monks v. City of Rancho Palos Verdes, 167 Cal.App.4th 263 (2008) (Monks II), the Court again reversed the trial court’s judgment and concluded that by requiring the plaintiffs to establish a gross safety factor of at least 1.5, “the City deprived plaintiffs’ land of all economically beneficial use without proving a justification therefor under state principles of nuisance or property law,” and had therefore violated the state takings clause. The Court held that the moratorium along with resolution No. 2002-43 constituted a categorical taking that “deprive[d] [plaintiffs’] land of all economically beneficial use” under Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1027 (1992).
In January of 2009, three months after publication of Monks II, the City repealed resolution No. 2002-043 and adopted a new resolution allowing the plaintiffs to develop their properties. Nevertheless, the plaintiffs asserted they were also entitled to compensation for the decline in the fair market value of their properties. The trial court disagreed, finding that the City had remedied the permanent taking by repealing resolution No. 2002-43 and enacting a new resolution. The Court of Appeal agreed with the trial court and affirmed. Monks v. City of Rancho Palos Verdes (Mar. 28, 2013, Case No. B237221) [nonpub. opn.] (Monks III).
The Black Litigation
On September 10, 2018, the Second District published the latest decision related to the City’s famous landslides, Black v. City of Ranch Palos Verdes, __ Cal.App.5th __ (2018) (Case No. B285135), holding that eight Zone 2 landowners seeking relief from a building moratorium and damages for inverse condemnation failed to exhaust their administrative remedies. Based on their interpretation of Monks II, none of the landowners even filed an application for an exclusion from the moratorium. Instead, the landowners argued that Monks II absolved them of the need to exhaust administrative remedies or, alternatively, that exhausting administrative remedies would be futile. The trial court rejected those arguments and entered judgment for the City.
In light of the axiom that “cases are not authority for propositions not considered,” the Court of Appeal held that Monks II is not dispositive and that application of its holding in that case to a changed set of circumstances is not appropriate or persuasive. The Court reasoned that its holding in Monks II was about the moratorium in the specific context of a City Council resolution that required Zone 2 property owners to establish a gross (or region-wide as opposed to local, or single-lot only) safety factor of 1.5 or higher as a condition of construction. In other words, the Monks II Court did not consider the moratorium outside the context of resolution No. 2002-043, which was subsequently repealed.
The Black Court noted that the “futility” exception to the exhaustion of administrative remedies requirement is extremely narrow and requires at least some development proposal by the landowner. Only when a governmental agency has as a practical matter defined what development will be allowed, by way of its response to a proposal, may a court then determine whether there has been a taking. The prospect of refusal must be certain or nearly so.
There was no evidence in the record that exhaustion would be futile given that the City took no action on any application for permission to build. The only evidence in the record consisted of statements the landowners elicited after having filed suit. The Court explained that “[i]t is specious to contend that it would be futile to exhaust administrative remedies neither having attempted to do so nor having developed a record establishing futility before filing suit.”
Finally, the Court noted that although the expense of the administrative process can be a factor in determining whether exhaustion is required, it is not the only factor. While the Court was persuaded in Monks I where the parties agreed that exhausting administrative remedies would cost an individual homeowner hundreds of thousands of dollars, if not more than $1 million to reach a conclusion that resolution No. 2002-43 necessarily foreordained, the landowners here simply claimed that they “did not want to hire architects and engineers and pay fees only to see an application for an exclusion rejected.” The Court explained that fees to hire architects and engineers to work with a single parcel are not an “unusual expense” within the meaning of Monks I.
The Black case highlights the importance of exhausting administrative remedies and the rare circumstances in which the futility exception could obviate the need to exhaust. The Monks cases thus have extremely limited applicability, and development proponents should be cautious in relying upon their limited holdings in the land use context.
Questions? Please contact Bryan W. Wenter, AICP of Miller Starr Regalia.
For more than 50 years, Miller Starr Regalia has served as one of California’s leading real estate law firms. Miller Starr Regalia has expertise in all types of real property matters, including full-service litigation and dispute resolution, transactions, acquisitions, dispositions, leasing, financing, common interest development, construction, management, eminent domain and inverse condemnation, exactions, title insurance, environmental law, and land use. Miller Starr Regalia attorneys also write Miller & Starr, California Real Estate 4th, a 12-volume treatise on California real estate law. “The Book” is the most widely used and judicially recognized real estate treatise in California and is cited by practicing attorneys and courts throughout the state. For more information, visit www.msrlegal.com.