1901 First St. Owner, LLC v. Tustin Unified Sch. Dist.

• Decision Date: 29 March 2018
• Docket Number: G054086
• Citation: 231 Cal.Rptr.3d 84,21 Cal.App.5th 1186
• Court: California Court of Appeals Court of Appeals
• Parties: 1901 FIRST STREET OWNER, LLC, Plaintiff and Appellant, v. TUSTIN UNIFIED SCHOOL DISTRICT, Defendant and Respondent.

21 Cal.App.5th 1186

231 Cal.Rptr.3d 84

1901 FIRST STREET OWNER, LLC, Plaintiff and Appellant,

v.TUSTIN UNIFIED SCHOOL DISTRICT, Defendant and Respondent.

G054086

Court of Appeal, Fourth District, Division 3, California.

Filed March 29, 2018

As Modified April 5, 2018

Jackson Tidus, Michael L. Tidus, Irvine, Gregory P. Regier, Westlake Village, and Nedda Mahrou for Plaintiff and Appellant.

Bowie, Arneson, Wiles & Giannone, Wendy H. Wiles, Newport Beach, Jeffrey W. Frey ; Atkinson, Andelson, Loya, Ruud & Romo, Wendy H. Wiles and Jeffrey W. Frey for Defendant and Respondent.

OPINION

IKOLA, J.

Plaintiff 1901 First Street Owner, LLC (First Street), appeals from a judgment which interpreted the meaning and application of Government Code section 65995, subdivision (b)(1), in a manner favorable to defendant Tustin Unified School District (the District).¹ First Street is the developer of an apartment complex. The underlying dispute arose after the City of Santa Ana (the City) had calculated the square footage of the development for purposes of assessing a school impact fee. The District disputed the City's method of calculating the assessable space and filed an administrative appeal. Before that appeal was resolved, the City revised its calculation in the District's favor, prompting First Street to file an administrative appeal. First Street prevailed in its administrative appeal and subsequently filed the present lawsuit against the District, alleging various tort causes of action and seeking declaratory relief and a writ of mandate ordering the District to refund the excess school fees. The court dismissed the tort claims pursuant to an anti-SLAPP motion, which we affirmed in a separate appeal. ( 1901 First Street Owner, LLC v. Tustin Unified School Dist. (Nov. 9, 2017, G053201 [nonpub. opn.].) 2017 WL 5185147 ) The case proceeded on the declaratory relief claim and writ petition, as well as a cross-complaint by the District for an administrative writ of mandate. The court found in favor of the District, and First Street appealed from the judgment.

The disputed issue boils down to whether the square footage of interior space outside the individual apartment units should be included in the calculation of school impact fees (e.g. interior hallways, storage rooms, mechanical rooms, fitness centers, lounges, etc.—we refer to this as interior common area). Section 65995, subdivision (b)(1), defines "[a]ssessable space" as "all of the square footage within the perimeter of a residential structure, not including any carport, covered or uncovered walkway, garage, overhang, patio, enclosed patio, detached accessory structure, or similar area." It requires the city building department to make that calculation in accordance with its "standard practice ... in calculating structural perimeters."

First Street makes three arguments on appeal. First, it contends the "residential structure" is the apartment unit, and that various exclusions in the statute omit all interior common area. Second, even if such contention is wrong, First Street argues the City's standard practice must govern, and the evidence shows the City's standard practice was to exclude interior common area. Third, First Street had a vested right to develop the project, and it argues an implication of that right is that the City's method of calculating school impact fees could not be changed. We reject these arguments and affirm the judgment.

FACTS²

The underlying facts are essentially undisputed. First Street is the developer of a residential project that includes a five-story apartment building. Before obtaining building permits, First Street was required to pay a school impact fee to the District. ( Ed. Code, § 17620, subd. (b).) To that end, First Street submitted a worksheet to the City containing its square footage totals. First Street calculated the square footage using a "net rentable" method, which was the City's standard practice at that time. This method calculated the square footage of the individual apartment units, but excluded everything else in the building. The City accepted First Street's calculation of 272,943 square feet of residential space and informed the District.

The District responded with a letter from its legal counsel objecting to the net rentable method. In particular, the District argued that method did not include "all of the square footage within the perimeter of a residential structure" pursuant to section 65995, subdivision (b)(1), and, as such, "is not permissible under the Government Code or Education Code." The City's attorney responded with a letter reaffirming that the net rentable method was its "standard practice" pursuant to section 65995.

This prompted the District to file an administrative appeal pursuant to Santa Ana Ordinance No. NS-2792, section 3-2(2) of the Santa Ana Municipal Code. Rather than contest the appeal, the City decided to abandon its net rentable method. The City's revised square footage calculation was based on the perimeter of the building and resulted in an increase of approximately 70,000 square feet, increasing the fee by $238,549.86. First Street, of course, objected to the change, arguing that any change in policy could not be retroactively applied to the development. When the City did not relent, First Street filed its own administrative appeal. In the meantime, First Street paid the increased fees under protest.

The administrative hearing officer found in favor of First Street, concluding that the City's standard practice of calculating net rentable space must govern. He did not address whether the City's net rentable method complied with section 65995 and ordered the District to refund the portion of the fees First Street had paid under protest.

The District refused to refund the fees, prompting First Street to file the present lawsuit. First Street's verified complaint/petition for writ of mandate asserted causes of action for declaratory relief, violation of the Mitigation Fee Act (§ 66000 et seq.), intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, and interference with contractual relations. In addition to declaratory relief and damages, First Street sought a writ of mandate ordering the District to refund the excess fees. The District cross-petitioned for a writ of administrative mandate to order the City to set aside the decision of the administrative hearing officer. The District also filed an anti-SLAPP motion to dismiss the tortious interference claims that was granted by the court, which we affirmed in a separate appeal. ( 1901 First Street Owner, LLC v. Tustin Unified School Dist. , supra , G053201.)

The remaining causes of action proceeded to a bench trial; after which the court found in favor of the District. The court interpreted section 65995, subdivision (b)(1), as precluding the net rentable method the City had initially used. That method, the court commented, "entirely ignored the mandate of" section 65995, subdivision (b)(1). The court denied First Street's claims for relief and issued the writ of administrative mandate sought by the District. First Street appealed.

DISCUSSION

We begin with the central question of this appeal: Does "[a]ssessable space," as defined in section 65995, include interior common area? The interpretation of a statute is an issue we review de novo.

( Fishback v. County of Ventura (2005) 133 Cal.App.4th 896, 902, 35 Cal.Rptr.3d 199.) We conclude it does.

Education Code section 17620, subdivision (a)(1), authorizes a school district to levy a fee on new residential construction: "The governing board of any school district is authorized to levy a fee, charge, dedication, or other requirement against any construction within the boundaries of the district, for the purpose of funding the construction or reconstruction of school facilities, subject to any limitations set forth in Chapter 4.9 (commencing with Section 65995) of Division 1 of Title 7 of the Government Code."

Government Code section 65995, subdivision (b)(1), calculates the applicable fee as follows: "In the case of residential construction ... one dollar and ninety-three cents ($1.93) per square foot of assessable space. ‘Assessable space,’ for this purpose, means all of the square footage within the perimeter of a residential structure, not including any carport, covered or uncovered walkway, garage, overhang, patio, enclosed patio, detached accessory structure, or similar area. The amount of the square footage within the perimeter of a residential structure shall be calculated by the building department of the city or county issuing the building permit, in accordance with the standard practice of that city or county in calculating structural perimeters."³

The definition of "assessable space" begins with the perimeter of a residential structure . If we were to stop there and consider only the plain language of the statute, interior common area clearly constitutes assessable space. The only way this interpretation could be avoided would be to conclude that residential "structure" refers to an individual apartment unit. But that would be an extremely strained interpretation of the word "structure." Moreover, the education fee applies to residential "construction" ( § 65995, subd. (b)(1) ), and "construction" is defined as "new construction and reconstruction of existing building for residential [use] ...." (Id. , subd. (d), italics added.) Use of the word "building" cuts strongly against the notion that the "structure" is an individual apartment unit.

First Street attempts to recast the term "structure" by referring to section 65995.5, which provides an alternative method of calculating a school impact fee (that was not utilized here).⁴ That method requires, among other things, the calculation of "the projected total square footage of assessable space of residential units anticipated to be constructed during the next five-year period." (Id. ...