City of Vallejo v. Ncorp4, Inc.

• Decision Date: 29 September 2017
• Docket Number: A149907
• Citation: 223 Cal.Rptr.3d 740,15 Cal.App.5th 1078
• Court: California Court of Appeals Court of Appeals
• Parties: CITY OF VALLEJO, Plaintiff and Appellant, v. NCORP4, INC., et al., Defendants and Respondents.

15 Cal.App.5th 1078

223 Cal.Rptr.3d 740

CITY OF VALLEJO, Plaintiff and Appellant,

v.NCORP4, INC., et al., Defendants and Respondents.

A149907

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

Filed September 29, 2017

Colantuono, Highsmith & Whatley, PC, Michael G. Colantuono, Jon R. di Cristina, Pasadena, David J Ruderman, Grass Valley, City of Vallejo, Claudia M. Quintana, Donna Mooney for Plaintiff and Appellant

Law Office of Scot Candell, Scot Candell, San Rafael, for Defendants and Respondents

Pollak, Acting P.J.

The City of Vallejo (Vallejo or city) appeals from the denial of its request for a preliminary injunction to enjoin the operation of a medical marijuana dispensary within the city. The trial court concluded that the city's ordinance conferring limited immunity for the operation of such a dispensary conditioned on the prior payment of a business tax imposes an unconstitutional ex post facto condition and therefore may not be enforced. We disagree and therefore shall reverse the order.

Background

Vallejo's zoning code does not recognize medical marijuana dispensaries as a permitted land use within city limits. (Vallejo Mun. Code, §§ 16.06.010-16.06.630.) An unpermitted use is declared to be "a public nuisance." (Id. , § 16.100.040.) Vallejo recently adopted Ordinance No. 1715 granting limited immunity to those medical marijuana dispensaries that meet various requirements, including the past payment of local business taxes. (Id. , §§ 7.100.010, 7.100.080(A)(3).)

Defendant NCORP4, Inc. (NCORP4), doing business as Nature's Love Collective, is a nonprofit corporation operating a medical marijuana dispensary in Vallejo. Defendants Marc Hewitt and Gerome Tango manage the business. Vallejo denied NCORP4's application for limited immunity for failure to pay taxes, among other reasons, but the dispensary continues to operate. The city brought this action to enjoin the dispensary as a public nuisance. The trial court denied the city's request for a preliminary injunction, concluding that the ordinance improperly conditions immunity upon past payment of business taxes.

Marijuana Laws

Federal law prohibits the use, possession, manufacture and sale of marijuana. ( City of Riverside v. Inland Empire Patients Health & Wellness Center, Inc. (2013) 56 Cal.4th 729, 738-739, 156 Cal.Rptr.3d 409, 300 P.3d 494 ( City of Riverside ); see generally 21 U.S.C. § 801 et seq. ) A number of states, including California, have less restrictive marijuana laws. In 1996, the voters of California adopted an initiative measure permitting medicinal use and, in 2004, the Legislature enacted a statute to enhance access to medicinal marijuana. ( City of Riverside, supra, at p. 739, 156 Cal.Rptr.3d 409, 300 P.3d 494.) In 2016, the voters approved Proposition 64 legalizing marijuana for recreational use by adults, subject to various conditions. (See, e.g., Health & Saf. Code, §§ 11358 - 11359.)

While permitting the use of marijuana, California law "does not thereby mandate that local governments authorize, allow, or accommodate the existence of" marijuana dispensaries. ( City of Riverside, supra, 56 Cal.4th at p. 759, 156 Cal.Rptr.3d 409, 300 P.3d 494.) " ‘Land use regulation in California historically has been a function of local government.’ " ( Id. at p. 742, 156 Cal.Rptr.3d 409, 300 P.3d 494.) "A county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws." ( Cal. Const., art. XI, § 7.) State law permitting medicinal marijuana use and distribution does not preempt "the authority of California cities and counties, under their traditional land use and police powers, to allow, restrict, limit, or entirely exclude facilities that distribute medical marijuana, and to enforce such policies by nuisance actions." ( City of Riverside, supra, at p. 762, 156 Cal.Rptr.3d 409, 300 P.3d 494.) The same principle applies to recreational marijuana use, as Proposition 64 expressly provides that state regulations do not "limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate" marijuana dispensaries "or to completely prohibit" their "establishment or operation." ( Bus. & Prof. Code, § 26200, subd. (a)(1).)

Vallejo's Ordinances

Vallejo has several ordinances affecting the operation of medical marijuana dispensaries. The starting point is its zoning ordinance, which predates state medical marijuana laws. Vallejo's zoning ordinance provides an extensive list of permitted land uses and prohibits all other uses. (Vallejo Mun. Code, §§ 16.06.010-16.06.630.) An unpermitted use is declared to be "a public nuisance." (Id. , § 16.100.040.) Vallejo has never recognized medical marijuana dispensaries as a permitted land use. A marijuana dispensary is not a designated land use and, therefore, is an unpermitted nuisance. (Id., §§ 16.06.010-16.06.630, 16.100.040; see City of Corona v. Naulls (2008) 166 Cal.App.4th 418, 433, 83 Cal.Rptr.3d 1 [enjoining operation of a medical marijuana dispensary upon finding that "where a particular use of land is not expressly enumerated in a city's municipal code as constituting a permissible use, it follows that such use is impermissible "].)¹

In 2011, Vallejo city officials studied the impact of medical marijuana establishments and possible regulatory responses. On May 24, 2011, city officials presented a report on the matter to the mayor and city council.² The report noted that marijuana dispensaries were not permitted under the city's zoning ordinance but were, nonetheless, "proliferat[ing]." The report proposed a combined regulatory and taxation approach. Noting a lack of financial resources to enforce land use restrictions, a local marijuana tax was recommended as an initial step. "A business license tax would have the sole purpose to raise revenue for municipal purposes and would not be intended to regulate, sanction, condone or authorize any activity connected with the possession and distribution of marijuana, unless otherwise authorized by both state and federal law." The city council decided to seek voter approval of an ordinance taxing marijuana businesses.

In November 2011, the voters approved Measure C, entitled "Vallejo Marijuana Business License Tax Measure."³ The measure enacted an ordinance taxing gross receipts from the cultivation and sale of marijuana within the city. The "City Attorney's Impartial Analysis of Measure C" advised the voters that the proposed measure would tax marijuana businesses but "does not legalize or otherwise permit marijuana businesses in Vallejo." The argument in favor of Measure C, written by several city councilmembers, said "Nearly twenty marijuana businesses are operating in the City of Vallejo, and are not being taxed or regulated. ... [¶] The passage of this business license tax is the first necessary step in taxing and regulating these businesses. The city is currently working on separate ordinances to control and limit the number of marijuana businesses."

Measure C expressly states that it "is enacted solely to raise revenue for municipal purposes and is not intended for regulation." (Vallejo Mun. Code, § 5:05:010.) Nothing in the measure "shall be deemed to repeal, amend, be in lieu of, replace or in any way affect any requirements for any license or permit required by ... any other ordinance of the city" (id. , § 5.05.200) nor does "payment of a business license tax" entitle "any person to carry on any marijuana business unless the person has complied with all of the requirements" of Vallejo's municipal code and "all other applicable laws" (id. , § 5.05.220). Measure C provides that it "may be repealed or amended by the city council without a vote of the people" but "voter approval is required for any amendment provision that would increase the rate of any tax" beyond 10 percent. (Id. , § 5.05.640.)

Measure C imposes financial penalties for delinquency. (Vallejo Mun. Code, § 5.05.290.) It makes any amount owed a debt to the city subject to civil enforcement (id., § 5.05.540), declares any violation of its requirements a misdemeanor (id., § 5.05.600), and makes the remedies and penalties it imposes cumulative (id. , § 5.05.630). The business tax was implemented in March 2012. (Id. , § 5.05.250(C).)

The business tax was suspended in February 2015. The city council found there had been a "proliferation of medical marijuana dispensaries" and that "accepting taxes from those engaged in an activity that is not lawful under the city's land use regulations tends to confuse the public as to the city's policy and undermines enforcement of the city's land use controls." The city undertook to draft an ordinance limiting the number of dispensaries before reinstating the tax.

In July 2015, the city council adopted Ordinance No. 1715, which is the ordinance at issue on this appeal.⁴ The council determined there were more than 40 medical marijuana businesses operating in the city despite being a prohibited use under the zoning ordinance. The council declared: "the city wishes to resume collection of marijuana tax and also address the continued proliferation of unauthorized medical marijuana dispensaries in the city by accepting tax from, and granting limited immunity from enforcement of its prohibition on medical marijuana dispensaries under the Vallejo Municipal Code to, those medical marijuana dispensaries that meet certain criteria, until the number of medical marijuana dispensaries is reduced to no more than four ...."

The council chose "limited civil immunity" as "a vehicle that will allow those existing medical marijuana dispensary operators that have obtained tax certificates and paid their quarterly taxes" to operate. Ordinance No. 1715 provides that a medical marijuana dispensary is, and remains, an unpermitted land use under the zoning ordinance (Vallejo Mun. Code, § 7.100.030) but "a limited immunity shall be available and may be asserted as an affirmative...