Dryden Oaks, LLC v. San Diego Cnty. Reg'l Airport Auth., D069161

• Decision Date: 26 September 2017
• Docket Number: D069161
• Citation: 224 Cal.Rptr.3d 333,16 Cal.App.5th 383
• Court: California Court of Appeals Court of Appeals
• Parties: DRYDEN OAKS, LLC et al., Plaintiffs and Appellants, v. SAN DIEGO COUNTY REGIONAL AIRPORT AUTHORITY et al., Defendants and Respondents.

16 Cal.App.5th 383

224 Cal.Rptr.3d 333

DRYDEN OAKS, LLC et al., Plaintiffs and Appellants,

v.SAN DIEGO COUNTY REGIONAL AIRPORT AUTHORITY et al., Defendants and Respondents.

D069161

Court of Appeal, Fourth District, Division 1, California.

Filed September 26, 2017

As Modified on Denial of Rehearing October 19, 2017

Freeland McKinley & McKinley, Steven A. McKinley and Karen G. McKinley, San Diego for Plaintiffs and Appellants.

San Diego County Regional Airport Authority and Amy Gonzalez ; Gatze Dillon & Ballance LLP, Lori D. Ballance, Stephen F. Tee and Michael P. Masterson for Defendant and Respondent San Diego County Regional Airport Authority.

Thomas E. Montgomery, County Counsel, Judith A. McDonough and John P. Cooley, Deputy County Counsel for Defendant

and Respondent County of San Diego.

DATO, J.

In 2001, Michael Durkin used two limited liability companies—Dryden Oaks LLC and Durkin-CAC Lot 24, LLC—to purchase two lots directly adjacent to the McClellan Palomar Airport (Airport) in the City of Carlsbad, California (City). His development plans for the two lots were initially successful despite determinations by the San Diego County Regional Airport Authority (Authority) that the proposed projects were not compatible with the Airport. Overriding the Authority's objections, the City issued a planned industrial permit and Durkin completed the construction of a commercial building on one of the lots in 2005. He also obtained a permit from the City for construction of a second building on the other lot. Both permits included provisions in which Durkin agreed to hold the City harmless for any liability arising out of approval of the projects.

Durkin's permit on the second lot expired in 2012 without the commencement of any construction. By the time Durkin sought to restart the permitting process with the City, the Authority had adopted an Airport Land Use Compatibility Plan (ALUCP) that designated Durkin's properties as being within a Safety Zone that carries specific limiting recommendations for compatible land uses. Despite having approved Durkin's previous permit application, the City now refused to override the recommendations in the ALUCP.

Under California law, it is the City that bears ultimate responsibility for deciding which property development projects to permit. But apparently unable or unwilling to sue the City, in February 2014 Durkin filed an inverse condemnation action against the Authority and the County of San Diego (County). Durkin's complaint asserted that the value of his property was depressed by the Authority's 2010 adoption of the ALUCP and that the decrease in value constituted a governmental taking requiring the County and the Authority to provide compensation.

We conclude the trial court properly entered summary judgment in favor of the County and the Authority on the ground that undisputed evidence shows there was no taking by these defendants. To the extent Durkin has any arguable claim, which we express no opinion on, it would be against the City. Based on established legal principles, nothing done by the Authority or the County amounts to a taking of Durkin's property. Accordingly, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

At the time the complaint was filed, Dryden Oaks owned a parcel of real property known as Lot 25 and Durkin-CAC owned a parcel known as Lot 24. The two lots are located in the County of San Diego and the City of Carlsbad at the west end of the Airport, adjacent to the end of a runway. When Durkin purchased the lots, they were designated as part of the Airport's Runway Protection Zone (RPZ) on the County's Airport Layout Plan (ALP), a long-range planning tool that preceded the ALUCP. The Federal Aviation Administration defines a RPZ as "[a]n area at ground level prior to the threshold or beyond the runway end to enhance the safety and protection of people and property on the ground." In March 2000, Durkin entered into an agreement to purchase Lots 24 and 25 (and a third lot, Lot 23, not at issue in the litigation), which were part of a development known as the Carlsbad Airport Centre, from the Callaway Golf Company. Durkin visited the property 14 times prior to signing the purchase agreement and observed the lots' proximity to the airport.

The transaction was in escrow for approximately 15 months, closing in June 2001. Durkin paid $474,000 for Lot 24 and $310,000 for Lot 25. Prior to the close of the transaction, Durkin submitted an application to the City for a permit to construct a 29,000 square foot industrial building on Lot 24. In December 2001, the City submitted the application to the Authority for a determination as to whether the proposed project was consistent with the 1994 Comprehensive Land Use Plan for the Airport, a predecessor plan to the ALUCP. Roughly two months later, the Authority issued a determination that it could not make an administrative finding that the project was consistent with that plan because the property was "located within the 75 CNEL zone of the McClellan-Palomar Airport" and the proposed industrial development was not compatible. The Authority's letter communicating its decision indicated that the City could pursue the development through the override procedures contained in Public Utilities Code section 21676.¹

In June 2002, the City passed a resolution overriding the Authority's determination "as to noise compatibility only" conditioned on "internal noise reduction, Notices of Restrictions, Hold Harmless Agreements, and exemptions from outdoor eating area requirements ...." It also issued planned industrial permits (PIP No. 00-04 and PIP No. 00-04(A)) to Durkin. Each permit contained an indemnification clause in which Durkin agreed to hold the City harmless from all liabilities arising out of the approval, development and operation of the project and to execute "a Hold Harmless Agreement regarding aircraft operations and aircraft noise prior to issuance of grading or building permits" to be "reviewed and approved by the City Attorney ...." Durkin also gave the County an avigation easement for Lot 24 in the process of developing the property. Thereafter, the project was finished and the building has been leased to various tenants since 2005.²

Plans for Lot 25 proceeded on a slower schedule, and it was not until October 2006 that Durkin submitted an application to the City for a planned industrial permit to construct a 30,000 square foot two-story industrial building. As with the project on Lot 24, after Durkin submitted his permit application the plans were submitted to the Authority for a determination as to whether the project was consistent with the applicable airport compatibility plan, which at that time was the 2004 Airport Land Use Compatibility Plan. In February 2007, the Authority provided notice to the City that the Lot 25 project was not consistent with that compatibility plan.

The City also submitted the project proposal to the California Department of Transportation (Caltrans) for comment. In its October 2007 response, Caltrans noted that the proposed development was within the "Runway Protection Zone (RPZ) as depicted on the Federal Aviation Administration (FAA) approved Airport Layout Plan" and was therefore " ‘very high risk’ due to its proximity to the end of the runway." The letter also noted that the "Caltrans Airport Land Use Planning Handbook (Handbook) generally recommends prohibiting all new structures within the RPZ."

Thereafter, as it had with respect to Lot 24, the City voted to override the Authority's determination that the project was inconsistent with the Compatibility Plan and approved Durkin's permit application (PIP No. 06-19). Also, as with Lot 24, the permit required Durkin to hold the City harmless with respect to its development of the property. The permit for Lot 25 stated that "the project is consistent with the safety requirements of the Runway Protection Zone of the currently adopted Airport Land Use Compatibility Plan for the McClellan-Palomar (ALUCP), dated October 2004 .... However, according to the Department of Transportation, Division of Aeronautics and the Federal Aviation Administration, the project is located within the Runway Protection Zone as depicted on the May 13, 2004 Federal Aviation Administration approved Airport Layout Plan."

In October 2009, the City issued a three-year extension of the permit for Lot 25, extending its expiration date to 2012.³ Durkin, however, did not pursue the development of the property before the permit expired. In the interim, the Authority adopted the ALUCP based, in part, on the County's existing ALP. The ALUCP designates six different Safety Zones for purposes of determining compatible land uses. The most restrictive is Safety Zone 1, which encompasses the RPZ designated in the ALP. In 2012, the City amended its general plan to ensure its consistency with the ALUCP.

On November 5, 2013, Durkin submitted a preliminary review application to the City to restart the process for the development of Lot 25. The City responded with a letter dated December 3, 2013, outlining the history of the project and explaining that despite the earlier approval the proposed development was no longer feasible because the ALUCP was more restrictive than the prior compatibility plan and the application's proposed use of "research and development" was not permissible. Thereafter, Durkin took no further step to develop the property and in early 2015 sold Lot 25 to Baker Parking LLC for $1.5 million.⁴

Prior to the sale of Lot 25, in February 2014, Durkin filed the underlying complaint against the Authority and the County. The complaint contains four causes of action—two separate claims for inverse condemnation for each lot (causes of action one and three), and two separate claims for "unreasonable pre-condemnation delay and conduct" for each lot (causes of action two and four). It alleges that the Authority's adoption of the ALUCP designating Lots 24 and 25 as part...