Oceanic California, Inc. v. City of San Jose

• Decision Date: 21 August 1980
• Docket Number: No. C-78-2622 AJZ.,C-78-2622 AJZ.
• Citation: 497 F. Supp. 962
• Parties: OCEANIC CALIFORNIA, INC., a California Corporation, Plaintiff, v. CITY OF SAN JOSE, a Municipal Corporation, Defendant.
• Court: U.S. District Court — Northern District of California

497 F. Supp. 962

OCEANIC CALIFORNIA, INC., a California Corporation, Plaintiff, v. CITY OF SAN JOSE, a Municipal Corporation, Defendant.

No. C-78-2622 AJZ.

United States District Court, N. D. California.

August 21, 1980.

Ellman, Passovoy & Burke, Howard N. Ellman, San Francisco, Cal., for plaintiff.

Berliner, Cohen & Biagini, Andrew L. Faber, Robert Logan, City Atty. of San Jose, San Jose, Cal., for defendant.

OPINION AND ORDER DENYING MOTION FOR ABSTENTION AND GRANTING MOTION TO DISMISS

ZIRPOLI, District Judge.

Plaintiff, Oceanic California, Inc. (hereinafter "Oceanic") alleges in its First Amended Complaint that defendant, the City of San Jose ("the City"), has deprived it of "the entire, economic beneficial use" of its property, some 7,300 acres of land lying within the City. Oceanic charges that the City has forced Oceanic to hold the land as a "public viewshed," with no corresponding benefit accruing to Oceanic and without just compensation from the City. The complaint is premised exclusively on the Fifth and Fourteenth Amendments of the United States Constitution.

Four claims for relief are set forth. The first seeks damages in inverse condemnation for the asserted unconstitutional taking of the property, in the amount of $30 million. The second seeks a declaratory judgment that the land has been taken, through regulations and other "purported exercises of the police power" which were and are arbitrary, capricious, unreasonable and discriminatory. The judgment sought would declare the offending land use regulations invalid to the extent they have effected a taking of Oceanic's property. The third seeks, as an alternative to the damages sought in the first claim, a mandatory injunction ordering the City to adopt regulations which will allow the City a "reasonable, economic beneficial use of its property." The court is asked to retain jurisdiction following issuance of the requested order to ensure that the City does not fail to comply "by artifice, subterfuge and delay." Complt. paras. 3, 38-40. The fourth, added by amendment, alleges a separate taking with respect to taxes and assessments imposed on Oceanic, assertedly for the purpose of paying for "urban services" to the property, services which the City allegedly represented it would provide but never did provide. The theory of this fourth claim is that the withholding of the services, specifically, sewer lines, and the simultaneous assessment of taxes and levies therefor against Oceanic, amounted to a deprivation of the funds paid. Oceanic seeks the amount of those funds as recovery.

This court's jurisdiction is proper under 28 U.S.C. sections 1331 and 2201.

The City moves the court to dismiss the complaint for failure to state a claim, Fed. R.Civ.P. 12(b)(6), or, in the alternative, to abstain from the exercise of jurisdiction.

Allegations of the complaint

The pleading under scrutiny is lengthy and a detailed recitation of Oceanic's versions of the history of the City's actions, representations, land use policies, regulations, and planning activity with respect to the property. Although the complaint perhaps does not comport with the letter of Rule 8(a)(2), Fed.R.Civ.P., it is apparent that Oceanic's theory of the case has dictated its decision to file this prolix and complex pleading. Oceanic does not purport to premise its taking claim on the existence of a zoning ordinance. Nor is any expressly facial attack made on the City's general plan¹ or other official statement or enactment pertaining to land use policy. Instead, the complaint is leveled at the City's alleged deliberate creation of a "regulatory condition" whereunder "all feasible development" of the property is rendered impossible, even though, for example, the most recent general plan purports to permit various uses.² Oceanic further charges that even the permitted uses under the general plan would yield "no economic, beneficial use"; specifically, each permitted use "would cost more to implement and maintain than the gross income therefrom would yield." Complt. para. 12. The complaint is aimed at the City's alleged intent, as manifested in the history of conduct recited, to force Oceanic to maintain the land as a public viewshed at Oceanic's sole expense after a long period of fostering its expectations of intensive residential development. However, the averments are not easily encapsulated and merit further explication.

The court, in proceeding to a more particular scrutiny of the complaint, is mindful of the liberal standards to which the allegations are to be held on a motion to dismiss and of the fact that those standards are not made more severe because an ostensible exercise of governmental police power is challenged. See Jacobson v. Tahoe Regional Planning Agency, 566 F.2d 1353, 1359 n.9 (9th Cir. 1978), modified on other grounds sub nom. Lake Country Estates v. Tahoe Planning Agency, 440 U.S. 391, at 397 n. 11, 99 S.Ct. 1171 at 1175 n.11, 59 L.Ed.2d 401 (1979). At the same time, the court is not bound to ignore legally significant facts disfavorable to plaintiff which appear on the face of the complaint or which are proper subjects of judicial notice; if such facts create an insurmountable obstacle to obtaining relief, dismissal is proper. See Thomas W. Garland, Inc. v. City of St. Louis, 596 F.2d 784, 787 (8th Cir. 1979) (dicta); 2A Moore's Fed.Prac. ¶ 12.08 at 2271 (2d ed. 1979). With these considerations in mind, the court turns to the factual averments tested by the City's motion.

Oceanic is a land developer. In the early 1960's its predecessor³ purchased some 11,000 acres of land in a then—unincorporated portion of Santa Clara County. The property is about fifteen miles from the City's downtown area, in a hilly region in the path of the seventeen mile long Coyote Valley Park Chain. Within the approximately 7,300 acres now within San Jose and at issue in this case there is a golf course and the Lake Anderson Recreational Facility. (Whatever monetary return or other value Oceanic may derive from these uses of the property does not appear from the complaint, nor from the exhibits appended thereto.)

Oceanic claims that the City induced it to buy the land in the first place, on the representation that the City would fully support intensive urban development there. Specifically, San Jose's then City Manager flew to Hawaii in 1963 to persuade plaintiff's board of directors to invest in land for development, and promised the City's full cooperation; Oceanic would not have made the purchase without that representation.

Also in 1963, the City annexed the 7,300 acres and zoned it under two classifications, R-1:B-1 and R-1:B-3. These permitted one family dwelling per 10,000 square feet and one family dwelling per acre, respectively. The land has not since been rezoned.

In the late 1960's, Oceanic successfully developed that portion of the 11,000 acres which fell within the City of Morgan Hill or within still-unincorporated portions of Santa Clara County.

The complaint places these and subsequent events against a backdrop of the City's former "well-publicized policy" of promoting rapid urban expansion, and its search for a developer whose resources and holdings would be sufficient to undertake the creation of a "new town" project. Complt. paras. 16-17. The new town project Oceanic contemplated then (in the 1960's) was to have: (1) extended over most of the 11,000 acres, (2) included commercial and service facilities as well as residences, and (3) housed an ultimate population of about 100,000.

Oceanic lists a number of "illustrative" instances of what it terms the City's "strong encouragement of the New Town Project, and of Plaintiff's efforts to accommodate the City's desires." Complt. para. 20. Among these are the following two:

In 1966, City held a municipal election in which Measure H, providing for Four Million Dollars ($4,000,000.00) in bonded indebtedness for a sanitary sewer system, was put on the ballot. In the campaign preceding said election, City represented that funds obtained through the sale of the bonds sought to be approved by said Measure H would be expended in part on the construction of a sewage system serving the . . . Property. The voters approved Measure H. Accordingly, in every year from 1966 until 1975, City's Capital Improvement Program allocated in excess of Seven Hundred Thousand Dollars ($700,000.00) of the 1966 bond fund to construction of a sanitary sewer system for the . . . Property. This allocation has now been deleted.

City participated in discussions between Plaintiff and the California Division of Highways (subsequently Caltrans) regarding construction of the proposed South Valley Freeway and appropriate access roads to serve the New Town Project, and on August 21, 1967, entered into an agreement with the Department of Public Works as to the freeway route and appropriate interchanges. The settlement between Plaintiff and Caltrans as to a right of way on the . . . Property contemplated that City would participate in constructing certain access roads to link the new freeway to the New Town Project.

Complt. paras. 20(c) and (f).

The above recitations, in conjunction with paragraphs 26(a), (b) and (d), are set forth in evident support of the fourth claim for relief as well as in support of the complaint's allegation that the City reneged on its "prior commitments to support intensive urban development" on the Oceanic land. Complt. para. 26.⁴

Oceanic asserts that it made "major expenditures" in "reasonable reliance" on the City's support. It states that these costs were incurred to collect geologic and engineering data, to "analyze the cost and fiscal impact of the New Town Project," and to "prepare appropriate applications for rezoning, subdivision approval and related permits," Complt. para. 20.

In 1970 the City "initiated" an "Urban Redevelopment Policy" designating the property as "urban reserve": land not readily...