San Remo Hotel v. SAN FRACISCO CITY & CTY

• Decision Date: 04 March 2002
• Docket Number: No. S091757.,S091757.
• Citation: 41 P.3d 87,27 Cal.4th 643,117 Cal.Rptr.2d 269
• Court: California Supreme Court
• Parties: SAN REMO HOTEL L.P., et al., Plaintiffs, Cross-defendants and Appellants, v. CITY AND COUNTY OF SAN FRACISCO et al., Defendants, Cross-complainants and Respondents.

117 Cal.Rptr.2d 269

27 Cal.4th 643

41 P.3d 87

SAN REMO HOTEL L.P., et al., Plaintiffs, Cross-defendants and Appellants, v. CITY AND COUNTY OF SAN FRACISCO et al., Defendants, Cross-complainants and Respondents.

No. S091757.

Supreme Court of California.

March 4, 2002.

Law Offices of Andrew M. Zacks, Andrew M. Zacks, San Francisco, James B. Kraus; Law Offices of Paul F. Utrecht and Paul F. Utrecht, San Francisco, for Plaintiffs, Cross-defendants and Appellants.

Daniel J. Popeo, R. Shaw Gunnarson; and Alexander Dushku for Washington Legal Foundation as Amicus Curiae on behalf of Plaintiffs, Cross-defendants and Appellants.

Law Offices of Richard R. Dale and Richard R. Dale, Mill Valley, for Harsch Investment Corp. as Amicus Curiae on behalf of Plaintiffs, Cross-defendants and Appellants.

R.S. Radford, Sacramento, and John A. Ramirez, Mill Valley, for Pacific Legal Foundation as Amicus Curiae on behalf of Plaintiffs, Cross-defendants and Appellants.

Nielsen, Merksamer, Parrinello, Mueller & Naylor, John E. Mueller and James R. Parrinello, Mill Valley, for San Francisco Association of Realtors and The Coalition for Better Housing as Amici Curiae on behalf of Plaintiffs, Cross-defendants and Appellants.

Paul B. Campos, San Ramon; Nicholas J. Cammarota; and David C. Smith for the California Building Industry Association, Home Builders Association of Northern California and Building Industry Legal Defense Foundation as Amici Curiae on behalf of Plaintiffs, Cross-defendants and Appellants.

Louise H. Renne, City Attorney, Andrew W. Schwartz, Susan S. Cleveland and Ellen Forman, Deputy City Attorneys, for Defendants, Cross-complainants and Respondents.

Timothy J. Dowling and William Higgins, San Leandro, for 67 California Cities, the County Counsels' Association of California and the International Municipal Lawyers Association as Amici Curiae on behalf of Defendants, Cross-complainants and Respondents.

Goldfarb & Lipman, San Francisco, and Richard A. Judd for American Planning Association as Amicus Curiae on behalf of Defendants, Cross-complainants and Respondents.

Bill Lockyer, Attorney General, Richard M. Frank, Chief Assistant Attorney General, J. Matthew Rodgriquez, Assistant Attorney General, and Daniel L. Siegel, Deputy Attorney General, for People of the State of California as Amicus Curiae on behalf of Defendants, Cross-complainants and Respondents.

WERDEGAR, J.

Plaintiffs, the owners and operators of the San Remo Hotel in San Francisco, sought approval from the City and County of San Francisco to rent all rooms in the San Remo Hotel to tourists or other daily renters, rather than to longer term residents. Plaintiffs eventually received approval but, in the process, were required to (1) comply with zoning laws by obtaining a conditional use permit for use of their property as a tourist hotel, and (2) help replace the residential units San Francisco claimed would be lost by the conversion, pursuant to the city's Residential Hotel Unit Conversion and Demolition Ordinance (S.F.Admin.Code, ch. 41) (hereafter the HCO), which plaintiffs elected to do by paying an in lieu fee into a governmental fund for the construction of low- and moderate-income housing.

Plaintiffs challenged the conditional use permit requirement by petition for writ of administrative mandate (Code Civ. Proc, § 1094.5), pled as the first cause of action in their second amended complaint, and challenged the housing replacement requirement by four additional causes of action alleging the taking of private property without just compensation in violation of article I, section 19 of the California Constitution.¹ The trial court denied the writ petition and sustained a demurrer to the takings counts. The Court of Appeal reversed.

Based on the administrative record and the pleadings, and guided by established legal principles, we conclude the trial court properly denied the petition for writ of administrative mandate and sustained the demurrer as to the remaining causes of action. We will therefore reverse the judgment of the Court of Appeal insofar as the appellate court reversed the trial court's judgment for defendant City and County of San Francisco.

I. BACKGROUND

Plaintiffs are San Remo Hotel L.P., a limited partnership; its general partner, T & R Investment Corp.; and its limited partners, Thomas and Robert Field. Defendants are the City and County of San Francisco, and the various agencies and agents through which it acted (collectively the City, or San Francisco).

Because the proceedings below turned on the application and validity of two bodies of local San Francisco law, we first summarize those ordinances.

A. The San Francisco Hotel Conversion Ordinance

The HCO, codified in chapter 41 of the San Francisco Administrative Code, was first enacted in 1981 (S.F.Ord. No. 330-81) and was substantially revised in 1990 (S.F.Ord. No. 121-90).² Its purpose is to "benefit the general public by minimizing adverse impact on the housing supply and on displaced low income, elderly, and disabled persons resulting from the loss of residential hotel units through their conversion and demolition." (HCO, § 41.2.) Accompanying the ordinance are findings that the City suffers from a severe shortage of affordable rental housing; that many elderly, disabled and low-income persons reside in residential hotel units; that the number of such units had decreased by more than 6,000 between 1975 and 1979; that loss of such units had created a low-income housing "emergency" in San Francisco, making it in the public interest to regulate and provide remedies for unlawful conversion of residential hotel units; that the City had instituted a moratorium on residential hotel conversion effective November 21, 1979; and that because tourism is also essential to the City, the public interest also demands that some moderately priced tourist hotel rooms be available, especially during the summer tourist season. (HCO, § 41.3.) Each hotel room's initial status for purposes of the HCO was determined by having the owner or operator of each hotel file an initial unit usage report stating the number of residential and tourist units in their hotel as of September 23, 1979. (HCO, § 41.6, subd. (b)(1).) The HCO defines a "Residential Unit" as a "guest room" that was occupied by a "permanent resident" on September 23, 1979, or that was designated residential under section 41.6's procedures for initial status determination. (HCO, § 41.4, subd. (q).) A "Tourist Unit" is defined as a guest room not occupied by a permanent resident on September 23, 1979, or a guest room certified as a tourist unit under section 41.6. (HCO, § 41.4, subd. (s).) A permanent resident is a person who occupies a guest room for at least 32 consecutive days. (Id., subd. (n).)

The HCO makes it unlawful to eliminate a residential hotel unit without obtaining a conversion permit or to rent a residential unit for a term shorter than seven days. (HCO, § 41.20, subd. (a).) Violators are subject to civil penalties. (Id., subd. (c).)

An application to convert residential units to tourist use must include, inter alia, "[a] statement regarding how one-for-one replacement of the units to be converted will be accomplished." (HCO, § 41.12, subd. (b)(9).) The applicant may satisfy the replacement requirement by constructing or bringing onto the market new residential units comparable to those converted (HCO, § 41.13, subd. (a)(1), (2)); constructing or rehabilitating certain other types of housing for low-income, disabled or elderly persons (id., subd. (a)(3)); or paying to a public or nonprofit housing developer, or to the City's Residential Hotel Preservation Fund Account, an in lieu fee equal to the replacement site acquisition costs plus a set portion of the replacement construction costs (id., subd. (a)(4), (5)).³ The replacement costs are to be determined by the City's Department of Real Estate based on two independent appraisals. (HCO, § 41.3, subd. (a)(4), (5).)

The 1981 and 1990 versions of the HCO differ in their treatment of temporary tourist rentals of residential units. The 1981 ordinance allowed summer season rentals (May 1 September 30) of vacant residential units without numerical restriction, with the proviso that the room "shall immediately revert to residential use on application of a prospective permanent resident," but contained no provision for winter tourist rentals. (1981 HCO, § 41.16, subd. (a)(3)(B).) The 1990 revision additionally restricted summer tourist rentals of residential units by, among other things, limiting such rentals, absent special permission from the City's Bureau of Building Inspection,⁴ to 25 percent of a hotel's residential rooms. (HCO, § 41.19, subd. (a)(3).) The revision, however, also allowed a limited number of residential rooms to be rented to tourists during the winter months as well. (Id., subd.(c).)

B. The San Francisco Planning Code

In 1987, San Francisco adopted article 7 of its Planning Code, a set of zoning regulations for "neighborhood commercial districts." (S.F. Planning Code, § 701, added by S.F. Ord. No. 69-87.) The San Remo Hotel is within the North Beach neighborhood commercial district (hereafter North Beach district), created in 1987. The North Beach district "functions as a neighborhood-serving marketplace, citywide specialty shopping, and dining district, and a tourist attraction, as well as an apartment and residential hotel zone." (S.F. Planning Code, § 722.1.) While most new commercial development is permitted on the first two stories of buildings, new housing development is encouraged above the second story and "[e]xisting residential units are protected by prohibitions of upper-story conversions and limitations on demolitions." (Ibid.)

Tourist hotels are a conditional use in the North Beach district. (S.F. Planning Code, § 722.55.) "Conditional uses are permitted in a Neighborhood Commercial District when authorized by the Planning...