Smith v. City and County of San Francisco

Citation275 Cal.Rptr. 17,225 Cal.App.3d 38
Decision Date14 November 1990
Docket NumberNo. A046622,A046622
CourtCalifornia Court of Appeals Court of Appeals
PartiesErnest M. SMITH et al., Cross-Complainants and Appellants, v. CITY AND COUNTY OF SAN FRANCISCO, Cross-Defendant and Respondent.

Louis H. Renne, City Atty., Andrew S. Schwartz, Deputy City Atty., San Francisco, for plaintiff, cross-defendant and respondent.

Thomas M. Burton, Burton, Brunt & Robbins, Pleasanton, for defendants, cross-complainants and appellants.

BENSON, Associate Justice.

Ernest and Alice Smith appeal from the judgment entered after the trial court sustained a demurrer to their second amended cross-complaint without leave to amend. Appellants attempted to state causes of action against the City and County of San Francisco ("the City") for inverse condemnation, promissory estoppel, breach of the covenant of good faith and fair dealing, negligence, breach of fiduciary duty, civil rights violations, and breach of oral contract. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

On March 18, 1983, the City filed a complaint in eminent domain against appellants and other parties. It sought to acquire property for park and open space use. Appellants cross-complained against numerous parties, including the City, for inverse condemnation, fraud, interference with prospective economic advantage, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, deprivation of constitutional rights, mandamus, and injunction. The court sustained the City's demurrer to all but the inverse condemnation cause of action, allowing 20 days to amend. The court also severed and stayed the cross-complaint.

After trial began in the City's eminent domain action, the parties settled that case in May 1985. Under the settlement, the City agreed to pay $307,500 for appellants' three lots and portion of a fourth which had been the subject of the eminent domain action ("the upper lots").

Appellants filed a verified first amended cross-complaint asserting various causes of action. The court sustained the City's demurrer to all causes of action with leave to amend.

The Smiths then filed a second amended cross-complaint, which is the subject of this appeal. The relevant factual allegations are as follows:

"5. In 1954, the Smiths had acquired one acre of a wooded hillside with a view of the Pacific Ocean for future development as a retirement resource....

"6. In June 1975, the Smiths asked the City for assistance in developing their land. The City at that time formulated a scheme to keep the Smith's [sic] land in an undeveloped state tantamount to open space without the necessity and cost of acquisition. In pursuit of this secret scheme, the City decided to encourage the Smiths to engage in multiple plans for development of their land which plans would, however, be manipulated by the City so as always to require further submittals, amendments, information, and other compliance measures necessitating time, effort and expense. The City knew that the Smiths were a retired couple of limited means attempting to develope [sic] their land without professional assistance. In furtherance of the City's secret scheme to stop any development on the Smith land, the City embarked upon its scheme to cause the Smiths to exhaust their resources and time in fruitless development efforts, all "7. The City first recommended that the Smiths and adjacent landowners develop their mutual lands as a nineteen unit subdivision which, however, depended upon access rights available only for a limited time through still farther adjacent property. The City thwarted the nineteen unit development by requiring an unjustified Environmental Impact Report which the City knew would delay the project until the access rights were lost.

for the purpose of keeping the land in its undeveloped state.

"8. Next, the City suggested a nine unit planned unit development (PUD).... After spending two years preparing and submitting numerous plans and meeting all requirements, the City, on June 27, 1980, suddenly designated the Smith land as open space so as to buffer a large apartment complex proposed by a member of the Citizens' Housing Task Force appointed by the City's mayor.

"9. Over a year later, the City, having taken no steps to acquire the Smiths' property and based upon the City's advice to the Smiths that their land would be deleted from the master plan open space designation, the Smiths signed an option to sell the entire acre for $810,000.

"10. Without notice to the Smiths, the City then abruptly amended the open space designation to delete only the Smiths' lower three lots fronting on Kensington Way, while retaining the upper three lots within the open space designation.

"11. The City then offered the Smiths $85,000 for their one-half acre of forested land consisting of 5 regulation sized lots or three oversized lots with a view of the Pacific Ocean. The City's in-house appraisal was $75,000 per lot. Its outside appraisal was $500,000 for the entire half-acre parcel.

"12. In January, 1985 the City offered to buy lot 17 adjacent to the Smiths' land and only one third its size for $109,000 but only raised its offer to the Smiths to $141,900.

". . . . .

"14. The City had promised and was required by law to negotiate in good faith with the Smiths, but nevertheless refused to do so from 1981 until it raised its offer at the beginning of the condemnation trial in 1985, and finally settled the acquisition by agreeing to pay the Smiths $307,500.

"15. Under the terms of the settlement of the eminent domain action, the Smiths were to retain their three buildable lots below fronting on Kensington Way which the City had never purported to take. Nevertheless, the City prepared a deed for the Smiths' signature conveying land in excess of the agreed settlement, and which would deprive the Smiths of one of their three lots below. Not until after further judicial hearings and six months after the agreed settlement, did the City pay the Smiths the agreed purchase price for their lots.

"16. Notwithstanding the terms of the settlement and the revision of the deed conveying only so much of the upper lots to the City as would leave the Smiths three buildable lots below, the City still maintained that, although the area of the three lots below was sufficient for development, the lots were still unbuildable because of set-back requirements. Accordingly, not since the settlement of the condemnation action in March, 1985, have the Smiths been able to develop their lower three lots because of technical objections by the City as to lot description and set-back requirements."

The City then demurred for a third time to appellants' cross-complaint. On March 14, 1989, the court sustained the demurrer without leave to amend. Appellants filed a timely notice of appeal from the judgment subsequently entered in favor of the City.

DISCUSSION

1. Inverse Condemnation

Incorporating the factual allegations set forth above, appellants' inverse condemnation cause of action further alleges that:

"18. From and after 1975 the City has taken and damaged the Smiths' real property interests by its administrative scheme to "19. The conduct of the City toward the Smiths in attempting to keep their land in an undeveloped state, by making an unnegotiable and inadequate offer for the purchase of the land, and by placing formidable obstacles in the Smiths' path in the use of their land, has been unreasonable and oppressive, and has resulted in a legal restraint of the use of the Smith property so as to constitute a taking of said property which has proximately and irreparably damaged the Smiths."

keep the property undeveloped, from 1980 and thereafter, by its announcements and activities making known its intent and desire to acquire the Smith property for use as a park, and from 1985 by its efforts to thwart even the development of the land not subject to the eminent domain proceeding, solely to discourage the Smiths from further development and from pursuing their cross-complaint.

The courts recognize two forms of compensable inverse condemnation which may apply in this case: (1) excessive regulation which denies the owner all economic use of the property (see First Lutheran Church v. Los Angeles County (1987) 482 U.S. 304, 107 S.Ct. 2378, 96 L.Ed.2d 250; Agins v. City of Tiburon (1979) 24 Cal.3d 266, 157 Cal.Rptr. 372, 598 P.2d 25, aff'd (1980) 447 U.S. 255, 100 S.Ct. 2138, 65 L.Ed.2d 106 rev'd on other grounds, First Lutheran Church, supra ); and (2) improper precondemnation conduct causing a diminution in the property's market value. (See Klopping v. City of Whittier (1972) 8 Cal.3d 39, 52, 104 Cal.Rptr. 1, 500 P.2d 1345.) Since appellants do not clearly identify which theory they rely upon, we will determine whether the second amended complaint states a cause of action for either form of inverse condemnation.

A. Regulatory Taking

To state a cause of action for inverse condemnation based on government regulation amounting to a constitutional taking, appellants must allege facts showing such regulation deprived them of substantially all use of their property. (Terminals Equipment Co. v. City and County of San Francisco (1990) 221 Cal.App.3d 234, 242-244, 270 Cal.Rptr. 329 [demurrer properly sustained where face of complaint established no deprivation of all reasonable use of property]; Guinnane v. City and County of San Francisco (1987) 197 Cal.App.3d 862, 868, 241 Cal.Rptr. 787 [plaintiff could not contend he had been denied all use of his property]; Pan Pacific Properties, Inc. v. County of Santa Cruz (1978) 81 Cal.App.3d 244, 256, 146 Cal.Rptr. 428 [demurrer sustained where no facts alleged showing plaintiffs deprived of all reasonable use of property]; Sierra Terreno v. Tahoe Regional Planning Agency (1978) 79 Cal.App.3d 439, 442-443, 144 Cal.Rptr. 776 [demurrer sustained where allegations conceded value remained in property]; Pinheiro...

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