Santa Monica Beach, Ltd. v. Superior Court

KENNARD, J., Concurring.

The United States Constitution requires the government to pay just compensation when private property is taken for public use. (U.S. Const., 5th Amend.) One test for determining whether a property regulation effects a taking, which the United States Supreme Court first articulated about twenty years ago, is the following: Government action affecting the use of private property is a taking requiring just compensation if the action does not “substantially advance” a legitimate government purpose. (Agins v. City of Tiburon (1980) 447 U.S. 255, 260 [ 100 S.Ct. 2138, 2141 , 65 L.Ed.2d 106 ].)

The “substantially advance” test is a means-end test: It requires that the property regulation in question—the means by which the government is acting—advance the end or purpose the government is seeking to achieve through the regulation. The question here is: How “substantially” must rent control, the regulation at issue here, “advance” the governmental purpose that justifies it? To answer this question, the majority opinion, in which I concur, uses what might be termed a “functional” approach, looking for guidance to cases judging the constitutionality of two functionally similar categories of regulation: price controls and general land use regulations. It concludes that rent control is valid unless it is an arbitrary regulation of property rights. (Maj. opn., ante, at p. 967.) I write separately to explain an additional basis for reaching this conclusion. An examination of the historical origins and development of the high court’s “substantially advance” test shows that it originated outside of just compensation law in the realm of substantive due process and that, outside the narrow circumstances in which government exacts property as a condition of a development permit, the test is best understood as a rational relationship test.

I

As I have noted elsewhere, courts have long struggled with the difficult question of how to determine whether a particular government action is a taking requiring compensation under the just compensation clause. (Customer Co. v. City of Sacramento (1995) 10 Cal.4th 368 , 394 & fn. 1 [ 41 Cal.Rptr.2d 658 , 895 P.2d 900 ] (conc. opn. of Kennard, J.).) And as I mentioned at the outset here, in the past 20 years the United States Supreme *976 Court has adopted the rule that government regulation of property is a taking if it fails to substantially advance a legitimate state interest.

The “substantially advance” test first entered just compensation law in 1980 in Agins v. City of Tiburon, supra, 447 U.S. 255, 260 [ 100 S.Ct. 2138, 2141 ] (hereafter Agins). In that case, the United States Supreme Court stated: “The application of a general zoning law to particular property effects a taking if the ordinance does not substantially advance legitimate state interests, see Nectow v. Cambridge, 277 U.S. 183, 188 (1928)[ 48 S.Ct. 447, 448 , 72 L.Ed. 842 ], or denies an owner economically viable use of his land, see Penn Central Transp. Co. v. New York City, 438 U.S. 104, 138, n. 36 (1978) [ 98 S.Ct. 2646, 2666 , 57 L.Ed.2d 631 ].” (Ibid., italics added.) Two years earlier, the high court had foreshadowed this test by stating that “a use restriction on real property may constitute a ‘taking’ if not reasonably necessary to the effectuation of a substantial public purpose, see Nectow v. Cambridge, supra." (Penn Central Transp. Co. v. New York City (1978) 438 U.S. 104, 127 [ 98 S.Ct. 2646, 2660-2661 , 57 L.Ed.2d 631 ], italics added (hereafter Penn Central).)

More recently, in Nollan v. California Coastal Comm’n (1987) 483 U.S. 825 [ 107 S.Ct. 3141 , 97 L.Ed.2d 677 ] (hereafter Nollan) and Dolan v. City of Tigard (1994) 512 U.S. 374 [ 114 S.Ct. 2309 , 129 L.Ed.2d 304 ] (hereafter Dolan), the United States Supreme Court used the “substantially advance” language of Agins as the textual basis for developing unique requirements to be used in deciding whether an adjudicatively determined “exaction” of property as a condition of a property development permit was a taking. (Regulations affecting property can generally be classified as either legislative, if the restriction they impose applies to all property falling within a given class, or adjudicative, if the government through case-by-case decisionmaking makes an individualized determination of what restriction to impose on each particular piece of property.)

Nollan and Dolan were cases in which property owners seeking development permits were adjudicatively required by the permitting authority to dedicate property easements to the government as a condition of a development permit. ( Dolan, supra, 512 U.S. at pp. 379-380 [ 114 S.Ct. at p. 2314 ]; Nollan, supra, 483 U.S. at p. 828 [ 107 S.Ct. at p. 3144 ].) The analysis in those cases began with the proposition that the development condition in question, if it had been imposed compulsorily by the government, would have been a taking requiring compensation. (Dolan, supra, 512 U.S. at p. 384 [ 114 S.Ct. at p. 2316 ] [“Without question, had the city simply required petitioner to dedicate a strip of land along Panno Creek for public use, rather than conditioning the grant of her permit to redevelop her property on such *977 a dedication, a taking would have occurred.”]; Nollan, supra, 483 U.S. at p. 831 [ 107 S.Ct. at p. 3145 ] [“Had California simply required the Nollans to make an easement across their beachfront available to the public on a permanent basis in order to increase public access to the beach, rather than conditioning their permit to rebuild their house on their agreeing to do so, we have no doubt there would have been a taking.”].)

The exchange of development permission for exaction avoids being a per se taking only because technically it is voluntary. Some limit, however, is needed to ensure that the exchange is a fair one; otherwise, these exchanges would become a mechanism for the government to obtain property without paying for it—“ ‘an out-and-out plan of extortion.’ ” (Nollan, supra, 483 U.S. at p. 837 [ 107 S.Ct. at p. 3149 ].) The Nollan and Dolan decisions attempted to ensure the fairness of the exchange by creating a special form of means-end testing. The Nollan/Dolan test authorizes exactions without compensation only if the exaction has a nexus to the harm the development will cause and is roughly proportional to the harm. ( Dolan, supra, 512 U.S. at pp. 386, 391 [114 S.Ct. at pp. 2317, 2319].)

Outside the Nollan/Dolan context, the United States Supreme Court has not yet had occasion to define how closely ends and means must be related for a government action to avoid being a taking. The rent control at issue here is outside the Nollan/Dolan context because it is a restriction on property use that is not imposed adjudicatively on only certain rental housing but instead is imposed legislatively on all rental housing in the municipality. Plaintiff landlord nonetheless seeks to have us extend the Nollan/ Dolan test to rent control. In their dissents, Justices Chin and Baxter criticize the majority for rejecting that view, and they assert that the majority has inappropriately conflated due process analysis with takings analysis by adopting instead a “rational relationship” means-end test, a test commonly used in substantive due process analysis. Although the dissents’ position is a plausible one if the words “substantially advance” are viewed in isolation, it collapses once the history of the “substantially advance” test is examined, for that test originated as a due process rational relationship test.

Before the United States Supreme Court’s decisions in Agins and Penn Central, there had been no means-end test in just compensation law. As authority for applying a means-end test to determine whether there has been a taking, both cases cited Nectow v. Cambridge (1928) 277 U.S. 183 [ 48 S.Ct. 447 , 72 L.Ed. 842 ] (hereafter Nectow). Nectow, however, was not a takings case in which the property owner sought just compensation, but a substantive due process case in which the property owner challenged a zoning ordinance as lacking any rational relationship to the public welfare *978 and sought invalidation of the ordinance. To understand the connection between the substantive due process means-end test used in Nectow and the United States Supreme Court’s recent application of that test in just compensation law, it is necessary to examine the history of the high- court’s development of substantive due process means-end review.

II

The United States Supreme Court in the late 19th and early 20th century was developing as one aspect of substantive due process its view—applicable to all exercises of state power depriving someone of life, liberty, or property—that due process required some reasonable relationship between the means chosen by government and the ends it seeks to achieve. As I noted earlier, the high court’s 1928 decision in Nectow, supra, 277 U.S. 183 , sets forth a substantive due process means-end test. That test has its origins in Mugler v. Kansas (1887) 123 U.S. 623, 661 [ 8 S.Ct. 273, 297 , 31 L.Ed. 205 ], a case upholding a state’s prohibition statute that rendered a brewery valueless. Mugler formulated the general substantive due process test of state action as follows: “If, therefore, a statute purporting to have been enacted to protect the public health, the public morals, or the public safety, has no real or substantial relation to those objects, or is a palpable invasion of rights secured by the fundamental law, it is the duty of the courts to so adjudge, and thereby give effect to the Constitution.” (Ibid., italics added.) The high court repeated the “substantial relation” requirement in later substantive due process decisions in which the plaintiff challenged the validity of various forms of state regulation. (See, e.g., German Alliance Ins. Co. v. Hale (1911) 219 U.S. 307, 316 [ 31 S.Ct. 246, 248 , 55 L.Ed. 229 ] [regulation of fire insurance]; Jacobson v. Massachusetts (1905) 197 U.S. 11, 31 [ 25 S.Ct. 358, 363 , 49 L.Ed. 643 ] [mandatory vaccination legislation]; Booth v. Illinois (1902) 184 U.S. 425, 429 [ 22 S.Ct. 425, 426-427 , 46 L.Ed. 623 ] [prohibition of grain option contracts]; Powell v. Pennsylvania (1888) 127 U.S. 678, 684 [ 8 S.Ct. 992, 995 , 32 L.Ed. 253 ] [regulation of oleomargarine].)

The United States Supreme Court used this substantive due process means-ends test, and the “substantial relation” language, to determine the validity of zoning regulations in due process cases, including Nectow , in which a property owner contended that the regulations were unreasonable and therefore invalid but made no claim that the regulations were a taking requiring just compensation. (Cusack Co. v. City of Chicago, (1917) 242 U.S. 526, 531 [ 37 S.Ct. 190, 192 , 61 L.Ed. 472 ]; Euclid v. Ambler Co. (1926) 272 U.S. 365, 395 [ 47 S.Ct. 114, 121 , 71 L.Ed. 303 ]; Gorieb v. Fox (1927) 274 U.S. 603, 610 [ 47 S.Ct. 675, 677-678 , 71 L.Ed. 1228 , 53 A.L.R. 1210 ]; Nectow, supra, 277 U.S. 183, 188 [ 48 S.Ct. 447, 448 ].) In perhaps the most *979 famous of these early zoning cases, Euclid v. Ambler Co. (hereafter Euclid), the court stated: “[B]efore the ordinance can be declared unconstitutional [under the due process clause], [it must be found] that such provisions are clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare.” (Euclid, supra, 272 U.S. at p. 395 [ 47 S.Ct. at p. 121 ].) Euclid thus equates a regulation that has “no substantial relation” to its ends with one that is “arbitrary and unreasonable” and therefore fails to satisfy the requirements of substantive due process. The portion of Nectow that Agins came to rely on many years later was a restatement of Euclid’s substantive due process means-end test: “The governmental power to interfere by zoning regulations with the general rights of the land owner by restricting the character of his use, is not unlimited, and other questions aside, such restriction cannot be imposed if it does not bear a substantial relation to the public health, safety, morals, or general welfare. Euclid v. Ambler Co., supra, p. 395.” (Nectow, supra, 277 U.S. at p. 188 [ 48 S.Ct. at p. 448 ].)

Ill

Means-end testing has remained a cornerstone of substantive due process since the high court’s 1928 decision in Nectow . In cases after Nectow , the court continued to use Nectow’s formulation as a general test of substantive due process review. In Nebbia v. New York (1934) 291 U.S. 502, 525 [ 54 S.Ct. 505, 510-511 , 78 L.Ed. 940 , 89 A.L.R. 1469 ], a price control case upholding price controls on milk, the court observed: “And the guaranty of due process, as has often been held, demands only that the law shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the object sought to be attained.” 1

Nectow , and its predecessor Euclid , have continued to be understood as due process means-end relationship cases; more specifically, they have been consistently viewed as cases applying a rational relationship standard of due process review. (Nashville, C. & St. L. Ry. v. Walters (1935) 294 U.S. 405, *980 415 [ 55 S.Ct. 486, 488 , 79 L.Ed. 949 ] [describing Nectow as holding that “[t]he police power is subject to the constitutional limitation that it may not be exerted arbitrarily or unreasonably” (fn. omitted)]; Arlington Heights v. Metropolitan Housing Corp. (1977) 429 U.S. 252, 263 [ 97 S.Ct. 555, 562 , 50 L.Ed.2d 450 ] [describing Nectow as recognizing a “right to be free of arbitrary or irrational zoning actions”]; Moore v. East Cleveland (1977) 431 U.S. 494, 498, fn. 6 [ 97 S.Ct. 1932, 1935 , 52 L.Ed.2d 531 ] (plur. opn.) [“Euclid held that land-use regulations violate the Due Process Clause if they are ‘clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare.’ 272 U.S., at 395 . See Nectow v. Cambridge, 277 U.S. 183, 188 (1928). . . . [O]ur cases have not departed from the requirement that the government’s chosen means must rationally further some legitimate state purpose.”].)

In 1980, the high court in Agins imported the substantive due process means-end test of Nectow into just compensation law. Citing Nectow , the Agins court stated that a zoning law that did not “substantially advance legitimate state interests” was a taking requiring just compensation. (Agins, supra, 447 U.S. at p. 260 [ 100 S.Ct. at p. 2141 ]; see also Penn Central, supra, 438 U.S. at p. 127 [98 S.Ct. at pp. 2660-2661] [“[A] use restriction on real property may constitute a ‘taking’ if not reasonably necessary to the effectuation of a substantial public purpose, see Nectow v. Cambridge, supra, . . .” (Italics added.)].)

Agins applied as a rational relationship test the “substantially advance” test it derived from Nectow . In Agins , the State of California had a policy requiring cities to develop open space plans; in response, a city enacted an ordinance limiting use of the five-acre property in question to residential housing at a density of one house per acre. Agins concluded with little difficulty and without a searching examination that the ordinance substantially advanced the legitimate government goal of reducing the “ill effects of urbanization” ( Agins, supra, 447 U.S. 255, 261 [ 100 S.Ct. 2138, 2142 ]); to demonstrate that the advancement would be substantial the court relied on the following: “The State of California has determined that the development of local open-space plans will discourage the ‘premature and unnecessary conversion of open-space land to urban uses.’ ” (Ibid.) A legislative conclusion made at the state level that as a statewide matter open space planning will in general discourage urbanization may show that there is a rational relationship between the particular zoning restrictions imposed on the parcel at issue and the goal of “protect[ing] the residents of [the city] from the ill effects of urbanization” (ibid.), but does not establish any stronger connection than that between those ends and means.

In Schad v. Mount Ephraim (1981) 452 U.S. 61, 68 [ 101 S.Ct. 2176, 2182 , 68 L.Ed.2d 671 ], the high court made clear that the Agins “substantially *981 advance” requirement is a rational relationship test: “Where property interests are adversely affected by zoning, the courts generally have emphasized the breadth of municipal power to control land use and have sustained the regulation if it is rationally related to legitimate state concerns and does not deprive the owner of economically viable use of his property. Agins v. City of Tiburon, 447 U.S. 255, 260 (1980); Village of Belle Terre v. Boraas, 416 U.S. 1 (1974) [ 94 S.Ct. 1536 , 39 L.Ed.2d 797 ]; Euclid v. Ambler Realty Co., 272 U.S. 365, 395 (1926). But an ordinance may fail even under that limited standard of review. Moore v. East Cleveland, supra, at 520 (Stevens, J., concurring in judgment); Nectow v. Cambridge, 277 U.S. 183 (1928).” (Italics added.)

Even apart from this historical understanding of the “substantially advance” test as a rational relationship test, plaintiff here has failed to give persuasive reasons for extending the heightened scrutiny of Nollan and Dolan to other forms of land use regulation, like the rent control at issue here, in which the government does not make an adjudicative decision to exact property as a condition of a development permit. There is good reason for using heightened means-end scrutiny in the Nollan/Dolan context because of the danger of government engaging in extortion by permit. But outside of that context, there is no clear justification for it as a general requirement of just compensation law. (See Ehrlich v. City of Culver City (1996) 12 Cal.4th 854, 903, 906-907 [ 50 Cal.Rptr.2d 242 , 911 P.2d 429 ] (conc. and dis. opn. of Kennard, J.) [noting that Nollan and Dolan were limited to exactions of property adjudicatively imposed as a condition of development].)

IV

As I have explained, outside the Nollan/Dolan context, I would adhere to the historical understanding of the “substantially advance” test as a rational relationship test. Nonetheless, as the differing positions held by members of this court in this case show, there are grounds for reasonable debate as to the meaning of that test in just compensation law outside the Nollan/Dolan context. Does it require only a rational relationship between the regulation and its purpose? Or a closer connection between means and ends, adapted from the Nollan/Dolan test? Or some other degree of connection between means and ends? I urge the high court to resolve this uncertainty.

This also raises a more fundamental question: Outside the Nollan/Dolan context, is a means-end test an appropriate measure of whether a regulatory taking has occurred? Means-end tests measure the degree to which the property regulation in question advances the purpose the government is seeking to achieve through the regulation. It may be questioned whether the *982 existence of a taking should depend on how well it advances the government’s purpose for invading the property owner’s interests. To the property owner, the loss is the same whatever the degree to which it advances the government’s purpose. And although means-end testing can be used as an argument for expanding the right to compensation, as plaintiff does here, it could also restrict the right to compensation, for it suggests that if the regulation greatly advances the government’s purpose, then no taking has occurred even if the invasion of the property owner’s interest is also very great.

I note that recently Justice Kennedy of the United States Supreme Court has questioned the appropriateness of using a means-end test as the measure of whether a taking has occurred. (Eastern Enterprises v. Apfel (1998) 524 U.S. 498 , __ [ 118 S.Ct. 2131, 2157 , 141 L.Ed.2d 451 ] (conc. and dis. opn. of Kennedy, J.) [“The imprecision of our regulatory takings doctrine does open the door to normative considerations about the wisdom of government decisions. See, e.g., Agins v. City of Tiburon, 447 U.S., at 260 . . . (zoning constitutes a taking if it does not ‘substantially advance legitimate state interests’). This sort of analysis is in uneasy tension with our basic understanding of the Takings Clause, which has not been understood to be a substantive or absolute limit on Government’s power to act. The Clause operates as a conditional limitation, permitting the Government to do what it wants so long as it pays the charge. . . . [¶] . . . [T]he more appropriate constitutional analysis [of the legitimacy of a legislative judgment that the means chosen will advance the government’s purpose] arises under general due process principles rather than under the Takings Clause.”]; see also id. at p. __ [ 118 S.Ct. at p. 2161 ] (dis. opn. of Breyer, J., joined by Stevens, Souter, and Ginsburg, JJ.) [“at the heart of the Clause lies a concern, not with preventing arbitrary or unfair government action, but with providing compensation for legitimate government action that takes ‘private property’ ” (italics original)]; First Lutheran Church v. Los Angeles County (1987) 482 U.S. 304, 315 [ 107 S.Ct. 2378, 2386 , 96 L.Ed.2d 250 ] [purpose of just compensation clause is “not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking” (italics original)].)

Commentators have likewise questioned the high court’s incorporation of due process means-end testing in just compensation law. (Echeverria & Dennis, The Takings Issue and the Due Process Clause: A Way Out of a Doctrinal Confusion (1993) 17 Vt. L.Rev. 695.) Outside the Nollan/Dolan context, should a means-end test be used to determine whether a taking has occurred, or instead should means-end testing remain within due process jurisprudence? Only the high court can resolve this question and, given the *983 importance of this area of the law, I respectfully suggest that it do so when the opportunity next arises.

Justice Chin’s dissent perceives a conflict in meaning between the “substantially advance” test that Agins adopted from Nectow and the rational relationship test of Nebbia v. New York, supra, 291 U.S. 502 . The conflict vanishes, however, when the historical origins of the “substantially advance” test are taken into account. Both tests spring from the same root of substantive due process means-end review and are almost identically phrased in Nectow and Nebbia . (Compare Nectow, supra, 277 U.S. 183, 187-188 [ 48 S.Ct. 447, 448 ] [due process requires that challenged law not be “ ‘a mere arbitrary or irrational exercise of power having no substantial relation to the public health, the public morals, the public safety or the public welfare in its proper sense’ ”] with Nebbia v. New York, supra, 291 U.S. at p. 525 [ 54 S.Ct. at p. 511 ] [due process requires that “the law shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the object sought to be attained”].)