Appendix A — City of Los Angeles v. Ali

App. 1

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL

_OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

SYED MOUZZAM ALI, ) B114226

Plaintiff and Appellant. ! (Super. Ct.

5 No. BC008240)

) (Filed

CITY OF LOS ANGELES, ) Dec. 28, 1999)

Defendant and Appellant. )

)

APPEALS from a judgment of the Superior Court of

Los Angeles County, Lawrence W. Crispo, Judge.

Affirmed.

Law Offices of Rosario Perry, Rosario Perry, and

Marie E. Berglund for Plaintiff and Appellant.

James K. Hahn, City Attorney, Claudia McGee Henry,

Senior Assistant City Attorney, and Michael L. Klekner,

Deputy City Attorney, for Defendant and Appellant.

INTRODUCTION

The City of Los Angeles (the City) appeals from a

judgment in inverse condemnation in favor of Syed

Mouzzam Ali (Ali).

The essential facts and procedural background are as

follows: when Ali’s hotel, the Ferraro, was substantially

App. 2

destroyed by fire in November 1988, Ali desired to

demolish it and sell the land. He applied for a demolition

permit in January 1989. The City withheld the permit

because officials believed the Ferraro was a single room

occupancy (SRO) hotel, and the City had an ordinance

prohibiting demolition of such low income housing

unless (1) it was infeasible to repair, or (2) the owner

agreed to replace it with similar housing, or (3) the owner

established extreme hardship for an exemption. Eventu-

ally, but not until August 1990, the City determined the

Ferraro was not an SRO hotel and permitted its demoli-

tion. In the meantime, however, commencing in July 1989

a series of fires occurred in the abandoned building, the

City determined that Ali was not providing adequate

security, and the City contracted for 24-hour security with

the costs assessed against Ali pursuant to an ordinance.

Ali filed an action against the City which in part

sought a writ of mandate (Code Civ. Proc., § 1094.5) to set

aside the assessments on the ground that the delay in

issuance of the demolition permit was unlawful, and if

the City had promptly issued the demolition permit Ali

would have promptly demolished the building, and the

security measures would never have been necessary. Ona

prior appeal in this case we held that the delay in issuing

the demolition permit based on the SRO ordinance vio-

lated the Ellis Act, Government Code section 7060, subdi-

vision (a), which provides that no public entity may

compel the owner of any residential real property to offer

or to continue to offer accommodations in the property

for rent or lease. (Ali v. City of Los Angeles (May 9, 1995)

B077712, unpublished opinion.) We said that Ali would

be entitled to vacate all or a portion of the assessments if

App. 3

he could prove that he would and could have complied

with all legitimate conditions of a demolition permit and

would have demolished the building before the need for

security measures arose. We remanded the matter for a

trial of that issue. The remand left open, pursuant to the

parties’ stipulation and the trial court’s discretion con-

cerning proposed amendments to the complaint, whether

additi »nal causes of action might be tried. The present

appeai arises from the proceedings following the first

appeal.

In bifurcated proceedings, the writ of mandate was

tried first by Judge O’Brien. Judge O’Brien found wholly

in Ali’s favor on this cause of action. In accordance with

our prior opinion, Judge O’Brien ruled that the delay in

issuing the demolition permit from January 19, 1989,

through August 1, 1990, violated the Ellis Act. Judge

O’Brien found factually that the delay was due solely to

the actions of the City and that had the permit been

issued without delay Ali would have demolished the

building before the need ever arose for the security mea-

sures assessed against Ali. He ruled that all the assess-

ments be set aside and refunded to Ali ($399,000 plus

interest), and that “Any subsequent judgment on the

remaining causes of action will incorporate this Statement

of Decision and the granting of the Petition for Writ of

Administrative Mandate.” The subsequent judgment so

provided. The City does not appeal from the portion of the

judgment granting the writ of mandate setting aside and

refunding the assessments.

The remaining issues were tried by Judge Crispo. On

Ali’s cause of action for inverse condemnation Judge

Crispo ruled for Ali. He ruled that the City had taken

App. 4

Ali’s property in two ways, a regulatory taking and a

physical taking. He found that the delay in issuing the

demolition permit was a regulatory taking of Ali’s prop-

erty because demolition was the only economically viable

option for use of the land; the delay thus deprived Ali of

the only economically viable use of his property. Judge

Crispo also found that the posting of security guards by

the City was a physical taking of Ali’s property. He ruled

that this taking could not be justified based on the health

and safety concerns which prompted the City, because

those problems were created by the City’s own unlawful

conduct in delaying the demolition permit. The parties

stipulated as to damages, and the judgment awards Ali

$1,199,237 plus interest for inverse condemnation.The

City appeals from this portion of the judgment.!

We conclude that the judgment in favor of Ali in

inverse condemnation should be affirmed on the ground

that the City’s wrongful denial of a demolition permit

between January 1989 and August 1990 in violation of the

Ellis Act effected a temporary regulatory taking of Ali’s

property. This conclusion renders moot whether there

was a temporary physical taking during a portion of the

same time period or whether the same conduct should be

characterized as a violation of Ali’s federal civil rights.

1 Judge Crispo ruled, on the other hand, that the actions of

the City did not additionally violate the federal Civil Rights Act,

42 United States Code section 1983. Ali cross-appeals from the

portion of the judgment which rejected Ali’s cause of action

under the federal Civil Rights Act.

App. 5

STANDARD OF REVIEW

Whether the actions of the City constituted a taking

of Ali’s property is a mixed question of law and fact. (See

Healing v. California Coastal Com. (1994) 22 Cal.App.4th

1158, 1170; Aaron v. City of Los Angeles (1974) 40

Cal.App.3d 471, 484.) Our review is neither entirely de

novo, as contended by the City, nor entirely limited by

the substantial evidence rule, as contended by Ali. (Board

of Administration v. Wilson (1997) 52 Cal.App.4th 1109,

1127-1130.) Mixed questions of law and fact involve three

steps: (1) the determination of the historical facts — what

happened; (2) selection of the applicable legal principles;

and (3) application of those legal principles to the facts.

The first step involves factual questions exclusively for

the trial court to determine; these are subject to substan-

tial evidence review; the appellate court must view the

evidence in the light most favorable to the judgment and

the findings, express or implied, of the trial court. (Board

of Administration v. Wilson, supra, 52 Cal.App.4th at p.

1129; Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 801; Patrick

Media Group, Inc. v. California Coastal Com. (1992) 9

Cal.App.4th 592, 605.) Thus, contrary to the City’s argu-

ment, we do not apply de novo review to all factual

findings underlying the trial court’s judgment. (Board of

Administration v. Wilson, supra, 52 Cal.App.4th at pp.

1129-1130.) Only the second and third steps involve ques-

tions of law for our de novo review. (Ghirardo v. Antonioli,

supra, 8 Cal.4th at pp. 800-801; Board of Administration v.

Wilson, supra, 52 Cal.App.4th at pp. 1129-1130.)

App. 6

DISCUSSION

In First English Evangelical Lutheran Church v. Los

Angeles County (1987) 482 U.S. 304 (hereafter First

English),2 the Supreme Court indicated that a govern-

mental regulation which deprives a landowner of all econom-

ically viable use of the land may constitute a regulatory

taking of property which requires just compensation

under federal constitutional law. (Id. at pp. 312-313.) This

is consistent with the United States Supreme Court’s

pronouncements both before and after First English. (See

Agins v. City of Tiburon (1980) 447 U.S. 255, 260 [ordinance

allowed some development and therefore did not consti-

tute a denial of all economically viable use; includes

statement that a zoning law which “denies an owner

economically viable use of his land” would constitute a

taking]; Lucas v. South Carolina Coastal Council (1992) 505

U.S. 1003, 1009, 1015-1018, 1020, 1022-1030 [statute pro-

hibited all development of beachfront property and trial

court found this rendered property valueless; held this

constituted a taking; exception for traditional exercise of

police power to prevent “noxious uses” or “nuisance” did

not apply, because under the circumstances the statute

simply required property to remain undeveloped in order

to promote a general societal interest}.)

The main significance of First English is its holding

that a temporary regulatory taking consisting of the tem-

porary deprivation of all economically viable use of the

property may also require compensation for the period of

2 The full name of the church was First English Evangelical

Lutheran Church of Glendale, and the case is more typically

known to the bench and bar as the “First English” case.

App. 7

time the regulation denied the owner all use of the land.

(First English, supra, 482 U.S. at pp. 318, 321.) The court

stated, “Here we must assume [on demurrer] that the Los

Angeles County ordinance [enacting a moratorium on

construction of buildings on the church’s property in a

flood plain] has denied appellant all use of its property

for a considerable period of years, and we hold that

invalidation of the ordinance without payment of fair

value for the use of the property during this period of

time would be a constitutionally insufficient remedy.” (Id.

at p. 322.) “We merely hold that where the government's

activities have already worked a taking of all use of

property, no subsequent action by the government can

relieve it of the duty to provide compensation for the

period during which the taking was effective.” (Id. at p.

321.)

The court in First English indicated two circum-

stances in which such a temporary denial of all use of the

property would not require compensation: (1) the denial

of use was required for public safety reasons (482 U.S. at

p- 313 [on demurrer the court had no occasion to decide

“whether . . . the denial of all use was insulated as a part

of the State’s authority to enact safety regulations”] ),3 or

3 In the present case the denial of a demolition permit

based on the SRO ordinance does not involve the “public

safety” exception. An example of the public safety exception is

found in the First English case itself, in the subsequent

California proceedings on remand from the United States

Supreme Court. There it was eventually determined that the

interim moratorium on construction of buildings on the

church’s property in a flood plain satisfied the exception

because it was necessary to preserve human life in light of a

App. 8

(2) the temporary deprivation was merely a normal delay

in the permissible regulation of development. (482 U.S. at

p. 321 [not deciding “the quite different questions that

would arise in the case of normal delays in obtaining

building permits, changes in zoning ordinances, vari-

ances, and the like”].)

In Landgate, Inc. v. California Coastal Com. (1998) 17

Cal.4th 1006 (hereafter Landgate), the California Supreme

Court elaborated upon the second exception, “normal

delays” in the “development process.” There the County

of Los Angeles had approved a lot split involving prop-

erty in the coastal zone. When the owner sought to build

upon one of the newly split parcels, the California

Coastal Commission refused to issue a permit for any

construction, contending that the prior lot split was not

legal. Construction was delayed for two years until the

landowner obtained a court judgment that the Coastal

Commission had no legal jurisdiction over the lot split.

The landowner contended this delay denied it all viable

use of the property for two years, which constituted a

temporary taking requiring compensation. The California

Supreme Court held to the contrary, that “the mistaken

assertion of jurisdiction over a development is part of the

development approval process, and development delays

that result therefrom may be imposed on the developer

rather than the general taxpayer without violating the

United States Constitution.” (Id. at pp. 1021, fn. omitted.)

fatal flood which had occurred there. (First English Evangelical

Lutheran Church v. County of Los Angeles (1989) 210 Cal.App.3d

1353, 1370.)

_ App. 9

“Here, there was a postponement of development pend-

ing resolution of a threshold issue of the development

approval process - whether the lot was legal - and not a

final decision denying development.” (Id. at pp.

1029-1030.) “[A] judicial determination of the validity of

certain preconditions to development is a normal part of the

development process, and the fact that a developer must

resort to such a determination does not constitute a per se

temporary taking.” (Id. at p. 1030, italics in original.)

In the reply briefs submitted after Landgate was

decided, the City contends Landgate controls and compels

judgment in favor of the City, whereas Ali distinguishes

Landgate and contends First English controls and compels

affirmance of the judgment in favor of Ali. We conclude

the facts of the present case are distinguishable from

Landgate, and the delay between January 1989 and August

1990 in issuing a demolition permit was a temporary

regulatory taking, not a normal delay in the development

process.

For the purpose of this appeal we treat as an estab-

lished fact that the denial of the demolition permit

deprived Ali of all economically viable use of his land

during the period in question. (See First English, supra,

482 U.S. at pp. 313, 321 [allegation of complaint assumed

to be true on demurrer], and Lucas v. South Carolina

Coastal Council, supra, 505 U.S. at pp. 1009, 1020 [trial

court’s factual findings were binding].) Judge Crispo

made the following factual findings: “The SRO ordinance

prevented the immediate demolition of the Ferraro. This

denied Ali the benefits of his contract with Harouni for

the sale of the property on which the Ferraro stood. As a

result of the November 17, 1988 fire, the property was

App. 10

damaged beyond feasible repair. Consequently, demoli-

tion was the only economically viable option for the

Ferraro’s owner. Additionally, the City later evicted the

few remaining tenants still occupying the hotel, further

denying Ali the rents the Ferraro generated.” The City

does not even acknowledge Judge Crispo’s findings and

makes no attempt to satisfy its burden as an appellant to

demonstrate that there is no substantial evidence to support

those findings. (Green v. Green (1963) 215 Cal.App.2d 31,

35.) The City’s sole assertion on this point, that Ali was

not denied all economically viable use of his property

because “[a]lthough there was a delay in the sale of his

property to Harouni, Ali did sell to the original pur-

chaser,” is a non sequitur which fails to address the

temporary deprivation of all use of the property.

This brings us squarely to the nub of this case: was

the erroneous denial of a demolition permit, in violation

of the Ellis Act, which temporarily deprived Ali of all

economically viable use of the property, merely a “normal

delay” in the “development process” as explained in

Landgate?

In Landgate, the landowner obtained from the county

a lot split in order to develop undeveloped property

which lay in the coastal zone. The Coastal Commission

would not approve any construction because, it con-

tended, the lot split was not legal. All development was

thereby stymied until, through litigation, the landowner

obtained a judgment that the Coastal Commission had no

legal authority over the lot split. The landowner later

contended this delay was a temporary regulatory taking

requiring compensation. The trial court and the Court of

Appeal agreed, but the California Supreme Court granted

App. 11

review and held the delay was a normal delay in the

development process.

The Supreme Court explained that, “Part of that reg-

ulatory process is the imposition of certain procedural

conditions and substantive requirements on develop-

ment. . . . [A] government agency may deny a develop-

ment permit when the reasonable conditions imposed on

development are not met[,] without that denial constitut-

ing a taking. . . . [T]he imposition of a development

condition is not a constitutional violation merely because

that condition is subsequently shown to have been erro-

neously imposed. . . . Landgate’s development was

denied because of the Commission’s plausible, though

perhaps legally erroneous, position that Landgate or its

predecessor failed to comply with one of the conditions

of obtaining a coastal development permit by illegally

reconfiguring the lot boundaries.” (17 Cal.4th at pp.

1027-1028.)

The Court of Appeal had concluded that the Com-

mission’s position on the illegality of the lot split fur-

thered no legitimate governmental interest, merely ” ‘the

Commission’s ongoing jurisdictional spat with the

County of Los Angeles combined with a desire to prevent

Landgate from building on its parcel.’” (17 Cal.4th at p.

1016.) The Supreme Court disagreed based on the circum-

stances of the particular case. It held the Court of Appeal

erred in “attempt[ing] to divine, through the statements

of the commissioners and Commission staff and through

circumstantial evidence, the ‘true,’ illegitimate, motive

for the Commission’s decision to deny Landgate’s devel-

opment permit. The proper inquiry is not into the subjec-

tive motive of the government agency, but whether there

App. 12

is, objectively, sufficient connection between the land use

regulation in question and a legitimate governmental

purpose so that the former may be said to substantially

advance the latter.” (17 Cal.4th at p. 1022.) The Supreme

Court found that the Commission’s position on the ille-

gality of the lot split was objectively reasonable. It was

not based “on formal, jurisdictional or bureaucratic

grounds, but on the view that such [lot-line] adjustment

would lead to an intensification of the environmental

impacts with which the Commission was concerned.” (Id.

at p. 1023.) Furthermore, the Commission’s conclusion

concerning its legal authority to deny the lot line adjust-

ment was “following the Attorney General’s advice, that

[Public Resources Code] section 30106 gave it authority[.

Its position was] ‘supported by a plausible though [per-

haps] erroneous legal argument’ and therefore not the

basis of a taking.” (id. at p. 1025.)

The Supreme Court cautioned, however, “It would

be, of course, a different question if, even though the

Commission’s position on the lot line adjustment sub-

stantially advanced a legitimate state interest, that posi-

tion was so unreasonable from a legal standpoint as to

lead to the conclusion that it was taken for no purpose

other than to delay the development project before it.

Such a delaying tactic would not advance any valid gov-

ernment objective.” (Id. at p. 1024.) “Of course, as

explained in the preceding part of this opinion, a govern-

ment agency may not evade the takings clause by fabri-

cating a dispute over the legality of a lot, or by otherwise

arbitrarily imposing conditions on development in order

App. 13

to delay or discourage that development. The govern-

ment agency’s assertion of authority, whether or not erro-

neous, must advance some legitimate government

purpose.” (Id. at p. 1029.) In other words, even if the

agency action depriving the owner of all viable use

occurs “during” the development process, and ostensibly

serves a proper governmental purpose, it is not a “nor-

mal” delay in the process if it is so unreasonable from a

legal standpoint as to be arbitrary. (Id. at pp. 1021, 1022,

1024-1025, 1029, 1030.)

Applying the teachings of Landgate to the present

case, we conclude the City’s attempt to enforce its SRO

ordinance in violation of the Ellis Act involves the “dif-

ferent question” suggested by Landgate, where the posi-

tion taken by the City was “so unreasonable from a legal

standpoint” as to be arbitrary, not in furtherance of any

legitimate governmental objective, and for no other pur-

pose than to delay any development other than for an

SRO hotel. Therefore the delay in demolition of the hotel

was a temporary regulatory taking requiring compensa-

tion.

The City contends that its erroneous enforcement of

the SRO ordinance had the legitimate governmental

objective of preserving the availability of low income

housing. This apparent purpose does not save the City

from its temporary taking of Ali’s property, because it

was arbitrary and unreasonable in light of the Ellis Act.

In our prior opinion in this case, we pointed out that Ali’s

argument was supported by authority already existing

when the City in 1989 and 1990 prevented Ali from

demolishing his hotel. In Javidzad v. City of Santa Monica

(1988) 204 Cal.App.3d 524, a local rent control law

App. 14

required that in order to obtain a permit to demolish

controlled rental units a landlord must show that repair is

not economically feasible or that redevelopment of the

property would include 15 percent low income housing.

The appellate court held the Ellis Act preempted the local

law and that the owner was entitled to issuance of a

demolition permit without having to cemply with the

local law conditions. (Id. at pp. 530-531.) We concluded,

“Similarly here, the SRO ordinance prevents a landlord

who desires to go out of the SRO hotel business from

demolishing the hotel and redeveloping the property, and

instead requires the landlord either to repair the hotel

and remain in business, rebuild with replacement units,

or establish financial hardship. The SRO ordinance suf-

fers from the same defects as the Santa Monica rent

control law in Javidzad.” (Ali v. City of Los Angeles,

B077712, supra, slip opinion at pp. 6-7.)

Therefore, based on the teachings of Landgate, the

delay in demolition caused by the erroneous enforcement

of the SRO ordinance despite the prohibitions of the Ellis

Act was not a “normal” delay in the development pro-

cess. Because the delay temporarily deprived Ali of all

use of his property and was not a normal delay in the

development process, it was a temporary regulatory tak-

ing which required compensation under First English.

Judge Crispo correctly awarded a judgment in favor of

Ali in inverse condemnation.

The City alternatively contends that the temporary

delay was Ali’s own fault, because Ali allegedly did not

timely seek administrative review of the determination

that the Ferraro was an SRO hotel. It is the City’s position

that timely exhaustion of administrative remedies is a

App. 15

necessary part of the normal development process, citing

Hensler v. City of Glendale (1994) 8 Cal.4th 1. This argu-

ment does not apply to the circumstances of this case.

First, it is precluded by the factual findings of the trial

court. Both Judge O’Brien and Judge Crispo found factu-

ally that none of the delay in issuance of the demolition

permit is attributable to Ali. As noted ante, the City does

not appeal from Judge O’Brien’s findings, which were

incorporated in the judgment, and the City does not

challenge Judge Crispo’s factual findings for lack of sub-

stantial evidence.

Moreover, administrative review of the determina-

tion whether the Ferraro was an SRO hotel is irrelevant.

Whether or not the Ferraro was an SRO hotel, Ali was

entitled under the Ellis Act to demolish it and go out of

the SKO hotel business. We held in the prior appeal that

Ali was excused from exhausting administrative

remedies, because the issue whether the City’s SRO ordi-

nance was invalid in light of the Ellis Act was not an

issue for the Building and Safety Department acting

administratively. We are not reviewing the classification

of the Ferraro as an SRO hotel, but rather the City’s

legally erroneous invocation of its SRO ordinance against

Ali in violation of the Ellis Act. The City may not simply

delay development by fabricating an irrelevant dispute

about whether the Ferraro was an SRO hotel. (Landgate,

supra, 17 Cal.4th at p. 1029.)

If the City is arguing that Ali’s litigation to determine

the illegality of applying the SRO ordinance to him in light

of the Ellis Act is part of the “normal delay in the develop-

ment process” within the meaning of Landgate, we reject

that contention. In Landgate, the Coastal Commission’s

App. 16

position on the illegality of the prior lot split was plaus-

ible, supported by written advice of the Attorney General,

and furthered legitimate governmental objectives relating

to coastal development. Here the inapplicability of the

SRO ordinance in light of the Ellis Act was apparent from

a 1988 appellate court opinion involving a similar require-

ment in the Santa Monica rent control ordinance. The City

has never disputed the unenforceability of the SRO ordi-

nance in light of the Ellis Act nor claimed a good faith

mistake similar to the mistake of the Coastal Commission

in Landgate. The City’s delay of the demolition was so

unreasonable from a legal standpoint as to be arbitrary

and not in furtherance of any legitimate governmental

objective. Therefore the delay incurred by the City’s insis-

tence that the SRO classification precluded issuing a

demolition permit, including the ensuing litigation, were

not simply normal delays in the development process.

DISPOSITION

The judgment is affirmed. Plaintiff Ali’s cross-appeal

from the judgment is dismissed as moot. Costs on appeal

are awarded to plaintiff.

CERTIFIED FOR PUBLICATION

VOGEL (C:S.), P.J.

We concur:

CURRY, J.

DAU, J.*

* Assigned by the Chairperson of the Judicial Council.