Dryden Oaks v. San Diego County Regional Airport Authority

California Court of Appeal·Decided October 19, 2017·No. D069161·Published

Opinion

Filed 9/26/17; Modified and Certified for Pub. 10/19/17 (order attached)

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE

STATE OF CALIFORNIA

DRYDEN OAKS, LLC et al., D069161 Plaintiffs and Appellants,

v. (Super. Ct. No. 37-2014-00004077-

CU-EI-NC)

SAN DIEGO COUNTY REGIONAL AIRPORT AUTHORITY et al.,

Defendants and Respondents.

APPEAL from a judgment of the Superior Court of San Diego County, Earl H.

Maas, III, Judge. Affirmed.

Freeland McKinley & McKinley, Steven A. McKinley and Karen G. McKinley for Plaintiffs and Appellants.

San Diego County Regional Airport Authority and Amy Gonzalez; Gatze Dillon & Ballance LLP, Lori D. Ballance, Stephen F. Tee and Michael P. Masterson for Defendant and Respondent San Diego County Regional Airport Authority.

Thomas E. Montgomery, County Counsel, Judith A. McDonough and John P.

Cooley, Deputy County Counsel for Defendant and Respondent County of San Diego.

In 2001, Michael Durkin used two limited liability companies—Dryden Oaks LLC and Durkin-CAC Lot 24, LLC—to purchase two lots directly adjacent to the McClellan Palomar Airport (Airport) in the City of Carlsbad, California (City). His development plans for the two lots were initially successful despite determinations by the San Diego County Regional Airport Authority (Authority) that the proposed projects were not compatible with the Airport. Overriding the Authority's objections, the City issued a planned industrial permit and Durkin completed the construction of a commercial building on one of the lots in 2005. He also obtained a permit from the City for construction of a second building on the other lot. Both permits included provisions in which Durkin agreed to hold the City harmless for any liability arising out of approval of the projects.

Durkin's permit on the second lot expired in 2012 without the commencement of any construction. By the time Durkin sought to restart the permitting process with the City, the Authority had adopted an Airport Land Use Compatibility Plan (ALUCP) that designated Durkin's properties as being within a Safety Zone that carries specific limiting recommendations for compatible land uses. Despite having approved Durkin's previous permit application, the City now refused to override the recommendations in the ALUCP.

Under California law, it is the City that bears ultimate responsibility for deciding which property development projects to permit. But apparently unable or unwilling to sue the City, in February 2014 Durkin filed an inverse condemnation action against the

Authority and the County of San Diego (County). Durkin's complaint asserted that the value of his property was depressed by the Authority's 2010 adoption of the ALUCP and that the decrease in value constituted a governmental taking requiring the County and the Authority to provide compensation.

We conclude the trial court properly entered summary judgment in favor of the County and the Authority on the ground that undisputed evidence shows there was no taking by these defendants. To the extent Durkin has any arguable claim, which we express no opinion on, it would be against the City. Based on established legal principles, nothing done by the Authority or the County amounts to a taking of Durkin's property. Accordingly, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND At the time the complaint was filed, Dryden Oaks owned a parcel of real property known as Lot 25 and Durkin-CAC owned a parcel known as Lot 24. The two lots are located in the County of San Diego and the City of Carlsbad at the west end of the Airport, adjacent to the end of a runway. When Durkin purchased the lots, they were designated as part of the Airport's Runway Protection Zone (RPZ) on the County's Airport Layout Plan (ALP), a long-range planning tool that preceded the ALUCP. The Federal Aviation Administration defines a RPZ as "[a]n area at ground level prior to the threshold or beyond the runway end to enhance the safety and protection of people and property on the ground." In March 2000, Durkin entered into an agreement to purchase Lots 24 and 25 (and a third lot, Lot 23, not at issue in the litigation), which were part of a development known as the Carlsbad Airport Centre, from the Callaway Golf Company.

Durkin visited the property 14 times prior to signing the purchase agreement and observed the lots' proximity to the airport.

The transaction was in escrow for approximately 15 months, closing in June 2001.

Durkin paid $474,000 for Lot 24 and $310,000 for Lot 25. Prior to the close of the transaction, Durkin submitted an application to the City for a permit to construct a 29,000 square foot industrial building on Lot 24. In December 2001, the City submitted the application to the Authority for a determination as to whether the proposed project was consistent with the 1994 Comprehensive Land Use Plan for the Airport, a predecessor plan to the ALUCP. Roughly two months later, the Authority issued a determination that it could not make an administrative finding that the project was consistent with that plan because the property was "located within the 75 CNEL zone of the McClellan-Palomar Airport" and the proposed industrial development was not compatible. The Authority's letter communicating its decision indicated that the City could pursue the development through the override procedures contained in Public Utilities Code section 21676.1 In June 2002, the City passed a resolution overriding the Authority's determination "as to noise compatibility only" conditioned on "internal noise reduction, Notices of Restrictions, Hold Harmless Agreements, and exemptions from outdoor eating area requirements . . . ." It also issued planned industrial permits (PIP No. 00-04 and PIP No. 00-04(A)) to Durkin. Each permit contained an indemnification clause in which

1 Undesignated statutory references are to the Public Utilities Code.

Durkin agreed to hold the City harmless from all liabilities arising out of the approval, development and operation of the project and to execute "a Hold Harmless Agreement regarding aircraft operations and aircraft noise prior to issuance of grading or building permits" to be "reviewed and approved by the City Attorney . . . ." Durkin also gave the County an avigation easement for Lot 24 in the process of developing the property. Thereafter, the project was finished and the building has been leased to various tenants since 2005.2 Plans for Lot 25 proceeded on a slower schedule, and it was not until October 2006 that Durkin submitted an application to the City for a planned industrial permit to construct a 30,000 square foot two-story industrial building. As with the project on Lot 24, after Durkin submitted his permit application the plans were submitted to the Authority for a determination as to whether the project was consistent with the applicable airport compatibility plan, which at that time was the 2004 Airport Land Use Compatibility Plan. In February 2007, the Authority provided notice to the City that the Lot 25 project was not consistent with that compatibility plan.

The City also submitted the project proposal to the California Department of Transportation (Caltrans) for comment. In its October 2007 response, Caltrans noted that the proposed development was within the "Runway Protection Zone (RPZ) as depicted

2 Durkin and Michael Lamb formed Durkin-CAC in November 2004, with each retaining 50% ownership of the new entity. The operating agreement required Durkin's family trust to convey Lot 24 and Lamb to convey stock worth approximately $250,000 and a $400,000 note to the new entity in exchange for ownership.

on the Federal Aviation Administration (FAA) approved Airport Layout Plan" and was therefore " 'very high risk' due to its proximity to the end of the runway." The letter also noted that the "Caltrans Airport Land Use Planning Handbook (Handbook) generally recommends prohibiting all new structures within the RPZ."

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