Laguna Village, Inc. v. County of Orange

In April 1978 the county approved Laguna’s tentative map and conditional use permit. In July it adopted ordinance 3071, pursuant to the school facilities act, requiring payment of interim school facilities fees prior to issuance of a building permit in attendance areas found to be overcrowded.

Saddleback, in January 1980, requested building permits for its district be conditioned upon payment of these fees. In February 1980, Laguna was granted a two-year extension on its tentative map. By resolution in June, the county adopted Saddleback’s findings of overcrowding and made the ordinances, conditioning the issuance of building permits upon payment of fees, applicable to the Saddleback district. Laguna was refused a building permit unless it would agree to pay those fees. Payment was made under protest and in November, Laguna filed the underlying action for declaratory relief and rescission of its fee agreement with the school district.

Waiver

Saddleback and the county urge us to find Laguna has waived its right to contest the condition attached to issuance of its building permit. They cite Pfeiffer v. City of La Mesa (1977) 69 Cal.App.3d 74 [ 137 Cal.Rptr. 804 ] for the proposition Code of Civil Procedure section 1094.5 provides the only remedial path available to Laguna. “It is fundamental that a landowner who accepts a building permit and complies with its conditions waives the right to assert the invalidity of the conditions and sue the issuing public entity . . . .” (Id., at p. 78.)

Laguna concedes this general rule but contends it comes within the exception outlined in McLain Western #1 v. County of San Diego (1983) 146 Cal.App.3d 772 [ 194 Cal.Rptr. 594 ]. The McLain plaintiff was midway in a two-phase condominium development. After completing phase I and just prior to application for the building permit for phase II, an ordinance similar to 3071 was passed, conditioning the issuance of building permits upon payment of interim school facilities fees. Plaintiff made payment under protest and brought an action for return of the fees. The court reiterated the Pfeiffer rule, noting “the applicant has the ability to elect to decline the benefits of the permit, and the fee, construction or dedication are not required. The County requires and is entitled to certainty in its fiscal affairs

The court then addressed a possible exception to the general rule. “There are instances where the decision to proceed with a project has been made, commitments have been made, and costs have been incurred, all of which are in practice irrevocable, but permits will be obtained in phases as the project progresses. Where new law imposes a fee condition on one of the subsequent permits under circumstances where even the time necessary to challenge the legality of the fee by petition for mandamus is economically impractical, there is in reality no opportunity for an election .... Under such limited circumstances the developer should not be required to adhere to the general rule . . . .” (Id., at p. 777.)

Plaintiff in McLain had completed phase I and its sales and construction crews were the same for phase II. It was accruing interest costs of $12,000 per month and labor costs if delayed would have been approximately $30,000 per month.

Laguna’s declaration alleged it was committed for the necessary loans and would lose $3,000 to $15,000 per day in additional interest. The declaration was uncontradicted. Thus, Laguna would have accrued interest payable of $90,000 to $450,000 per month, considerably higher than in McLain. For this reason, and in the interests of judicial economy, we address the merits of this action.^[2]

Discussion

The school facilities act was added by statute in 1977. The Legislature declared “[ajdequate school facilities should be available for children residing in new residential developments” and as new developments cause overcrowding which cannot be remedied within a reasonable time with available funds, “new and improved methods of financing for interim school facilities . . . are needed in California.” (§ 65970.) When a school district makes

Laguna argues because the fee payment must be made at the time the building permit is issued, it must have been imposed at an earlier time. However, we feel the Legislature logically chose this stage as representing the final approval necessary to completion of the project. Any payment made prior to this point would be an unnecessary and unrefundable expenditure in the event the development was aborted. Merely because payment is due when the permit is issued does not preclude imposing liability for that payment as a condition precedent to granting the permit.

We agree with the court in McLain Western #1 v. County of San Diego, supra, 146 Cal.App.3d 772 . “[T]he School Facilities Act ... allows certain conditions to be imposed on the issuance of a building permit where school overcrowding will result from the development. The purpose of the Act is to provide funding for interim school facilities to ease overcrowding caused by rapid residential development within each state school district.” (Id., at p. 775, italics added, fns. omitted.)

Section 65974 may indeed have been modeled after section 66477 (dealing with parkland dedication).^[3] This does not mean approval of a residential development, as used in section 65974, is restricted to the enumerated actions in section 65972. The court in Trent Meredith, Inc. v. City of Oxnard (1981) 114 Cal.App.3d 317 [ 170 Cal.Rptr. 685 ] compared the two sections, not to construe the meaning of “approval” but to determine the imposition of school fees “is as appropriate a subject for the exercise of the police power as the subject of inadequate open space . . . .” (Id., at p. 326.) Laguna fails to note Trent also addressed a challenge to payment of school fees “as a precondition to issuance of a building permit. ” (Id., at p. 321, italics added.) Quite properly, neither party and none of the amicus curiae briefs challenged the ordinance’s compliance with the school facilities act for this reason. (Id., at p. 320.) The only issue was whether the fees were a “special tax”; the court determined they were not.

Of interest is the similar wording of the ordinance in Trent: “. . . no decision-making body shall approve a residential development unless . . .

In Santa Monica Pines, Ltd. v. Rent Control Board (1984) 35 Cal.3d 858 [ 201 Cal.Rptr. 593 , 679 P.2d 27 ], the plaintiff had received its final subdivision map approval after enactment of a charter amendment requiring a landlord to obtain a permit before removing controlled rental units from the market. Thus, “[t]he [subsequent] ordinance’s requirement of a removal permit [was] not a ‘new condition’ imposed on a subdivision in violation of Youngblood; it is not a restriction on the right to subdivide at all. Nor did approval of the tentative subdivision map imply that removal of the units from the rental market was also ‘approved.’ ” (Id., at p. 866, fn. 6.) The plaintiff was denied a vested right exemption.^[4] The court upheld the denial because “an ‘insubstantial’ amount . . . was actually expended in reliance on the map approval” (id., at p. 864) [which expenditures] “were clearly a ‘calculated risk’ . . . .” (Id., at p. 867.)^[5]

The Santa Monica court noted the plaintiffs still had the “authority to subdivide their apartment building as provided in the approved tentative map, that is, to sell fee interests in single apartment units. [They merely did not acquire] the further right to transfer interests which are free of an intervening general regulation—the requirement that any owner of a ‘controlled rental unit’ obtain a permit before removing it from the rental market. [if] But it is well established that the rights which may ‘vest’ through reliance on a government permit are no greater than those specifically granted by the permit itself.” (Id., at pp. 865-866.)

A similar after-enacted ordinance was upheld in People v. H & H Properties (1984) 154 Cal.App.3d 894 [ 201 Cal.Rptr. 687 ], as modified at 155 Cal.App.3d 1049c. H & H had received both tentative and final map approvals and its rights had fully vested. The ordinance “did not intervene and constitute an additional condition precedent to final approval . . . [but] merely requires H & H, and all developers . . . interested in converting their apartments to condominiums, to satisfy certain [then] existing requirements . . . .” (Id., at p. 900.)