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Arcadia Development Co. v. City of Morgan Hill

December 16, 2008


(Santa Clara County Super. Ct. No. CV020598). Trial Judge: Hon. Marc B. Poché.

The opinion of the court was delivered by: Premo, J.



In 2004, voters in the City of Morgan Hill (City) passed a measure amending City's general plan and extending to 2020 a growth control ordinance that had been set to expire in 2010. One provision of the original ordinance drastically restricted development of certain property within the city limits (the Density Restriction). The 2004 enactment did not change the effect of the Density Restriction other than to extend it for 10 years.

Arcadia Development Company (Arcadia), which owned property subject to the Density Restriction, filed a complaint and petition for writ of mandate against City and the Morgan Hill City Council,*fn1 challenging the 10-year extension of the Density Restriction on equal protection and takings grounds. (U.S. Const., 14th Amend., § 1; 5th Amend.) The trial court dismissed the action, concluding that Arcadia's causes of action had accrued in 1990, when the original measure had been enacted and, therefore, that they were barred by the 90-day statute of limitations contained in Government Code section 65009.*fn2

We conclude that under the circumstances of this case the 2004 measure extending the Density Restriction for 10 years gave rise to a new cause of action and, therefore, that Arcadia's lawsuit was timely. Accordingly, we shall reverse.


City is located in the southern portion of the Santa Clara Valley. In 1970, City had a population of fewer than 6,000 people. In the mid-1970s the population was growing at a rate of about 20 percent per year. In or about 1977, in response to this rapid growth, City's voters approved Measure E, which imposed City's first residential development control system (RDCS), a method by which City distributed a limited number of housing allotments among those seeking to develop property within City's borders. Measure E remained in effect until 1990 when voters passed Measure P. Measure P placed additional limits upon City's rapid rate of growth, which, for the years 1985 through 1990, was the highest in the county. Measure P continued the housing allotment system first implemented by Measure E and set a population target of 38,800 for 2010.

In addition to its purpose of limiting growth, Measure P was designed to concentrate residential growth toward the center of the city and prevent the outward sprawl that put excessive pressure on city services. In order to advance this purpose, Measure P prohibited City from adding any more land to its urban service area, other than "desirable in-fill," until such time as the city council found that developable land already within City's borders was insufficient to accommodate five years of residential growth. Measure P also introduced the Density Restriction, which was expressly intended to limit development of properties annexed between March 1, 1990, and the effective date of Measure P (December 8, 1990).*fn3 The properties subject to the Density Restriction were the properties being considered for annexation by the Santa Clara County Local Agency Formation Commission (LAFCO) around the time Measure P was being drafted. They were located on the outskirts of City's borders, which meant that developing the properties would contribute to the urban sprawl Measure P was designed to prevent. The Density Restriction limited development on these properties to the density allowed by the Santa Clara County general plan to which they would have been subject absent annexation, effectively preventing them from competing for housing allotments at the much greater density City's zoning regulations would have allowed. Measure P became effective on December 8, 1990 and, by its terms, was set to expire in 2010.

Arcadia owned one of the properties awaiting annexation approval when Measure P was being drafted. Arcadia's property consisted of approximately 80-acres in the rural area of Santa Clara County, just outside City's borders. LAFCO approved its annexation on March 19, 1990, which placed the property squarely within the time frame to which the Density Restriction was to apply. On September 19, 1990, within the window of time between annexation of its property and passage of Measure P, Arcadia was awarded a housing allotment for an 11 acre subdivision of its parcel. City approved Arcadia's plans for the subdivision in 1991 with the condition that "no further subdivision and or residential development of the [remaining 69 acres] shall be allowed except in accordance with the provisions contained in [City's RDCS] (Chapter 18.78 of the Morgan Hill Municipal Code) as amended." The Density Restriction, which was part of the RDCS, limited development of Arcadia's 69 acre remainder parcel to a maximum of one unit per 20 acres, or a total of four homes. Absent the Density Restriction, the RDCS would have allowed Arcadia to compete for housing allotments at a density of five units per acre, or approximately 345 homes.

There were two other parcels in addition to Arcadia's that were potentially subject to the Density Restriction. One was a 33-acre parcel known as the Half Road-Grattan property and the other a 14-acre parcel known as the Watsonville-Tersini property. At the time of its annexation, the Half Road-Grattan property was designated for industrial development so that unless it was rezoned the RDCS did not apply to it at all. The Watsonville-Tersini property was designated residential and, therefore, was subject to the RDCS. However, like Arcadia, the Watsonville-Tersini property received housing allotments after it was annexed but before the effective date of Measure P. Those allotments effectively built out that 14-acre parcel. Thus, by the time Measure P took effect, Arcadia's property was, for all practical purposes, the only property to which the Density Restriction applied.

In early 2002, City began considering amendments to Measure P. In biweekly meetings, from July 2002 until May 2003, the Measure P Update Committee met to consider revisions to the RDCS. Among other things, City planned to extend the duration of the RDCS for an additional 10 years. During this planning phase, Arcadia had urged City to do away with the Density Restriction. Arcadia maintained that the restriction unfairly singled out Arcadia's property because there was no reasonable basis upon which to differentiate Arcadia's property from other developable property within the city limits. Arcadia was also concerned that the restriction would become a perpetual limit upon development of its property. City considered three ways of dealing with the Density Restriction. It could extend the restriction along with the rest of the RDCS to 2020, delete it, or allow it to expire in 2010 as it would have under Measure P. City chose to extend it to 2020.

The new measure, designated as Measure C, was put to the voters pursuant to a resolution adopted by City at the conclusion of the public hearing on November 19, 2003. Measure C set a population target of 48,000 for 2020, continued, with some refinements, the housing allotment system, continued to prohibit annexation of other than "desirable in-fill" until City had insufficient land available to accommodate five years of growth, and continued the Density Restriction in substantially the same form it had appeared in Measure P.*fn4 ...

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