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Trinity Park, L.P., et al v. City of Sunnyvale

March 24, 2011

TRINITY PARK, L.P., ET AL., PLAINTIFFS AND APPELLANTS,
v.
CITY OF SUNNYVALE, DEFENDANT AND RESPONDENT.



Trial Court: Santa Clara County Superior Court Superior Court No. CV159525 Trial Judge: Hon. Kevin J. Murphy

The opinion of the court was delivered by: Bamattre-manoukian, Acting P.J.

CERTIFIED FOR PUBLICATION

Santa Clara County Super. Ct. No. CV159525

I. INTRODUCTION

Appellants Trinity Park, L. P. and Classic Communities, Inc. (hereafter, collectively Trinity) are the developers of a residential housing project known as Trinity Park, which consists of 42 houses in a subdivision located in respondent City of Sunnyvale (City). The City's 2007 approval of the Trinity Park development was conditioned upon compliance with the City's below market housing ordinance, which required Trinity to sell five houses in the subdivision at below market prices. In 2009, after substantial construction of the project, Trinity filed a complaint in which it sought to invalidate the City's below market housing requirement as applied to the Trinity Park development.

The City demurred to the complaint on the ground that it was time-barred under the 90-day limitation periods provided by the applicable statutes of limitation, Government Code sections 65009, subdivision (c)(1)(E) [challenges to conditions on development permits] and 66499.37 [challenges to conditions on subdivision development].*fn1 In opposition, Trinity argued that those statutes did not apply and its complaint was timely filed under the 180-day limitations period provided by section 66020 [challenges to development fees, dedications, reservations and "other exactions" imposed as condition of development project approval], which had not begun to run due to the City's failure to give the requisite notice. The trial court sustained the City's demurrer without leave to amend and entered a judgment of dismissal from which Trinity appeals.

For reasons that we will explain, we determine that a requirement that a subdivision developer sell a certain percentage of a subdivision's houses at below market prices as a condition of development approval does not constitute a development fee, dedication, reservation or "other exaction" within the meaning of section 66020 where, as here, the affordable housing requirement was clearly not intended to "defra[y] all or a portion of the cost of public facilities related to the development project." (§ 66000, subd. (b); Barratt American, Inc. v. City of Rancho Cucamonga (2005) 37 Cal.4th 685, 696 (Barratt).)

We therefore conclude, as a matter of law, that section 66020 does not apply and Trinity's complaint was untimely filed under both section 66499.37 and section 65009, subdivision (c)(1)(E). Accordingly, the trial court did not err in sustaining the City's demurrer without leave to amend and we will affirm the judgment of dismissal.

II. FACTUAL BACKGROUND

Since this appeal concerns a judgment of dismissal upon an order sustaining a demurrer without leave to amend, our summary of the facts is drawn from the properly pleaded factual allegations of the complaint and those matters properly subject to judicial notice. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 (Schifando).)

Trinity is the owner and developer of a residential housing project known as Trinity Park in the City of Sunnyvale. In 2007, the City approved Trinity's application for rezoning, a special development permit allowing 42 single family homes, and a tentative map subdividing four lots into 42 lots and one common lot. One of the City's conditions for granting approval of Trinity's application for the development of Trinity Park was compliance with the City's below market housing ordinance.

Adopted in 1980, the below market housing ordinance as amended provides that where the proposed development includes more than nine units, "For ownership units, twelve and one-half percent of the total number of dwelling units . . . within the development shall be maintained as below market rate." (Sunnyvale Mun. Code, § 19.66.020, subd. (a)(1).)*fn2 A developer may pay an "in-lieu fee" instead of providing below market rate units only if the proposed development consists of between nine and 19 parcels or units. (Mun. Code, § 19.66.090, subd. (a).) The below market housing ordinance also provides that where a proposed residential development project is subject to the below market rate housing requirement, any tentative map, use permit or special development permit approving the project must include conditions "sufficient to ensure compliance" with the ordinance. (Mun. Code, § 19.66.020, subd. (b).) A residential development providing at least 10 percent below market rate units is entitled to priority processing of required city permits and approvals. (Mun. Code, § 19.66.120.)

In 2008, the City and Trinity entered into a "Below Market Rate Developer Agreement" that the City recorded. Among other provisions, the agreement states that Trinity is required to sell five houses at below market purchase prices of $246,821 for three-bedroom units and $269,115 for four-bedroom units. In addition, each "BMR [below market rate] unit" is to be first offered for sale to the City or its designee. The agreement further states that the estimated completion date for the units was June 30, 2009.

In a letter to the City dated August 5, 2009, captioned "Notice of Protest and Statement of Objections--Below Market Rate ('BMR') Housing Requirements," Trinity stated that it was providing notice, pursuant to sections 66020 and 66021, that any contracts to sell houses in Trinity Park for less than market value "should be deemed to be executed or submitted, and continue to be executed or submitted, under protest and subject to full reservation of rights to seek relief therefrom." Trinity also argued that the City's "BMR exactions" were unlawful for several reasons: (1) due to the lack of reasonable relation to the development's impacts, the "BMR exactions" constituted special taxes requiring a two-thirds vote of the electorate; (2) improper shifting of the cost of affordable housing; (3) failing to allow a credit for revenue generated by new residents; (4) inconsistency with the City's general plan, and (5) preemption by state laws.

There is no indication in either the complaint or the matters subject to judicial notice that Trinity has sold any houses in the Trinity Park development at below market purchase prices.

III. PROCEDURAL BACKGROUND

A. The Complaint

On December 17, 2009, Trinity filed its complaint against the City arising from the Trinity Park development. Without specifically mentioning the City's below market housing ordinance, Trinity claimed that the City's below market rate "housing policies" and "BMR exactions" were unlawful. According to Trinity, the City's requirement that Trinity sell five houses at below market prices as a condition of approval of its application to develop Trinity Park violated several California laws, constituted an unconstitutional taking, was a "disguised 'special tax,' " and was arbitrary and excessive.

Trinity also alleged that it had executed the "Below Market Rate Developer Agreement" "under duress and compulsion as apparently non-negotiable conditions of submitting and processing the necessary development applications." Additionally, Trinity alleged that it "continued to perform very substantial work" on Trinity Park, including installing "infrastructure and other public improvements," while continuing to "question the validity or justification for the disputed BMR housing exactions." Trinity also complained that the City had "not provided any relief from said invalid and unjustified fees and exactions . . . ." Finally, Trinity asserted that it had "duly and timely submitted written Statements of Protest and objections to such BMR exactions as provided by [sections] 66020 and 66021, and the common law of California."

The complaint included two causes of action for declaratory relief in which Trinity sought invalidation of the City's below market housing requirement as applied to the Trinity Park development. In three other causes of action Trinity sought a refund, injunctive relief, and a writ of mandate directing the City "to vacate the invalid BMR housing exactions conditions to this Project, and the underlying BMR housing policies, and to conform [the City's] imposition of any other 'affordable housing' exaction or fee to State law as set forth herein[.]"

B. The City's Demurrer

The City demurred to Trinity's complaint on three grounds, including the affirmative defenses of the statute of limitations and equitable estoppel, as well as failure to state a cause of action under the applicable laws.

Regarding the statute of limitations, the City contended that the complaint was time-barred under section 66499.37, which is part of the Subdivision Map Act (section 66410 et seq.). Section 66499.37 provides a 90-day limitations period to challenge the decision of a legislative body "concerning a subdivision." The City argued that Trinity had only 90 days after tentative map approval in 2007 to file its complaint because all of Trinity's claims arose from the below market housing requirement imposed as a condition of the tentative map approval for the Trinity Park subdivision. Since the complaint was not filed until 2009, City asserted that the complaint was untimely filed. The City also contended that the complaint was similarly time-barred under section 65009, subdivision (c)(1)(E), which provides a 90-day limitations period for a challenge to the "reasonableness, legality, or validity of any condition attached to a variance, conditional use permit, or any other permit."

Anticipating Trinity's argument that the applicable statute of limitations was instead found in sections 66020 and 66021 (two provisions of the Mitigation Fee Act, section 66000 et seq.), the City noted that those provisions expressly apply only to " 'fees, dedications, reservations, or other exactions.' " The City argued that the below market housing requirement imposed on Trinity Park did not constitute a fee, dedication, reservation, or "other exaction" because it did not require Trinity "to pay anything to the City, to give the City a possessory interest in real property, or to build anything for the City."

In addition, the City argued that the complaint was barred under the doctrine of equitable estoppel because Trinity had "substantially built Trinity Park" after agreeing to the below market housing requirement. As to its contention that Trinity had failed to state a cause of action, the City argued that under the relevant authorities Trinity's claim that the below market housing ordinance was invalid lacked merit as a matter of law.

C. Trinity's Opposition

Trinity argued that its complaint was timely filed under the statute of limitations provided by sections 66020 and 66021 for challenges to below market rate "exactions." It asserted that it had filed a timely protest to the "BMR exactions" in 2009, in compliance with the protest procedure set forth in section 66020, while the City had failed to give the notice required to trigger the section 66020 limitations period of 180 days for an action challenging an exaction, and therefore the limitations period had not begun to run.

The 90-day limitations period provided by section 66499.37 did not apply, in Trinity's view, because that statute of limitations only applies to a challenge to a condition of tentative subdivision map approval. Trinity also rejected the application of the 90-day limitations period provided by section 65009, subdivision (c)(1)(E) for a challenge to a condition attached to a development permit, on the ground that section 65009, subdivision (c)(1)(E) was less specific than section 66020.

Trinity further argued that the merits of the complaint could not be resolved on demurrer for two reasons. First, Trinity claimed that imposition of a mandatory below market housing requirement on its Trinity Park development constituted a constraint on housing that was not authorized under state law. Second, Trinity asserted that it had entered into the "Below Market Rate Developer Agreement" under duress, and therefore the court could not take judicial notice of the agreement.

Finally, Trinity argued that the City's equitable estoppel claim lacked merit because the record would not support a showing that the City had changed its position in reliance on the below market housing rate requirement imposed on the Trinity Park development.

D. The Trial Court's Order

On April 20, 2010, the trial court issued its order sustaining the City's demurrer without leave to amend on the ground that the complaint was untimely filed. The order also granted the parties' requests for judicial notice of various City ordinances and records pertaining to the Trinity Park development and the City's below market rate housing requirement, including the "Below Market Rate Developer Agreement" between the City and Trinity.

The trial court determined that the applicable statute of limitations was section 66499.37, since that statute provides that any action attacking the decision of a legislative body concerning a subdivision, or the validity of a condition attached to a subdivision, must be commenced and the service of summons effected with 90 days after the date of the decision.

Further explaining its determination, the trial court stated, "[Trinity's] complaint seeks to challenge the constitutionality of [the City's] below market housing ordinance (BMR) along with the legality and validity of the BMR conditions imposed on them in the BMR agreement they signed in order to obtain permits. [Trinity was] required to execute the BMR agreement prior to the issuance of a permit for the project. [Citation.] This lawsuit was not commenced until December 17, 2009 despite the fact that the BMR conditions were imposed in September of 2007 when Trinity Park's tentative subdivision map was approved, and were memorialized in April 2008 in the recorded BMR agreement. Therefore, the 90 day limitations period has run even when calculated from the more recent April 2008 time period."

The trial court also reasoned that even "assuming that the BMR requirements constitute [an] 'other exaction' " and therefore the 180-day limitations period provided by sections 66020 and 66021 applied, the complaint was still untimely because "notice of the BMR conditions was provided to [Trinity] both in 2007 and in the April 2008 BMR agreement and this lawsuit was not filed within 180 days of [the City] providing this notice to [Trinity]."

Leave to amend was denied because the trial court concluded that the complaint could not be amended to cure the statute of limitations defect. The City's other arguments regarding the merits of the action and the affirmative defense of equitable estoppel were rejected by the court as not "well taken."

Judgment of dismissal was entered on April 28, 2010. Trinity subsequently filed a ...


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