Judge Randolph M. Hammock, Case Number: 22STCV21354, Date: 2023-08-04 Tentative Ruling

Plaintiffs Peter R. Katz and Teresa M. Katz are the trustees of the Peter R. Katz and Teresa M. Katz 1998 Family Trust dated June 9, 1998. Plaintiffs hold an undivided 50% interest in three real property lots at North Laurel Canyon Boulevard—Plaintiff Zoe Lynn Katz owns the other 50%. The lots contain two single family residences.

Plaintiffs bring this action against Defendant City of Los Angeles and the Los Angeles Department of Building and Public Safety. Plaintiffs allege the City has wrongfully cited them for, among other things, removing accumulated silt and debris from the property and repairing an existing retaining wall. It is also alleged that Defendant also wrongfully required that two of the lots be “tied.” In the FAC, Plaintiffs assert causes of action for (1) Failure to Perform Mandatory Government Duty, (2) Violation of Civil Rights, (3) Inverse Condemnation, (4) Civil Conspiracy, and (5) Declaratory Relief.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732 (internal citations omitted).)

Plaintiffs Peter R. Katz and Teresa M. Katz, as Trustees of the Peter R. Katz and Teresa M. Katz 1998 Family Trust dated June 9, 1998, allege they hold “an undivided 50% interest in real property identified as Lots 295, 296, 297, and those certain unnumbered lots, using the last two digits of the assessor's parcel number, 32, 33, and 37, all of which located at 2650 North Laurel Canyon Boulevard, Los Angeles, California 90046 and 2652 North Laurel Canyon Boulevard, Los Angeles, California 90046.” (FAC ¶ 1.) Plaintiff Zoe Lynn Katz holds an undivided 50% interest in the other half of the property. (Id. ¶ 2.) Plaintiffs purchased the property in June 2015. (Id. ¶ 11.) There are two single-family residences on the property—a main dwelling unit and a smaller dwelling unit. (Id. ¶ 15.)

After purchasing the property, “Plaintiffs discovered there was a large amount of silt from the hillside that had migrated onto the Lots. Much of the silt had piled up behind the Small Dwelling Unit, behind the Main Dwelling Unit, and on and alongside the driveway.” (Id. ¶ 16.) Before obtaining any permits, Plaintiffs “began removing the silt and debris that had accumulated” by using a 10-inch pipe “as a chute to slide the silt to the bottom of the hill.” (Id. ¶ 18.) On or about October 6, 2016, Plaintiffs received a Notice of Violation from LADBS for grading without a permit, resulting in a $300.00 fine. (Id. ¶ 19.) Plaintiffs maintain that the removal of silt was “required maintenance” that did not require a permit. (Id. ¶ 22.) LADBS eventually issued an Order to Comply. (Id. ¶ 22.) Plaintiffs appealed the Order to Comply, and a hearing was held on September 14, 2021. (Id. ¶ 23.) The Commission orally ruled against Plaintiffs. (Id.)

In 2016, Plaintiffs sought to replace old stone steps or walls at the Property that were “crumbling and broken in certain places.” (Id. ¶ 24.) “Plaintiffs approached DBS Plan Check in West Los Angeles with a photograph of the rock walls and asked for a permit to repair them. Plaintiffs were told that if the walls were in the same place, and no new ones were being added, and they were just being repaired, no permits were required because these were decorative walls only, not retaining walls.” (Id.) Plaintiffs went on to repair the existing walls. (Id. ¶ 25.) “Nonetheless, DBS issued an OTC-Supplemental made on or about January 22, 2019, citing Plaintiffs for unpermitted retaining wall.” (Id.)

Plaintiffs next allege they “wished to remodel the Small Dwelling Unit that essentially consisted of making changes to add a kitchen and modify the bathroom. No additional square footage was added to the Small Dwelling Unit.” (Id. ¶ 26.) Thereafter, “Plaintiffs applied to have Lots 295, 296, 297, and APN Designated 37 tied together as one parcel, which was based on the City’s condition before the City would issue a building permit regarding the Small Dwelling Unit.” (Id. ¶ 27.) Plaintiffs contend the City improperly implied the law by requiring Plaintiffs to tie the lots, and therefore “Plaintiffs should be allowed to untie said lots.” (Id. ¶ 29.)

Finally, Plaintiffs allege the City wrongfully issued two Corrective Notices on August 3, 2021, for purportedly invalid permits. (Id. ¶ 31.) Plaintiffs now bring causes of action for (1) Failure to Perform Mandatory Government Duty, (2) Violation of Civil Rights, (3) Inverse Condemnation, (4) Civil Conspiracy, and (5) Declaratory Relief.

Defendants also demurrer to the Third and Fourth Causes of Action. Plaintiff maintains the Third Cause of Action for inverse condemnation is well-pled. Plaintiffs also contend they can successfully amend their Fourth Cause of Action for civil conspiracy, while apparently conceding the claim, at least as currently pled, is insufficient. This court therefore focuses its analysis on the Third and Fourth Causes of Action.

In support of the Third Cause of Action for Inverse Condemnation, Plaintiffs allege that Defendants “substantially impaired Plaintiffs' ability to transfer or refinance the Lots and APN Designated 32, 33, 37 by requiring the Lots to be tied and then failing to provide any official determination as to whether it will approve Plaintiff untying Lot 237 from Lots 295, 296, and APN Designated 37 so that Plaintiffs may appeal the City's decision should the City deny approval for Plaintiffs to untie the Lots.” (Id. ¶ 50.) “As a legal and proximate result of Defendants’ violations of Plaintiffs’ constitutional rights, Plaintiffs have suffered and will continue to suffer damages in the form of damages including, but not limited to, loss of the value of the Lots and APN Designated 32, 33, 37, impairment of marketability, inability to refinance, fees paid to the City, attorneys’ fees incurred, lost time, inconvenience, emotional distress, and anguish.” (Id. ¶ 52.)

As an initial matter, governmental immunity does not apply to Plaintiffs’ claim for inverse condemnation. (See Baldwin v. State of California (1972) 6 Cal.3d 424, 438 [government immunity does not insulate a public entity from liability for inverse condemnation; the constitutional provisions requiring compensation for property taken or damaged by a public use override the Government Claims Act and its statutory immunities]; Pacific Bell v. City of San Diego (2000) 81 Cal.App.4th 596, 603 [same].)

Defendant also contends Plaintiffs’ claim for inverse condemnation fails under the test set forth in Penn Central Transp. Co. v. New York City (1978) 438 U.S. 104, 124 (“Penn Central”). Plaintiffs “concur that the Penn Central analysis is applicable” here. (Opp. 9: 18-19.) The court therefore focuses its analysis on this issue, which it finds dispositive.

Penn Central is “essentially an ‘ad hoc’ inquiry mostly focusing on three factual inquiries that probe the severity of the burden imposed on private property rights and the extent to which the claimant has been unfairly forced to bear a public burden.” (Shaw v. Cnty. of Santa Cruz (2008) 170 Cal. App. 4th 229, 272.) These factors are: “(1) the economic impact of the regulation on the claimant; (2) the extent to which the regulation has interfered with distinct, investment-backed expectations; and (3) the character of the government action, i.e., did it involve a physical invasion or merely a regulation adjusting societal burdens and benefits to promote the public good.” (Id. [citing Penn Central, supra. at p. 124.) The Penn Central factors “do not serve as a checklist,” and “a court may dispose of a takings claim on the basis of one or two of them.” (Id.) “This analysis turns in large part on the magnitude of a regulation's economic impact and the degree to which it interferes with legitimate property interests.” (Id. [internal quotations omitted].) Recovery under a regulatory taking is limited to “extreme circumstances.” (640 Tenth, LP v. Newsom (2022) 78 Cal. App. 5th 840, 861.) The goal of the analysis is to identify actions that are “functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain.” (Id.)

“Ordinarily,” the Penn Central analysis “requires a factual inquiry, which may preclude a ruling on demurrer.” (Herzberg v. Cnty. of Plumas (2005) 133 Cal. App. 4th 1, 18.) However, a trial court may properly sustain a demurrer where the plaintiffs “have not and could not plead a regulatory taking as a matter of law.” (Id.) The court turns to the three factors.

Penn Central factor 1 is the economic impact of the regulation on the claimant. Addressing this factor, Defendant argues the lot tie “does not unreasonably or negatively impact the use or value of the Property because it does not impede the development of Plaintiffs’ project.” (Mtn. 21: 7-9.) “On the contrary,” Defendant asserts, “the lot tie enhances the value of the Property by facilitating the development of a JADU and detached ADU.” (Id. 9-10.) It “created one developable parcel out of the three separate parcels over which the existing single family dwelling was built,” and “thus allowed Plaintiffs to retain their home, legalize the accessory structure as a JADU, and build a detached garage as an ADU without demolishing the otherwise illegal structure.” (Id. 10-14.)

In opposition, Plaintiffs disagree that the tying of the lots facilitated development, and instead contend the lot tie “impedes the development of the Properties.” (Opp. 9: 25-26.) Specifically, the court understands Plaintiffs to argue that they could have constructed the garage, ADU, and JADU even without the tying, and perhaps, even a second additional ADU. (Opp. 11: 4-9.)

Even accepting all of Plaintiffs’ allegations (and arguments in opposition) as true, Plaintiffs have failed to allege a substantial economic impact, much less one “the functional equivalent of government appropriating the property.” (640 Tenth, LP v. Newsom (2022) 78 Cal. App. 5th 840, 862.) Indeed, “even a ‘significant’ economic loss is not enough.” (Id.) Plaintiffs concede the City issued the permits to build a JADU and ADU that Plaintiffs had requested. (FAC at ¶ 30.) At best, Plaintiffs may have wanted to build an additional ADU, or three units instead of four. That they might have been prevented from doing so is not a substantial or even significant economic impact.

Factor two is the extent to which the regulation has interfered with Plaintiffs’ distinct, investment-backed expectations. Defendant argues “Plaintiffs cannot establish that the City interfered with a reasonable investment-backed expectation.” (Mtn. 21: 21-22.) Defendant again maintains that the “lot tie facilitates the development of the Property pursuant to Plaintiffs’ plans, which furthers (as opposed to interfering with) Plaintiff’s reasonable investment-backed expectations, as evidenced by their plans and the permits they obtained to effectuate those plans.” (Id. 21: 24-28.)

Plaintiffs counter their investment-backed expectations have been interfered with because they have “already demonstrated their commitment to building and improving their Properties, so there can be no doubt that they would have further improved them and rented out the extra dwelling units to begin to recoup their investment.” (Opp. 11: 17-20.)

As the court understands Plaintiffs’ argument and pleading, it again goes that Plaintiffs could have and might have constructed additional units on the Property had the lots not been tied. Even accepting as true for present purposes that Plaintiff could have constructed additional units had the lots not been tied—a proposition the City disputes—takings law “is not a panacea for less-than-perfect investment or business opportunities.” (Long Beach Equities, Inc. v. Cnty. of Ventura (1991) 231 Cal. App. 3d 1016, 1040.) Plaintiffs have therefore merely alleged they were prevented from developing the property to its full potential. This only minimally impairs Plaintiffs’ investment-backed expectations.

“[T]he ‘character of the government action’ factor focuses on whether the government action involves a temporary physical occupation.” (640 Tenth, LP, supra, 78 Cal. App. 5th at 863.) The Penn Central Court explained that regulations adjusting “the benefits and burdens of economic life to promote the common good” rather than causing a “physical invasion” of property rarely constitute a taking. (Penn Central, supra, 438 U.S. at 124.)

Accordingly, Defendant’s Demurrer to the Third Cause of Action is SUSTAINED. Generally speaking, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) When considering Plaintiffs’ previous Complaint, current FAC, and their oppositions to the Demurrers to each pleading—all of which have failed to articulate a viable claim—it appears there is no reasonable 22possibility of successful amendment. Therefore, no leave to amend is given.

“The elements of a civil conspiracy are (1) the formation of a group of two or more persons who agreed to a common plan or design to commit a tortious act; (2) a wrongful act committed pursuant to the agreement; and (3) resulting damages.” (City of Indus. v. City of Fillmore (2011) 198 Cal. App. 4th 191, 212.) “Civil conspiracy is not an independent tort. Instead, it is ‘a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration.” (Id. at 211-212.)

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.