City Attorney Dennis Herrera News Release 

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ForImmediateRelease:March4,2014Contact:MattDorsey(415)554‐4662

Herrera’s Fillmore Center defense saves  1,113 apartments from condo conversion 

City Attorney hails outcome in high‐stakes litigation as ‘a major legal victory that  protects affordable housing at a time when San Francisco desperately needs it’ 

SANFRANCISCO(March4,2014)—ASuperiorCourtjudgetodayblockedaprotractedlegalbidbytheFillmoreCenter’scurrentownershipgrouptoconvertmorethan1,100occupiedrentalunitsinSanFrancisco’sWesternAdditionneighborhoodintocondominiums.Inafinaltrialcourtdecisionissuedlatethismorning,JudgeCurtisE.A.KarnowsidedwithCityAttorneyDennisHerreraintwoparallellegalactions,bothfiledbyFillmoreCenterAssociatesin2008,rulingthatthelandlordwastime‐barredfromresurrectingcondominiumconversionrightsthatpriorownershadsurrenderednearlytwodecadesago.Today’s17‐pagestatementofdecisionsimilarlyrejectedtheplaintiff’sarguments—includingsomeKarnowcalled“bizarre”—thatFillmoreCenterAssociateswaslegallyentitledtoconverttherentalunitsintocondosbasedonanarrayofpropertyrightsandallegedpreemptionsofSanFrancisco’sCondominiumConversionOrdinance.“ThisisamajorlegalvictorythatprotectsaffordablehousingatatimewhenSanFranciscodesperatelyneedsit,”saidHerrera.“ThedisplacementofWesternAdditiontenantsfrommorethan1,100apartmentsinthemidstofthecurrenthousingcrisiswouldhavebeenunthinkable.Andthehighstakesofthispotentiallydevastatinglegalattackjustifiedtheresourceswedeployedtodefendagainstit.I’mveryproudoftheextraordinaryworkdoneonthiscasebymyoffice’sLandUseTeam,especiallyVictoriaWongandKristenJensen.AndI’mgratefultoJudgesKarnowandKramerfortheirthoughtfulconsiderationofthemyriadissuesthesecomplexlawsuitspresented.”Karnow’srulingtoday,whichmadeexplicitreferenceto459residentialunits,followedaSept.5,2012decisionbyJudgeRichardA.Kramerduringanearlierphaseofthetrialthatappliedtothebalanceoftheunits.Asaresult,today’soutcomepreserves1,113unitsintheFillmoreCenteras

CityAttorneyDennisHerrera—Page2rentalhousinginperpetuity.Twentypercentofthoseunitsarereservedforlow‐incomeresidentsthrough2017.Thoughthecourt’sstatementofdecisionisfinal,JudgeKarnowhassetacasemanagementconferenceforMarch13todeterminewhetheranyfurtherproceedingsarerequiredinthenearlysix‐year‐oldlitigation.FillmoreCenterAssociatesisthelatestinastringofownersofFillmoreCenter,whichisgenerallyboundedbyFillmore,Steiner,TurkandO’FarrellStreets,inaone‐timeredevelopmentareaoftheWesternAddition.ThoughHerrera’sofficepresentedevidencethatFillmoreCenter’soriginaldevelopersacknowledgedtheydidnotpossesscondominiumsubdivisionrightstotheresidentialapartmentcomplex,thenewownersbeganassertingcondoconversionrightsinpursuitofwindfallprofitsafterpurchasingthepropertyin2004.FillmoreCenterAssociates’contentionledtotwolawsuitsagainsttheCity:adeclaratoryreliefactionfiledonJuly3,2008,andapetitionforawritofmandatefiledonOct.9,2008.Apartfromthekeyaspectoftoday’srulingthatFillmoreCenterAssociates’claimsweretime‐barred,JudgesKramerandKarnowadditionallyrejectedfourlegaltheoriesraisedbytheplaintiffs,rulingthatFillmoreCenterAssociatesdidnotpossesssovereignimmunityfromtheCondominiumConversionOrdinance;thatairspacesubdivisionmapsthatexistforsomeofthebuildingsdidnotauthorizeresidentialcondominiums;thattheplaintiffhadnovestedrighttocondominiums;andthattheCondominiumConversionOrdinanceisnotpreemptedbyCalifornia’sCommunityRedevelopmentLaw,theexpiredredevelopmentagreementforthearea,orthelanddispositionagreementbetweentheoriginaldeveloperandtheformerRedevelopmentAgency.Thecasesare:FillmoreCenterAssociatesv.CityandCountyofSanFranciscoetal.,SanFranciscoSuperiorCourtNo.477064,filedJuly3,2008(DeclaratoryReliefAction);andFillmoreCenterAssociatesv.CityandCountyofSanFranciscoetal.,SanFranciscoSuperiorCourtNo.480768,filedOct.9,2008(PetitionforWritofMandate).AdditionaldocumentationfromthecaseisavailableontheCityAttorney’swebsiteat:http://www.sfcityattorney.org/.

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55084392 Mar 04 2014

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SUPERIOR COURT OF CALIFORNIA

COUNTY OF SAN FRANCISCO

FIL Son Franci$co County Su

NAR Q ~ ZQI

ey:CL~~~ ~~[;~RT Deputy Clerk

10 FILLMORE CENTER ASSOCIATES, LP Case No. CGC - 08-477064 Case No. CGC - 08-480768

11 Plaintiff,

12 vs.

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CITY AND COUNTY OF SAN FRANCISCO ET AI..

Defendants.

STATEMENT OF DECISION

Plaintiff Fillmore Center Associates sues the City of San Francisco and the City's

Redevelopment Agency seeking declaratory judgment. On February 6,2014 the parties

presented evidence and argument on a bifurcated bench trial devoted to issues further

described below.

I issued a tentative determination and proposed statement of decision under CRC

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3.1590 (c)(1), dated February 11,2014. There, I invited the parties to reiterate objections

to any evidence I had relied on. By letter dated February 28,2104, I received suggested

edits from the City, and an indication that Plaintiff Fillmore did not intend to file objections.

I did not receive, as I had requested, the parties' written suggestions for further

proceedings. I will set a case management conference for that purpose.

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Introduction

The Fillmore Center is a redevelopment project completed in the early 1990s

spanning four city blocks in San Francisco. The original purpose of the underlying

development and regulatory agreements for this Project was to provide lower income

rental units for a period of years, contemplating the developer would thereafter sell units

as condominiums. Plaintiff Fillmore purchased the Project in 2004. Fillmore sues the City

now for declaratory relief in order to establish its right to sell 459 condominiums. The City

contests Fillmore's right to do this.!

Issues

I list here the issues presented by the parties. Aside from a few argumentative

terms, they do not appreciably differ. The City's version is presented first followed by

Fillmore's version in parentheses.

1. Is the Complaint barred by Government Code Section 66499.37, the

Subdivision Map Act's statute of limitations in the for challenges to decisions relating to the

subdivision of property? (Whether Plaintiffs rights were lost by the mere passage oftime.)

2. Do the final airspace subdivision maps confer the right to subdivide

Assessor's Blocks 707 and 726 of the Fillmore Center into 459 condominiums? (Whether

the recording of "Final Maps, a Subdivision for Condominium Purposes" were legally

1 Aside from the four issues I list next, the City also contends that that this action for declaratory relief inappropriate, and that the relief sought by Fillmore ought to have been presented by way of an action for writ. In letter briefing dated January 24, 2014, the City cited the recent opinion in Tejon Real Estate v. City of Los Angeles, 223 CaI.App.4'h 149 (2014). Fillmore responded in a letter dated January 3 I, reiterating its central argument that it was not dissatisfied with any action by the City and does not challenge what it considers to be approvals for its sale of over 400 condominiums. Thus Fillmore sees no reason to have sought a writ. Reporter's Transcript of Proceeding for February 6, 2014 at 59. The resolution of these conflicting views requires an examination of the merits, and so I have decided to address those issues as such.

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1 sufficient to create a condominium subdivision such that the City's conversion ordinance

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does not apply.)

3. Does the Plaintiff possess a vested right in a subdivision approval for 459

condominiums? (Whether Plaintiff obtained vested rights to complete development of 459

condominiums in blocks 707 and 726.)

4. Is the Condominium Conversion Ordinance preempted by the California

Community Redevelopment Law, the expired redevelopment plan for the area, or the land

disposition agreement for the Fillmore Center project? (Whether the local conversion

ordinance is preempted by the State's Redevelopment Law.)

Setting aside the issue of pre-emption, the other three issues ultimately reduce to

one decisive dispute. Because the Airspace Maps, although recorded, were insufficient to

permit Fillmore to sell condominiums, Fillmore's arguments on vested rights and the

statute oflimitations also fail.

Factual Background

The parties generally agree that the Timeline of Key Facts (provided by the City as

an appendix to its Trial Brief signed December 13, 2013) is accurate.z Judge Kramer of this

Court has previously described the general factual background in his Statement of Decision

filed September 5, 2012.

The San Francisco Redevelopment Agency is a public agency pursuant to the

California Community Redevelopment Law.3 The Agency entered into various contracts

2 Reporter's Transcript of Proceeding for February 6, 2014 at 161. They have noted that on page 2 ofthat Timeline, between 11/2811988 and 02/2111989, on December 6 1988 there was a final approval of one of the Airspace Maps. 3 Health & Safety Code §§ 33360-33375.

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with the original developer to develop the Fillmore Center Project. The City was not a

party to those agreements.

Pursuant to the Map Act, the City is the official body "charged with the cluty of

making investigations and reports on the design and improvement of proposed divisions of

real property, the imposing of requirements or conditions thereon, or having the authority

by local Conversion Ordinance to approve, conditionally approve or disapprove

[subdivision] maps."4 The City has delegated this authority to the Department of Public

Works (DPW).5

In 1985, the original developer and Agency entered into the Agreement for

Disposition of Land for Private Development.6 The developer acquired rights to develop the

four-block site into a mixed-use development. This Agreement noted the developer's intent

to secure condominium maps and sell the condominiums, and the Agency agreed to

"process and file, when requested by the Developer, condominium subdivision maps, both

tentative and final, prepared by and at the sole expense of the Developer."7 While "it clear

that the City and the Agency always understood the developer's intent regarding

condominiums, it is not the case that the City or Agency ever thought the Agreement

created the right to sell condominiums, as Fillmore apparently contends;8 nor it is true that

the Agreement did create such rights, as I discuss below.

'Gov. Code § 66414. , City' s RJN Ex. D [S.F. Subd. Code § 1307].) ' Ex. 6. 7 [d. at § 909 (F). ' Trial Brief at e.g. 6. (Fillmore apparently disavows that now. Reporter's Transcript of Proceeding for February 6, 2014 at 167.) For this reason, Fillmore' s evidence of contemporaneous publicity concerning the project is not relevant: it shows no more than an awareness of the developer's desires. See Plaintiff's Trial Brief at 7. See also, Reporter's Transcript of Proceeding for February 6, 20 J 4 at J 5, '16 (City's awareness of developer' s desires). The City does not disagree that it knew the developer expected to seIl condominiums. Reporter' s Transcript of Proceeding for February 6, 2014 at 64, 114-15.

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1 On June 29, 1987, the developer purchased the site9 and secured its first building

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. permits for Blocks 707 and 726.10 These permits authorized the construction of "housing"

and "residential" units. None of the building permits contained an authorization for

condominiums. As discussed below, I reject Fillmore's contention that the authorization of

building permits signals an authorization to sell condominiums; rather, these permits

authorized the building of the physical units, without regard to the type of ownership they

might be subject to.

Construction of the Fillmore Center began in August 1987.11 By May 26, 1989 at the

latest, at least one unit in Block 707 was occupied,12 By 1991, construction was complete

but the developer had filed for bankruptcy.

By December 23, 1989 at the latest, at least one unit in Block 726 was occupied,13

All of the Fillmore Center buildings are now occupied.

In 1988 and 1990, the Block 707 and 726 Airspace Maps were recorded. DPW

reviewed and approved two applications to subdivide the Project's Blocks 707 and 726 into

12 and 27 airspace units.14 DPW also approved tentative maps to re-subdivide the airspace

units into condominiums, but later determined that the applications had expired by

operation of law because the developer failed timely to record final su bdivision maps

corresponding to those applications.1s

, Ex. 208 at II. 10 Building Penn its . Exs. II, 12.22 & 23. II Ex. 42 at 9. 12 Ex. 243 [certifying May 26, 1987 move-in date for low-income tenant at 1730 O'Farrell St. , in Block 707]; Ex. 12 [1730 O' Farrell located in Block 707]. Il Ex. 243 [certifying December 3, 1989 move-in date for low-income tenant at 1425 Fillmore St.] ; Ex. 22 [1425 Fillmore St. located in Block 726]; see also Exs. 244-246. See Reporter's Transcript of Proceeding for February 6, 2014 at 186. "Exs. 16, 32,214. " E.g., Exs. 49, 50.

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Through these Airspace Maps, the City approved the creation of 12 airspace units on

Block 707, and 27 airspace units on Block 726.16 The DPW Order approving the Block 707

Airspace Map stated "Fillmore Center, Block No. 707 in Assessor's Block No. 707 is an

airspace subdivision for condominium purposes which would create 12 condominium

units."17 The DPW Order approving the Block 726 Airspace Map stated, "Fillmore Center in

Assessor's Block No. 726 is a 27-unit airspace condominium subdivision."18 The creation of

these airspace subdivisions allowed each one to be sold separately for different

development purposes.19 These subdivisions were designated for different uses, induding

"commercia!/' tlresidential," (lparking," and Itlandscaping."2o

The developer later declined opportunities to request an exception to the City's

Conversion Ordinance. In response to the question "Is an exception [to the Subdivision

Code] requested pursuant to Section 1312 of the Subdivision Code?" the developer checked

"NO".21 In response to a question that asked the applicant to check a box "[i]fthe project

requires an exception to any of the substantive requirements of the Subdivision Code," the

developer left the box empty. In response to the question of why an exception would be

required, the developer answered "Nj A."22

In response to these Applications, between 1989 and 1992, the City conditionally

granted some tentative and final approvals of subdivision maps (Tentative Condominium

Approvals).23 Some of these Tentative Condominium Approvals were explicitly

"Ex. 17 &31. 17 Ex. 16; see Ex. 214 [conditional approval for "12-Unit Airspace Subdivision"]; Ex. 15. 18 Ex. 32; Ex. 24. 19 See Gov. Code § 66424. 20 Exs. 17,31. 21 See, e.g., Ex. 29 at FCA 02790; Ex. 35 at FCA 02716; Ex. 39 at FCA 03131. 22 Ex. 29 at FCA 02807; Ex. 35 at FCA 02733; Ex. 39 at FCA 03136. -23 E.g., Exs. 21, 34, 41. - -

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conditioned on "[c)ompJiance with all applicable provisions of the Subdivision Code and all

amendments thereto." The tentative approvals all also indicated that no exception to the

Subdivision Code had been requested. Each conditional tentative approval stated, "If you

wish to appeal this decision, you may do so by filing an appeal with the Clerk of the Board

of Supervisors at Room 235, City Hall, within ten (10) days from the date of this letter."24

The developer did not appeal these conditional approvals. Neither the developer nor any

subsequent owner of Project recorded final maps for these proposed subdivisions. Instead

the developer rented out some of those units.25

In July of 1992 the developer's CFO wrote to the Agency and the project lenders,

explaining that the Developer intended to follow a two-step subdivision process by first

recording maps to subdivide the property into major areas for different uses, including a

parcel for each residential building, and then recording a second set of subdivision maps to

create residential condominium units in each residential building.26

In 1994, John Paul Hanna, an attorney hired to advise the Project on condominium

issues, also informed the developer that further work was required to perfect the right to

sell condominiums, that is, that the Airspace Maps did not subdivide Blocks 707 and 726

into 459 condominium units.27

In 1995, the City sent the developer letters of determination notifying it that the

24 Jd " Ex. 260 at p. 10. 26 Ex. 258 at FCA _02596. The developer repeatedly stated its intention to follow this two-step process. (See, e.g. , Exs. 211 , 310 at CCSF2_001779.) I note this evidence, as well as that relating to Hana, to demonstrate that the developer and other predecessors-in-interest to Fillmore believed that these steps to be necessary before the condominiums could be sold as such. This is relevant to plaintiffs suggestion that it (or its predecessors) have certain equitable rights, discussed below. I do not use Hanna's views, or those of any other person, as evidence of what the law was at the time. " Ex. 308 at FCA _ 02544, FCA _02550-02551; Exs. 307 & 211 ; Ex. 309. The developer, its counsel and engineers who were drafting the maps noted that the condominium subdivision maps had not been recorded. E.g., Ex. 204 at p. 2; Ex. 211 at p. 1; Ex. 308 at FCA_02548; Ex. 46; Ex. 201; Ex. 216.

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Condominium Subdivision Applications had expired by operation oflaw between 1991 and

1993, for failure to timely record final maps.28 The letters stated that any future

subdivision map applications for residential condominiums on these lots had to comply

with the Conversion Ordinance. The developer did not appeal these determinations.

Fillmore applied to DPW for certificates of compliance under the Map Act for Blocks

707 and 726 in November of 2007. In those applications, Fillmore asked the City to certify

that Blocks 707 and 726 contained a total of 459 residential condominium units.29

In December 2007, DPW denied the certificates in the form requested, and instead

issued conditional certificates of compliance. The required condition was that that all

references to residential condominiums be deleted.3D Specifically, for Block 707, DPW

struck the language "Such real property including a maximum of 135 residential

condominium units, and 4 commercial condominium units," and corresponding language

on the accompanying sketches.31 Similarly, for Block 726, DPW struck the language "Such

real property including a maximum of 324 residential condominium units, and 10

commercial condominium units," and corresponding language on the accompanying

sketches.32 In doing so, DPW staff noted, "per 66499.35(d), a recorded final map ... shall

constitute a cert. of compliance." I understand that that to mean that the conditional

certificate of compliance would grant no condominium rights beyond those granted by the

recorded map.33

Fillmore did not appeal DPW's determinations. It filed this declaratory relief action

28 E.g., Exs. 49 & 50; Gov. Code § 66452.6. 29 See Exs. 67 & 68. 30 Exs. 67 & 68. 31 Ex. 68 at FCA02077, FCA020279. 32 Ex. 67 at FCA02069, FCA02071. 33 Ex. 67 at FCA02069.

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Discussion

1. Adequacy afthe "Final Maps"

Fillmore calls the Airspace Maps the "Final Maps".34 The point behind this

nomenclature is to suggest that the Airspace Maps, coming as they did after building

permits were approved, and stating as they do that they are "subdivisions for

Condominium Purposes" are enough, upon recordation, to constitute all the authority

Fillmore needs to sell 459 condominiums.35 As Fillmore agrees, these were the only final

maps recorded.36

Fillmore states without authority that if these "final maps" do not themselves state

the number of condominiums that are approved, we may look back to the building permits

to discern the number.37 As argued at the hearing, Fillmore contends that no further "final

process of another round of maps with the City" was required.38 Having secured the

Airspace Maps, Fillmore was no longer subject to the Conversion Ordinance, it says.39

The Map Act defines a "subdivision" as the "division, by any subdivider, of any unit

or units of improved or unimproved land," and "includes a condominium project."40

Tentative and final subdivision maps are required "for all subdivisions creating ... five or

more condominiums."41

34 Trial Brief at 12. 3S Trial Brief at 12-13. 36 Reporter's Transcript of Proceeding for February 6, 2014 at 178. 37 Trial Brief at 14-15; Reporter's Transcript of Proceeding for February 6, 2014 at 11-12; 170-72. l8 Reporter's Transcript of Proceeding for February 6, 2014 at 8. 39 E.g., Reporter's Transcript of Proceeding for February 6, 2014 at 60. 40 Gov. Code § 66424. 41 Gov. Code § 66426.

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1 The Attorney General has issue an opinion rejecting Fillmore's position, stating that

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the Map Act requires that the actual number of divisions should be included on the

tentative and final maps_42 Under this reading, the Airspace Maps could not have created

more than the number of subdivisions marked on them, that is, they could not have created

459 condominiums_

Section 66427's legislative history is to the same effect_ The statute was amended in

1992 to "clarify" its existing meaning43 to state that the separation or division of a portion

of subdivided property into condominiums does not constitute a further subdivision

provided that "[t]he total number of condominiums established is not increased above the

number authorized by the local agency in approving the parcel map or final map_"44 The

Governor's understanding of the legislation appears to be the same_45 This legislative

history undermines Fillmore's position that the authorization for a particular number of

condominium units may be found outside the map itself.

Fillmore presents no authority to suggest that the building permits have anything to

do with this issue_ Nor does Fillmore present authority which would recognize an "implicit

approval" of 459 condominiums based on a constellation of events such as (i) the original

Agreement, (ii) the issuance of building permits, and (iii) the approval and recordation of

42 73 Ops.CaLAtty.Gen. 312 (1990), 1990 WL 484779 at *6 [pL's RJN Ex. 9 at p.108]. 43 PL's RJN Ex. 9 at 19 & 31. 44 PL's RJN Ex. 9 [fonner Gov. Code § 66427, Stats. 1992, ch. 400 (S.B. 1519)]. See also to the same effect reports from the Senate Committees. PL's RJN Ex. 9 at 19 [Senate Housing and Urban Affairs Committee] & 31 [Senate Rules Committee]. 45 The Governor's Office stated that "[t]he sole purpose" of the amendment was to confinn the Attorney General's 1990 opinion and noted a builder would not be allowed to increase the number of condominiums thereby approved by the local agency. PL's RJN Ex. 9 at 36-37 [Governor's Office of Planning and Research, Enrolled Bill Report]; PL's RJN Ex. 9 at 38 [Business, Transportation & Housing Agency Enrolled Bill Report] ["This bill makes explicit in the civil code what has been detennined to be valid by the A.G."]; Pl.'s RJN Ex. 9 at 92-93 [bill sponsor's Position Letter explaining that the amendments would allow a condominium purchaser to own an undivided interest in the common area of their building, rather than in the other condominium buildings or the underlying land].

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Airspace Maps.46 As I noted above, these permits are authorizations to build to certain

physical specifications, and they do not relate to the form of ownership of the structure.47

It is the Map Act that governs the subdivision of property for a condominium project.48

N either the City nor the Agency, nor any other relevant governmental agency, authorized

459 condominiums.

2. Vested Rights

Fillmore's vested rights argument adds nothing to the contention that the Airspace

Maps entitled Fillmore to sell 459 condominiums. The doctrine does not create rights

where none previously existed; rather, it preserves developers' or owners' rights in the

face of new law or other regulation.49 For example, the scope of rights which may "vest" is

a function of the original permit.50 Indeed, Fillmore recognizes this.51 Because Fillmore

and its predecessors never had the right to sell 459 condominiums, no doctrine of vested

rights could create such right to sell.

Fillmore agrees that such earlier rights must first have existed,52 and argues that the

Agreement signed by the original developer creates those rights.53 At argument, Fillmore's

counsel reiterated this argument, stating that the Agreement itself in effect estopped the

46 Compare, Reporter's Transcript of Proceeding for February 6, 2014 at 20. 47 Blue Chip Properties v. Permanent Rent Control Bd, 170 Cal.App.3d 648, 661 (1985). 48 Gov. Code § 66424. 49 E.g., Oceanic California, Inc. v. North Central Coast Regional Comm'n, 63 Cal. App.3d 57,80 (1976). 50 Santa Monica Pines, Ltd v. Rent Control Board, 35 Ca1.3d 858 (184); Oceanic California, Inc. v. North Central Coast Regional Comm'n, 63 Cal.App.3d 57, 67 (1976). 51 Trial Brief at 16, lines 4-10. " [d. at 16 lines 26 et seq. 53 [d. at 17 lines 5-11. As I suggest below, if Fillmore were right in this there would be no need to invoke the vested rights doctrine.

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City (and Agency) from denying permission for the 459 condominiums.54

Both Fillmore's logic and its assumption of predicate facts are wrong.

Logically, it cannot be that the Agreement which itself does not create a right can at

the.same time bar a party from denying the right, and so create the right.

And as a matter of fact, the Agreement contemplated possible future action to create

condominiums, but never created such rights_ It would be odd, indeed, to hold that the

entire swath of state and local regulation set up for the approval of subdivisions might be

swept away by contracts such as the Agreement,55 especially when the parties negotiated

on the subject of an exemption from the conversion ordinance-and expressly left that

out.56

N or can Fillmore show that the original developer or subsequent owners including

Fillmore reasonably relied on an earlier permission to create and sell 459 condominiums. I

saw no substantial evidence that any of them did in fact rely. Fillmore counsel tells me sop

but cites no evidence.

And there is very good evidence that shows the opposite. Fillmore and its

predecessors were told, and they apparently believed, that they would have to secure

additional maps and record them before they could claim the right to sell 459

condominiums. The developer was notified by the text of the Condominium Subdivision

Applications,58 the conditional approvals of its tentative map applications to re-subdivide

54 Reporter's Transcript of Proceeding for February 6, 2014 at 32. " Taiga v. Town of Ross, 70 Cal.AppAth 309, 321 (1998). 56 Judge Kramer found this, and I agree. See his Statement of Decision filed September 5, 2012 at 9 n.6 ("the Agency and the Developer expressly decided to exclude language from the LDA that would have stated the Developer was exempt from the City's conversion limitations.") 57 Trial Brief at 21 lines 4 ef seq.

58 Exs. 29; 30; 35; 36; 39; 40.

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the airspace parcels,59 and the City's 1995 expiration determination letters60 that it would

be required to comply with the City's Subdivision Code in order to obtain condominiums.

And developer's own counsel informed both the developer and its successor that the

condominium mapping process had not been completed.61

3. Preemption

Fillmore argues that the City's Conversion Ordinance is preempted by state law,

specifically, the Community Redevelopment Law. Fillmore also argues that the Agreement

pre-emptied the Conversion Ordinance.62 I confess 1 do not understand the latter

argument: the notion of a contract such as the Agreement here "preempting" anything is

meaningless.

Thus I turn to the apparent main focus of Fillmore's brief on this topic, which is that

the Legislature intended to "occupy the field" when it enacted the Community

Redevelopment Law.63 Here, Fillmore suggests that because the Redevelopment Law

preempts the field of "community redevelopment" and other efforts to remediate blight

and to increase lower income housing,64 localities may not regulate condominium

conversions, such as through the Conversion ordinance.65 Fillmore apparently concludes

that because the Redevelopment Law countenances condominiums, the City may not

" Exs. 34, 41. '" Exs. 49, 50. ., Ex. 308 & attachments. See also Ex. 258 . • 2 Trial brief at 28, lines 3 et seq. See also an allusion to this at id. at 29, line 6; see also, Reporter's Transcript of Proceeding for February 6, 2014 at 182 . • , Trial Brief at 29, line 16, ef seq. 0< [d. at e.g., 26, line 9. 6l E.g. Filhnore's Reply Brief at 13, lines 3 ef seq.

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through its agencies block condominium sales as it does in this case.66

The City claims Judge Kramer has already in effect ruled against Fillmore here, in his

earlier Statement of Decision.67 This may be so, but because it is difficult to understand

Fillmore's argument, it is difficult to know whether the Court previously addressed it.

Fillmore seems to argue that because (i) state law (the Redevelopment Law)

contemplates redevelopments (including the creation of condominiums) to remedy blight,

and (ii) the impact of the local conversion ordinance was to deny Fillmore the ability to

build condominiums, local law must be preempted.

But Fillmore has not established the predicate that the Redevelopment Law

purports to regulate and occupy the field of condominium regulation. And if this is indeed

Fillmore's argument, it is bizarre. Its consequences include (1) the plethora of local

ordinances regulating condominium and related conversions would be preempted; and (2)

anyone who wishes to build (any number of) condominiums without local permission

ought to be able to do so.

The cases cited by Fillmore do not help. In Redevelopment Agency, to be sure, the

Court did state that the Legislature intended to preempt the field of the "redevelopment of

blighted areas .. .in the interest of health, safety and welfare of the people of the state and

of the communities in which the areas exist."68 But the fatal problem in Redevelopment

Agency was that a valid action by the city's redevelopment agency was sought to be set

aside by an initiative proceeding.69 The court held the actions of the state's authorized

agency were not to be set aside in such a manner.

66 Reporter's Transcript of Proceeding for February 6, 2014 at 42. 67 City Opposition Brief at 39; Reporter's Transcript of Proceeding for February 6, 2014 at 142. 68 Redevelopment Agency v. City of Berkeley, 80 Cal. App. 3d 158, 169 (1978), citing Health & Safety Code § 33037 (c). 69 80 CaI.App.3d at 169.

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No such problem exists here.

A similar problem appeared in Kehoe,7o that is, a local ordinance was adopted which

conflicted with the directives issues by the authorized agency and the redevelopment plan.

Fillmore tries to bring the facts of this case into the orbit of those two cases by

arguing that the Project here was in a blighted area and that the responsible Agency

authorized construction of the Project's 1,113 units for sale as condominiums,71 as if the

Agency had in fact not only abrogated to itself all rights to approve such a division of

property interests but in fact had granted them to the original developer. The evidence

Fillmore cites is the 1985 Agreement-and we have already seen that it does no such thing.

Nor has Fillmore been able to point to an express directive from the Legislature that

it intended to 'occupy the field' to such an extent that no local ordinance in this area would

be permitted. The contrary appears true. It appears it is the Map Act-which contemplates

the local ordinances-which controls here.n

4. Statute of Limitations

The City has set forth a series of persuasive arguments that the statute of

limitations, as measured from a variety of eligible dates, preclude the prosecution of

Fillmore's claims now. Fillmore does not oppose the City's reasoning and does not

challenge its legal authority. Instead Fillmore disputes a basic predicate of the City's

argument.

For example, let us take one of the latter dates the City discusses, in 2007. (The City

70 Kehoe v. City of Berkeley, 67 Cal.AppJd 666, 675 (1977). 71 Trial Brief at 28. n Griffin Development Co v. City of Oxnard 39 Ca1.3d 256, 262 (1985); B & P Development Corp. v. City of Saratoga, 185 CaI.App.3d, 949, 961 (1986); Gov. Code § 66411.

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contends the statutes expired far earlier than this.73) In 2007, as the City accurately notes,

Fillmore sought certificates of compliance reflecting the existence of 459 residential

condominium units. The City rejected this claim, stating that the City could only issue a

certificateof compliance consistent with the Airspace Maps (for 39 airspace parcelsJ.74 The

City says this was a decision regarding a certificate of compliance· and is subject to the

limitations period of the Map Act, citing Kirk.75 That period is 90 days.76 And the City goes

on to note that these sorts of municipal actions, when not timely challenged, may not be

later challenged.77

Fillmore's retort is a straightforward denial that there was anything to contest in

court. Fillmore purports to be content with the state of the administrative record, and says

it does not challenge any adverse determination; the decisions the City made, Fillmore says,

actually endorsed its right to 459 condominiums. No statute of limitations ever ran, it

says.78 This position directly relies on its position on the merits, which is that it secured the

approval it needed by recording what it calls the "Final Maps" (the Airspace Maps) which

"the City specifically determined were in compliance with the City Subdivision Code."79

The evidence cited here, as with the merits, are the DPW approvals of the Airspace

subdivisions which created 12 and 27 (for a total of39) units.8o But Fillmore is wrong on

the merits, and so it is wrong on the statutes oflimitation issue. The period ran long ago, no

73 The City is right. For example, in 1995 the then owner of the project and its engineers received notices from the City that expressly disapproved (or, more accurately perhaps, noted the expiration of) tentative maps, specifically because the final maps had not been recorded. Exs. 49, 50. To be sure, as these exhibits state, the Project's owner might then yet have recorded final maps for e.g. 459 condominiums if the property did not yet have tenants. But by then the property did have tenants. 74 Exs. 67, 68. " Kirk v. County of San Luis Obispo, 156 Cal.App.3d 453 , 459 (1984). 76 Gov. Code § 66499.37. 77 City Opposition Brief at 19 el seq. . 78 Fillmore Reply Brief at 16; Reporter's Transcript of Proceeding for February 6 2014 at 23 49 154-55 156-57. 79 ' " ,

Fillmore Reply Brief at 17, lines 1-2. 8. Id. , citing Ex. 16 ~4; Ex. 321}4.

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1 matter which of the dates one selects, including in particular the 2007 date.

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Conclusion

I find against Fillmore and for defendants on each of the four issues presented.

Dated: March 4, 2014 Curtis E.A. Karnow

Judge Of The Superior Court

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Superior Court of California County of San Francisco

March4,2014

FILLMORE CENTER ASSOCIATES, A CALIFORNIA LIMITED

PLAINTIFF

VS.

THE CITY AND COUNTY OF SAN FRANCISCO et al

DEFENDANT

FILLMORE CENTER ASSOCIATES, A CALIFORNIA LIMITED

PLAINTIFF

VS.

THE CITY AND COUNTY OF SAN FRANCISCO et al

DEFENDANT

Department: 304

Case Number: CGC-OS-477064

Case Number: CGC-OS-4S076S

CERTIFICATE OF ELECTRONIC SERVICE

(CCP 1010.6(6) & CRC 2.260(g»)

I, DANIAL LEMIRE, a Deputy Clerk of the Superior Court of the County of San

Francisco, certify that I am not a party to the within action.

On March 4, 2014, I electronically served STATEMENT OF DECISION via File &

ServeXpress on the recipients designated on the Transaction Receipt located on the File &

ServeXpress website.

Dated: March 4,2014

By: DANIAL L"'IgJd'.L, Deputy Clerk

CERTIFICATE OF ELECTRONIC SERVICE

1 FIJ ... ED

San Francisco County Sup~rior Court

2 SEP 0 5 2012

3 ClEBK QF: THE:,COURT1I1L--BY: 01tiL&Q.,. ~ vtrr

Deputy Clerk

4

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6

7 SUPERIOR COURT OF THE STATE OF CALIFORNIA

8 COUNTY OF SAN FRANCISCO

9

10 FILLMORE CENTER ASSOCIATES, a California limited partnership,

11 Plaintiff/Petitioner,

12 vs.

13 THE CITY AND COUNTY OF SAN

14 FRANCISCO; SAN FRANCISCO REDEVELOPMENT AGENCY, and DOES 1

15 through 10, inclusive,

16 Defendants/Respondents

17

Case No. CGC-08-477064

STATEMENT OF DECISION REGARDING THE APPLICABILITY OF THE CONDOMINIUM CONVERSION ORDINANCE TO THE FILLMORE CENTER

Judge: Hon. Richard A. Kramer Dept.: 304

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The issue before the Court is whether Fillmore Center Associates, PlaintifffPetitioner in these

actions ("Plaintiff'), enjoys sovereign immunity so that the Condominium Conversion Ordinance, San

Francisco Subdivision Code Section 1396 ("Conversion Ordinance"), does not apply to the Fillmore

Center. Having conducted a bifurcated trial on this issue, and having considered the parties' written

and oral arguments and the evidence submitted by the parties, the Court rules that Plaintiff does not

possess sovereign immunity from the Conversion Ordinance, and that the Conversion Ordinance

therefore applies to the Fillmore Center.

FACTS

Plaintiff alleges that it is the current owner of the Fillmore Center.' In 1985, the original

developer of the Fillmore Center ("Developer") entered into a contract with Defendant and

Respondent the San Francisco Redevelopment Agency ("Agency") to acquire and develop the

Fillmore Center site. (See Pl.'s Request for Judicial Notice r"RJN"] Exh. B.i The Developer

eventually filed for bankruptcy protection pursuant to Chapter II, Title 11 of the United States

Bankruptcy Code. (Defts.' RJN at Exh. A.) Plaintiff allegedly acquired its interest in the Fillmore

Center some time after the bankruptcy.

The Agency is a public agency authorized and organized pursuant to California's Community

Redevelopment Law (CRL), Health and Safety Code Section 33000 et seq. Pursuant to the CRL, the

Agency is charged with carrying out redevelopment plans adopted by the San Francisco Board of

Supervisors. These plans establish the specific powers of the Agency to undertake redevelopment

activities in each redevelopment area. (Health & Saf. Code §§ 33360-33375).

Pursuant to the Subdivision Map Act (,'SMA"), Government Code Section 66410 et seq., the

City and County of San Francisco ("City") is the official body "charged with the duty of making

investigations and reports on the design and improvement of proposed divisions of real property, the

imposing of requirements or conditions thereon, or having the authority by local ordinance to approve,

conditionally approve or disapprove [subdivision] maps." (Gov't Code §66415; S.F. Subd. Code

I While Plaintiff has presented no evidence that it is the successor-in-interest to the original developer in this action, for the purposes of this opinion, this Court assumes, without deciding, that it is such a successor.

2 The Court grants all parties' requests for judicial notice in this bifurcated trial.

1

1 § 1307.) The City has further delegated this authority to the Department of Public Works (DPW).

2 (S.F. Subd. Code §§ 1301, 1307.)

3 In 1964, the City'S Board of Supervisors adopted the Redevelopment Plan for the Western

4 Addition A-2 Redevelopment Project (the "A-2 Plan" or "Plan") so that "[t]he Agency in accordance

5 with and pursuant to applicable Federal, State and local laws will remedy, or cause to be remedied,

6 conditions causing blight presently existing in the Project.. .... (PI. 's RJN Exh. A, p. 3.) The purpose

7 of the Plan was, in part, to "[g]uide and stimulate the development of sound and attractive residences

8 available to persons of varied income and ages, with emphasis on the provision of moderate-priced

9 private housing for families of moderate income and for the elderly." (/d. at p. 5.) The Plan, as

10 amended, expired on January 1,2009. (ld. at p. 31.)

11 Pursuant to its powers under the CRL and the A-2 Plan, in 1985, the Agency negotiated an

12 Agreement for Disposition of Land for Private Development ("LOA") with the Developer to develop

13 the Fillmore Center site as a mixed-use residential and commercial complex. (PI.'s RJN Em. A, pp. 2

14 & 6.) On or about December 16, 1985, the Agency and the Developer entered into the LDA. (Ibid.)

15 The City was not a party to the LDA or any amendments thereto. (Ibid.) In addition, the Agency and

16 the Developer entered into a Regulatory Agreement, which, in exchange for advantageous financing

17 tenns for construction of the Fillmore Center project, reserved a certain number of units in the project

18 for low- and moderate-income renters through the year 2017. (See Pl.'s RJN Exhs. C & D.)

19 Pursuant to the LDA, the Agency conveyed the Fillmore Center site to the Developer in 1987.

20 (Defts.' RlN Exh. E.) Soon after the Developer took title to the property, its attorney sent letters to

21 both the .Agency and the City stating that the Developer wished to perfect its subdivision map

22 applications quickly because the Conversion Ordinance applied to the Fillmore Center, and once the

23 units were occupied, the Conversion Ordinance would bar conversion of the units to condominiums.

24 (See Defts.' RJN Exh. M; Wong Decl. Exh. 2 [Exh. B to Decl. of Sonja JolmsonJ.) Between 1988

25 and 1990, final maps for the airspace subdivisions of Blocks 707 and 726 were recorded, creating 12

26 air space condominiums on Block 707 and 22 air space condominiums on Block 726. (Defts.' RJN

27 Exhs. C & D.) These maps divided the lots into specific uses, with some lots designated as entirely

28 commercial, others entirely residential, and others for parking or landscaping. (Ibid.) The Developer

2

1 did not record airspace maps for Blocks 731 and 750. (See Storrs Decl. Exhs. DD & EE.)

2 In the late 1980s and early 1990s, before completing construction of the Fillmore Center, the

3 Developer submitted applications to the City to subdivide certain lots within Blocks 707, 726, 731 and

4 750 into residential condominiums, pursuant to the SMA and San Francisco's Subdivision Code. The

5 Developer did not seek any exception from the application of the SMA or Subdivision Code and did

6 not assert that sovereign immunity limited the application of these laws to the Fillmore Center. (Storrs

7 Decl. Exhs. A-J.)

8 The Developer encountered [mandaI difficulties in developing the Fillmore Center and filed

9 for Chapter 11 bankruptcy protection in 1991. (Defts.' RJN Exh. A, p. 2.) After defaulting on

10 numerous loan obligations, the Developer completed construction of the Fillmore Center in 1991 by

11 funding the fmal phases of work using income generated by leasing the completed residential units.

12 (Id. at p. 11.) The Developer had not completed the process of subdividing the Fillmore Center into

13 individual residential condominiums prior to leasing those units to tenants.

14 In 1995, the City sent the Developer letters of determination notifying the Developer that its

15 map applications had expired by operation of law between 1991 and 1993, for failure to timely record

16 fmal maps. (See, e.g., Storrs Decl. Exhs. X-EE; Gov't Code §66452.6.) The letters further stated that

17 any future subdivision map applications for residential condominiums on these lots must comply with

18 the Conversion Ord.inance. (Ibid.) The Developer did not appeal these determinations.

19 Some time after the Developer filed for bankruptcy and sold the Fillmore Center, Plaintiff

20 allegedly purchased the Fillmore Center as a successor-in-interest to the Developer and other previous

21 owners. (Compl.1: 7; Petition'1[ ll.) In November of 2007, Plaintiff applied to DPW for "Certificates

22 of Compliance" for Blocks 707 and 726, seeking to establish the existence of 459 individual

23 residential condominium units. (See Storrs Ded. Exhs. GG & RH.) Plaintiff indicated that its

24 applications were made pursuant to the provisions of the SMA (Ibid.) DPW determined that it could

25 not issue certificates of compliance in the fonn requested by Plaintiff, and deleted Plaintiffs proposed

26 revisions to the property's legal description that indicated the existence of residential condominiums,

27 stating that it would issue certificates of compliance only as to subdivisions that had already been

28 created by recorded maps. (Ibid.) Plaintiff did not appeal DPW's determination to the Board of

3

1 Supervisors or any other City body. Instead, it filed Case No. CGC-08-477064, seeking declaratory

2 relief, approximately six months after DPW denied the request.

3 In 2008, Plaintiff filed subdivision map applications with DPW for Blocks 731 and 750,

4 seeking to subdivide various lots into 655 residential condominium units. The proposed maps required

5 the City and County Surveyor's signature certifying compliance with the SMA and the San Francisco

6 Subdivision Code. (Defts.' RJN Exhs. G & H.) DPW denied these applications on the grounds that

7 (1) the applications sought the conversion of existing rental units into condominiums. which is barred

8 by the Conversion Ordinance, and (2) the Planning Department found the proposed maps inconsistent

9 with the City's General Plan. (Defts.' RJN Exhs. 1&1.) Plaintiff appealed these decisions to the

10 Board of Supervisors, which affIrmed DPW's determinations. (Defts.' RJN Ems. K & L.) Plaintiff

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then filed Case No.CGC-08-480768, seeking issuance of a writ of mandate and declaratory relief.

LEGAL BACKGROUND L THE SUBDIVISION MAP ACT

The SMA provides the exclusive statutory scheme governing the subdivision of land. It

15 delegates to local authorities the exclusive responsibility to regulate and control the design and

16 improvement of subdivisions within their jurisdictions, by the enactment of local ordinances. (Gov't

17 Code §§ 66411, 66463(a) & 66415; CEB, Forming California Commorr Interest Developments, §2.2,

18 p.73.) This delegation includes the authority to regulate condominium conversions. (54A Cal. Jur. 3d

19 Real Estate § 1077 [citing City of West Hollywood v. Beverly Towers, Inc. (1991) 52 Cal.3d 1184,

20 Griffin Devel. Co. v. City of Oxnard (1985) 39 Cal. 3d 256, and Santa Monica Pines, Ltd. v. Rent

21 Control Ed. (1984) 35 Cal. 3d 858].) The SMA dictates that "[a] local agency shall disapprove a map

22 for failure to meet or perform any of the requirements or conditions imposed by [the SMA] or local

23 ordinance enacted pursuant thereto ...... (Gov't Code § 66473.) "Local agency" is defmed as a "city,

24 county or city and county." (Gov't Code § 66420.)

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II. THE SAN FRANCISCO SUBDIVISION CODE

San Francisco's Subdivision Code is the City's implementing legislation for the SMA. (S.F.

27 Subd. Code § 1301.) The Subdivision Code establishes standards for approval of subdivision

28 development and governs the "necessity for tentative maps [and] final maps" for all private

4

1 development within the City. (ld. at § 1303(b).) OPW, through its Director, is the advisory agency for

2 purposes of processing subdivision maps and the sole agency responsible for approving subdivision

3 maps for projects in the City. (Gov't Code §§ 66411 & 66420; S.F. Subd. Code §1307(a).)

4 Since 1979, the Subdivision Code has recognized the unique character and impact on the City's

5 population and housing stock of condominium conversion subdivisions, and has required the City to

6 adopt special requirements for those conversions. (S.F. Subd. Code § 1302(c).) To that end, in 1982,

7 the San Francisco Board of Supervisors enacted the Conversion Ordinance. ([d. at § 1396.) The

8 Conversion Ordinance was in effect when both the LOA and the Regulatory Agreement were executed.

9 and remains in effect today. Under the Conversion Ordinance, only rental apartments in buildings of

10 six lUlits or less are eligible for conversion to condominiums, and no more than 200 units citywide

11 may be converted in any given year. (ld. at § 1396; see also id. at § n08(d) [defming "conversion"].)

12 The Ordinance applies to "residential units, whether vacant or occupied" any time after the building is

13 occupied by one or more tenants. (ld. at § 1396.) The law does not apply to newly constructed, never-

14 occupied bUildings. ([d. at § l308(d}.) Rather, owners of such buildings may apply for approval of a

15 "new construction condominium" at any time prior to, during, or after construction until such time as

16 the buildings are occupied. (ld. at §1396.)

17 III. THE COMMUNITY REDEVELOP:MENT LAW

18 The CRL defmes and limits the scope of the Agency's authority. The CRL authorizes the City

. 19 to create a redevelopment agency and to endow it with certain powers. (Health & Saf. Code § 33002.)

20 "Being a creature of statute, a redevelopment agency may engage only in those activities authorized by

21 statute .... " (Price Development Co. v. Redevelopment Agency of the City of Chino (9th Cir. 1988) 852

22 F.2d 1123, 1126; see also 11 Miller & Starr, Cal. Real Estate [3d ed. 2004] § 30B:2 ["(T)he scope of

23 (a redevelopment agency's) authority is, therefore, defmed and limited by the Community

24 Redevelopment Law and further limited by other bodies of law."].) Once created, a redevelopment

25 agency may draft and propose redevelopment plans for specific redevelopment areas. All

26 redevelopment plans are subject to approval of the local legislative body. (Health & Saf. Code §

27 33360 et seq.) In no case may the powers granted in a redevelopment plan exceed the Agency's

28 statutory authority under the CRL. (Health & Saf. Code §33330 et seq.; Price, supra, 852 F.2d at p.

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1126.) The CRL contains only one provision that references the subdivision of property, Health &

Safety Code section 33430. Section 33430, entitled "Disposal of Property Interests," provides,

An agency may, within the survey area or for purposes of redevelopment, sell, lease for a period not to exceed 99 years, exchange, subdivide, transfer, assign, pledge, encumber by mortgage, deed of trust, or otherwise, or otherwise dispose of any real or personal property or any interest in property.

This section authorizes a redevelopment agency to "subdivide" property owned by the agency (i.e.,

property subject to its "disposal"), not property owned by third parties. The CRL does not grant

redevelopment agencies the power to approve private property owners' subdivision map applications.

Instead, as discussed above, that power is reserved to local agencies by the SMA.

ANALYSISJ

I. THE COMMUNITY REDEVELOPMENT LAW AND THE SUBDIVISION MAP ACT MUST BE HARMONIZED.

This case involves two state statutory schemes regulating development. On the one hand, the

SMA is the '''primary regulatory control' governing the subdivision of real property in California.

[citation omitted]. The Act vests the 'regulation and control of the design and improvement of

subdivisions' in the legislative bodies of local agencies." (Gardner v. County of Sonoma (2003) 29

Cal.4th 990, 996-997.) On the other hand. the CRL is the statute authorizing local jurisdictions to

remedy economic and physical blight through a prescribed set of powers vested in redevelopment

agencies, after approval by local legislative bodies. (Health & Saf. Code §§ 33360-33375.) Both

statutory schemes result from the California Legislature's exercise of its plenary authority over

subdivisions and redevelopment. In addressing any actual or potential conflict between the two

statutes, the law requires courts to reconcile or "hannonize" those statutes. (See Associated Home

Builders of the Greater Eastbay, Inc. v. City of Livennore (1976) 18 Cal.3d 582, 596; Apartment Ass 'n

24 of Los Angeles County v. City of Los Angeles (2009) 173 Cal.App.4 th 13, 22.)

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3 Defendants argue that Plaintiffs claims are time-barred by Government Code Section 66499.37 and the doctrine of res judicata; that the Conversion Ordinance applies because it is a "zoning ordinance" pursuant to Goverrunent Code Section 53091; that the A-2 Plan constitutes a waiver of any sovereign immunity; and that the expiration of the A-2 Plan forecloses the existence of sovereign immWlity. Because the Court rules in Defendants' favor on other grounds, it does not reach these arguments.

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1 Plaintiff argues that Health and Safety Code Section 33430 requires the City to approve its

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subdivision map applications despite the fact that such an approval would violate the Conversion

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Ordinance. But Plaintiff s argument is not is not a "rational way to harmonize the two potentially

conflicting statutes." (Apartment Ass'n, supra, 173 Cal. App.4th at p. 18.) The SMA requires that "(a]

local agency shall disapprove a map for failure to meet or perform any of the requirements or

conditions imposed by [the SMA] or local ordinance enacted pursuant thereto .... " (Gov't Code

§§ 66411, 66415 & 66473.) If Section 33430 permitted a private landowner to obtain City approval of

its subdivision maps despite noncompliance with the SMA and the Conversion Ordinance, it would

10 require the City to approve maps in violation of Goverrunent Code Section 66473. Moreover ..

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pursuant to the SMA. a city has the exclusive authority to regulate subdivision of property, including

the 'right to enact a condominium conversion ordinance. (See Gov't Code § § 66411 & 66415.) The

CRL delegates powers to local redevelopment agencies to address blight, but nowhere delegates

authority to subdivide privately-owned properties.

Therefore, these two statutory schemes can be reasonably harmonized to establish that the

authority of redevelopment agencies to eliminate blight does not include the power to subdivide

properties owned by private parties. The Court therefore concludes that the Agency's authority under

19 Section 33430 does not include the power to subdivide the privately-owned Fillmore Center or to

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compel the City to approve maps that do not comply with the SMA or the Conversion Ordinance. As

a result, the Developer was not granted sovereign immunity from the Conversion Ordinance.

II. THERE IS NO NEXUS BETWEEN PLAINTIFF'S CLAIl\1ED SOVEREIGN IMM1JNITY AND ITS PROPOSED CONVERSION OF THE FILLMORE CENTER.

Even assuming the CRL provides sovereign immunity from local subdivision regulation to

private parties under certain circumstances, those circumstances do not exist here. Plaintiff contends

that it possesses sovereign immunity from the Conversion Ordinance4 as a matter of law because its

4 In its Reply Brief, Plaintiff argued that it also possesses sovereign immunity from the Subdivision Map Act. However, at trial, Plaintiff suggested that it was withdrawing that argument.

7

1 activities are "sufficiently associated with the statutory purpose of the state agency and carry out the

2 agency's governmental role." (Pl.'s Reply at p. 14.) Plaintiff argues that because the Agency entered

3 into the LDA with the Developer to further its governmental purpose (eliminating blight) and the

4 Plaintiff is the alleged successor-in-interest to the Developer, Plaintiff enjoys sovereign immunity

5 from the Conversion Ordinance, even though its proposed condominium conversion does not itself

6 further the elimination of blight. The Court disagrees.

7 To support its position, Plaintiff cites Bame v. City oj Del Mar (2001) 86 Cal.App.4th 1346.

8 However, Bame holds that sovereign immunity may pass from a governmental entity to a private party

9 only when the private party is performing a governmental activity, not when a private party is

10 performing a proprietary activity. Activities that "have no relation to the governmental function" of a

11 state agency do not fall within the scope of that agency's sovereign immunity. (ld. at p. 1357 [citing

12 Board oJ Trustees v. City oj Los Angeles (1975) 49 Cal.App.3d 45,50].) "Even less defensible is [an

13 agency's] attempt. .. to extend its immunity to private entrepreneurs who are involved in the local

14 commercial market where their competitors are subject to local regulation." (Ibid.) Thus, Bame

15 requires a nexus between a source of sovereign immunity and its existence in a particular case based

16 on the performance of a governmental activity. Where an activity is undertaken for private economic

17 gain in the marketplace, rather than for a governmental purpose, no immunity exists.s

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19 S The Bame court's distinction between governmental and proprietary activity is important for at least two reasons. First, a governmental entity would have different motives from a private property

20 owner for choosing to convert apartments into condominiums. Assuming the Agency were immune from the Conversion Ordinance, any decision to convert a project it owned from apartments to

21 condominiums would be in furtherance of its public mission to eliminate blight In contrast, Plaintiff's goal in converting the Fillmore Center is to maximize its own profits, as Plaintiff admits. (See Oct.

22 17,2011 Transcript of Proceedings ["Tr."] at pp. 22:20-23:17.) That goal serves no public interest.

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Second, a redevelopment agency's process for deciding whether to convert a development to condominiums, unlike a private property owner's decision-making process, is subject to regulation and public scrutiny, to ensure that the decision is in the public interest. For example, the Agency is required to hold public hearings when considering whether to sell or lease subdivided property (Health & Saf. Code § 33431), and the Agency Commission's proceedings and records are open to the public generally (see generally Gov't Code § 54950 et seq.; Gov't Code § 6250 et seq.; S.F. Admin. Code Ch.

26 67.) No such public process or accountability exists when a private property owner like Plaintiff seeks to convert apartments into condominiums and sell those units for profit. (See, e.g., Del Campo v.

27 Kennedy (2008) 517 F.3d 1070, 1076, 1079 [a private party "whose only relationship to the sovereign is by contract. . .is certainly more removed from state power, and from democratic control," than a state agency; extending sovereign immunity to private entity creates inherent difficulties, in that private entity "enjoys the benefits both of not being the state and so being freed from the regulations that 28

8 n;\land\li2011\090068\00741617.doc

1 Plaintiff s proposed conversion of the Fillmore Center to condominiums is not a governmental

2 activity. Neither the A-2 Plan nor the LDA identified condominium conversion as an element of the

3 Agency's efforts to eliminate blight. Rather, the Agency's stated purpose in the Plan Area was to

4 address blight by promoting the "development of sound and attractive residences available to persons

5 of varied income and ages, with emphasis on the provision of moderate-priced private housing for

6 families of moderate income and for the elderly." (Pl.'s RJN Em. A, p. 5.) That purpose was

7 achieved when the Fillmore Ce~ter was built and occupied, and a certain number of units were

8 reserved for low- and moderate-income residents. While the LDA allowed the Developer to choose to

9 subdivide the Fillmore Center into condominiums under certain circumstances, it did not state that

10 such subdivision was an Agency activity or even a part of the Agency's goal in developing residential

11 housing. Rather, the choice to undertake such subdivision was entirely controlled by Developer. (See

12 Pl.'s RJN Exh. B at p. 60.) 6

13 The cases of Hall v. Taft (1956) 47 Cal.2d 177, City of Los Angeles v. A.E.C. Los Angeles

14 (1973) 33 Cal.App.3d 933, 940, and City of Orange v. Valenti (1974) 37 Cal.App.3d 240,244, cited

15 by Plaintiff, do not support its argument. In Hall, the court did not address the standard for extending

16 sovereign immunity to a private entity; moreover, the contractor in that case was hired by a school

17 district to construct a school, and therefore, unlike Plaintiff, was engaged in a governmental activity.

18 City of Los Angeles merely distinguished the holding of HaJl in upholding a mW1icipality's power to

19 tax a private party doing business with the state. Similarly, City of Orange held that a local parking

20 ordinance did not apply to a state entity's lease of a building to operate an unemployment insurance

21 office, a governmental activity.7

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constrain state agencies, and of being the state and so being immune from suit"].) Plaintiff offers no authority for its broad interpretation of the sovereign immunity doctrine.

6 Plaintiff contends that the requisite nexus exists because the Agency gave the Developer an 24 economic incentive to develop the Fillmore Center by agreeing that the Fillmore Center could

eventually be sold as condominiums. (Oct. 17,2011 Tr. at pp. 22-23.) But the question is not whether the Developer had the right to create condominiums. The question is whether the Developer was 25

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given the right to create condominiums without having to comply with the SMA and the Conversion Ordinance. The WA does not convey such a right. To the contrary, the Agency and the Developer expressly decided to exclude language from the LDA that would have stated the Developer was exempt from the City's conversion limitations. (See Wong Decl. Exh. 2 [attachments to Quinn Decl.].)

7 In re Bunker Hill Urban Renewal Project IB v. Goldman (1964) 61 Ca1.2d 21,53, County of 28 Santa Cruz v. City o/Watsonville (1985) 177 Cal.App.3d 831,841, Redevelopment Agency of Chula

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and occupied, and almost three years since the A-2 Plan expired. Plaintiffs proposed conversion of

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the Fillmore Center's apartments to condominiums does not constitute a governmental activity

because a change in the ownership of the Fillmore Center would not remediate blight. (See Bame,

supra, 86 Cal.App.4ih at p. 1357.) In addition, there is no longer a redevelopment plan for the Agency

to implement. As a result, Plaintiff has failed to establish a nexus between the Agency's authority to

address blight and the proposed conversion of the Fillmore Center to condominiums. Therefore, the

Court finds that the WA did not confer sovereign immunity from the Conversion Ordinance on the

Developer or its successors-in-interest.8

CONCLUSION

Plaintiff s characterization of the sovereign immunity doctrine would create a direct conflict

between the CRL and the SMA, and is unsupported by law. And even assuming the Plaintiff might

have possessed sovereign immunity from the Conversion Ordinance under certain circumstances,

those circumstances do not exist here: there is no nexus between the Agency's authority to address

blight and Plaintiff's proposed conversion of the Fillmore Center, which does not constitute a

governmental activity. For these reasons, the Court rules that Plaintiff does not enjoy sovereign

inunWlity from the Conversion Ordinance, and that the Conversion Ordinance therefore applies to the

Fillmore Center.

Vista v. Rados Bros. (2001) 95 Cal.AppAth 309, 315 and Friends of Mammoth Lakes Redevelopment Agency (2000) 82 Cal.AppAIh 511, 529 also do not support Plaintiffs position. Instead, they stand for the general proposition that redevelopment agencies must partner with private sector corporations in order to remediate blight. The holdings of these cases do not support an extension of sovereign immunity to a private party for subdivision activities that do not relate to the public agency's governmental purpose.

8 Plaintiff concedes that there are no fact questions relevant to the Court's sovereign immunity analysis. (See Oct. 17,2011 Tr. at 24:4-29-17; 42:27·43:7.) Thus, the Court need not address whether

27 there is a factual basis for Plaintiffs claimed sovereign immunity, including whether the claimed sovereign immunity survived the Developer's bankruptcy and was passed to all successors-in-interest, and whether any successor-in-interest waived or forfeited the claimed immunity.

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Dated <Ii 31 { \ 6

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RICHARD A. KRAMER Judge of the Superior Court

SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN FRANCISCO

FILLMORE CENTER ASSOCIATES

Case Number: CGC-08-477064 and

Plaintiff(s) Case Number: CGC-08-480768

vs.

THE CITY AND COUNTY OF SAN FRANCISCO, et al.

Defendant( s)

CERTIFICATE OF MAILING (CCP 1013a (4))

I, Felicia Green, Deputy Clerk of the Superior Court of the City and County of San

Francisco, certify that I am not a party to the above-entitled action.

On September 5,2012, I served the attached STATEMENT OF DECISION REGARDING

APPLICABILITY OF THE CONDOMINIUM CONVERSION ORDINANCE TO THE FILLMORE

CENTER by placing a copy thereof in a sealed envelope, addressed as follows:

Timothy Tosta Kristen Jensen MCKENNA LONG & ALDRlGE LLP DEPUTY CITY ATTORNEY Rincon Center II, 121 Spear Street, Suite 200 1 Dr. Carlton B. Goodlett Place, City Hall, Rm. 234 San Francisco, CA 94105-1582 San Francisco, CA 94102

Andrico Penick One South Van Ness Avenue, 5th Floor San Francisco, CA 94103

I then placed the sealed envelopes in the outgoing mail at 400 McAllister Street, San Francisco, CA.

94102 on the date indicated above for collection, attachment of required prepaid postage, and mailing

on that date following standard court practices.

Dated: September 5, 2012

T. MICHAEL YUEN, Executive Officer

By: Felicia Green, Deputy Clerk III