TARA v. CITY OF WEST HOLLYWOOD

Filed 2/21/07

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

PROCEEDINGS in mandate. Ernest Hiroshige, Judge. Affirmed in part; reversed and remanded in part.

Chatten-Brown & Carstens, Jan Chatten-Brown, Katherine A. Trisolini and Amy Minteer for Plaintiff and Appellant.

Jenkins & Hogin, Michael Jenkins and John C. Cotti for Defendant and Respondent.

Latham & Watkins, James L. Arnone, Stephanie E. Ord and Benjamin J. Hanelin for Real Parties in Interest and Respondents.

Respondent City of West Hollywood (City) and real parties in interest WASET, Inc., West Hollywood Community Housing Corporation (WHCHC) and Laurel Place West Hollywood, Inc., (sometimes collectively referred to hereafter as real parties in interest) entered into two agreements to develop property located at 1343 North Laurel Avenue in the City of West Hollywood. (This property, described more fully below, is referred to hereafter as Laurel Place.) The first was an option agreement entered into on June 9, 2003, and the second was an agreement to develop Laurel Place approved by Citys council on May 3, 2004. Work on the environmental impact report (EIR) commenced in October 2004; during the pendency of these proceedings, the city council has given final approval to the EIR.

On July 12, 2004, appellant Save Tara, an unincorporated association of individuals that includes residents of Laurel Place, filed a petition for a writ of mandate seeking an order requiring City to set aside the agreements of June 9, 2003, and May 3, 2004. The petition also seeks a judicial declaration that these two agreements violate the California Environmental Quality Act (CEQA), various provisions of the Government Code and Citys own ordinances.

The core of the matter is that no EIR was prepared prior to the agreement of May 3, 2004. The trial court concluded that an EIR was not required before this agreement was entered into, and denied the petition. We disagree and reverse with specific directions detailed in our opinion.

FACTS

1. Background

Laurel Place includes a colonial style home built in 1914-1915,^[1]which was divided into four apartments in 1941-1942, and includes a Chauffeurs House, which also became an apartment. City designated Laurel Place as a Local Cultural Resource in 1994. According to Citys Cultural Heritage Advisory Board, Laurel Place reflects special elements of the Citys social, geographic, aesthetic and architectural history and possesses an integrity of location, design, feeling and association. The house sits estate-like in the center of two large 80 foot lots behind a wide and heavily landscaped setback. According to a staff report prepared for the city council, Laurel Place is [s]urrounded by densely built lots, the property setbacks and open space provide relief from more concentrated parcels. The low density property with heavy landscaping is an established and familiar visual feature along Laurel Avenue. The petition alleges, and the answer admits, that in a City that describes itself as having a severe shortage of parks and green space, the [Laurel Place] property provides a unique green respite, shaded by trees that are nearly one hundred years old.

Laurel Place was owned by the Weisman family. Its last owner, Mrs. Elsie Weisman, then 98 years old, donated Laurel Place to City in 1997 by way of a quitclaim deed, on the conditions, among others, that she could live there until her death and that the tenants could live there for six months after her death. Mrs. Weisman died in 2000 at the age of 101, having lived in Laurel Place since 1924.

2. The Option Agreement of June 9, 2003

On June 9, 2003, City entered into an Option Agreement with the real parties in interest WASET, Inc., and WHCHC. This agreement recited that City was the owner and seller of Laurel Place and that WASET, Inc., and WHCHC, the buyers, desired to acquire the exclusive right to purchase Laurel Place. The option agreement provided that the agreement was entered into to enable the buyers to obtain financing from the United States Department of Housing and Urban Development (HUD) under the HUD Section 202 program to develop an approximately thirty-five (35) unit housing complex for very low income senior households. The option agreement contained a provision for an extension of one year; in view of the recognized need for affordable housing for very low income seniors, the price for Laurel Place was $393,375; and the closing of the escrow was made contingent on the buyers obtaining HUD financing.

In his presentation at the June 9, 2003 meeting of Citys council where the option agreement was considered, Citys housing manager explained the proposal to save the historic house, rehabilitate it, and provide 30 to 35 senior units to very low income seniors. The development was contingent on HUD grants for $3 million and would be done by an experienced development team that had worked with WHCHC in the past. Citys housing manager stated: This is also not the last bite at the apple . . . . This is only approving that we would be able to apply for federal funds. There would be several other actions that would be required before the project would be fully entitled and there will be public participation at every step.^[2]

3. Application to and Approval by HUD

The application to HUD was filed on June 13, 2003; the application exceeds seven hundred pages. This application is of operative significance to our decision in this case, and we will refer to it as the HUD application.

In the HUD application, real parties in interest WASET, Inc., and WHCHC represented that [t]he City of West Hollywood has committed by vote, $2,500,000 to the development of LAUREL PLACE. (Boldface and underscoring omitted.) The HUD application and the supporting correspondence from City officials, politicians, and seniors leaves no doubt as to the plan to develop 35 affordable senior units on Laurel Place.^[3]

The HUD application describes in great detail the proposed architectural layout and design of the project. The reconfiguration of the existing main building is described, e.g., the lower floor will be communal space composed of a kitchen, arts and crafts room, television lounge, etc. The new building is described as u-shaped and [will] wrap around the rear and both sides of the existing house. Other details, such as the primary entrance and allocation of administrative space, are also provided. The central courtyard area is to contain, among other things, a gazebo with shade trellis and lush landscaping. Specific components of the new building, such as the arts and crafts room and public rest rooms, are also described. The 35 dwelling units are to be configured to allow for the most efficient delivery of services and to encourage social interaction while emphasizing the non-institutional aspect of the building. Details of the dwelling units are also provided, e.g., the width of the doorways (36) to accommodate wheelchairs and the wall cabinets with pulls that can be used by persons with arthritis. A professionally prepared, architects rendition of floor plans, as well as the layout of the entire project, are attached to the descriptive text.

The HUD application also sets forth the parcels environmental problems including lead and asbestos in the building, possible soil contamination from an incinerator, and a remediation plan that the City agreed to fund at an estimated $560,000. The HUD application also contains an Historic Structures Report.

HUD awarded a $4.2 million grant for the development of Laurel Place in November 2003.

4. The Period Immediately Preceding the May 3, 2004 Council Meeting

On April 23, 2004, City announced, among other places, on its website that on May 3, 2004, the council will consider the development of a 35-unit affordable Senior housing project and park. The announcement stated that the council would consider: (1) approving a one-year extension of the option agreement; (2) approving an agreement to facilitate development of the project, including a $475,000 predevelopment loan, subject to environmental review and additional review by the Historic Preservation, Planning and Public Facilities Commission; and (3) reviewing and advising staff on alternative configurations for the proposed 35-unit Senior Housing Project to be built behind the historic Weisman House which will be preserved and restored.

On April 29, 2004, counsel for appellant Save Tara^[4]wrote to the members of the city council objecting to the planned actions both as inconsistent with the intent of Elsie Weisman^[5]and because the City must comply with CEQA, including an EIR, before renewing the option agreement and entering into a development agreement for the property. Counsel urged the City not to renew the option agreement or approve the agreement to facilitate development but instead consider a public use that will respect the nature of this historic property.

The staff report on this agenda item stated that the city council would consider approving a Conditional Agreement for Conveyance and Development of Property that will lead to development on [Laurel Place] of 35 units of affordable senior housing as well as rehabilitation of the main house and retention of landscaped open space as a public pocket park. The report recommended: approval of the agreement to facilitate development of the project and begin the process of exploring relocation options with the tenants; to authorize the city manager to execute the documents substantially in the form attached to the report;^[6]to review alternative configurations for new construction, and refer them to various City commissions for review; and to direct staff to hold a preliminary informational meeting to obtain further input from the neighborhood. The staff report stated that the the project attempts to strike a balance among the various goals and objectives. Under fiscal impact, the staff report concluded that the recommended actions would [c]ommit the City to convey the property to Laurel Place West Hollywood in exchange for the commitment to develop the affordable senior project as planned; would commit $475,000 in predevelopment funds; and would commit the balance of $1 million as a construction loan, subject to project approval and funding by HUD.

5. The May 3, 2004 Council Meeting; CEQA and EIR Are Mentioned

Public speakers both for and against the Citys plans crowded the May 3, 2004 hearing. Many citizens signed petitions or letters to the council opposing any development on the site. The dichotomy was principally between those who wanted more affordable housing for seniors, along with preserving the house and much of the grounds as had been proposed in the HUD grant, and those who supported affordable housing at some other location but, fearing the destruction of trees and parts of the house, wanted Laurel Place to be restored and preserved, and used by City in a manner that would maintain both the green space and the house.

Although the minutes of the meeting repeatedly referred to the proposed project, the city attorney in his oral presentation stated that the recommendation of this item is not approval of a project, but rather a concept, that the expenditure of funds did not commit City to any specific project design and that an EIR was not required until the project is solidified. The city attorney considered the agreement truly conditional on the performance of a number of prerequisites, the failure of any of which would mean the concept would not go further. He explained that it is not a commitment to any particular project. No mitigation measures have been precluded. There was no loss of flexibility. The city attorney characterized the approval as allowing for funds to be advanced in order to prepare studies, to prepare architectural renderings, to conduct historical preservation analysis and to do other studies, the absence of which really make it really impossible to go forward at all. He believed that genuine flexibility remains to address the environmental concerns, so there need not be an EIR yet. One council member stated that this project first came before the council as a concept about a year before.

The representative from WHCHC stated that any actual design proposal will be subject in the coming months to an environmental impact review, a review by the community, by the Historic Preservation Commission, by the Planning Commission and ultimately by this council. The architect discussed plans for preserving the house and acreage and the difference in plans for a two-story or three-storing building in back of the house and choices for use of the house itself, but emphasized that the building had not as yet been designed.

The oral presentation made by City, before the public spoke, initially described the agenda item as a conditional agreement for conveyance and development of property at 1343 Laurel Avenue to serve multiple goals of affordable housing, historic preservation and park development. It also offers council an opportunity to comment on alternative concepts and to start the public participation process to select and refine a design. Referring to the need for low-income senior housing, Citys housing manager stated: This project will provide over ‑‑ it will provide 35 affordable senior units that will be available [for] rents at approximately $200 per month. He described the HUD grant and stated it specified 35 units, the retention and the rehabilitation of the historic house and the park so its all part of ‑‑ it was all part of the proposal, its a part of HUDs expectations. He added: The project will be subject to a full EIR and public review. And the EIR will start upon submission of a development permit application to the planning division and were still months away from that. Moreover, City would convey the property conditioned on the developer obtaining all the environmental clearances required for project entitlement.

Citys housing manager explained that the HUD grant is on a very firm deadline and that construction had to begin by November 2005, two years after the award of the grant. Therefore, an application for planning review needed to be submitted and the City had to take action on this project by the end of the year. Construction, we think, will start sometime between July and November of 05 and be completed by the end of 07.

The Citys housing manager added that this is not a rubber stamp. There are real options to consider here . . . . And there will be additional opportunities as the EIR is circulated for public input. He stressed that the agreement before you is a conditional agreement. The housing manager went on to state that by taking the recommended action tonight, the council is affirming its commitment to a project that balances multiple objectives and anything short of that would not meet the contractual requirements. But while the agreement is conditional, the council needs to know that the recommended actions will commit the city as long as the developer delivers. And we also cant put this off. The clock is ticking. Weve already used up six months of our two year time frame to get under construction.

The city council approved the agreement between City and real parties in interest on May 3, 2004, and also extended the Option Agreement for one year.

6. The Terms of the May 3, 2004 Agreement

The May 3, 2004 agreement (hereafter the May 2004 Agreement) is between City and real party in interest Laurel Place West Hollywood, Inc., the latter being referred to in the agreement as Developer.

The May 2004 Agreement is a complex document extending to 39 pages of single-spaced text and eight attachments. It is entitled Conditional Agreement for Conveyance and Development of Property. Without attempting to summarize the entire document, we note some of the aspects of this agreement that are material to the proceedings before us.

The stated purpose of the agreement is to develop Laurel Place for the purpose of providing affordable housing for seniors and a neighborhood pocket park. Thirty-four of the units are to be restricted to very-low and low income senior households; one unit is for the resident manager. The main house is to be rehabilitated. The performance of the various phases of the development is regulated in detail, as are the various issues and questions arising from the transfer of the title to Laurel Place. The terms of the escrow are set forth in minute detail. It is very significant that the agreement leaves no room for doubt about the scope and nature of the development. Barrier free design approach shall govern the layout of each apartment with each unit to be composed of a full bath, a living room/dining room combination and a kitchen. The design of the units and the style to be followed in the interiors is carefully delineated, down to such detail as natural light to be provided by large sliding glass doors; semisubterranean parking to be placed at the rear setback yard; the majority of the mature trees are to be retained and landscaping is to employ a variety of plant materials that include diverse colors and textures.

The scope and detail of this agreement, of which we have given only illustrations, is of two-fold significance. First, the agreement presents a project for which the planning in practical fact is complete. As we explain below, however, an EIR is to be part of the planning process, and is not an after-the-fact rationalization of a completed plan. Second, the agreement is, first and last, an agreement to develop Laurel Place; it is not a land acquisition agreement, as City contends. We return to these points in parts 1 and 2 of the Discussion portion of this opinion.

7. Filing of the Petition for a Writ of Mandate: June 2, 2004

We defer a discussion of appellants petition for a writ of mandate to the next principal part of this opinion entitled Procedural History. Since there were a number of events that took place after June 2, 2004, we proceed to summarize them.

8. The Revised Agreement of August 9, 2004

In July 2004, City and real party in interest Laurel Place of West Hollywood, Inc., entered into an agreement that revised the May 2004 Agreement. The parties refer to this revised agreement as the August 9, 2004 Agreement, and we adopt the same terminology.

The August 2004 Agreement is substantially the same as the May 2004 Agreement. However, one of the differences between the two agreements is that under the August 2004 Agreement CEQA requirements must be complied with and cannot be waived. The May 2004 Agreement provided that the city manager could waive a number of conditions precedent, including CEQA requirements; appellants petition for a writ of mandate challenged this provision of the May 2004 Agreement.

9. Preparation of the EIR

Work on the EIR commenced in October 2004.^[7] On August 3, 2006, Citys planning commission certified a final EIR and a statement of overriding considerations. The city council has now approved the EIR.

PROCEDURAL HISTORY

1. The Petition for a Writ of Mandate

The operative amended petition was filed on July 12, 2004, and alleged five causes of action. The first cause of action alleges that CEQA required City to conduct an environmental impact review prior to making a decision on the project involving Laurel Place. This cause of action alleges that City did not meet this obligation in that it did not prepare an EIR prior to entering into the May 2004 Agreement. The second cause of action alleges that City violated Government Code sections 65867 and 65867.5, which provide that a development agreement cannot be entered into unless certain procedures are followed, among which are a public hearing and the enactment of an ordinance approving the development agreement. The third cause of action alleges violations of certain provisions of Citys own municipal code that mirror the Government Code sections set forth in the second cause of action. The fourth cause of action alleges that the project set forth in the May 2004 Agreement is inconsistent with Citys general plan. The fifth cause of action seeks a judicial declaration that the CEQA and the aforesaid provisions of the Government Code and Citys municipal code were violated.

The petition sought the following relief:

(1) A mandate ordering City to set aside the May 2004 Agreement^[8]and the Option Agreement;

(2) An injunction prohibiting City from proceeding with any actions under the May 2004 Agreement and the extension of the Option Agreement pending full compliance with the Government Code, the West Hollywood Municipal Code and CEQA;

(3) An injunction prohibiting City and real parties interest from cutting down any trees or removing any structures prior to [the] resolution of this case;

(4) For a judicial declaration that Citys approval of the May 2004 Agreement and of the extension of the Option Agreement violates CEQA, the Government Code, and West Hollywoods zoning ordinance and is therefore void.

2. Discovery Disputes

We note that a number of discovery disputes developed after July 2004. To a large extent, these disputes revolved around documents generated after May 3, 2004, when the May 2004 Agreement was concluded. These documents, with the exception of the August 2004 Agreement (see text, post), are not germane to our decision and we therefore express no opinion on the resolution of these discovery disputes.

The trial court granted real parties in interests and Citys motion to augment the record with the August 2004 Agreement.

3. The Trial Courts Decision

The trial court first concluded that CEQA was not violated. The court reasoned that City has not yet entered into a legally binding agreement to approve the conveyance . . . of the Tara property or the proposed housing project. The [May 2004] Agreement is expressly conditioned on compliance with CEQA. . . . The City has not given its final approval to convey the property . . . nor has it given its final approval of the housing project itself.

Next, the court concluded that the Government Code was not violated because City had not in fact entered into a binding development agreement. For the same reason, the court found that there was no merit to the third cause of action that alleges violations of Citys municipal code.

Finally, the court concluded that since City had not approved the Design Documents called for by the May 2004 Agreement, it calls for speculation whether the project was in fact inconsistent with Citys general plan.

The court entered judgment denying the petition in accordance with these rulings.

TO BE CONTINUED AS PART II.

Publication Courtesy of California lawyer directory.

Analysis and review provided by Escondido Property line Lawyers.

^[1] There is a conflict in the evidence when the main house was built. The petition alleges the dates set forth in the text. Documents generated by City state the house was built in 1923. It appears the main house has 7,044 square feet.

^[2] At the same time that City entered into the option agreement, Citys council also approved $20,000 in recoverable financing to be used to help WHCHC to develop a proposed low-income senior project to be located at 1343 North Laurel Avenue. In an agreement signed July 18, 2003, City acknowledged that WHCHC might not be able to obtain financing, in which case repayment of the recoverable grant would not be necessary.

^[3] For example, a letter from Citys mayor to HUD stated in part Citys strong support of the application to fund development of 35 units of affordable housing for the elderly. A letter from the city manager indicated Citys financial commitment to the Section 202 proposal by [WHCHC] and WASET to develop 35 affordable senior units at 1343 Laurel Avenue in West Hollywood, explaining that the City will be contributing land and funds totaling $2.5 million toward the development of the Laurel Place project. (Boldface omitted.) The Citys planning manager opined that the entire parcel upon which the above described 35-unit low-income housing project is to be located conforms to zoning and will not require a conditional use permit.

^[4] Use of the name Tara is explained by the fact that Mrs. Weismans favorite movie was Gone With the Wind, which she was watching when she passed away. There is a passing similarity between the main house on Laurel Place and the Tara of Gone With the Wind fame.

^[5] The petition alleges, and the answer in substance denies, that Mrs. Weisman believed that the City, which had designated [Laurel Place] as a cultural resource, would protect it as a public resource with little or no alteration to the buildings or landscaping.

^[6] A 42-page conditional agreement for conveyance and development of property was attached.

^[7] Without burdening this opinion with the details, we base this on materials that are attached to a request for judicial notice filed by real parties in interest in the trial court on October 22, 2004.

^[8] The petition predates the revision of this agreement by the August 2004 Agreement.