Court Opinion

ID: 9856360
Source: CourtListenerOpinion
Date Created: 2023-09-24 06:45:53.219221+00
Date Added: 2024-06-11T09:38:40.855016
License: Public Domain

KLEINFELD, Circuit Judge,
dissenting:
I respectfully dissent.
I agree with the majority that the prudential ripeness requirement of Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City1 does not preclude a decision on the merits, and I agree with the majority that the rent control ordinance would amount to a regulatory taking under Penn Central Transportation Co. v. New York City,2 were it not a re-enactment of one already in effect when the Guggenheims purchased the trailer park. But I cannot agree that there was a taking of anything for which the Guggenheims would be entitled to compensation, because they purchased the park after the regulatory takings that mattered.
The challenged rent control ordinance was first passed by Santa Barbara County (the “County”) in 1979, and revised in 1987. The Guggenheims bought the trailer park in 1997, which was, at the time, located in an unincorporated part of the County. When the Guggenheims bought the trailer park, the County had long since taken away much of the rising value of the fee from the landlord and given it to the tenants who then owned trailers at the park. By 1997 the purchase price of the trailer park reflected the lower value of the trailer park to the landlord under the ordinance.3 All the Guggenheims paid for was a trailer park burdened by the rent control ordinance. And when they bought, the statute of limitations had long since run on any takings claims arising from the County’s 1979 and 1987 rent control ordinances.
The parties have stipulated that there was a short period during the day of February 1, 2002 — the day the City of Goleta (the “City”) was incorporated — when the County rent control ordinance did not apply. Later that same day, pursuant to California statute, the City re-adopted the rent control ordinance.4 Accordingly, the Guggenheims’ lawsuit is not barred by the statute of limitations because they challenge the City’s adoption, as part of its incorporation, of the County rent control ordinance, which followed the brief period when the ordinance was not in effect. Because the ordinance amounts to a regulatory taking, and not a physical taking,5 the Guggenheims’ challenge must be analyzed as regulatory taking.
*1036We disagree on how to apply the controlling Supreme Court decision, Palazzolo v. Rhode Island,6 In that case, a single shareholder owned a corporation that held land burdened by regulations.7 When the corporation was dissolved, title to the burdened land passed to the sole shareholder by operation of law.8 The government claimed that because the sole shareholder, the plaintiff, did not own the land when its use was restricted, he had no claim for compensation on account of any taking that had occurred when his corporation held title.9 In this factual circumstance, the Court held that the plaintiff could pursue a claim for compensation, 5 to 4. Five justices wrote for the Court that a regulatory takings claim “is not barred by the mere fact that title was acquired after the effective date of the state-imposed restriction.” 10 Justice O’Connor’s concurrence states that the claim was not barred in the circumstances presented in that case.11 Her stated rule rejects treating a change of ownership before or after the enactment of the regulation as per se barring or not barring a takings claim.12 Instead, courts “must attend to those circumstances which are probative of what fairness requires in a given case.”13 The four dissenters and Justice O’Connor agreed that acquiring title after the taking could bar a takings claim.14
In Palazzolo, the transfer of title (by operation of law) had no effect on the wealth of the plaintiff. He merely gained personal title to what he previously owned as 100% shareholder of the corporation which held title.15 By contrast, in this case, the Guggenheims bought the trailer park at a price presumably reflecting the impact of the rent control on the prior owners, a price lower than what they would have had to pay without the rent control ordinance. The Guggenheims purchased at arms length a trailer park already devalued by rent control. The land in Palazzolo was devalued by the challenged regulations while the plaintiff owned the impacted economic interest as a 100% shareholder in the corporation holding the land.16
We have two decisions on point. Daniel v. County of Santa Barbara holds that although Palazzolo rejects a rule that a purchaser who is aware of existing land-use regulations may never pursue a takings claim, it “did not adopt the converse of that rule,” that the successor could always recover.17 Daniel distinguishes Palazzolo on two grounds. One is that Palazzolo was a regulatory taking (as is the case at bar), while Daniel was a physical taking.18 The second is that “the full value of the [taking] had already been taken from the Daniels’ predecessors, it took *1037nothing of value from the Daniels.”19 This second ground applies to the case at bar.
Equity Lifestyle Properties, Inc. v. County of San Luis Obispo involved another trailer park rent control ordinance.20 Our decision in that case discusses, but explicitly declines to decide whether a plaintiff who had purchased after the ordinance went into effect had a claim under Palazzolo.21 Instead, it rejects the takings claim as barred by the statute of limitations.22 Since the takings claim failed on an another ground, Equity Lifestyle did not need to distinguish Daniel.
Our case fits the second Daniel distinction from Palazzolo, “[bjecause the full value of the [taking] had already been taken from the Daniels’ predecessors, it took nothing of value from the Daniels.”23 It also fits the limitation Justice O’Connor imposed in Palazzolo. Her opinion, and Daniel, would both have us “attend to those circumstances which are probative of what fairness requires in a given case.”24 Since the Guggenheims benefitted from a lower purchase price reflecting the burden of the rent control ordinance when they bought the trailer park, fairness does not require that they be compensated. Taking from Peter does not require giving compensation to Paul.
If this were a new rent control ordinance and a previous owner had transferred the trailer park to the Guggenheims before the statute of limitations had barred the seller’s claim, then this might be an actionable case. But it is not. The naked wealth transfer was in the 1970’s. The 2002 re-adoption was merely a ministerial re-enactment that did not transfer wealth from the Guggenheims.
Or, if there had been a substantial period of time, instead of less than one day, when the rent control ordinance had not been in effect, and if the Guggenheims had bought at a price reflecting freedom to charge market rents, they might have suffered an impairment of them investment-backed expectations or a negative economic impact.25 But that is a hypothetical circumstance neither argued nor, on the facts of this case, arguable. There is nothing in the record to support the notion that the Guggenheims’ interest in the trailer park was worth more before than after the City reenacted the County ordinance.26 The reenactment had no economic impact on the Guggenheims.27
The Guggenheims cannot demonstrate any investment backed expectations that were harmed by the 2002 reenactment of the ordinance unless they breathe life into the takings claims that prior owners never brought. When the prior owners let the statute of limitations run without challenging the 1970’s ordinance and the 1987 reenactment, their claim expired. Palazzolo does not undermine the rule that “a takings claim must [ ] comply with timeliness requirements.”28 The time-barred claims *1038could not establish investment backed expectations. Palazzolo does not suggest that a transfer of title revives dead claims. Instead, Palazzolo holds that transfer of title- will not necessarily bar a takings claim, a quite different proposition. In one case, there is no longer a claim and in the other, there is a claim that has changed hands.
The Guggenheims purchase of the trailer park in 1997 did not breathe life into the dry bones of the takings claim that had died years-before.29 As the majority opinion concedes, the Guggenheims “got exactly what they bargained for when they purchased the Park-a mobile-home park subject to a detailed rent control ordinance.” 30 The City took nothing from what they bought.
The third factor analyzed by the majority, the “character of the government action,” 31 is a continuation of the old ordinance, the same one that applied when the Guggenheims bought the trailer park. The brief gap and readoption did not reapportion public burdens, as did the 1987 and 1979 ordinances.32
Because the rent control ordinance did not harm the Guggenheims, they do not have a regulatory takings claim under Penn Central Transportation Co. v. New York City,33 or the test Justice O’Connor set forth in Palazzolo, which forces us to consider “what fairness requires in a given case.”34 Fairness cuts the other way.
Unfairness arises in this case in quite another quarter because of the market distortions created by the rent control ordinance during the years after its enactment in 1979. 'As the majority explains, the rent control ordinance has had the effect of raising the average price of a trailer in the park by $105,054, 88% of the sale price.35 But for the rent control ordinance, the average trailer would be worth only $14,037. The people who really do have investment backed expectations in this circumstance are those who have bought trailers since rent control went into effect. Tenants come and go, and even though rent control transfers wealth to “the tenants,” after a while, it is likely to affect different tenants from those who benefitted from the transfer. The present tenants lost nothing on account of the City’s reinstitution of the County ordinance. But they would lose, on average, over $100,000 each, if the rent control ordinance were repealed. They have no legal protection against repeal, and have invested, essentially, in reliance on the stability of government decisions that create market distortions.36 Repeal would not amount to a taking, but continuation of the *1039ordinance deprives no one, not the plaintiffs and not the tenants, of any compensable value.

. 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985).

. 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978).

. Majority op. at 1020-21.

. California code requires a newly incorporated city to adopt "prior to performing any other official act, [] an ordinance providing that all county ordinances previously applicable shall remain in full force and effect as city ordinances for a period of 120 days after incorporation, or until the city council has enacted ordinances superseding the county ordinances, whichever occurs first.” Cal. Gov’t Code § 57376. The City did this on February 1, 2002. On April 22, 2002, the City re-adopted the entire County Code, including the rent control ordinance, for an indefinite period, subject to the City’s power to amend, repeal, or modify the Code.

. Yee v. City of Escondido, 503 U.S. 519, 112 S.Ct. 1522, 118 L.Ed.2d 153 (1992).

. 533 U.S. 606, 121 S.Ct. 2448, 150 L.Ed.2d 592 (2001).

. Id. at 613-14, 121 S.Ct. 2448.

. Id. at 614, 121 S.Ct. 2448.

. Id. at 616, 121 S.Ct. 2448.

. Id. at 630, 121 S.Ct. 2448.

. Id. at 635-36, 121 S.Ct. 2448 (O’Connor, J., concurring).

. Id. at 633, 636, 121 S.Ct. 2448.

. Id. at 635, 121 S.Ct. 2448.

. Id. at 641, 121 S.Ct. 2448 (Stevens, J., concurring in part and dissenting in part); id. at 654 n. 3, 121 S.Ct. 2448 (Ginsburg, J., dissenting); id. at 654-55, 121 S.Ct. 2448 (Breyer, J., dissenting).

. Id. at 614, 121 S.Ct. 2448 (majority opinion).

. Id.

. 288 F.3d 375, 384 (9th Cir.2002).

. Id.

. Id.

. 548 F.3d 1184 (9th Cir.2008).

. Id. at 1190 n. 11.

. Id. at 1193 & n. 15.

. Daniel, 288 F.3d at 384.

. Palazzolo, 533 U.S. at 635, 121 S.Ct. 2448 (O’Connor, J., concurring).

. See supra note 4 and accompanying text.

. Garneau v. City of Seattle, 147 F.3d 802, 807-08 (9th Cir.1998).

. See Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538-39, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005) (quoting Penn Central, 438 U.S. at 124, 98 S.Ct. 2646).

. Equity Lifestyle Props., Inc. v. County of San Luis Obispo, 548 F.3d 1184, 1190 (9th Cir.2008).

. Ezekiel 37:1-14 (King James).

. See Lingle, 544 U.S. at 539, 125 S.Ct. 2074 (quoting Penn Central, 438 U.S. at 124, 98 S.Ct. 2646).

. Id. (quoting Penn Central, 438 U.S. at 124, 98 S.Ct. 2646).

. Armstrong v. United States, 364 U.S. 40, 49, 80 S.Ct. 1563, 4 L.Ed.2d 1554 (1960)

. 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978).

. Palazzolo, 533 U.S. at 635, 121 S.Ct. 2448 (O’Connor, J., concurring).

. Majority Op. at 1014 n. 11.

. Madera Irrigation Dist. v. Hancock, 985 F.2d 1397, 1403 (9th Cir.1993) (holding that “[rjeasonable expectations arising out of past policy but without a basis in cognizable property rights may be honored by prudent politicians, because to do otherwise might be unfair, or because volatility in government policy will reduce its effectiveness in inducing long term changes in behavior. But violation of such expectations cannot give rise to a Fifth Amendment claim.”); see also Nat'l Union Fire Ins. v. United States, 115 F.3d 1415, 1422 (9th Cir.1997); Peterson v. U.S. Dep’t of Interior, 899 F.2d 799, 812-13 (9th Cir.1990).