“Birds of a feather flock together.”  — Proverb

The Fourth District Court of Appeal (Div. 2) affirmed a judgment entered after the sustaining of a demurrer without leave, holding that a mandate action brought by The Inland Oversight Committee (IOC), CREED-21, and Highland Hills Homeowners Association (HOA) alleging CEQA and Water Code violations was barred by res judicata (based on the final judgment in the HOA’s prior related CEQA action), and failure to state a claim.  The Inland Oversight Committee v. City of San Ramon (First American Title Insurance Company) (2018) 27 Cal.App.5th 771.  (The Court’s opinion, filed September 14 and later ordered published on September 27, 2018, denied the parties’ motions to dismiss and strike and related requests for judicial notice as moot in light of its disposition on the merits.)

Factual and Procedural Background

The Court’s opinion involved challenges to year 2014 modifications to a 541-acre mixed use development in San Bernardino (the Highland Hills Project), the specific plan for which was originally approved pursuant to an EIR in 1982, and dealt with the second appeal to come before it regarding those same proposed modifications.  The HOA alone had previously filed an action challenging those modifications on CEQA grounds, and the Court affirmed the judgment rejecting those claims in a prior, unpublished 2017 opinion.  (In explaining the long history of prior project changes and litigation, the Court quoted extensively from its prior opinion.)

In 1985, the City amended the residential development’s specific plan to allow for affordable housing in a certain portion of it, the HOA brought suit challenging the amendment, and the parties reached a settlement agreement incorporated in a stipulated judgment in 1989.  At that point, the Highland Hills Project, as contemplated by the settlement agreement, specific plan, and City’s general plan, was to consist of up to 1,730 residential dwelling units and a golf course.

In 1992, an addendum to the settlement agreement incorporated into the stipulated judgment reduced permitted multi-family units from 1,200 to 566, and provided for preservation of a particular canyon and its trees as part of the planned golf course.  In 2001, an approved tentative map reduced total units from 1,730 to 1,516, and the parties agreed to a second addendum to the stipulated judgment providing that prior CEQA review was adequate and no subsequent or supplemental EIR was required for this density reduction.  The second addendum also provided a new application process would apply to future “minor modifications” to the Highland Hills Project, defined as those resulting in development with the same or less intense environmental impacts from a CEQA standpoint, which could be approved as a ministerial act by the City’s development director without further planning commission involvement.

In 2014, real party First American Title Insurance Company (First American), the developer’s successor, applied for (and City’s development director approved as a “minor modification”) modified construction plans further reducing total units from 1,516 to 695; eliminating commercial uses and the golf course; increasing park acreage and protecting an important ridge line by eliminating higher-elevation development; and substantially reducing the project’s footprint and impact on jurisdictional streams and wetlands.  The development director adopted and made findings contained in an environmental consultant’s report to support this ministerial action; the City rejected the HOA’s administrative appeals; and the trial court granted First American’s and the City’s motion by order determining the changes constituted a minor modification under the second addendum to the stipulated judgment requiring no subsequent or supplemental EIR. The Court of Appeal affirmed that order in its 2017 unpublished opinion in the related matter, which held the HOA failed to demonstrate that the City had eliminated any mitigation measures without due consideration, and failed to show that substantial evidence did not support City’s conclusion that the modifications would have equally or less intense environmental impacts.

The New Lawsuit And The Court Of Appeal’s Decision

In the midst of the litigation of the HOA’s first challenge, in mid-2015, the second lawsuit challenging the minor modification (as allegedly illegal under both CEQA and the Water Code) was filed by the HOA, this time joined by IOC and CREED-21.  In affirming the judgment entered after the trial court sustained the City’s and First American’s demurrer to the First Amended Petition in that new action without leave to amend, the Court of Appeal made the following points:

  • Appellate courts review the trial court’s demurrer ruling (not its reasoning) de novo to determine whether the complaint alleges sufficient facts to state a cause of action under any possible legal theory, assuming the truth of properly pleaded factual allegations, facts reasonably inferred from those expressly pleaded, and matters judicially noticed. It is plaintiff’s burden to prove how an amendment would cure the defect and if plaintiff fails to so demonstrate on appeal the Court presumes plaintiff has stated his allegations as favorably as all facts known to him permit.
  •  Under the doctrine of res judicata, a valid final judgment on the merits bars a subsequent action by the parties or their privies on the same cause of action; whether the cause of action is the same for res judicata purposes depends on whether it involves the same “primary right” to be free from a particular injury, regardless of the legal theory on which liability is based.  By contrast, res judicata does not apply where two actions involve the same general subject matter, but “distinct episodes” of purported legal noncompliance.
  • Applying these rules, the Court held the HOA’s CEQA claim was not distinct from, but was the same as the one it asserted in the related action and lost – namely, that City violated CEQA by failing to conduct further environmental review and by treating First American’s project changes as a minor modification under the second addendum to the stipulated judgment.  The HOA litigated that claim and lost, and the Court of Appeal affirmed that judgment in its prior unpublished opinion, rejecting all the HOA’s CEQA arguments that were specifically alleged in the present action.  Res judicata thus applied to bar the HOA from relitigating the same CEQA claim in the current action.
  • Res judicata likewise barred the same CEQA claim as asserted by IOC and CREED-21 because those entities are in privity with the HOA.  Privity is found where, among other circumstances, “a relationship between the party to be estopped and the unsuccessful party in the prior litigation is “sufficiently close” so as to justify application of the doctrine of collateral estoppel.”  (Quoting Citizens for Open Access, etc. Tide Inc. v. Seadrift Assn. (1998) 60 Cal.App.4th 1053, 1069-1070.)  In essence, such a relationship renders the losing litigant a “virtual representative” of the new plaintiffs, where it had the “same interest” as them and a “strong motive” to assert it.
  • As disclosed by the new action’s pleadings, IOC and CREED-21 shared the same interest as the HOA in “promoting responsible land use and planning,” and all three opposed and sought to invalidate the project approval on the ground that it violated CEQA for the same reasons as alleged in the HOA’s prior action, including alleging the same purported serious adverse environmental impacts.  Accordingly, and since nothing suggested the HOA failed to zealously litigate the related matter, “IOC and CREED-21’s interests were adequately represented by HOA in the related matters for purposes of the privity rule.”
  • Rejecting claims that the HOA’s interests were distinguishable because it was suing to protect homeowners’ property values and not in the public interest, the Court noted that plaintiffs failed to articulate how those public and private interests were not aligned with respect to the jointly asserted CEQA claim, and that the pleadings did not include explicit allegations of “private” harm to the HOA or its members.  Thus, per the Court:  “IOC and CREED-21 therefore have an identity or community of interest with and adequate representation by HOA in the related matter.  [citation]  Like HOA’s CEQA claim, the CEQA claims advanced by IOC and CREED-21 are barred by res judicata.”
  • Plaintiffs’ new Water Code claim – asserting that a Water Supply Assessment (WSA) was required for the project changes and not prepared – also failed as a matter of law.  While a WSA is required for certain discretionary development approvals, the Court had already held in the final judgment in the related action that the challenged approval was a ministerial minor modification requiring no further CEQA review, and plaintiffs were “barred from relitigating that finding.”

 

Questions? Please contact Arthur F. Coon of Miller Starr Regalia. Miller Starr Regalia has had a well-established reputation as a leading real estate law firm for more than fifty years. For nearly all that time, the firm also has written Miller & Starr, California Real Estate 4th, a 12-volume treatise on California real estate law. “The Book” is the most widely used and judicially recognized real estate treatise in California and is cited by practicing attorneys and courts throughout the state. The firm has expertise in all real property matters, including full-service litigation and dispute resolution services, transactions, acquisitions, dispositions, leasing, financing, common interest development, construction, management, eminent domain and inverse condemnation, title insurance, environmental law and land use. For more information, visit www.msrlegal.com.