BEVERLY OIL CO v. CITY OF LOS ANGELES

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District Court of Appeal, Second District, Division 1, California.

BEVERLY OIL CO. v. CITY OF LOS ANGELES et al.*

Civ. 18567.

Decided: April 07, 1952

George E. Cryer, R. Alston Jones, Los Angeles, for appellant. Ray L. Chesebro, City Atty., Bourke Jones, Asst. City Atty., and Alan G. Campbell, Deputy City Atty., Los Angeles, for respondents.

The primary question for decision is whether the ‘Comprehensive Zoning Ordinance’ of the city of Los Angeles may constitutionally be applied to an 11 1/212-acre tract located within the city upon which seven wells are now producing oil so as to bar the drilling of additional wells thereon and what is more, restrict the production to only six of these wells.

In 1908, a predecessor in title of the plaintiff drilled the first of some ten or twelve producing wells upon the property here involved. However, in 1924 only five of these wells were operating and producing when the land was annexed by the city and likewise this was true in 1925 when the city passed its first zoning ordinance prohibiting the drilling of oil wells in the zone in which the property was located. The operation of the five wells while ‘nonconforming’ was expressly permitted by the terms of the ordinance and was so recognized by the administrative agency.

At the time the plaintiff acquired the property the average daily production of each well operating in the general locality of its wells was only twelve barrels. Originally there were 287 wells in the area, but as production declined in the area, one well after another was abandoned until in 1947 the only wells remaining were those operated by the plaintiff.

It should here be added that in 1945 the plaintiff instituted a suit against the city to have it adjudicated that it was entitled to drill one new additional well in the center of its property. In this plaintiff was successful.

The present Comprehensive Zoning Ordinance, effective June 1, 1946, is in large part but a reenactment and continuation of the previous ordinances. The ordinance permits the continued nonconforming use of the land and the maintenance thereon of all nonconforming buildings and structures. However, the ordinance as it now reads expressly provides that no well for the production of oil, gas or other hydrocarbon substances, which is a nonconforming use, shall be redrilled or deepened.

The city, it should likewise be stated, has granted a variance which apparently permits the plaintiff, if it so desires, to drill on a triangular two-acre plot, within the confines of the 11 1/212-acre tract, as many as four new wells at such angles as will reach any oil deposit underlying the entire 11 1/212-acre tract, provided that for each one of the wells so drilled it abandons a well located outside of such triangular plot.

The property involved herein fronts on the north upon Beverly Boulevard, on the east upon La Cienega Boulevard, on the south upon West Third Street, and on the west upon San Vicente Boulevard. Immediately across these various boulevards or streets which surround the property there are for the most part commercial developments except perhaps on San Vicente where there is a high-grade light industrial development along with a relatively solid commercial development. Beyond all these streets or boulevards, in every direction, there is a dense residential development. All the streets surrounding the property are heavily traveled over which pass thousands of people each day in busses or passenger automobiles.

There are no oil wells outside of the property for very many miles distant. The seven wells now on the property yield a total of approximately 6,000 barrels per month. Evidently the oil recovered is heavy gravity oil, which for the most part, slowly migrates from underneath other lands and reaches inlets located on plaintiff's land, thus enabling plaintiff to recover the oil through its own wells. What the surface land is worth for uses to which it may be put under the ordinance is not shown.

Shortly stated, the plaintiff contends (1) that the city cannot restrict the number of wells it chooses to drill as (a) the property was developed for oil before it was annexed by the city and (b) prior to the time the first zoning ordinance was enacted; (2) that the wide nonconforming use permitted by the original ordinance may not be restricted so as to take away the vested right to reach any and all oil underlying the property. The appellant's various and detailed references to the state and federal constitutions urged by it in support of these contentions need not here be narrated in detail for reasons that will presently appear.

Contrary to the contention of plaintiff, there is no constitutional objection whatsoever to any municipal interference with vested rights in property when such interference is at most merely incidental to the legitimate exercise of the police power. The enactment of a comprehensive zoning ordinance necessarily destroys many vested rights, such as the untrammeled use of property acquired before the enactment of the ordinance, but nevertheless comprehensive zoning has long been established as being a legitimate exercise of the police power. Euclid v. Ambler Realty Co., 1926, 272 U.S. 365, 47 S.Ct. 114, 71 L.Ed. 303. Such an ordinance will be held unconstitutional only if it operates unreasonably as to particular property. The term ‘vested right,’ as used by appellant, is of little significance when used in connection with the police power. The very essence of the police power is that no individual rights of any nature can prevent its operation, once it is shown that its exercise is proper and that the means of its exercise is reasonable.

That pecuniary loss or injury resulting from an exercise of the police power does not demonstrate violation of constitutional limitations is strikingly shown by the case of Hadacheck v. Sebastian, 239 U.S. 394, 36 S.Ct. 143, 145, 60 L.Ed. 348, affirming Ex parte Hadacheck, 165 Cal. 416, 132 P. 584, L.R.A.1916B, 1248, upholding a zoning ordinance of the city of Los Angeles. Hadacheck had erected his brickyard and kiln in an almost uninhabited locality several miles outside the city upon an eight-acre tract of land with soil peculiarly valuable for brickmaking. Subsequently the city boundaries were extended to include the locality and later on a zoning ordinance was enacted which not only zoned the locality as residential but operated retroactively so as to require the removal of the industry. It was shown that the tract was worth $800,000 for brickmaking purposes and only $60,000 for residential purposes, or any purpose other than brickmaking; that the land was purchased for brickmaking; that the manufacture of brick could not profitably be carried on at a point distant from the clay beds; and that expensive machinery was installed on the premises. Despite the retroactive operation of the ordinance and the great impairment of values the Supreme Court of both California and the United States declared the ordinance valid. In its opinion the Supreme Court of the United States said: ‘It is to be remembered that we are dealing with one of the most essential powers of government,—one that is the least limitable. It may, indeed, seem harsh in its exercise, usually is on some individual, but the imperative necessity for its existence precludes any limitation upon it when not exerted arbitrarily. A vested interest cannot be asserted against it because of conditions once obtaining. Chicago & A. R. Co. v. Tranbarger, 238 U.S. 67, 78, 35 S.Ct. 678, 59 L.Ed. 1204, 1211. To so hold would preclude development and fix a city forever in its primitive conditions. There must be progress, and if in its march private interests are in the way, they must yield to the good of the community. The logical result of petitioner's contention would seem to be that a city could not be formed or enlarged against the resistance of an occupant of the ground, and that if it grows at all it can only grow as the environment of the occupations that are usually banished to the purlieus.’

The argument so often made that ‘when property is held by its owner for a particular use, as, for instance, an industrial use, the prohibition of such use is ‘confiscatory’ because destructive of that use or of the property's value derived from the possibilities of that use, is obviously the same sort of begging of the question and vicious circle as the proposition formerly advanced but now discredited, that the capitalization of the earning capacity of a utility may be applied as the valuation basis in testing the validity of a rate regulation. Surely the individual cannot be permitted to speculate upon the community's not exercising its constitutional powers, and then claim that the community is barred from interfering with the speculation.' Bettman on ‘Constitutionality of Zoning,’ 37 Harv.L.Rev. 834 at 848.

The further contention made by appellant that just because the city has annually levied and collected taxes against the property—upon an ad valorem basis as to the mineral and surface rights—estops the city ‘from interfering with the operation of recovering the mineral wealth from said land, either by the exercise of its zoning power or otherwise’ is without merit. If this contention should be regarded as meritorious, it would follow that one who derived his income from extortion would be entitled to say to the federal government that if it sought to hold him criminally liable for the extortion, it was estopped to collect income taxes based on the ill-gotten gains and if on the other hand it sought to collect the tax it was estopped to seek his conviction for extortion. Only fourteen days ago (March 24, 1952) the Supreme Court of the United States in Rutkin v. U. S., 72 S.Ct. 571, made short shrift of this argument. We follow its lead.

As the judgment appears to be correct in every respect, it is affirmed.

HANSON, Justice pro tem.

WHITE, P. J., and DRAPEAU, J., concur.