CALIFORNIA COASTAL COMMISSION v. ADAMS (1995)

The California Coastal Commission appeals from a summary judgment entered against it in an action it brought against respondents for an injunction, civil penalties, and exemplary damages for violation of the California Coastal Act.   The Commission also appeals from an award of legal fees to certain respondents.

The issue presented is whether, after a landowner has begun developing coastal land without a permit, in brazen disdain for the law, the Coastal Commission's power to obtain remedial injunctive relief under the Coastal Act can be instantly and permanently thwarted by a transfer of ownership.   The surprising answer, found in the Coastal Act, is yes.   We will affirm the summary judgment but reverse the legal fee award.

The property consists of approximately 22 hillside acres in the Carbon Canyon area of Malibu, a half mile from the coast highway, in an unincorporated portion of Los Angeles County.   On April 26, 1990, the property was bought by respondents (Charles H. and Hava Jeanine Adams, Clarine Anderson, Merlyn C. and Rosemary Duerksen, Bernard and Francine Ehrman, Lev and Bella Frank, Eugene P. Wagner, and Providence Trust Company as trustee).

The previous owner was Vista Pacific Development Co. Inc., which acquired title by grant deed in April 1988.   Vista was apparently under the control of Virgil Doerfler.

Within five months after acquiring the land, Doerfler, without seeking any permit from the county or the Coastal Commission, used bulldozers to begin developing the property.   By the time the County noticed the work and issued a stop order in September 1988, Doerfler had cleared the brush from approximately four acres, cut down trees, and created level pads for four homes by moving an estimated 50,000 cubic yards of earth.   Because the building pads were situated across Carbon Creek from the road, some of the grading work entailed diverting the creek bed and building a culvert across it.

The Commission became aware of these events in October 1988 and told Doerfler that he would be required, under the Commission's oversight, to undertake immediate measures to prevent erosion during the approaching rainy season, followed by measures to restore the land to its previous condition, to the extent feasible.

Doerfler did undertake emergency measures, consisting primarily of the placing of sandbags and plastic sheeting and the seeding of barren slopes.   Doerfler then began working with an expert consultant and with the Commission to develop a restoration plan.   This process was ongoing as late as April 12, 1990, when the Commission held a public hearing on Doerfler's latest restoration plan.   The Commission's staff favored this plan, and, so far as the Commission was aware, Doerfler proposed it and attended the hearing in good faith and with an intention to implement the plan if the Commission approved it.

The record is sketchy on the cost of restoration.   The Commission told the trial court it would exceed $50,000.   Several of the respondents told the trial court it would be only approximately $8,000.¹

Early in the development of the restoration plan, however, on June 20, 1989, Vista borrowed $800,000 from respondents.   This debt was secured by a deed of trust on the property.   The note called for 18 percent interest, with eleven monthly payments of $12,000, to be followed a month later by a final payment of $812,000.   Vista made the first $12,000 payment, which was due August 1, 1989.   It made no further payments.   In October 1989 a notice of default was recorded, and in March 1990 a trustee's sale was scheduled.   The Commission recorded a Notice of Violation on April 23, 1990.   The trustee's sale proceeded on schedule on April 26, 1990, two weeks after the public hearing mentioned earlier.   Respondents were the successful bidders.   They received and recorded a trustee's deed.

The Commission demanded that respondents proceed with restoration of the property.   Respondents refused, taking the position that they were innocent lenders duped by Doerfler and had no legal duty to remedy Doerfler's wrong.   This action ensued.   The Commission prayed for an injunction requiring respondents to perform the restoration work, and for civil penalties and exemplary damages.   Vista and Doerfler were among the defendants named in the Commission's complaint.   They did not file an answer, and they are not parties to this appeal.

The trial court granted summary judgment to respondents.   Five of the respondents (Anderson, the Ehrmans, and the Franks) moved for an order that the Commission pay their legal fees of $91,000, contending that in successfully defending the action they had enforced an important right affecting the public interest and conferred a significant benefit on a large class of persons.   The trial court granted the motion and awarded these respondents $87,767.25.   The Commission appealed separately from the summary judgment and the fee award.   We consolidated the appeals.

I.

We conclude that respondents have no affirmative liability under the terms of the Coastal Act.

The coastal zone runs the length of the state.   On the inland side of the shoreline, it extends 1,000 yards to five miles, depending on topography and other factors, except that in developed urban areas it extends less than 1,000 yards.  (Pub.Res.Code, § 30103.)   Any person may maintain an action for declaratory and equitable relief to restrain any violation of the Act, and to recover civil fines for violations of the Act.  (§§ 30803, 30805.)   Any person who violates any provision of the Act is subject to a civil fine not to exceed $10,000.  (§ 30820.)   Any person who intentionally and knowingly performs any development in violation of the Act is subject to an additional civil fine of $50 to $5,000 for each day in which the violation occurs.  (§ 30821.)   In an action brought by the Commission, a person who has intentionally and knowingly violated any provision of the Act may be held liable for exemplary damages, of a size left to the discretion of the trial court.  (§ 30822.)   The Act created the California Coastal Commission, with fifteen members, in the Resources Agency.  (§ 30300.)   The Commission has power to bring lawsuits.   In litigation it is represented by the Attorney General.  (§ 30334.)

Although very long, the Act contains but a single central provision governing development in the coastal zone:  “any person wishing to perform or undertake any development” must obtain a coastal development permit, in addition to any other permit required by state or local law.  (§ 30600.)

Development means “the placement or erection of any solid material or structure;  discharge or disposal or any dredged material or of any gaseous, liquid, solid, or thermal waste;  grading, removing, dredging, mining, or extraction of any materials;  change in the density or intensity of use of land, including [subdivision] and any other division of land, including lot splits ․ change in the intensity of use of water, or of access thereto;  construction, reconstruction, demolition, or alteration of the size of any structure, including any facility of any private, public, or municipal utility;  and the removal or harvesting of major vegetation other than for agricultural purposes, kelp harvesting, and timber operations․  ‘[S]tructure’ includes, but is not limited to, any building, road, pipe, flume, conduit, siphon, aqueduct, telephone line, and electrical power transmission and distribution line.”  (§ 30106.)   The statute does not define “perform” or “undertake.”

 It is plain to us that one who merely owns land, without conducting any activities on it, does not “perform or undertake any development” and therefore does not violate the statute by failing to obtain a coastal development permit.   The fact that a previous owner performed and undertook development without a permit does not affect the analysis, so long as the present owner had no direct or vicarious participation in the previous owner's performance or undertaking of that development or in the previous owner's efforts to avoid the consequences of his noncompliance.   Here, the Commission did not claim that the conduct of respondents was either collusive or evasive.

The Commission's strongest precedent is Leslie Salt Co. v. San Francisco Bay Conservation etc. Com. (1984) 153 Cal.App.3d 605, 200 Cal.Rptr. 575.   There an unknown person dumped fill material on a landowner's marshy wetlands, in violation of the permit requirement of the San Francisco Bay Conservation and Development Commission law (Gov.Code, § 66632), and without the landowner's knowledge or consent.   Construing that statute broadly to implement its purposes, the court held that the Commission could require the landowner to remove the fill.

The present case is distinguishable, because respondents did not own the land at the time of the unlawful grading.   Nor were they beneficiaries under the deed of trust at that time.   Even the broadest remedial construction of the Coastal Act cannot stretch so far past the generous interpretation Leslie Salt gave the similar language of the San Francisco Bay statute.

 We also reject the Commission's argument that Doerfler's violation of the Coastal Act should be deemed a continuing wrong, analogous to a nuisance, until remediation is accomplished.   The statutory language does not support this argument.²

 This case does not present the question, of great importance to lenders, of the liability of lenders for unlawful development performed after their deeds of trust are in place.   Similarly, we need not decide whether recording of a notice of violation would be effective against a later purchaser or grantee whose title (unlike that of respondents) derived entirely from a subsequent transaction.   Nor need we consider the implications of a successor owner's actual knowledge of unlawful development, because those are not the facts before us.   We have considered, and reject, the Commission's argument that a lender is liable under the Act for pre-loan violations if it makes a loan secured by coastal property without first inspecting the property for violations;  the statute cannot support this argument.   We also reject the Commission's argument that the lender's power, as beneficiary under the deed of trust, to compel its borrower to remedy violations of law relating to use or improvements, is a sufficient basis to impose statutory liability on the lender.

Whether respondents are maintaining a nuisance, and whether they are in violation of any other principle of federal, state, or local law, are issues not framed by the pleadings in this case, and therefore not before us on this appeal.

California's seacoast is a fragile treasure deserving of the utmost care.   (See §§ 30001–30007.5.)   The Legislature took care to specify that the provisions of the Coastal Act, and the remedies therein, should be liberally construed and are not exclusive.  (§§ 30005, 30009, 30800.)   Obviously, evasion of the Coastal Act by transfer of title to property to an innocent purchaser is a grave loophole in the statute.   The precise circumstances under which good public policy would dictate closing this loophole is a matter for legislative, not judicial, consideration.

Our ruling does not necessarily leave the public without remedy.   The Commission can enforce monetary remedies against Doerfler, Vista, and anyone else it can prove participated in the bulldozing.   It can get an injunction requiring the former owner to restore the property if the current owner will allow it or if a court will authorize it over the current owner's objection.   The Commission, the County, and the People may have effective remedies under principles other than the Coastal Act.

II.

The award of legal fees to five respondents under Code of Civil Procedure section 1021.5, however, cannot be sustained.

Section 1021.5 confers discretion on a trial court to award legal fees to a successful party in any action if (1) the action has resulted in the enforcement of an important right affecting the public interest, (2) a significant benefit has been conferred on either the general public or a large class of persons, (3) private enforcement of the right was necessary and appropriate, (4) the financial burden of private enforcement was such as to make the award appropriate, and (5) it would disserve the interests of justice to expect the successful party to use a portion of its monetary recovery to pay its legal fees.

There are well over 150 published cases on section 1021.5 and its judicial predecessor, the private attorney general exception to the American rule that litigants bear their own legal expenses.  (See generally Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 154 Cal.Rptr. 503, 593 P.2d 200.)

 Here, there was insufficient evidence that the financial burden on respondents was such as to make a fee award appropriate.   This criterion requires a showing that the cost of the claimant's legal victory transcended its personal interest.  (Feminist Women's Health Center v. Blythe (1995) 32 Cal.App.4th 1641, 1667, 39 Cal.Rptr.2d 189.)   The evidence showed that respondents' legal fees exceeded the cost of remediation, but it did not show the relationship of those fees to the cost or value of the unlawful work Doerfler had done, which is what respondents were litigating to preserve.   In addition, there was no showing that respondents' willingness to incur significant legal expenses was motivated by their desire to vindicate a public right or confer a public benefit, rather than by their intention to defend their own property interest (or by their belief that the state might be compelled to pay their attorneys).  (See Wang v. Division of Labor Standards Enforcement (1990) 219 Cal.App.3d 1152, 1161, 268 Cal.Rptr. 669 [no award where any public benefit is incidental to litigant's own financial interest in the litigation];  Austin v. Board of Retirement (1989) 209 Cal.App.3d 1528, 1535, 258 Cal.Rptr. 106 [same].)   Indeed, the detailed fee statements show considerable attention was devoted to the pursuit of cross-claims against the mortgage broker and appraiser and related work concerning insurance coverage for legal fees, which suggests that the true pecuniary interests implicated in the defense of the action were vindication of a mortgage broker and an appraiser accused of fraud or malpractice in connection with origination of the loan respondents made.

In addition, there is a paucity of awards to defendants in the reported cases.   We are aware of only four such cases:  County of San Luis Obispo v. Abalone Alliance (1986) 178 Cal.App.3d 848, 869, 223 Cal.Rptr. 846;  Wallace v. Consumers Cooperative of Berkeley, Inc. (1985) 170 Cal.App.3d 836, 216 Cal.Rptr. 649;  Hull v. Rossi (1993) 13 Cal.App.4th 1763, 17 Cal.Rptr.2d 457;  and City of Sacramento v. Drew (1989) 207 Cal.App.3d 1287, 255 Cal.Rptr. 704.  Abalone Alliance was a suit seeking to stop defendant's protests to construction of the Diablo Canyon nuclear plant.   Consumers Cooperative arose from the defendants' decision to test the legality of state minimum milk prices by violating the regulations and defending the ensuing enforcement action.  Hull v. Rossi was litigation between two opposing factions battling over a ballot measure advocating a water desalinization plant in Santa Barbara.  Drew was a bond validation proceeding won by an objecting taxpayer.   All four cases clearly involved public interest litigation by the defendants.   In contrast, it would be difficult to characterize the efforts of respondents in the present case as public interest litigation, even had respondents initiated it.   It must be remembered that the basis for section 1021.5 and its judicially-created predecessor doctrine is to authorize courts to award legal fees to litigants who successfully pursue public interest litigation.  (Woodland Hills Residents Assn., Inc. v. City Council, supra, 23 Cal.3d 917, 925, 154 Cal.Rptr. 503, 593 P.2d 200.)

The judgment is affirmed.   The postjudgment order awarding legal fees is reversed, with directions to deny legal fees.   Respondents Adamses and Duerksens to recover costs from appellant;  appellant and the remaining respondents to bear their own costs of appeal.

ORDER VACATING CERTIFICATION

With the addition of footnote 2, our opinion, filed November 7, 1995, no longer meets the standards for publication set forth in rule 976(b)(1) and (b)(3) of the California Rules of Court.   Accordingly, our certification that the opinion meets the standards for publication is vacated.  (See rule 976(c)(1).)

FOOTNOTES

FOOTNOTE.  

1.   The record fully dispels any implication that these transactions constituted a disguised cash sale of the property, or that the parties hoped to evade the remedial consequences of Doerfler's environmental piracy and thus divide the plunder amongst themselves.   If such had been the case, our analysis would undoubtedly be different.

2.   While this case was pending, the Legislature enacted section 30826 (now § 30811), which appears to create an additional remedy in certain cases of unpermitted development causing continuing resource damage.   The Commission did not argue this provision in the trial court or on this appeal, and we express no view on its past or future applicability to the property involved in this case.

BRETT KLEIN, Associate Justice.* FN* Judge of the Municipal Court for the Los Angeles Judicial District assigned by the Chairperson of the Judicial Council.

EPSTEIN, Acting P.J., and CHARLES S. VOGEL, J., concur.