In Zack’s, Inc. v. City of Sausalito, (— Cal.Rptr.3d —, 2008 WL 3272048, Cal.App. 1 Dist., Aug. 11, 2008), a California Court of Appeal considered whether a city can lawfully lease a portion of dedicated public street to a private party, thereby impairing private and public easements, where the street is situated on tidelands granted to the city by the California Legislature and is held by the city according to the common law public trust relating to tidelands. If so, does the power granted the city by the Legislature permit it to vacate or close the leased portion of the street without complying with the general statutes applicable to the vacating or closing of public streets? The Court of Appeal concluded that a city could lease a portion of the dedicated land subject to certain restrictions; however, if the city wanted to vacate or close the leased portion of the street it would have to comply with the general statutes.
Zack’s, Inc. owns property with a “large warehouse style building” in the City of Sausalito (“City”) at the corners of Locust Street and Humboldt Avenue. The two streets intersect Zack’s property at the northwest corner, with Locust Street boarding the northern boundary, and Humboldt Avenue bordering the western boundary. To the south and east of Zack’s property is Richardson Bay, a portion of the greater San Francisco Bay. Humboldt Avenue terminates at the edge of Richardson Bay near the southwestern boarder of Zack’s property. Zack’s property and the streets it abuts are on reclaimed tidelands that were originally held by the state in trust for the public purpose of navigation, commerce, and fishery. In a 1957 statute, the California Legislature transferred to the City the state’s rights in the land.
In 1979, the City leased to Edgewater Yacht Sales (“Edgewater”) a portion of Humboldt Avenue that boarders Zack’s property, up to the waters of Richardson Bay that abut the street. The lease provided “for the storage of boats in the water premises and storage of boats on trailers in the land premises.” Zach’s purchased its property in 1998 and in 1999 attempted to convert the warehouse into a restaurant. However, Zack’s ran into difficulty because the leasehold granted to Edgewater eliminated parking, blocked easy access to Zack’s building, and obstructed visibility of the building from the City’s main thoroughfare, one block away.
In 2005, when Zack’s development proposals were rejected by the City, Zack’s filed a complaint for nuisance and inverse condemnation. Twice the City filed motions for summary judgment, and the trial court granted both. The first motion for summary judgment was granted on the theory that the City’s lease, operating under authority conferred by the Legislature, could not be a nuisance as a matter of law. The trial court granted Zack’s leave to amend. The second motion for summary judgment was granted because the trial court found Zack’s claims were barred by the statutes of limitation. Zack’s appealed the trial court’s ruling.
The Court of Appeal considered whether “(1) the leasehold [the] City granted Edgewater was expressly authorized by the 1957 statute; and (2) [whether] that statute relieved [the] City of the need to comply with general statutes relating to street closure.”
The Court of Appeal then discussed the common law public trust in relation to tidelands because the land at issue in the case was public land held by the City in trust for the benefit of the public. When California was admitted into the union, it gained ownership of all the tidelands and inland waters within its borders. This ownership is held in trust for the public purposes of navigation and fishery. The court said that it should “look with considerable skepticism upon” any action by the state to restrict this public use, or to subvert public use to the interests of private parties.
Next, the Court of Appeal explained the California Legislature delegated the state’s trust power to the City by the 1957 statute. The 1957 statute provided the City may lease the land delegated to it by the Legislature, so long as the purpose of any lease is consistent with the original prescribed purpose as held by California. The 1957 statute does not explicitly provide for the use employed by Edgewater, however, the court found the storage of boats is impliedly consistent with the purpose of the statute.
Zack’s first argued the City does not have the power under the trust or the 1957 statute to shift the use of the tideland once it has already been dedicated as a public street and property has been sold abutting the street on the basis of that dedication. The Court of Appeal was not persuaded by Zack’s argument because the City does have the authority to change the use, but change must be in the public interest. The court explained the City, as trustee, is bound to serve the public interest and may necessarily require a trustee, like the City, to change the allowed use of the tideland as public interest changes. The court reiterated that its scrutiny would be greater if the City’s new use was more restrictive, or if the public interest were subverted to the interests of private parties.
Zack’s also argued the 1957 statute did not give the City the power to vacate or close a tideland street without following the requirements of general statutes relating to the vacation and closure of streets. The Court of Appeal agreed with Zack’s argument, and began by pointing out traffic control by local and municipal governments is preempted by state law. California State law requires notice, a hearing, and a finding of public necessity; or, in the alternative a resolution of vacation subject to statutory requirements.
The City conceded it did not follow any of the required statutory provisions for the vacation or closure of public streets, but nevertheless argued the grant of the lease to Edgewater was “expressly authorized by the 1957 statute . . ..” As a result, the City argued the lease to Edgewater was “maintained under the express authority of a statute” and cannot “be deemed a nuisance.” The Court of Appeal disagreed and said “a special statute granting tidelands . . . [does not] ha[ve] the effect of empowering a trustee to administer the lands conveyed free from constraints of facially applicable general land use statutes.” In other words, the power delegated to the City by the state as trustee over particular tidelands is not absolute, and works in conjunction with other statutory regulations. Consequently, because the City failed to follow the general land use statutes in connection with the lease, the leasehold “is not maintained under the express authority of an applicable statute and can therefore be deemed a nuisance.”
The Court of Appeal then discussed Zack’s easement interest in Humboldt Avenue. The court said property owners have “certain private easements in the street” that run adjacent to the property. Specifically, property owners have the right to enter and exit to the street, to receive light from the space occupied by the street, and to display signs visible from the street to attract business to the property. The court found the lease to Edgewater impaired Zack’s easement interest and was therefore both a private and public nuisance. The public nuisance finding was relevant because public nuisance cannot be time-barred by a statute of limitations.
In conclusion, the Court of Appeal stated Zack’s easement rights in Humboldt Avenue were not in conflict with the interests of the public. Therefore, the court said the grants for summary judgment by the trial court were in error because, “a leasehold interfering with public and private rights to use a tidelands street” may be found to be a nuisance, and can be “enjoined for the failure of the trustee to comply with” general land use statutes.