J. Arthur Props., II, LLC v. City of San JoseJ. Arthur Props., II, LLC v. City of San Jose
Plaintiffs
A. REGULATIONS IN EFFECT WHEN THE COLLECTIVE OPENED
Plaintiffs' collective opened in 2010. At that time, the Municipal Code did not list medical marijuana collectives or any other marijuana-specific uses in the table of permitted uses. (The Municipal Code had formerly listed medical marijuana dispensaries as а use for which an administrative permit could be obtained, but all references to marijuana-related uses were removed from the Municipal Code in 2001.) The Municipal Code specified that "uses not listed on [the applicable table] are not Permitted." That table did list "medical offices" as a permitted use in the Commercial Office zone.
B. MARIJUANA BUSINESS TAX
After the collective opened, voters passed a local measure adding a marijuana business tax to the Muniсipal Code. The tax applies to anyone "engaging in marijuana business" within the City. The Municipal Code states that the marijuana business tax was "enacted solely to raise revenue for municipal purposes and [was] not intended for regulation."
Businesses are required to obtain a business tax certificate from the City. The Municipal Code states that the certificate tax and marijuana business tax
C. ZONING AMENDMENTS
The Municipal Code was amended in 2011 specifically to regulate medical marijuana collectives, but that regulatory scheme was suspended almost immediately due to a referendum petition challenging the amendments. The Municipal Code was amended again in 2014 specifically to regulate medical marijuana. Under the 2014 amendments, "medical marijuana collective" is nоt listed as a permissible use in the Commercial Office district. It is, however,
D. COMPLIANCE ORDER AND ADMINISTRATIVE PROCEEDINGS
Plaintiffs received a compliance order in 2014 stating that a medical marijuana collective "was never an allowed use in the CO Zoning District." The order asserted that plaintiffs' collective "is in violation of the [Municipal Code] and is not allowed." Plaintiffs disputed the compliance order by requesting a Director's Hearing conducted by a City hearing officer. At that hearing, plaintiffs argued their collective was a legal nonconforming use because it met the definition of a medical office, which was a permissible use when the collective opened. A deputy city attorney argued that the collective did not meet the Municipal Code definition of a medical office. He stated that the "property was a priority that's been recognized by the City and the City Council, as there had been prior directions to close medical marijuana collectives from the City Council, which have a zero lot line or abut a ... property with a residential use." The hearing officer upheld the compliance order, and plaintiffs appealed to the City's Appeals Hearing Board.
E. TRIAL COURT WRIT PROCEEDINGS
Plaintiffs petitioned the trial court for a writ of administrative mandate ( Code Civ. Proc., § 1094.5 ), arguing that the collective was a legal nоnconforming use because it met the definition of a medical office and that the City should be estopped from enforcing the Municipal Code because they collected taxes from plaintiffs. Plaintiffs appeal from the trial court's order denying their mandate petition.
II. DISCUSSION
A. LEGAL NONCONFORMING USE
Plaintiffs argue that the collective is a legal nonconforming use because it is a medical office, a use that has been allowed in the Commercial Office zoning district since the сollective opened in 2010. The Municipal Code defines medical office as "offices of doctors, dentists, chiropractors, physical therapists, acupuncturists, optometrists and other similar health related occupations, where patients visit on a daily basis." The Municipal Code defines a legal nonconforming use as: "Any lawful use of land or structure, which ceases to conform
The interpretation and application of the Municipal Code's definition of "medical office" is a question of law that we review de novo. ( City of Monterey v. Carrnshimba (2013)
Though we independently judge the text of the Municipal Code, we give appropriate respect to a government entity's interpretation of its own laws. ( Yamaha Corp. of America v. State Bd. of Equalization (1998)
2. Municipal Code Definition of Medical Office
Plaintiffs argue that a medical marijuana collective is a medical office because it is a health-related occupation. They note that the term medical generally means something curative or related to healing, and they cite Health and Safety Code section 11362.5, subdivision (b)(1)(A), which states that one purpose of the Compassionate Use Act of 1996 is to "ensure that seriously ill Californians have the right to obtain and use marijuana fоr medical purposes
The City argues that all of the specifically enumerated professions in the Municipal Code definition of medical office "have in common the fact that they are physicians or similar professions and that they
Though the definition at issue is reasonably susceptible of both proffered interpretations, we agree with the City that a medical marijuana collective is not a "medical office" under the Municipal Code. Because a medical marijuana collective does not fall within any of the specifically listed occupations (i.e., doctors, dentists, chiropractors, physical therapists, acupuncturists, or optometrists), a collective would have to be a "similar health rеlated occupation" to qualify as a medical office. Applying the principle of ejusdem generis , the phrase "similar health related occupations" refers to occupations of the same nature or class as the listed occupations. ( Arias , supra ,
Plaintiffs argue that we should not defer to the City's interpretation because the "terms 'medical office' and 'other similar health related occupations' are not technical, obscure or complex." But given that medical marijuana collectives are unique entities because marijuana remains illegal for most purposes under federal law, whether such a land use is authorized by a catchall provision in a local zoning classification is intertwined with issues of fact, policy, and discretion. (See Yamaha , supra ,
Further support for deference comes from evidence suggesting the City consistently interpreted the medical office category to exclude medical marijuana collectives. A City inspector informed the collective's owner the year it opened that the location of the collective "may not qualify due to the residential use located next door." The City argued (both orally during the
Anticipating the City's argument that a medical marijuana collective is not a medical office becausе collectives are not regulated by a state agency with authority to license and discipline them, plaintiffs note that starting in 2016 collectives are now licensed and regulated under the Business and Professions Code. (See Stats. 2016, ch. 32, § 6, p. 1240; see also Bus. & Prof. Code, § 26000 et seq. [amended by Stats. 2017, ch. 27, § 3, to replace the 2016 regulatory scheme].) But having determined that a medical marijuana collective is not a medical office under the Municipal Code, the fact that сollectives are now regulated under state law does not persuade us otherwise.
Giving due deference to the City's interpretation, we conclude that the medical office use category in the Municipal Code does not include medical marijuana collectives. Because plaintiffs' collective was not a permitted use when it opened, it cannot be a legal nonconforming use.
B. ESTOPPEL
Plaintiffs contend that even if the collective is not a legal nonconforming use, the City should be equitably estopped from enforcing the Municipal
1. Standard of Review
To trigger the doctrine of equitable estoppel, plaintiffs must show that: (1) the City knew that medical marijuana collectives were an impermissible use; (2) the City intended, by delaying enforcement and cоllecting marijuana business taxes, to induce plaintiffs into operating a medical marijuana collective (or acted in a manner entitling plaintiffs to perceive such an intent); (3) plaintiffs did not know that medical marijuana collectives were unauthorized; (4) plaintiffs detrimentally relied on the City's conduct; and (5) the injustice that would result from a failure to estop the City is so great that it outweighs the effect the estoppel would have on public policy or the public interest. (See Feduniak v. California Coastal Com. (2007)
2. Reliance on Delayed Enforcement Was Not Reasonable
Plaintiffs argue there is no factual support for the City's claim that it consistently interpreted the Municipal Code to exclude medical marijuana collectives, and contend that the City's delayed enforcеment induced detrimental reliance by plaintiffs. As we have discussed, evidence that the City consistently interpreted the Municipal Code to exclude medical marijuana collectives includes a statement by an inspector directly to the collective's
Although it took the City multiple years to issue a compliance order, "the mere failure to enforce the law, without more, will not estop the government from subsequently enforcing it." ( Feduniak , supra ,
Plaintiffs received notice from a City inspector that the collective might not be a permissible land use, and they point to no affirmative representations by the City to the contrary. (See Steinhart v. County of Los Angeles (2010)
3. Reliance on Payment of Taxes was Not Reasonable
Plaintiffs argue that by collecting a marijuana business tax and requiring a business tax certificate, the City induced reasonable reliance by plaintiffs. The inescapable flaw in plaintiffs' argument is that express disclaimers in the Municipal Code and on the business tax certificate unambiguously state that collection of taxes is not authorization to operate a medical marijuana collective. Two pаssages in the Municipal Code state that the marijuana business tax was enacted to raise revenue and was not intended to be a regulatory permit fee. Another Municipal Code section, which we have previously quoted, is entitled "Payment of tax does not authorize unlawful business." And the business tax certificate issued to plaintiffs states that it is "not an endorsement, nor a certificate of compliance with other ordinances or laws, nor an assurance that thе proposed use is in conformance with the City's Building/Fire/Zoning regulations."
Plaintiffs argue the "prolix phrase in a 13-page tax ordinance" was "wholly inadequate" to inform them that they were operating illegally. But plaintiffs had constructive knowledge (if not actual knowledge) of the disclaimers. They received business tax certificates directly from the City, and the marijuana business tax disclaimers were in the publicly available Municipal Code, easily found using reasonable cаre or diligence. ( John B. v. Superior Court (2006)
4. Balancing Estoppel and the Public Interest
Estoppel will be applied "in the land use context in only ' "the most extraordinary case wherе the injustice is great and the precedent set by the estoppel is narrow." ' " ( Schafer v. City of Los Angeles (2015)
Plaintiffs have not demonstrated injustice here. There is no evidence that plaintiff J. Arthur Properties, II, LLC will be unable to rent the space formerly occupied by the cоllective to a different tenant. And plaintiff SV Care did not present evidence showing it will be unable to open a medical marijuana collective at another location. At most, plaintiffs would experience economic hardships in finding a new tenant and relocating the collective. As Schafer noted, courts have found no equitable estoppel against government entities in the face of much more significant economic hardships. ( Id. at pp. 1264-1265,
Against plaintiffs' minimal showing of hardship we must weigh the effect estoppel would have on public policy and the public interest. Public policy favors eliminating nonconforming uses. ( Feduniak , supra ,
The trial court's decision denying the petition for writ of mandate is affirmed. The City is entitled to its costs on appeal.
WE CONCUR:
Elia, Acting P.J.
Premo, J.
Notes
Plaintiff J. Arthur Properties, II, LLC owns the subject property with another owner who is not a party to this appeal. Plaintiff SV Care owned the medical marijuana collective at issue with an individual who is not a party to this appeal.
There is no judgment in the record. As neither party disputes that the order denying the petition completely disposed of the matter, we exercise our discretion to treat the trial court's order as appealable. (See Alan v. American Honda Motor Co., Inc. (2007)
In finding the City has consistently interpreted its Municipal Code to exclude medical marijuana collectives from the medical office use, we do not rely on exhibits four and five to the City's request for judicial noticе. Those exhibits are complaints filed against the City in superior court by other medical marijuana collectives, along with attachments that appear to be compliance orders issued by the City. They were not provided to the Appeals Hearing Board or to the trial court. We granted judicial notice because they are court records. (Evid. Code, § 452, subd. (d).) But in taking judicial notice of court records, we do not take notice of the truth of any matters stated therein. (Heritage Pacific Financial, LLC v. Monroy (2013)