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Court Bolsters Agricultural Land Preservation

In a decision bolstering farmland preservation, the First District Court of Appeal has ruled that Humboldt County can enforce updated land use regulations against a landowner whose original Williamson Act contract predates the regulations.

The court determined that unless they are cancelled, Williamson Act contracts renew every year and therefore are subject to newly adopted regulations for agricultural preserves. Thus, Humboldt County regulations approved in 1978 applied to the land in question, even though the original Williamson Act contract was signed in 1977.

The property owner argued that the 1978 regulations which increased the minimum parcel size for some agricultural preserve lands from 160 acres to 600 acres could not be enforced because the new parcel size restriction would be a unilateral change to the 1977 contract. The court rejected that argument.

"[A]s a legal matter, by renewing a Williamson Act contract on each anniversary date, the parties entered into a new contract each year," Justice Mark Simons wrote for the unanimous three-judge panel.

The California Farm Bureau Federation praised the ruling, which it said "strengthened and clarified" the Williamson Act. A ruling in the other direction would have converted the Williamson Act into a shield with which property owners could block the application of local plans and regulations, according to the federation.

The litigation achieved prominence in Humboldt County because of longstanding controversy over rural land use regulations and because the two sides combined had reportedly spent about $4 million in legal fees. The litigation has received statewide attention because the ultimate outcome could impact Williamson Act implementation elsewhere. About 16 million acres in California, or about half of all privately owned land, are covered by Williamson Act contracts. Under the act, the owner of agricultural land receives a substantial property tax break in exchange for a 10-year commitment not to develop the property. Williamson Act contracts automatically renew every year unless the county or the property owner opts for non-renewal, at which point property taxes gradually increase over 10 years.

In 1977, landowner Arthur Tooby signed a Williamson Act contract with Humboldt County covering 12,580 acres of his 13,700-acre ranch near Garberville. The following year, the county adopted new guidelines for land in the agricultural preserve. Among other things, the new regulations increased the minimum parcel size for Class B land from 160 acres to 600 acres to ensure agricultural viability. The Tooby Ranch lies in the Class B agricultural preserve.

In 2000, local developer Robert McKee and his Buck Mountain Ranch Limited Partnership purchased 13,340 acres of the ranch from the deceased Tooby's estate. Recognizing the existence of a number of patent parcels on the ranch, McKee soon began applying for lot line adjustments so that he could sell off ranchettes. According to the court, McKee has since sold about 25 parcels to third parties. All of the parcels are at least 160 acres but smaller than 600 acres apiece.

In December 2002, the county sued McKee and 47 third-party purchasers, arguing that the land divisions and sales violated the Williamson Act, the Subdivision Map Act, the Unfair Competition Act and posed a nuisance. The county sought to void the sales and halt future transfers.

Three years later, Humboldt County Superior Court Judge Bruce Watson ruled the county could not apply the 1978 guidelines because doing so would violate state and federal constitutional provisions regarding contracts. He also ruled against the county on nullifying parcel conveyances. In early 2007, after the county had dropped its map act claim, Judge Watson ruled that McKee had not violated the Williamson Act or the 1977 Tooby contract.

At the First District, McKee continued to maintain that the 1978 guidelines applied only to Williamson Act contracts consummated after 1978 and could not be applied retroactively to the 1977 Tooby contract. The county argued that the 1978 guidelines applied to all agricultural preserves, no matter when they were established. The court sided with the county, concluding that McKee's argument "would lead to an absurd result."

"The final provision of the 1978 guidelines rescinds the 1973 guidelines, rendering them void and inoperative," Simons wrote. "If the 1978 guidelines were intended to apply only to preserves established from 1979 onward, as McKee suggests, then the passage of the 1978 guidelines would have left the county with no operative regulations for preserves established before 1979." Such a result, Simons continued, would be contrary to the county's intent and state law.

After settling the question of the 1978 guidelines' enforceability, the court turned to the constitutional questions. McKee contended that permitting the county to incorporate the 1978 guidelines into the Williamson Act contract would amount to a unilateral amendment that is "unjust and inequitable."

However, the court ruled that under the Williamson Act, the parties enter into a new contract every year unless one side provides notice of non-renewal.

"Each year, a landowner bound by a Williamson Act contract has a choice: give timely notice of non-renewal, which preserves the current 10-year contract, or decline to give notice of non-renewal, which renews the contract for a new 10-year term. By choosing not to give notice of non-renewal, the landowner gains both the burdens and the benefits of a new 10-year contract," Simons wrote.

"Because the parties to the Tooby contract entered into a new 10-year contract on February 1, 1979, all applicable laws and ordinances then in existence, including the 1978 guidelines, became part of the Tooby contract," the court ruled. "In the 22 years after the adoption of the 1978 guidelines, Arthur Tooby and McKee collectively renewed the original contract at least 22 times. The 600-acre minimum parcel size for divisions of Class B preserves imposed by the 1978 guidelines applied to the subsequent divisions of the Tooby Preserve."

Not permitting counties to incorporate new regulations into Williamson Act contract renewals "would create substantial uncertainty, among both landowners and local governments, about what regulations apply to land under Williamson Act contracts," Simons wrote. "Land under contract could effectively be shielded from all subsequent efforts to regulate its use."

The appellate court did not decide whether to nullify the land divisions and transfers, instead directing the trial court to fashion an appropriate remedy. Three weeks after issuing the decision, the appellate court rejected McKee's request for a re-hearing, setting up a likely appeal to the state Supreme Court.

The Case:
County of Humboldt v. McKee, No. A117325, 08 C.D.O.S. 10837, 2008 DJDAR 12897. Filed August 15, 2008. Modified September 10, 2008 at 2008 DJDAR 14313.
The Lawyers:
For the county: Kevin Brodehl, Morgan, Miller, Blair, (925) 937-3600.
For McKee: David Blackwell, Allen, Matkins, Leck, Gamble, Mallory & Natsis, (925) 943-5551.
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