$91 million inverse condemnation award thrown out; court says SD's airport proposal, traffic didn't damage property rights; Legaldigest

One of the largest takings awards in California history has been thrown out by a state appellate court, which ruled that preliminary airport planning and traffic circulation changes by the City of San Diego did not amount to a taking of a developer's property.

In 2001, a jury awarded the developer of a business park just north of the Mexico border $94.5 million for inverse condemnation and forthe city's violation of a 1986 development agreement. A judge ordered a new trial on the development agreement contentions, but the awardof $65.3 million--plus $26.4 million in pre-judgment interest--to developer Roque de la Fuente II for inverse condemnation stood. By the time of the Fourth District's decision, interest had boosted the award to more than $120 million.

The jury awarded damages after San Diego County Superior Court Judge Vincent DiFiglia accepted de la Fuente's argument that planning for an international airport in the area of the business park, and the diversion of truck traffic to a new border crossing amounted to a taking of private property because they impacted development of the business park.

However, the Fourth District Court of Appeal ruled that because airport planning did not affect de la Fuente more than any other property owner, there was no taking. The court also found that, although truck traffic was thick for a period, there was always road access to the park and, therefore, there was no taking. The Fourth District alsoupheld Orange County Superior Court Judge Raymond Ikola's decision granting the city a new trial on the alleged breach of a development agreement.

Vincent Bartolotta Jr., de la Fuente's attorney, said he would askthe state Supreme Court to take the case. The Fourth District's decision "undermines the viability of inverse condemnation in California," he said.

The de la Fuente family and local government officials have battled for years over real estate development in the Otay Mesa section of San Diego, where Roque de la Fuente Sr., his wife and children have owned thousands of acres. (The senior de la Fuente died in 2002. His son, Roque II, runs the family development company.) In 1986, one yearafter the city annexed the territory, the city entered into a development agreement with the family's 260-acre Border Business Park, Inc.Under the agreement, the developer agreed to pay certain fees and bear the cost of various public improvements. In exchange, the city agreed not to hold the developer to certain fee and regulation revisions. The city also agreed to finance improvements with municipal bonds that the developer would pay off.

However, there had been talk by the city and the San Diego Association of Governments (SANDAG) of converting the small Brown Field airport at Otay Mesa into an international airport since at least 1981. In 1989, SANDAG identified Otay Mesa and Miramar Marine Corps Air Station as potential new airport sites, and in 1991 the city named Otay Mesa the preferred option. The city's plan called for a "twin port" that used both Brown Field north of the border and Rodriquez Field in Tijuana. In 1993, however, the city abandoned the plan because Mexico was not interested.

That same year, the federal government closed the San Ysidro border crossing to commercial truck traffic. Instead, trucks had to use a new border crossing in Otay Mesa. At first, truck traffic bypassed the business park. But two years later, the city re-routed traffic for about nine months in a way that inundated the business park with border-crossing trucks.

Meanwhile, development at the business park had slowed, and de la Fuente missed some bond debt payments. The city foreclosed on 35 parcels, although de la Fuente eventually regained most of the property.