By Kate J. Hart and Janell M. Bogue
In County of Humboldt v. McKee (August 15, 2008) 2008 Cal.App.Lexis 1248, the Court of Appeal, First Appellate District examined the state’s Williamson Act. The court determined that Humboldt County (“County”) Williamson Act guidelines, adopted in 1978 (the “1978 guidelines”), governed a Williamson Act contract signed in 1977. This holding meant that the new owners, Buck Mountain Ranch Limited Partnership, and the McKee’s, (collectively “Mckee”) of Tooby Ranch, consisting of over 10,000 acres, violated the Williamson Act by dividing it into parcels of 160 acres in size. This size of parcel was allowed under the County’s previous guidelines (the “1973 guidelines”).
The Williamson Act (Gov. Code, § 51200 et seq.) (the “WA”) was enacted in 1965 in an effort to preserve agricultural land. The WA provides property tax breaks for landowners who enter into contracts restricting the land to agricultural or compatible uses. The contracts have an initial term of ten years and are automatically renewed every year, unless the landowner opts to submit a notice of nonrenewal, which begins to wind the contract down. WA contracts run with the land and remain in effect even if the property is sold.
In this case, Arthur Tooby and the County entered into a WA contract in February 1977. The 1973 guidelines provided that land under contract could not be divided into parcels of less than 160 acres. Subsequent to the Tooby contract, the County adopted the 1978 guidelines which changed the minimum parcel size to 600 acres. In 2000, the Tooby Ranch was sold to McKee, who created 44 parcels. Some of the resulting parcels were sold to third parties and McKee retained control of roughly 3,000 acres. Although none of the new parcels were smaller than 160 acres, many were smaller than 600 acres in size. McKee did not file a notice of non-renewal of the contract and he continued to receive the tax breaks under the WA. The County filed suit against McKee for breach of the contract in December 2002. The trial court found that McKee did not violate the Williamson Act, and the County appealed.
First, the appellate court held that the 1978 guidelines, upon adoption, were intended to apply to all contracts, even those previously enacted. The County pointed out that the 1973 guidelines were rescinded upon adoption of the 1978 guidelines. If the 1978 guidelines were not intended to apply to the pre-1978 contracts, then there would be no valid guidelines at all. The court accepted this reasoning, despite McKee’s argument that the County itself advised him in letters that 160 acre parcel sizes were permissible. The court said that the letters did not reference either version of the guidelines and they instead directed McKee to the County’s zoning code. The court said, “A county’s agricultural preserve guidelines are separate from, and may be more restrictive than, it’s zoning regulations.” McKee asserted that he relied upon the County’s letters, but the court held that he could not demonstrate that this was an extraordinary case which justified application of the very narrow governmental estoppel doctrine.
Then, the court held that upon renewal of the WA contract, the 1978 guidelines were incorporated into the contract. The court said:
Each year, a landowner bound by a Williamson Act contract has a choice: give timely notice of nonrenewal, which preserves the current 10-year contract, or decline to give notice of nonrenewal, which renews the contract for a new 10-year term. By choosing not to give notice of nonrenewal, the landowner gains both the burdens and the benefits of a new 10-year contract. The landowner remains burdened by restrictions on the use of the contracted land for the balance of the new 10-year term, but also benefits from the preferential tax assessment guaranteed for enforceably restricted agricultural land. This preferential tax assessment is not available once the landowner gives notice of nonrenewal: upon notice of nonrenewal, taxes gradually return to the level of taxes on comparable non-restricted property. Thus, the decision not to give a notice of nonrenewal binds the landowner to a new 10-year contract.
When the contract was automatically renewed in 1979, all laws then in effect (including the 1978 guidelines) were made part of the new contract. If either of the landowners, Tooby or McKee, objected to the new rules, the court reasoned that they could have submitted notice of non-renewal. This would have begun the winding down of the WA contract and the landowner would stop receiving the preferential tax treatment. However, without non-renewal, the contract was still in force.
Thus, the court held that the 1978 guidelines were incorporated into the contract upon renewal and the division of parcels smaller than 600 acres was a breach of the Williamson Act. A petition for rehearing was subsequently filed on September 2, 2008, by defendants, Buck Mountain Ranch.
A landowner whose land is covered by a Williamson Act contract should carefully examine the applicable County guidelines because the appellate court made it clear that even later adopted rules may apply to all previously entered into contracts.
We note that the facts of this case are unique given that the County permitted the subdivision of the property and then later argued non-compliance with the Williamson Act. The point, however, remains as to other counties that later adopted guidelines may apply to pre-existing contracts.
Kate Hart is a senior associate with Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, environmental and planning issues contact Abbott & Kindermann at (916) 456-9595. Janell Bogue assisted with this article.
The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.