Fate of Wild Cherry Canyon lands remains in limbo as SLO County judge weighs arguments
The fate of the Wild Cherry Canyon land — whether some of it may be developed into homes or it may be completely saved for conservation purposes — remains in limbo after a San Luis Obispo County Superior Court judge heard arguments in court on Thursday morning.
Judge Ginger Garrett said she may need a few weeks to consider all of the facts of the case before issuing a ruling on whether the sublease for Wild Cherry Canyon remains with Pacho Limited and San Luis Bay Limited partnerships, who are largely owned by HomeFed Corp., or, in essense, is handed back over to Eureka Energy Co., a subsidiary of PG&E.
Wild Cherry Canyon consists of 2,400 acres of largely untouched oak woodlands just northeast of Avila Beach and near Diablo Canyon nuclear power plant. It’s considered one part of the 12,000 acres of Diablo Lands that surround the power plant.
At the heart of the matter is the legal question around whether the lease is valid under California Civil Code 717, which says that a “lease or grant of land for agricultural ... purposes” is not valid if it is for a period longer than 51 years.
The lease held by the HomeFed partnerships for the Wild Cherry Canyon lands was drawn up for 99 years in 1968, meaning it was first supposed to expire in 2067, with the option to renew the lease for another 99 years, putting the final expiration date at 2166.
In 2018, HomeFed asked Eureka Energy if it could exercise its option to renew the lease for the additional 99 years. Eureka Energy denied that request, citing the 51-year limit set forth in the civil code, which indicated that the lease would instead expire on Dec. 26, 2019.
HomeFed’s partnerships filed a civil lawsuit against Eureka Energy in March 2019 asking for a judge to determine whether the lease is indeed subject to the 51-year limitation, or the 99-year terms set forth by the original agreement.
Attorneys for both parties in Thursday’s hearing focused their arguments on one central question: What is the purpose of the lease?
Basil Shiber, an attorney representing Eureka Energy, said that it comes down to the zoning and use of the land.
“One of the facts that is undisputed is that the property is zoned agricultural. ... That’s the determination that the county has made,” Shiber said during the court hearing Thursday. “It’s also undisputed that the property has been used for grazing — and in plaintiff’s view, only grazing — for over a century.”
Additionally, the lease itself says that for any use other than for agricultural purposes, the tenant must pay an additional fee.
“It’s undisputed that those incremental additional amounts have never been paid over the last 50-plus years of the lease,” Shiber said during the court hearing. “There’s never been any payment for any type of non-ag use.”
Shiber said that whether the 51-year lease limit is valid for the Wild Cherry Canyon property comes down to what the land is actually used for and zoned as, not the purpose of the lease or intent of the lessees.
Daniel Murphy, an attorney for the partnerships largely owned by HomeFed — the company that plans to possibly develop at least 10% of the Wild Cherry Canyon property — argued against Shiber’s reading of the statute and said that the land has not always been zoned for agricultural use.
“We believe that we proved that, in fact, at the time (in 1968), the lease was zoned ‘U,’ which permitted any lawful purpose,” Murphy said of the original lease that was drawn up in 1968.
Shiber argued against that point, saying that the person from the county who had told attorneys that the Wild Cherry Canyon property may have been undesignated sometime in the past was guessing, and it was merely speculation.
“The best information that we have from the county, in terms of the designation, is that this land has always been designated for ag use,” Shiber said during the court hearing. “Now, is it possible that at some point in the past, it was undesignated? Yes, obviously, because zoning was only applied at some point in time, but the only zoning that’s ever been applied to this property is agricultural zoning and no other.”
During his argument, Murphy noted that the purpose of the current use of the Wild Cherry Canyon lands is not for agricultural purposes.
“There’s no question that there’s been cattle grazing on the property,” he said in the hearing. “The purpose of that cattle grazing, as we have pointed out, is plainly ancillary to any other use of the property. The cattle grazing is simply to avoid the wildfire risk, which is huge in that area.”
The true purpose of the property from the lessee’s perspective, Murphy said, is for development.
“Our evidence is crystal clear that the purpose of this lease from inception has always been development,” he said.
It may come down to a grammatical evaluation of Civil Code 717, both attorneys said, which says in full that “No lease or grant of land for agricultural or horticultural purposes for a longer period than 51 years, in which shall be reserved any rent or service of any kind, shall be valid.”
Shiber, on one hand, said that the Legislature intended the phrase “agricultural ... purposes” to modify the term “land,” rather than the phrase “lease or grant of land.”
That would mean that the 51-year lease term limit would apply to what the land is used for — cattle grazing, which is an agricultural use — not what the lease says it could be used for — HomeFed intends to develop the property for residential use.
Murphy said during the court hearing that Shiber’s argument “is one of the most strained statutory interpretations I’ve ever heard” because in 1895 the civil code was amended to refer not to “agricultural land,” but to “leases or grants of land for an agricultural purpose.”
The attorneys for the HomeFed partnerships asked for the case to go to trial so that the facts of the lease may be tried in full, but attorneys for Eureka Energy argued that the case doesn’t have to go to trial.
A ruling from Judge Garrett on the matter may come in the next few weeks.
