Judge Upholds Blocking Plan for Headlands : Development: Ruling nixes landowners’ suit seeking compensation, sustains voter measures opposing construction of $500-million resort project.

A Superior Court judge on Wednesday upheld a pair of voter-approved measures that blocked construction of a $500-million resort project on the Dana Point Headlands, one of the county’s last major undeveloped coastal properties.

Judge Marvin G. Weeks ruled there was no merit to the lawsuit seeking $3 million in damages from the city of Dana Point, filed by landowners Chandis Securities Co. and M.H. Sherman Co.

Dana Point Councilman William L. Ossenmacher, an outspoken opponent of the 121-acre project on the peninsula near Dana Point Harbor, hailed the ruling as a victory for the residents of the coastal city.

City voters last November voted to overturn the City Council’s action that would have allowed the landowners to develop the land.

“I think it’s great that democracy has prevailed,” Ossenmacher said. “It seemed like a frivolous lawsuit to begin with.”

Richard G. Duncan Jr., an attorney for the landowners, said no decision has been made on whether to appeal the ruling.

“We are disappointed by (the ruling) and we disagree with it, but we will simply have to see what occurs next,” Duncan said.

Dan T. Daniels, president of Newport Beach-based M.H. Sherman Co., one of the landowners, said he was undecided on whether to appeal Weeks’ ruling.

“We think the judge possibly erred. We will be evaluating what we should do next,” he said.

The landowners unsuccessfully contended that, because voters had prevented them from building on the land, their private property rights had been taken without just compensation in violation of the Fifth Amendment of the U.S. Constitution.

Ossenmacher said the landowners should propose a different project, one that city residents can support.

“This was a vote by our community that this project was not acceptable. That did not mean no project is acceptable,” Ossenmacher said.

Dana Point City Atty. Jerry Patterson said he had been concerned that the city would be held liable for illegally depriving landowners of their property rights, but cheered the judge’s ruling.

Weeks’ decision was the latest chapter in a long-running and bitter dispute over what should be built on the environmentally sensitive peninsula, home to the California gnatcatcher and Pacific pocket mouse. In April, 1994, after months of debate, the landowners had won city approval for a plan that would include a 400-room hotel and a maximum of 370 homes on the site.

But the council decision sparked a petition campaign that placed two initiatives--called Measures C and D--on the November ballot that allowed voters to approve or reject the council’s action. Two referendums appeared on the ballot because the council had approved the development plan in two stages.

The plan’s opponents argued that the development was too large and needed more open space, while supporters said it would be a financial boost to the city.

A month after the voters rejected the project, the landowners sued, maintaining that the measures were “invalid because they are arbitrary and discriminatory and are in excess of the police power of the city.” Chandis Securities and M.H. Sherman Co., which have owned the property since the 1940s, said in the lawsuit that more than $2.6 million has been spent since 1991 on plans for the Headlands.

One of the companies, Chandis Securities, a firm that oversees the financial holdings of the Chandler family, is a major stockholder in Times Mirror Co., publisher of the Los Angeles Times.

Mayor Judy Curreri said she hopes the community can now heal the wounds of the dispute over the Headlands and decide what should be built on the property.

“I think it’s time to take a new look at the area,” Curreri said. “The community really needs to come together and, as a community, make a decision on this. . . . Let’s put the divisiveness over this behind us.”