Justices Refuse to Hear Appeal on Headlands

City officials were jubilant Monday after the state Supreme Court refused to hear an appeal from developers seeking to put a $500-million resort and housing complex on the environmentally sensitive Dana Point Headlands.

The action leaves intact a recent Court of Appeal ruling that essentially blocked the current development plan while upholding the developers’ right to be compensated unless some alternative is eventually approved.

“It’s good news,” said Harold Bridges, the city’s lead attorney in the case.

Edward Knight, Dana Point’s community development director, said the city and the developer now must try again to reach agreement on how the land will be used.

“The objective,” Knight said, “is to try and understand what the community wants and what the property owner can live with.”

Michael M. Berger, an attorney for the property owners, said Monday’s action “means the [court] case is over. But the property owners’ dispute with the city is continuing. They still need to develop the land, and at the moment they are making every effort to do that.”

The land is owned by M.H. Sherman Co. and Chandis Securities Co., a firm that oversees the financial holdings of the Chandler family, a major stockholder in Times Mirror Co., which publishes the Los Angeles Times.

While the development dispute goes back decades, it came to a head in April 1994, when the City Council unanimously approved scaled-down plans for a 400-room hotel, a commercial center and up to 370 homes.

The council’s action sparked an uproar in the community, where many residents thought the development would be too large for the 117-acre property on the bluffs at the west end of Dana Point Harbor.

Opponents of the plan put two referendums to rescind the council vote on the November 1994 ballot, and the measures won easily. The landowners then sued the city, claiming that the referendums were unconstitutional because the owners had been prevented from developing their property.

A Superior Court judge upheld the two referendums, and his decision was upheld by an appellate court. It was that ruling that the Supreme Court let stand.

Although the courts upheld the referendum, they warned that the property owners have a right to use their land, and that the city must either allow some development in the future or be ready to pay something to the landowners.

Councilwoman Karen Lloreda, who was on the council that approved the plan, voiced concern Monday over the issue of compensation.

“The city now finds itself in the position of having to grant the property owner zoning and land use,” Lloreda said. “The courts have made it very clear that you can’t deny an owner the right to develop and use his land.”

The issue could come before the City Council as early as late April or early May, Knight said.

Until this point, the Chandis lawsuit had cast a shadow over future planning efforts in the city. Bridges said that a court decision in the developers’ favor would have required the city to allow the development and cost the city millions of dollars.

Not only did Chandis and M.H. Sherman seek reimbursement of $3 million spent processing the development plan, plus attorneys’ fees, they also sought to hold the city responsible for inverse condemnation, which could have forced the city to pay compensation, Bridges said.

One of the biggest hurdles facing the city now, however, is of a political nature. After the referendums passed, the most recent City Council election resulted in a 3-2 council majority favoring slow growth, and it is that majority that now will oversee negotiations with the developer.

“As far as the developers are concerned,” Lloreda said, “They already told us, if we take one foot out of line, they’re going to sue us again.”