Date: 08-06-2020

Case Style:

Case Number: H045387

Judge: Grover, J.

Court: California Court of Appeals Fourth Appellate District, Division Three on appeal from the Superior Court, County of Orange

Plaintiff's Attorney: Andrew F. Pierce

Defendant's Attorney: Jordan Sheinbaum

Description: Santa Cruz County law enforcement officers seized more than 2,000 marijuana
plants from a medical marijuana dispensary for violating a local ordinance restricting
cannabis cultivation. When the dispensary sued to recover the marijuana, the county
asserted it had no obligation to return the plants since the dispensary violated the
ordinance. The trial court agreed and sustained the county’s demurrer without leave to
amend. We will reverse the judgment. A government entity does not have to return
seized property if the property itself is illegal. But the ordinance here ultimately
regulates land use within the county; it does not (nor could it) render illegal a substance
that is legal under state law. For that reason, the causes of action seeking return of
property survive demurrer.
I. BACKGROUND
We take the facts from the operative first amended complaint. Plaintiff Granny
Purps, Inc. operates a medical marijuana dispensary in Santa Cruz County that grows and
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provides medical marijuana to its 20,000 members. It does so in compliance with state
laws governing the production and distribution of marijuana for medical purposes.
The County of Santa Cruz restricts cannabis cultivation. A local ordinance
prohibits any medical cannabis operation from cultivating more than 99 plants, while
plaintiff’s dispensary was growing thousands of marijuana plants. As a result, law
enforcement officers from the county sheriff’s office went to the dispensary in June 2015
and seized about 1,800 plants. The county also issued plaintiff a notice of ordinance
violation. Several months later, law enforcement officers again went to the dispensary
and took about 400 more marijuana plants.
Plaintiff sued the county and two sheriff's deputies in July 2016. The complaint
asserted claims for monetary damages, alleging causes of action for conversion, trespass,
and inverse condemnation. Plaintiff also sought an order requiring the county to return
the seized cannabis plants, by way of a writ of mandate, injunctive relief, and a cause of
action for specific recovery of property. Plaintiff also requested a judgment declaring
that the county cannot lawfully seize cannabis plants from a dispensary operating in
compliance with state medical marijuana laws.
The county demurred to the complaint on the grounds that it failed to state a valid
cause of action and the claims were time barred. The trial court sustained the demurrer
without leave to amend and entered judgment for defendants.
II. DISCUSSION
The county argues the demurrer was properly sustained for two primary reasons:
the claims seeking return of property cannot succeed because plaintiff was in violation of
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the ordinance restricting cannabis cultivation; and the claims for damages are barred by
the statute of limitations for suits against a government entity. Our review of a decision
sustaining a demurrer is de novo. (Martin v. Bridgeport Community Assn., Inc. (2009)
173 Cal.App.4th 1024, 1031.) We independently review the complaint, assume its
factual allegations are true, and determine whether it states a cause of action under any
legal theory. (Ibid.)
A. CLAIMS FOR RETURN OF SEIZED PROPERTY
Plaintiff seeks an order compelling the county to return the seized marijuana
plants. As a general proposition, a government agency cannot retain an individual’s
property without providing due process of law. (Ensoniq Corp. v. Superior Court (1998)
65 Cal.App.4th 1537, 1548–1549.) Someone whose property is wrongfully withheld by
the government may bring a cause of action specifically for an order compelling return of
the property. (Minsky v. City of Los Angeles (1974) 11 Cal.3d 113, 121–123.) But the
right to regain property withheld by the government is not absolute. One exception
applies to property lawfully seized for use as evidence in a criminal action while the
action is pending. (People v. Lamonte (1997) 53 Cal.App.4th 544, 549.) Another
exception applies to illegal property. The state can retain property that is illegal to
possess, whether it was lawfully seized or not. (Ensoniq Corp., supra,
65 Cal.App.4th 1537, 1548.) It is that second exception the county relies on here. The
county asserts that because plaintiff’s dispensary violated a local ordinance restricting
cannabis cultivation within the county, the marijuana was illegally possessed and plaintiff
has no right to its return.
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The illegal property exception applies only where the property in question is per se
illegal to possess. (See Minsky v. City of Los Angeles, supra, 11 Cal.3d 113, 121
[government is a bailee of seized property unless it is shown to be contraband]; People v.
Lamonte, supra, 53 Cal.App.4th 544, 552 ); see also United States v. Harrell
(9th Cir. 2008) 530 F.3d 1051, 1057 [“An object is contraband per se if its possession,
without more, constitutes a crime; or in other words, if there is no legal purpose to which
the object could be put.”].) We must therefore determine if the seized marijuana is
contraband per se.
Marijuana, at least for medical purposes, has been legal to possess in California
since 1996. The Compassionate Use Act (Health & Saf. Code, § 11362.5) made
“ ‘possession and cultivation … noncriminal for a qualified patient or primary
caregiver.’ ” (City of Garden Grove v. Superior Court (2007) 157 Cal.App.4th 355, 373.)
For qualifying individuals, possession and cultivation of marijuana became “just as
lawful as the ‘possession and acquisition of any prescription drug.’ ” (Id. at p. 372.)
Protections for medical marijuana increased in 2003 with the passage of the California
Medical Marijuana Program Act (Health & Saf. Code, § 11362.71, et seq.), which
decriminalized medical marijuana-related activities beyond mere possession. The
Legislature “exempted those qualifying patients and primary caregivers who collectively
or cooperatively cultivate marijuana for medical purposes from criminal sanctions for
possession for sale, transportation or furnishing marijuana, maintaining a location for
unlawfully selling, giving away, or using controlled substances, managing a location for
the storage, distribution of any controlled substance for sale, and the laws declaring the
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use of property for these purposes a nuisance.” (People v. Urziceanu (2005)
132 Cal.App.4th 747, 785.)1

Significantly, California laws allowing access to medical marijuana do not limit
the ability of a local government to make land use decisions. A local government’s
inherent police power gives it broad authority to determine the appropriate uses of land
within its jurisdictional boundary. (City of Riverside v. Inland Empire Patients Health &
Wellness Center, Inc. (2013) 56 Cal.4th 729, 738 (City of Riverside).) As a result, a local
government can by zoning ordinance determine that a medical marijuana dispensary is
not an allowed land use anywhere in the jurisdiction. (See Ibid. [upholding Riverside’s
ban on medical marijuana dispensaries within city limits].) Similarly, a local legislative
body can restrict or disallow entirely the cultivation of medical cannabis. (See County of
Tulare v. Nunes (2013) 215 Cal.App.4th 1188, 1203.) Those local land use restrictions
have been held not to conflict with state laws permitting medical marijuana because of
the narrow scope of the state laws, which merely created an exception to the criminal
laws regulating the possession and use of marijuana. (City of Riverside, supra, at p. 746.)
An exemption from state criminal laws does not preempt local land use regulation. (Id. at
p. 749.)
1 After the events in this case, the marijuana laws changed again, with the passage
of Proposition 64 in November 2016. That initiative legalized marijuana for recreational
use by adults. (City of Vallejo v. NCORP4, Inc. (2017) 15 Cal.App.5th 1078, 1081.)
Adults over age 21 can now possess up to 28.5 grams of marijuana. (Health & Saf. Code,
§ 11362.1, subd. (a)(1).) No one has suggested the new law has any effect on the issues
presented here.
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The stated purpose of the Santa Cruz County ordinance at issue is “to prohibit
medical cannabis cultivation while granting limited immunity from the enforcement of its
prohibition to those medical cannabis cultivation activities that do not violate [certain
restrictions].” (Santa Cruz County Code, § 7.126.010.) It accomplishes that purpose by
declaring all cultivation of cannabis within the county by any cannabis cultivation
business to be a prohibited activity constituting a public nuisance. (Id., § 7.126.030.) At
the same time, the ordinance grants limited immunity from its provisions for any medical
cannabis cultivation business that does not cultivate more than 99 marijuana plants and
complies with certain other requirements. (Id., § 7.126.040.) Taken together, these
provisions essentially impose a 99-plant limit on medical cannabis cultivation within the
county, which is a permissible exercise of the County’s inherent authority to regulate for
public health, safety and welfare.
The County insists its cannabis restriction is a health and safety ordinance and not
a land use regulation, noting that the ordinance is codified in Title 7 of the County Code
which is entitled “Health and Safety.” But on its face the ordinance restricts the manner
in which land can be used, effectively making it a zoning regulation. (See City of
Riverside, supra, 56 Cal.4th 729, 754 [ordinance prohibiting marijuana-related activities
on land within the jurisdiction is a zoning regulation].) And the County is not helped by
characterizing its regulation as something other than zoning. Local land use regulation is
clearly allowed under the state marijuana laws, whereas other regulation of medical
marijuana risks state preemption. (See Id. at p. 754, fn. 8 [state medical marijuana laws
preserved “the authority of local jurisdictions to decide whether local land may be used to
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operate medical marijuana facilities.”].) The County’s label is ultimately
inconsequential. It is the effect of the ordinance that matters here.
A valid local ordinance restricting the number of marijuana plants that can be
cultivated does not change the status of medical marijuana under state criminal law (nor
could it, as any attempt to do so would be preempted). (People v. Ahmed (2018)
25 Cal.App.5th 136, 143.) Possession of medical cannabis, by those qualified according
to state law, is not a crime. That necessarily means that marijuana possessed for medical
purposes in compliance with state standards is not contraband per se. The concept that
marijuana is not contraband subject to seizure by law enforcement is relatively new;
marijuana (medical or otherwise) for so long was contraband that we may be conditioned
to think of it as such. But with medical marijuana now as legal as “any prescription
drug,” a local ordinance cannot make it illegal to possess, even while the locality remains
free to limit or prohibit commercial dispensing or cultivation. (City of Garden Grove v.
Superior Court, supra, 157 Cal.App.4th 355, 372.)
Plaintiff alleges in the complaint that its cultivation and possession of marijuana
were fully compliant with applicable state laws. We must assume that is true for
purposes of our review, because this case comes to us on demurrer. Based on that
allegation, the marijuana seized by law enforcement is not contraband, and plaintiff can
assert a valid cause of action seeking its return. (See City of Garden Grove v. Superior
Court, supra, 157 Cal.App.4th 355, 362 [local governments are bound by state laws and
“must return materials the state considers legally possessed.”].) The demurrer to the
causes of action for specific return of property, for mandamus relief compelling the return
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of the seized marijuana, and for declaratory relief therefore should have been overruled.2

(The county’s assertion that a declaratory judgment is a remedy and not an independent
cause of action is incorrect: declaratory relief is a cause of action, one that can be
maintained as long there is an existing legal controversy alleged. (City of Cotati v.
Cashman (2002) 29 Cal.4th 69, 80.) In contrast, the operative complaint also contains a
cause of action entitled “preliminary and permanent injunction”; because injunctive relief
is a remedy rather than a standalone cause of action, the demurrer to that claim was
properly sustained. (McDowell v. Watson (1997) 59 Cal.App.4th 1155, 1159.))
At this procedural stage, plaintiff has the benefit of our accepting as true that its
cultivation of marijuana complied with state law. But to succeed on its claims for return
of property, it will need to prove that fact (among others). If plaintiff was cultivating
marijuana in a manner not allowed by state law, the marijuana would indeed be
contraband and not subject to return. (See Littlefield v. County of Humboldt (2013)
218 Cal.App.4th 243, 256 [summary judgment for county properly granted in action for
wrongful seizure of medical marijuana because grower failed to present evidence
marijuana was being cultivated in compliance with state law]; see also Chavez v.
Superior Court (2004) 123 Cal.App.4th 104, 110 [no right to return of marijuana where
its possession was not in compliance with state law].)
2 The County argues in a footnote that these causes of action are outside the scope
of the leave to amend allowed by a prior order sustaining its demurrer to plaintiff’s initial
complaint. But the county did not demur to the first amended complaint on that ground,
nor raise the argument in the trial court at any time. The argument has therefore been
forfeited for appeal.
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We also observe that limits on law enforcement’s power to seize legitimate
medical marijuana as contraband does not prevent a locality from enforcing a valid
ordinance regulating medical marijuana cultivation. Local governments can cite violators
(an enforcement mechanism specifically provided for in the ordinance here [see Santa
Cruz County Code, § 7.126.070 (A)]), and local governments can seek an injunction to
stop a prohibited use of land. (See, e.g., City of Riverside, supra, 56 Cal.4th 729, 738;
County of Tulare v. Nunes, supra, 215 Cal.App.4th 1188, 1194.) But individual property
rights, including the right to the return of non-contraband property from the government,
are not diminished by the inherent power of local governments to regulate uses of land.
B. APPLICATION OF THE GOVERNMENT CLAIMS ACT
In addition to the claims seeking return of property, plaintiff seeks damages for
trespass, conversion, and inverse condemnation. Claims for money damages against a
public entity are subject to the Government Claims Act (Gov. Code, § 900 et seq.), which
limits the time for filing a lawsuit to six months from the entity’s written notice of its
refusal to pay a claim. (Gov. Code, § 945.6, subd. (a).)
Plaintiff commenced its lawsuit within six months of the county’s rejection of the
two claims for damages it submitted. But plaintiff is a corporation, and at the time it filed
the lawsuit its corporate status was suspended by the Secretary of State for failure to pay
taxes. A suspended corporation loses all rights and privileges under the law, including
the right to prosecute a lawsuit. (City of San Diego v. San Diegans for Open Government
(2016) 3 Cal.App.5th 568, 577.) Plaintiff ultimately paid the taxes it owed and revived
its corporate status, but not until after the six-month limitations period had expired.
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Plaintiff contends its suit for damages is nonetheless timely under the rule that a
revival of corporate powers retroactively validates any procedural actions taken during
the period of suspension. (See Longview International, Inc. v. Stirling (2019)
35 Cal.App.5th 985, 990.) But application of a statute of limitations is a substantive
defense, not a procedural matter. A corporate revivor that occurs after the time to
commence an action has expired does not retroactively validate a lawsuit filed during
corporate suspension. (ABA Recovery Services, Inc. v. Konold (1988) 198 Cal.App.3d
720, 725.) Plaintiff’s causes of action for damages are therefore time barred under the
Government Claims Act.
The county argues that the statute of limitations applicable to monetary claims
against public entities bars the entire complaint, including the causes of action in equity
seeking return of the marijuana plants. It bases that argument on the complaint's
alternative prayer that, in the event the property is not returned, plaintiff be awarded full
replacement value. We reject the county’s argument because a claim seeking return of
property withheld by the government is not subject to the Government Claims Act “even
though some or all of the property may have been dissipated and [the defendant] may be
compelled to respond in damages in lieu of property.” (Holt v. Kelly (1978)
20 Cal.3d 560, 565.) Were it otherwise, a government entity could convert a “wrongful
dissipation of the property into an advantage by using it to support an essentially dilatory
defense based on failure to comply with the claims statutes.” (Ibid.)
Another of plaintiff’s claims that is not subject to the Government Claims Act is
its cause of action for inverse condemnation, a theory of recovery rooted in the state
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constitution. (Pacific Bell v. City of San Diego (2000) 81 Cal.App.4th 596, 603.) But
that cause of action fails for a different reason: the complaint’s allegations are
insufficient to state a claim. An inverse condemnation action may be brought by an
individual whose property was either taken or damaged by the government for a public
purpose. (Customer Co. v. City of Sacramento (1995) 10 Cal.4th 368, 377.) An essential
element of the claim is that the property was taken for public use or damaged in
connection with a public work of improvement. (Ibid.) Here, the marijuana was seized
in connection with enforcing the ordinance prohibiting cultivation, violation of which is a
criminal offense. (See Santa Cruz County Code §§ 7.126.070 (A); 19.01.030(A).) But
inverse condemnation has never been applied “to require a public entity to compensate
a property owner for property damage resulting from the efforts of law enforcement
officers to enforce the criminal laws.” (Customer Co. v City of Sacramento, supra, at
p. 377–378.) The complaint contains no allegation indicating the marijuana was taken
for public use or damaged in connection with a public work of improvement, so it
does not state a cause of action for inverse condemnation.
The demurrer was properly sustained as to the causes of action seeking
damages (trespass, conversion, and inverse condemnation).
C. COUNTY’S REQUEST FOR JUDICIAL NOTICE AND MOTION TO DISMISS
The county requests that we take judicial notice of a stipulated judgment it
obtained against plaintiff in another action, and asserts the judgment contains certain
admissions that categorically bar plaintiff’s claims in this case. We deny the request for
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judicial notice because it was not made in the trial court, and the county’s arguments
based on it are being raised for the first time on appeal. (See Vons Companies, Inc. v.
Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444 fn. 3 [“Reviewing courts generally do not
take judicial notice of evidence not presented to the trial court. Rather, normally ‘when
reviewing the correctness of a trial court's judgment, an appellate court will consider only
matters which were part of the record at the time the judgment was entered.’ ”].)
We also deny the County’s motion to dismiss, filed after briefing was complete.
The County asserts we should exercise our discretion to dismiss the appeal because
plaintiff’s corporate status has again been suspended and an assignment of rights it
apparently made to a third party is ineffective to allow the litigation to continue.
Resolving that issue would require significant fact finding and consideration of matters
outside the record. That is inconsistent with our role as a reviewing court and something
for which the trial court is much better equipped. We will deny the motion to dismiss
without prejudice to the County raising the issue in the trial court on remand.

Outcome: The judgment is reversed. The matter is remanded to the trial court with
directions to vacate its order sustaining the demurrer to the first amended complaint and to enter a new order sustaining the demurrer without leave to amend as to the causes of action for trespass, conversion, inverse condemnation, and injunctive relief; and overruling the demurrer as to the petition for a writ of mandate and the causes of action for specific recovery of property and for declaratory relief. Appellant shall recover its costs on appeal.

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