A state appellate court has blocked San Francisco from considering an historical landmark designation for a 98-year-old church building.

The court ruled that, under state law, the building is exempt from local regulations to protect historic landmarks. The court rejected the city's contention that because the church owner intends to demolish the building to make way for housing on the site, the old church did not qualify for the exemption. The court also rejected the city's argument that the controversy was not ready for judicial review because the city has done nothing more than start the historical designation process.

First St. John's United Methodist Church, located at Larkin and Clay streets in San Francisco's Nob Hill district, is reportedly the only existing California building designed by noted church architect George Washington Kramer. First St. John's qualifies for placement on both the National Register of Historic Places and the California Register of Historic Resources as a good example of early 20th century church architecture.

Worship services in the building ended in 2002 because of declining membership. Two years later, the congregation transferred ownership of the property to an administrative arm of the United Methodist Church. A daycare and preschool operated at First St. John's until 2005, when the building was determined to be seismically unsafe because of its unreinforced masonry construction. About the same time, the United Methodist Church signed an agreement with Pacific Polk Properties to develop 27 condominiums on the site. The church applied for permits to demolish the old building and construct new housing.

In April 2007, San Francisco released a draft environmental impact report on the project, which triggered historic preservation efforts. The city's Landmarks Preservation Advisory Board conducted a public informational meeting on the draft EIR, and a Board of Supervisors' committee recommended the full board initiate proceedings to determine whether the property should be designated a local landmark. The United Methodist Church objected to the committee's recommendation because the designation could prevent demolition.

Despite repeated objections from the Methodist Church, the Board of Supervisors formally initiated historic landmark proceedings. Both the Landmarks Preservation Advisory Board and the city's Planning Commission recommended that supervisors approve the landmark designation. Meanwhile, the church and Pacific Polk sued the city to halt the landmark designation process. In 2008, San Francisco Superior Court Judge Peter Busch sided with the church and developer, ruling the building qualified for an exemption from local landmark designation. He ordered the city to halt its process; San Francisco appealed.

Fifteen years ago, state lawmakers amended Government Code � 25373 by adding subdivision (d). That provision permits a nonprofit religious group that owns "noncommercial property" to exempt the property from a county's historic preservation regulations. Lawmakers also added a similar provision to Government Code � 37361, which governs cities.

In 2000, the state Supreme Court in a 4-3 decision upheld the exemption's constitutionality in East Bay Asian Local Development Corp. v. State of California, (2000) 24 Cal.4th 693 (see CP&DR Legal Digest, January 2001).

The basis of San Francisco's appeal was that the building did not qualify as a noncommercial property because converting it into a site for condominiums made its sole purpose revenue generation. San Francisco argued a property had to have a religious purpose to qualify for the exemption. A unanimous three-judge panel of the First District Court of Appeal disagreed.

"[T]he opinion in East Bay, as well as the text of the statute and its legislative history, clearly refute this notion and support the trial court's observation that the �whole point' of the exemption �is to allow religious institutions to sell their dilapidated churches for a profit,'" Justice Stuart Pollak wrote for the court. "The East Bay opinion makes unmistakably clear that the statute permits a religiously affiliated nonprofit property owner �to exempt its property from a landmark preservation law if the owner determines in a public forum that application of the law will cause substantial hardship that is likely to deny the owner economic return on the property, or deprive the owner of reasonable or appropriate use of the property in furthering the owner's religion mission.'"

San Francisco also argued the matter was not ready for judicial review because designation of a landmark is a legislative decision, and the Board of Supervisors has never decided. Again, the court disagreed.

"Simply as a matter of common sense, there is no point in pursuing landmark designation if the city is prohibited from imposing any restrictions on the use or demolition of the property that otherwise might be imposed as the result of such a designation," Pollak wrote. "If an agency is proceeding in a matter beyond its jurisdiction, judicial intervention may be obtained even though the agency has not yet reached a final decision."

While there is no evidence the historic preservation process had delayed the project, the court concluded, there also is no evidence the city would suffer a disadvantage from an immediate court resolution of the controversy.

The Case:
The California-Nevada Annual Conference of the United Methodist Church v. City and County of San Francisco, No. A122578, 2009 DJDAR 7196. Filed May 20, 2009

The Lawyers:
For the church: Gordon Egan, Signature Law Group, (916) 362-2660.
For San Francisco: Kristen Jensen, city attorney's office, (415) 554-4700.
For Pacific Polk Properties: Timothy O'Leary, O'Leary & O'Leary, (415) 247-7900.