Montclair Parkowners Ass'n v. City of Montclair

Decision Date02 December 1999
Citation90 Cal.Rptr.2d 598,76 Cal.App.4th 784
CourtCalifornia Court of Appeals Court of Appeals
Parties(Cal.App. 4 Dist. 1999) MONTCLAIR PARKOWNERS ASSOCIATION et al.,Plaintiffs and Appellants, v. CITY OF MONTCLAIR, Defendant and Respondent. E024137 Filed

APPEAL from the Superior Court of Riverside County. Peter Norell, Judge. Affirmed.

(Super.Ct.No. RCV 35814) O P I N I O N

Hart, King & Coldren, Robert S. Coldren, C. William Dahlin and Keith W. Carlson, for Plaintiffs and Appellants.

Robbins & Holdaway, Diane E. Robbins, Richard Holdaway; Endeman, Lincoln, Turek & Heater, Donald R. Lincoln, Henry E. Heater and Linda B. Reich, for Defendant and Respondent.

*CERTIFIED FOR PARTIAL PUBLICATION

McKINSTER, Acting P. J.

Plaintiffs Montclair Parkowners Association and Hacienda Mobile Home Association (hereafter "Park Owners") seek to invalidate Ordinance No. 98-777, enacted by the City of Montclair (hereafter, "City"), on the grounds that it is unconstitutional on its face. Ordinance No. 98-777 was enacted to amend the existing rent control ordinance. Park Owners contend that enactment of the ordinance resulted in a regulatory taking of their property without just compensation in violation of article I, section 19, of the California Constitution. The trial court sustained City's demurrer on the ground that Ordinance No. 98-777 was facially constitutional and dismissed the entire case against City.

In the published portion of the opinion (Part I), we conclude that Ordinance No. 98-777 on its face is not an unconstitutional regulatory taking. In our view, the relevant inquiry into the constitutionality of Ordinance No. 98-777 under article I, section 19, of the California Constitution is whether the ordinance is an arbitrary regulation of Park Owners' property rights. Since City could have reasonably concluded that the limitation on Park Owners' ability to raise the rent upon sale of mobile homes would (1) protect the current mobile home owners' equity in the homes and (2) protect prospective mobile home owners from excessive rent increases, it is not a compensable taking under the California Constitution.

In the unpublished portion of the opinion (Part II), we conclude that the trial court did not abuse its discretion in denying leave to amend the complaint.

FACTUAL AND PROCEDURAL BACKGROUND
A. History of City's Rent Control Ordinance

Prior to 1998, City had an existing rent control ordinance. According to that ordinance, Park Owners were free to adjust the rental rate for the mobile home space in the park upon sale of the mobile home or other voluntary transfer of ownership in the mobile home unless the transfer was made to a family member by gift, contract, or otherwise. However, according to a study commissioned by City in 1998, the existing rent control ordinance lost some of its effectiveness because Park Owners routinely required prospective mobile home owners to sign long-term rental agreements or leases that were exempt from local rent control ordinances pursuant to Civil Code section 798.17 (hereafter, "the mobile home residency statute"). As a result, the current mobile homeowners' ability to sell their mobile homes was significantly impaired because many prospective mobile home owners were discouraged from buying by the prospect of paying higher market level rental rates.

Furthermore, according to the study, the limitation on the ability to sell the mobile homes resulted in a higher number of the homes being abandoned, which caused an increasing number of the mobile homes to be placed in the hands of Park Owners. Thus, Park Owners were, in a sense, competing with existing mobile home owners in selling the mobile homes. According to the study, although antitrust laws would bar Park Owners from requiring prospective mobile home owners to purchase their mobile homes from Park Owners as a condition of residence at the park, nothing would preclude Park Owners from giving rent preferences to those individuals that bought their mobile homes from Park Owners. Also, the study noted the peculiar nature of mobile homes, particularly their low mobility, as a factor in favor of amending the ordinance since the cost of moving a mobile home from place to place was prohibitive. Therefore, the study concluded that City's rent control ordinance's existing vacancy decontrol provision should be replaced with a vacancy control provision in order to (1) protect existing mobile home owners from excessive rents and preserve equity in their mobile homes and (2) protect prospective mobile home owners from excessive rent increases. An existing vacancy decontrol provision allowed Park Owners unlimited space rent increases when a mobile home was sold in place. The proposed vacancy control provision would prohibit Park Owners from adjusting the space rent to market level when a mobile home is sold in place.

When a concern arose that the proposed ordinance would not accomplish its stated legislative purpose, a supplemental report was issued. The report addressed the argument that any benefit created by the proposed vacancy control provision would be captured only by the existing mobile home owners because lower rent-controlled space rental rates would allow them to sell their mobile homes at higher prices. However, the report concluded that, in light of the data collected from neighboring cities with similar rent control ordinances, any potential increase in sale prices of mobile homes would be more than offset by low rental rates. Also, prospective mobile home owners would be able to benefit from the higher equity retained in the mobile homes once they bought them.

On June 20, 1998, City enacted Ordinance No. 98-777. The stated legislative goal of the ordinance was to ". . . (1) protect current home owner's investment in their mobile homes by precluding park owners from (a) requiring prospective mobile home owners to sign a long-term lease therefore adversely effecting [sic] sales of mobile homes and (b) raising space rents upon sale or transfer of a mobile home in a park." (Ord. No. 98-77,

5-19.01, subd. (H.) Moreover, the ordinance's aim was to ". . . protect prospective mobile home owners from excessive rents by providing (a) for lease options in order to give each prospective home owner a real choice between an exempt long-term lease and a lease subject to the protections of the Ordinance; and (b) that a park owner may not raise space rents upon the sale or transfer of a mobile home in a park." (Ibid.) Finally, the ordinance was designed to "protect prospective homeowners' future investments in their mobile homes by precluding park owners from (a) affecting a future sale of such mobile homes through a long-term lease requirement imposed upon the subsequent purchasers and (b) raising space rents upon sale or transfer of a mobile home in a park." (Ibid.)

Section 5-19.06 of the newly enacted ordinance limits Park Owners' ability to raise space rental rates upon sale or transfer of ownership of a mobile home to the greater of: (a) three percent; or (b) one hundred percent of the most current annual CPI percentage increase, up to a maximum of eight percent. Section 5-19.09 allows Park Owners to make an administrative application to increase rental rates above the limitations imposed by the ordinance based on increases in land lease payments made by Park Owners, certain taxes and making of capital improvements. The application for rent increase must be made to the Rent Review Administrator. (Ord. No. 98-777, 5-19.09, subd. (A).) Any adverse determination on the application for rent increase can be appealed to the City Council, and a subsequent judicial review of the City Council's decision can be made via a petition for a writ of administrative mandate. (Ord. No. 98-777, 5-19.09, subd. (F).)

In addition to any rent increase allowed pursuant to section 5-19.09, Park Owners may seek permission to increase space rent by submitting an application to the Park Mediation Committee (hereafter, "Committee"). (Ord. No. 98-777, 5-19.10, subds. (A) and (B).) The Committee shall consist of two representatives from Park Owners, two representatives from the spaces affected by the proposed rent increase, and one mediator appointed by the Rent Review Administrator. (Ibid.)

If the Committee fails to reach an agreement on the application, Park Owners may also apply for a rent increase through arbitration. (Ord. No. 98-777, 5-19.11.) Park Owners are permitted to employ legal counsel and present physical and testimonial evidence in support of their application. (Ord. No. 98-777, 5-19.11, subd. (F).) The ordinance provides a non-exclusive list of factors on which the arbitrator may rely in reaching his or her decision. (Ord. No. 98-777, 5-19.11, subd. (G).) Any adverse decision by the arbitrator is not binding and can be appealed to the City Council. (Ord. No. 98-777, 5-19.12.) Park Owners may obtain judicial review of any adverse decision by City Council by seeking a writ of administrative mandate. (Ord. No. 98-777, 5-19.13.)

B. Procedural History of This Litigation

On August 18, 1998, Park Owners filed a complaint against City in the superior court. It contained the following counts: (1) A declaratory relief cause of action re: facial constitutionality of the rent control ordinance;1 (2) A request for temporary and permanent injunctive relief on the grounds that the ordinance was facially unconstitutional, and its enforcement would result in irreparable harm; and (3) An inverse condemnation claim which alleged that enactment of the ordinance resulted in a regulatory taking of Park Owners' property without compensation.

City demurred to the entire complaint. The trial court ruled that the ordinance was facially constitutional and sustained City's demurrer to the entire complaint without leave to amend. Park Owners timely appealed.

DISCUSSION

"A demurrer tests the legal sufficiency of the complaint, . . ." (Hernandez v. City of...

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