Cacho v. Boudreau

• Decision Date: 11 January 2007
• Docket Number: No. S133378.,S133378.
• Citation: 149 P.3d 473,53 Cal.Rptr.3d 43,40 Cal.4th 341
• Court: California Supreme Court
• Parties: Luis J. CACHO et al., Plaintiffs and Appellants, v. Louis J. BOUDREAU et al., Defendants and Respondents.

53 Cal.Rptr.3d 43

40 Cal.4th 341

149 P.3d 473

Luis J. CACHO et al., Plaintiffs and Appellants, v. Louis J. BOUDREAU et al., Defendants and Respondents.

No. S133378.

Supreme Court of California.

January 11, 2007.

Bruce Cornblum, San Diego; Walters & Ward, R. Michael Walters, San Diego; Bien & Summers, Elliot L. Bien and E. Elizabeth Summers, Novato, for Plaintiffs and Appellants.

Berger & Kahn and Arthur Grebow, Marina del Rey, for California Mobilehome Parkowners Alliance as Amicus Curiae on behalf of Plaintiffs and Appellants.

Law Offices of Ron A. Stormoen, Stormoen & Associates, Ron A. Stormoen, San Diego, and Lori L. Krupa, for Defendants and Respondents.

Barbara A. Jones, Susan Ann Silverstein and Michael Schuster, for AARP and National Consumer Law Center as Amici Curiae on behalf of Defendants and Respondents.

Law Office of Bruce E. Stanton and Bruce E. Stanton, for California Mobilehome Resource and Action Association, Inc., as Amicus Curiae on behalf of Defendants and Respondents.

Maurice A. Priest, Sacramento, for Golden State Manufactured-Home Owners League, Inc., as Amicus Curiae on behalf of Defendants and Respondents.

Richard I. Singer Law Offices and Elvi J. Olesen, San Diego, for County Mobilehome Positive Action Committee, Inc., Santee Mobilehome Owners Action Committee, San Marcos Mobilehome Residents Association, Escondido Mobile/Manufactured Home Positive Action Committee, Inc., and Oceanside Manufactured Homeowners Alliance as Amici Curiae on behalf of Defendants and Respondents.

KENNARD, J.

The state Mobilehome Residency Law (Civ.Code, § 798 et seq.)¹ regulates relations between the owners and the residents of mobilehome parks. Three of its provisions are at issue here. The first provision states: "A homeowner shall not be charged a fee for other than rent, utilities, and incidental reasonable charges for services actually rendered." (§ 798.31.) Under the second provision, which applies only in parks subject to local rent control laws, a local agency that administers a rent control law must allow a park owner to separately charge park residents for certain government-imposed fees, assessments, and other charges (§ 798.49, subd. (a)), but this provision expressly does not apply to property taxes (§ 798.49, subd. (d)(4)). Under the third provision, which applies when a park resident is the prevailing party in a civil action to enforce rights granted by the Mobilehome Residency Law, the trial court is vested with discretion to impose on the park owner a civil penalty not exceeding $2,000 for each "willful violation" of that law. (§ 798.86.)

We granted review here to address these issues: Does the state Mobilehome Residency Law preempt a local rent control ordinance that allows a mobilehome park owner to separately charge park residents for property taxes imposed on the land on which the park is situated? If a park owner, relying on such an ordinance and the assurances of local officials charged with administering local law, separately charges park residents for property taxes, and the ordinance is thereafter held to be preempted, has the owner committed a "willful" violation of the Mobilehome Residency Law so as to justify imposition of civil penalties? If so, does the imposition of civil penalties violate the park owner's constitutional right to due process of law?

We conclude that the state Mobilehome Residency Law does not preempt local rent control ordinances insofar as they allow mobilehome park owners to separately charge park residents for property taxes imposed on park land. This conclusion renders the other two issues moot, and we do not address them.

I. Facts and Procedural Background

Luis J. Cacho and three of his children (Luis A. Cacho, Daniel Cacho, and Elizabeth Cacho) own a 129-space mobilehome park known as Don Luis Estates. The park is located in the City of Chula Vista (in San Diego County), which has a rent control ordinance regulating the space rent that mobilehome park owners like the Cachos may charge the residents in their mobilehome parks. (Chula Vista Mun.Code, tit. 9, ch. 9.50.)

Until 1994, Luis J. Cacho's mother had also been a part owner of Don Luis Estates, but she died during that year. Because of the change in ownership resulting from her death, the county assessor reassessed the mobilehome park property, and the property taxes increased by $18,676.57.

At that time, Chula Vista's rent control ordinance defined "space rent" as "the consideration ... demanded or received in connection with the use and occupancy of the mobilehome space ... exclusive of ... allowable pass-throughs ..." (Chula Vista Mun.Code, tit. 9, ch. 9.50, former § 9.50.030, subd. (A), italics added.) One of the pass-throughs that the ordinance then allowed, and excluded from the definition of "space rent," was "governmental assessments such as real property taxes...." (Id., former § 9.50.030, subd. (H).) The ordinance also listed "[p]roperty or other taxes" as one component of the owner expense factor that the mobilehome rent review commission was to consider in fixing space rent through the hearing process. (Id., former § 9.50.073, subd. (A)(1)(a).)

In April 1998, the Cachos consulted Juan Arroyo, a senior official with the Housing Division of the Chula Vista Community Development Department, to determine whether they could "pass through" their property tax increase to the park residents without following the administrative procedure required to obtain a space rent increase. In a letter dated October 26, 1998, Arroyo told them that the proposed pass-through of the property tax increase would not violate Chula Vista's rent control ordinance. Although he acknowledged that the state Mobilehome Residency Law, in section 798.49, "contains language which could preclude the automatic pass-through of increased property taxes as a separately stated amount," he asserted that "where a City's rent control ordinance specifically allows the passthrough of increased property taxes, such pass-through does not violate the State Law." Arroyo added this caution: "As we have stated in past discussions, the City Attorney cannot be your legal counsel. Our conclusions are for the benefit of the City. You should consult with your own attorney regarding the legal interpretation of Section 798.49." In the letter, Arroyo also requested that the pass-through "not be included in the space rent" and instead that it be "billed as a separate item to avoid confusion and to ensure that such pass-through is not included in any calculation of the increase in the rent."

The leases for the rental spaces contained a provision stating that the rent could be changed upon 90 days' notice under the state Mobilehome Residency Law and that any rental increase would be governed by the City of Chula Vista. In November 1998, to implement the property tax pass-through, the Cachos sent the residents a 90-day notice of a rental increase in the amount of $12.31 per month per space. Thereafter, the Cachos began including this amount as part of the "monthly rent" specified in lease agreements for park spaces and in the monthly rental invoices sent to park residents.² The Cachos increased the pass-through amount to $12.56 in 2000 and to $12.81 in 2001. On the invoices, the amount was variously listed as "rent tax," "rent adj," "adj," "other," and "CVMC9.50.030H."

In 2001, some of the park residents filed individual small claims actions against the Cachos alleging that the property tax passthrough was invalid because it violated the state Mobilehome Residency Law. In September 2001, the Cachos filed a complaint for declaratory relief in superior court, naming as defendants the same park residents who had brought the small claims actions. Those residents dismissed their small claims actions and instead cross-complained against the Cachos, seeking injunctive and declaratory relief, damages, statutory penalties, and attorney fees. In April 2002, in overruling the Cachos' demurrer to the residents' cross-complaint, the superior court issued an interlocutory ruling that the pass-through provisions of Chula Vista's rent control ordinance, which allowed a property tax charge that was separate from and in addition to space rent, were preempted by sections 798.31 and 798.49.

While this litigation was proceeding, the Cachos applied for an increase in space rent as a substitute for the disputed property tax pass-through. In May 2002, the Chula Vista Mobilehome Rent Review Commission approved the Cachos' request for a rent increase to compensate for the property tax increase, at the same time directing that the Cachos "should no longer bill residents for this increase in property tax." By this means, the Cachos continued to obtain reimbursement for the added expense caused by the property tax increase, albeit in the form of a discretionary rent increase rather than a pass-through of the property taxes as a separately stated item on the monthly rent invoices. The residents have apparently not challenged the validity of that rent increase.³

The litigation proceeded. In March 2003, the parties filed cross motions for summary judgment or summary adjudication. The superior court granted summary judgment in favor of the residents, and it awarded damages of $10,067, civil penalties of $23,000, attorney fees of $87,321, and litigation costs of $9,230. The court treated the Cachos' reliance on the city's advice about the legality of the passthrough as a mitigating factor in fixing the amount of the statutory penalty. The judgment was filed in February 2004, and the Cachos appealed.

The Court of Appeal affirmed the judgment. It agreed with the superior court that the Chula Vista ordinance that formerly had permitted mobilehome park owners to pass through property taxes to park residents conflicted directly with, and was preempted by, the state Mobilehome Residency Law, and that the Cachos' violation of that state law was willful. It also...