Casella v. City of Morgan Hill

• Decision Date: 10 May 1991
• Docket Number: No. H006972,H006972
• Citation: 230 Cal.App.3d 43,280 Cal.Rptr. 876
• Court: California Court of Appeals Court of Appeals
• Parties: Robert CASELLA, et al., Plaintiffs and Appellants, v. CITY OF MORGAN HILL, Defendant and Respondent.

Page 876

280 Cal.Rptr. 876

230 Cal.App.3d 43

Robert CASELLA, et al., Plaintiffs and Appellants, v. CITY OF MORGAN HILL, Defendant and Respondent.

No. H006972.

Court of Appeal, Sixth District, California.

May 10, 1991.

Review Denied July 17, 1991.

Debra K. Butler, Law Offices of Jagiello & Pech, Lake Arrowhead, for plaintiffs and appellants.

Marc G. Hynes, Emily Cote, City Atty., Morgan Hill, for defendant and respondent.

ELIA, Associate Justice.

Appellants, owners of a mobile home park, challenge the effect of a City of Morgan Hill mobile home rent control ordinance, claiming that its lack of a "vacancy decontrol" provision, which allows rents to be returned to market levels when a tenant leaves, effected a taking of their property without just compensation. We conclude that the pleadings here state facts insufficient to constitute a taking, and join the other California appellate district which has rejected the contrary result espoused by the Ninth Circuit Court of Appeals in Hall v. City of Santa Barbara (1986) 833 F.2d 1270, cert. den. (1988) 485 U.S. 940, 108 S.Ct. 1120, 99 L.Ed.2d 281. In consequence, we affirm the trial court's dismissal order.

BACKGROUND

Appellants Robert Casella et al are general partners who own Hacienda Valley Mobile Home Estates, a mobile home park. Respondent City of Morgan Hill (city) first enacted a mobile home rent stabilization ordinance in March 1983. ¹ This ordinance generally regulated rental increases and included a "vacancy control" provision, which limited mobile home park owners to increased space rents of no more than 75 per cent of the Consumer Price Index (CPI) or 8%, whichever was less, when a mobile home changed ownership but stayed in the park.

This ordinance was amended in 1986 to allow no rental increase, but a one-time $25.00 administrative fee charge when such a change of ownership occurred. It is this inability to raise rents at the time ownership is transferred to market levels which was the basis of this lawsuit. The ordinance was amended again, effective October 4, 1989, to provide for "vacancy decontrol;" it excepted from the ordinance's restrictions increases on rents during a 30-day period commencing on a transfer of ownership of a mobile home coach (coach) within the park.

Appellants filed a complaint against the city on August 30, 1989. The complaint stated causes of action for declaratory relief and inverse condemnation and prayed in addition for an injunction and damages.

The complaint alleged that the city's ordinance "has the effect of keeping rents below market rentals otherwise obtainable by plaintiff upon turnover of any given unit in plaintiff's park," that this resulted in "enabling the tenants to monetize the rent savings upon the sale of their mobile homes to third parties, and thus constitutes an impermissible transfer of wealth by the defendant to the departing tenants" in violation of the California Constitution. It alleged that the statute did not serve the "legitimate governmental purpose of preserving low or affordable housing" because "it enables the tenant in place to sell the mobile home for a 'premium' due to the existence of rent control, and thus dramatically increases the mobile home price resulting in forever burdening the space with the need to pay the additional premium, or to finance the additional premium...."

The complaint further alleged that the ordinance constituted a taking of appellants' right to enter into a long-term lease with incoming tenants since "[b]ut for the [o]rdinance" such a lease would be for "the consideration which the departing tenant, by virtue of the [o]rdinance, is now able to receive in a disguised form by receiving a 'premium' for the price of the coach which the departing tenant sells." As a consequence, the complaint alleged, "the [o]rdinance has effected the total transfer of all of the appreciated value of the pad from the landlord to the tenant, which the tenant realizes at the time of sale of a coach."

The city filed a demurrer to this complaint on October 17, 1989. The demurrer alleged that appellants had failed to state facts sufficient to state a cause of action, and that the same causes of action were the subject of another lawsuit between the parties.

As to the latter allegation, the facts as stated in the city's brief are that an action was filed against the city on March 19, 1984 by Allan Roman et al. The plaintiffs in that suit are the same general partners in Hacienda Valley Mobile Home Estates as are those in the present suit. The Roman suit, like this one, challenged the city's rent stabilization ordinance, specifically the vacancy control provision. It also alleged, inter alia, an unconstitutional taking of property without just compensation. The city moved for summary judgment or alternatively for summary adjudication of the issues. The trial court ruled in November 1984 that the ordinance did not constitute a taking on its face. This order was never memorialized in writing, however, and the case was not pursued by the plaintiffs. Now, although the five-year statute has run, the suit has neither been dismissed nor prosecuted and is still pending.

In the present suit, the trial court sustained the city's demurrer and dismissed the complaint on appellants' election not to amend. This appeal ensued.

DISCUSSION

When reviewing a dismissal based on a demurrer, an appellate court will review the facts alleged in the complaint in the light of the well-established principle that "allegations of the complaint which are not contrary to law or to a fact of which this court may take judicial notice must be deemed to be true. (Dale v. City of Mountain View (1976) 55 Cal.App.3d 101, 105 ....)" (Terminals Equipment Co. v. City and County of San Francisco (1990) 221 Cal.App.3d 234, 238, 270 Cal.Rptr. 329.) " 'A demurrer admits all material and issuable facts properly pleaded. [Citations.] However, it does not admit contentions, deductions or conclusions of fact or law alleged therein. [Citations.]' Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713 [63 Cal.Rptr. 724, 433 P.2d 732] ...; see also White v. Davis (1975) 13 Cal.3d 757, 765 [120 Cal.Rptr. 94, 533 P.2d 222]....) Thus, while allegations of the complaint are deemed to be true in ruling on a demurrer, 'where an allegation is contrary to law or to a fact of which a court may take judicial notice, it is to be treated as a nullity [citation].' ( Dale v. City of Mountain View, supra, 55 Cal.App.3d at p. 105 .) [p] Where the trial court sustains a demurrer with leave to amend but the plaintiff elects not to amend, there is a presumption that the plaintiff has stated as strong a case as he or she can. In such instances, in determining whether the trial court has abused its discretion, the appellate court must resolve all ambiguities and uncertainties raised by the demurrer against the plaintiff; 'if the complaint is objectionable on any ground raised by the demurrer, the judgment of dismissal must be affirmed. [Citations.]' (Hooper v. Deukmejian (1981) 122 Cal.App.3d 987, 994 ....)" (Terminals Equipment Co. v. City and County of San Francisco, supra, 221 Cal.App.3d at pp. 241-242, 270 Cal.Rptr. 329.) With this standard of review in mind, we turn to the merits of appellants' claims.

I. Previous Action

As a preliminary, the city contends that the trial court properly sustained its demurrer on the ground that the previously-mentioned Roman suit was pending. In essence, they contend the Roman suit, which also sounds in inverse condemnation, precludes the present challenge and appellants are estopped from challenging the ordinance on this ground.

Witkin states the rule as follows: "A second action between the same parties on a different cause of action is not precluded by a former judgment.... But the first judgment 'operates as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action.' " (7 Witkin, Cal.Procedure (3d ed. 1985) Judgments, § 253, p. 691; McClain v. Rush (1989) 216 Cal.App.3d 18, 28-29, 264 Cal.Rptr. 563.)

The city has alleged that the trial court ruled in its favor on a facial challenge to the ordinance. It concedes this ruling was never memorialized in writing, however. Since the trial court's adjudication was interlocutory and non-appealable, it has no res judicata effect and does not constitute an estoppel. (See De La Pena v. Wolfe (1986) 177 Cal.App.3d 481, 485, 223 Cal.Rptr. 325; 7 Witkin, supra, § 188, pp. 621-622, § 219, p. 655-656.)

II. Does the Morgan Hill Rent Control Ordinance constitute A Taking?

The protection of private property rights is guaranteed by the Fifth Amendment to the United States Constitution: "No person shall be ... deprived of ... property, without due process of law; nor shall private property be taken for public use, without just compensation." The Fifth Amendment is made applicable to the states by the due process clause of the Fourteenth Amendment. (Chicago, Burlington etc. R'd v. Chicago (1897) 166 U.S. 226, 239, 17 S.Ct. 581, 585, 41 L.Ed. 979.) Article I, section 19 of the California Constitution similarly provides that compensation is required when property is "taken or damaged."

Appellants claim that the effect of the Morgan Hill mobile home rent control ordinance is to create the right to secure tenure at reduced rents. This right, they allege, has a value, and this value is transferred to the mobile home owners (their tenants) who can then sell their mobile homes at a premium. Appellants claim this interest--in occupying a park space at reduced rent--is an attribute of property, and that the challenged ordinance transfers this "property right" to the park tenants. This "appropriation" of appellants' property interests, they claim, constitutes an unconstitutional taking.

The Ninth Circuit Court of Appeals in Hall v. City of Santa Barbara, considered the constitutionality of a mobile home...