Galland v. City of Clovis

• Citation: 24 Cal.4th 1003,103 Cal.Rptr.2d 711,16 P.3d 130
• Decision Date: 05 February 2001
• Docket Number: No. S080670.,S080670.
• Court: United States State Supreme Court (California)
• Parties: Roger GALLAND et al. Plaintiffs and Respondents, v. CITY OF CLOVIS et al. Defendants and Appellants.

103 Cal.Rptr.2d 711

24 Cal.4th 1003

16 P.3d 130

Roger GALLAND et al. Plaintiffs and Respondents, v. CITY OF CLOVIS et al. Defendants and Appellants.

No. S080670.

Supreme Court of California.

February 5, 2001.

As Modified on Denial of Rehearing March 21, 2001.¹

Lozano, Smith, Smith, Woliver & Behrens, Lozano Smith, Thomas J. Riggs, Jerome M. Behrens and David J. Wolfe, Fresno, for Defendants and Appellants.

Endeman, Lincoln, Turek & Heater, Donald R. Lincoln and Linda B. Reich, San Diego, for 76 California Cities and California State Association of Counties as Amici Curiae on behalf of Defendants and Appellants.

Pollak, Vida & Fisher, Girard Fisher and Daniel P. Barer, Los Angeles, for City of Chino as Amicus Curiae on behalf of Defendants and Appellants.

Worthington & Worthington and Jaquelynn C. Pope, Hermosa Beach, for Plaintiffs and Respondents.

Law Offices of Rosario Perry and Rosario Perry, Santa Monica, for Action In Santa Monica as Amicus Curiae on behalf of Plaintiffs and Respondents.

Berger & Norton, Michael M. Berger and Gideon Kanner, Santa Monica, for Western Manufactured Housing Communities Association as Amicus Curiae on behalf of Plaintiffs and Respondents.

Pahl & Gosselin, Stephen D. Pahl and Karen M. Kubala, San Francisco, for California Apartment Association as Amicus Curiae on behalf of Plaintiffs and Respondents. James S. Burling and Meriem L. Hubbard, Sacramento, for Pacific Legal Foundation as Amicus Curiae on behalf of Plaintiffs and Respondents.

June Babiracki Barlow, Neil D. Kalin and Sonia M. Younglove, Los Angeles, for California Association of Realtors as Amicus Curiae on behalf of Plaintiffs and Respondents.

MOSK, J.

In Kavanau v. Santa Monica Rent Control Bd. (1997) 16 Cal.4th 761, 782-786, 66 Cal.Rptr.2d 672, 941 P.2d 851 (Kavanau), we decided that under rent control, adjustment of future rents was generally sufficient to compensate for prior rent ceilings that were set so low as to be confiscatory, and that such adjustments precluded a claim for inverse condemnation. We left open the question, however, whether a future rent adjustment, which we will refer to as a Kavanau adjustment, also forecloses a suit for damages for violation of a right to constitutional due process (U.S. Const., 5th & 14th Amends.) under 42 United States Code section 1983 (hereafter section 1983).² We address that question here and conclude that a Kavanau adjustment would preclude section 1983 damages if it is adequate to prevent constitutional injury by compensating for previous excessively low rent ceilings. As in Kavanau, we further conclude that this matter must be remanded to the government agency responsible for setting rent ceilings to attempt to formulate an adequate Kavanau adjustment, subject to judicial review. In the present case, the trial court did not have the benefit of our Kavanau decision, and the Court of Appeal misapplied that decision in concluding that a Kavanau adjustment was not available as a matter of law. We further explain that the trial court appears to have made some fundamental errors in determining whether and to what extent the rent ceilings imposed in this case were confiscatory.

We further consider whether unreasonable costs, in the form of administrative and attorney fees, imposed on landlords seeking rent increases, may themselves be the basis of a section 1983 claim. We conclude that they may if either of two conditions is present: (1) the costs imposed are part of a government effort to deliberately flout established law, e.g., deliberately obstruct legitimate rent increases; or (2) the landlord suffers confiscation as a result of the imposition of such costs. Because the trial court's method of determining and calculating damages for this type of injury, affirmed by the Court of Appeal, was incorrect, the matter should be remanded to the trial court for reconsideration.

BACKGROUND: THE MOBILEHOME OWNER/MOBILEHOME PARK OWNER RELATIONSHIP

This case concerns the application of a mobilehome rent control ordinance, and some background on the unique situation of the mobilehome owner in his or her relationship to the mobilehome park owner may be useful. "The term `mobile home' is somewhat misleading. Mobile homes are largely immobile as a practical matter, because the cost of moving one is often a significant fraction of the value of the mobile home itself. They are generally placed permanently in parks; once in place, only about 1 in every 100 mobile homes is ever moved. [Citation.] A mobile home owner typically rents a plot of land, called a `pad,' from the owner of a mobile home park. The park owner provides private roads within the park, common facilities such as washing machines or a swimming pool, and often utilities. The mobile home owner often invests in site-specific improvements such as a driveway, steps, walkways, porches, or landscaping. When the mobile home owner wishes to move, the mobile home is usually sold in place, and the purchaser continues to rent the pad on which the mobile home is located." (Yee v. Escondido (1992) 503 U.S. 519, 523, 112 S.Ct. 1522, 118 L.Ed.2d 153.)

Thus, unlike the usual tenant, the mobilehome owner generally makes a substantial investment in the home and its appurtenances—typically a greater investment in his or her space than the mobilehome park owner. (See Baar, The Right to Sell the "Im"mobile Manufactured Home in Its Rent-controlled. Space in the "Im"mobile Home Park: Valid Regulation or Unconstitutional Taking? (1992) 24 Urb. Law. 157, 158, fn. 13.) The immobility of the mobilehome, the investment of the mobilehome owner, and restriction on mobilehome spaces, has sometimes led to what has been perceived as an economic imbalance of power in favor of mobilehome park owners (id. at pp. 170-182) that has in turn led many California cities to adopt mobilehome rent control ordinances (see id. at p. 182 [some 70 cities in California had adopted rent control as of 1992]).

I. STATEMENT OF FACTS

Because facts in their complexity are integral to an understanding of this case, we recite those facts in considerable detail.³ Clovis's Mobile Home Rent Review and Stabilization Ordinance (Clovis Mun. Code, ch. 13, § 5-13.01 et seq, enacted in 1978 and repealed in 1993 (Ordinance)), was one such ordinance. Its intended purpose was to protect mobilehome owners from unreasonable rent increases while recognizing the need of mobilehome park owners to receive rent increases sufficient to cover increased costs and to generate a fair return on their investment (ROI). (Ord., § 5-13.01.) The Ordinance provided that on the filing of a petition signed by more than 50 percent of the mobilehome owners within a mobilehome park, the Clovis Rent Review Commission (Commission) would review the rent increase and determine whether it was "so great as to be an unreasonable increase." (Ord., § 5-13.06(b).) The park owner had the burden to prove by a preponderance of the evidence that the rent increase was reasonable in light of the nonexclusive cost factors enumerated in Ordinance section 5-13.06(i). Those factors included utility rates, property taxes, insurance, advertising, cost-of-living increases attributable to incidental services, repairs and maintenance, capital improvements, amenity and service upgrades, fair rate of ROI, and increased property values. The Ordinance provided that Commission decisions could be appealed to the Clovis City Council within 15 days after the final written decision was mailed to the parties.

The Gallands purchased the Woods Mobile Country Club (the Woods or park), a 260-space park, in 1978. The Gallands hired Planned Management Services (PMS), a Utah corporation in which they owned an interest, and which manages mobilehome parks in a number of states, to manage the Woods. John Chamberlain, the president of PMS, has managed the Woods and acted as the Gallands' representative in the rent review proceedings since 1978.

In 1983, the Gallands challenged the constitutionality of the Ordinance and a decision by the Commission permitting only a portion of a noticed rent increase. The Court of Appeal upheld the constitutionality of the Ordinance and the Commission's rent decision.

In 1985, the Gallands (by PMS and Chamberlain) challenged a Commission decision permitting less than the noticed rent increase. The trial court rejected their challenge, and the Court of Appeal affirmed in an unpublished opinion, in which the court faulted PMS for failing to present any factual evidence in support of its requested rent increase. The court also sanctioned PMS for a frivolous appeal.

A. The Challenged Rent Review Proceedings

1. 1988 Rent Increase

The Gallands noticed a $6 a space rent increase effective April 1, 1988, which raised the monthly rent to $275. The mobilehome owners petitioned the Commission to review the matter. Chamberlain asked what materials and information the Commission would like produced and submitted a letter stating that the rent increase was less than half the increase in the consumer price index (CPI). Park expenses had increased $46,000 in the preceding year, and cash flow in constant dollars had fallen $10,275 since 1986 and $30,000 since 1984. Ray Wyland, the president of the Woods tenant association, responded that the CPI included increases for items other than housing, Mr. Chamberlain had not specified which expenses had increased, and the Woods rent had increased from $143 in 1979 to $269 in 1987.

In response, the Commission requested that Mr. Chamberlain provide a copy of the CPI and documentation demonstrating their increased expenses and decreased cash flow.

Mr. Chamberlain submitted several applicable CPI's and prepared tables that provided a breakdown of expenses and set forth the Woods's receipts, disbursements and pretax cash flows for 1984 through 1987. The tables showed that expenses had increased more than income, resulting in a diminution of cash flows by $30,000 to...