Hall v. City of Santa Barbara

• Decision Date: 09 March 1987
• Docket Number: No. 85-5838,85-5838
• Citation: 813 F.2d 198
• Court: U.S. Court of Appeals — Ninth Circuit
• Parties: Williams C. HALL and Jean G. Hall, Plaintiffs-Appellants. v. CITY OF SANTA BARBARA, Defendant-Appellee.

Page 198

813 F.2d 198

Williams C. HALL and Jean G. Hall, Plaintiffs-Appellants. v. CITY OF SANTA BARBARA, Defendant-Appellee.

No. 85-5838.

United States Court of Appeals, Ninth Circuit.

Argued March 5, 1986.

Submitted April 11, 1986.

Decided Aug. 22, 1986.

As Amended March 9, 1987.

Opinion on Denial of Rehearing and Rehearing En Banc March 9, 1987.

Robert J. Jagiello, Santa Monica, Cal., for plaintiffs-appellants.

David B. Koff, Latham & Watkins, Los Angeles, Cal., for amicus curiae plaintiffs-appellants.

Steven A. Amerikaner, City Atty., Santa Barbara, Cal., for defendant-appellee.

Michael Jenkins, City Atty. of the City of Westlake Village, Richards, Watson, Dreyfuss & Gershan, Los Angeles, Cal., for amicus curiae defendant-appellee.

Appeal from the United States District Court For the Central District of California.

Before SNEED and KOZINSKI, Circuit Judges; and SOLOMON, ^* District Judge.

AMENDED OPINION

KOZINSKI, Circuit Judge.

We review the district court's dismissal of plaintiffs' lawsuit seeking compensation for an alleged taking of property resulting from the operation of Santa Barbara's mobile home rent control ordinance.

Facts

Williams and Jean Hall own and operate the Los Amigos Mobile Home Estates, a mobile home park within the City of Santa Barbara. They provide tenants a plot of land and access to certain amenities such as water and electricity. Tenants install mobile homes, paying rent for use of the land and facilities.

Mobile homes are mobile only in the sense that they are not permanently anchored to a foundation. However, many mobile homes have no wheels and bear no other close resemblance to a motor vehicle. Nevertheless, in California they must display motor vehicle license plates, Cal.Veh.Code § 5352 (West 1971 & Supp.1986), and are considered personal property (exempt from real property tax). Cal.Rev. & Tax.Code § 5810 (West Supp.1986).

While tenants are free to remove their mobile homes when they move, in practice they rarely do so. California law normally prohibits mobile park operators from forcing tenants to remove mobile homes. Cal.Civ.Code § 798.73 (West 1982 & Supp.1986). Tenants typically sell their homes to buyers who then succeed them as tenants of the mobile home park.

In August 1984 the City of Santa Barbara enacted a rent control ordinance applicable to mobile home parks. Santa Barbara, Cal., City Council Ordinance No. 4285, ch. 26.08 (Aug. 14, 1984) (hereinafter S.B.Ord.) The ordinance requires mobile park operators to offer their tenants leases of unlimited duration. These leases must provide certain key terms: They must be terminable by the tenants at will, ¹ but by the mobile home operator only for cause, narrowly defined by the ordinance; ² rent increases are strictly limited; ³ and disputes about rent or lease terms are made subject to binding arbitration. S.B.Ord. § 26.08.040.

The Halls brought this action under 42 U.S.C. § 1983, ⁴ claiming that the ordinance effected a taking of their property and that such taking was neither for a public purpose nor justly compensated. Plaintiffs' claim was a novel one: they argued that by giving tenants the right to a perpetual lease at a below-market rental rate, the ordinance transfers to each of them a possessory interest in the land on which their mobile home is located. According to the Halls, this interest has a market value and a market: the market for mobile homes located in mobile home parks. According to the Halls, the price of mobile homes in their park shot up dramatically after enactment of the ordinance, with many selling far above their blue book value. ⁵ They claim that the substantial premium paid for mobile homes in parks subject to the Santa Barbara Ordinance reflects the transfer of a valuable property right to occupy mobile home parks at below-market rates.

The City of Santa Barbara filed a motion to dismiss and the Halls filed an opposition. ⁶ At a hearing held on April 15, 1985, the district court granted the motion. ⁷ The Halls appealed.

Discussion ⁸

It is axiomatic that "[t]he motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted." 5 C. Wright & A. Miller, Federal Practice & Procedure, Civil § 1357, at 598 (1969). ⁹ This admonition is perhaps nowhere so apt as in cases involving claims of inverse condemnation where the Supreme Court itself has admitted its inability "to develop any 'set formula' " for determining when compensation should be paid, Penn Central Transportation Co. v. New York City, 438 U.S. 104, 124, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631 (1978), resorting instead to "essentially ad hoc, factual inquiries" to resolve this difficult question. MacDonald, Sommer & Frates v. Yolo County, --- U.S. ----, ----, 106 S.Ct. 2561, 2566-67, 91 L.Ed.2d 285 (1986); Kaiser Aetna v. United States, 444 U.S. 164, 175, 100 S.Ct. 383, 390, 62 L.Ed.2d 332 (1979). While dismissal of a complaint for inverse condemnation is not always inappropriate, such a dismissal must be reviewed with particular skepticism to assure that plaintiffs are not denied a full and fair opportunity to present their claims. See Whitney Benefits, Inc. v. United States, 752 F.2d 1554, 1558-60 (Fed.Cir.1985); Yuba Goldfields, Inc. v. United States, 723 F.2d 884, 887 (Fed.Cir.1983).

In adjudicating a claim such as that presented by the Halls the court must resolve three questions: (1) Did the governmental action amount to a taking of property? See, e.g., Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1000, 104 S.Ct. 2862, 2872, 81 L.Ed.2d 815 (1984). (2) Did it advance a legitimate governmental interest? See, e.g., Agins v. City of Tiburon, 447 U.S. 255, 260, 100 S.Ct. 2138, 2141, 65 L.Ed.2d 106 (1980). (3) Was there just compensation? See, e.g., Kaiser Aetna, 444 U.S. at 179-80, 100 S.Ct. at 392-93. If the first question is answered in the affirmative and either of the remaining two in the negative, plaintiffs prevail; otherwise they lose. In determining whether plaintiffs' case was properly dismissed, we examine each of these issues in turn, assuming, of course, that plaintiffs' allegations are all true.

1. Was There a Taking of Property?

Supreme Court cases addressing this question can be divided into two lines of authority: ¹⁰ the so-called regulatory taking cases ¹¹ and the physical occupation cases. ¹² Regulatory taking cases are those where the value or usefulness of private property is diminished by regulatory action not involving a physical occupation of the property. A typical case of this sort is Penn Central Transportation Co. v. New York City, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978), where New York City prohibited Penn Central from building a 55-story office tower over its Grand Central Terminal. Despite the drastic diminution in the value and usefulness of Penn Central's property, the Court held that the city's action did not amount to a taking.

Physical occupation cases are those where the government physically intrudes upon private property either directly or by authorizing others to do so. A typical case is Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982), where New York City authorized Teleprompter to string 36 feet of one-half inch coaxial cable and place two switchboxes, all amounting to about one and one half cubic feet, on a private building. Despite the minimal burden placed on the property owner, the Court in Loretto held that a taking had occurred.

As Penn Central and Loretto demonstrate, the Court reaches dramatically different results depending on whether it concludes that a particular governmental action amounts to a physical occupation of property or merely a regulation. See R. Epstein, Takings 49-50, 94 (1985) (hereinafter Epstein). ¹³ As the Court explained in Loretto, the distinction lies in the fact that "a physical invasion [of property] is a government intrusion of an unusually serious character" for purposes of the taking clause. 458 U.S. at 433, 102 S.Ct. at 3175 (footnote omitted). Indeed, "a permanent physical occupation is a government action of such a unique character that it is a taking without regard to other factors that a court might ordinarily examine," id. at 432, 102 S.Ct. at 3174 (footnote omitted), and "without regard to the public interests that it may serve." Id. at 426, 102 S.Ct. at 3171. Elsewhere the Court noted that "when the 'character of the governmental action,' Penn Central, 438 U.S., at 124, 98 S.Ct., at 2659, is a permanent physical occupation of property, our cases uniformly have found a taking to the extent of the occupation, without regard to whether the action achieves an important public benefit or has only minimal economic impact on the owner." Loretto, 458 U.S. at 434-35, 102 S.Ct. at 3175-76. See also Kaiser Aetna, 444 U.S. at 179-80, 100 S.Ct. at 392-93 ("the 'right to exclude,' so universally held to be a fundamental element of the property right, falls within this category of interests that the Government cannot take without compensation").

When viewed in the light most favorable to the Halls, the allegations of the complaint seem to present a claim for taking by physical occupation, as in Loretto, Kaiser-Aetna and their precursors. Reduced to its essentials, appellants' claim is that the Santa Barbara ordinance has transferred a possessory interest in their land to each of their 71 tenants; that this interest consists of the right to occupy the property in perpetuity while paying only a fraction of what it is worth in rent; and that this interest is transferable, has an established market and a market value. If proven, appellants' claims would amount to the type of interference with the property owner's rights the Court described so eloquently in Loretto. See Fresh Pond Shopping Center, Inc. v. Callahan, 464 U.S. 875, 104 S.Ct. 218, 78 L.Ed.2d 215 (1983) (Rehnquist, J., dissenting from dismissal for want of substantial federal question). ¹⁴

The right...