Homeowners Assn. v. De Anza

Citation94 Cal.App.4th 890,114 Cal.Rptr.2d 708
Decision Date21 December 2001
Docket NumberNo. H020036.,H020036.
CourtCalifornia Court of Appeals
PartiesDe ANZA SANTA CRUZ MOBILE ESTATES HOMEOWNERS ASSOCIATION, Plaintiff and Respondent, v. De ANZA SANTA CRUZ MOBILE ESTATES, et al., Defendants and Appellants.

Elliot L. Bien, San Francisco, Dorothy K. Gustafson, San Mateo, Bien & Summers, Frederik A. Jacobsen, Law Offices of Frederik A. Jacobsen, San Mateo, David Spangenberg, Law Firm of David Spangenberg & Associates, Palo Alto, for Defendants and Appellants: De Anza Santa Cruz Mobile Estates, Manufactured Home Communities, Inc.

Mark B. Fredkin, William Siamas, Morgan, Franich, Fredkin & Marsh, San Jose, Burl S. Polon, Santa Cruz, for Plaintiff and Respondent: De Anza Santa Cruz Mobile Estates Homeowners Association.

BAMATTRE-MANOUKIAN, Acting P.J.

In this action by a mobilehome homeowners' association against the owners of the mobilehome park, a jury awarded punitive damages in the amount of $6 million after the trial court instructed the jury that it was "an established fact" that defendants had violated Civil Code section 798.41,1 causing actual damages of $36,401.85, which had already been paid. The trial court subsequently awarded plaintiff attorney's fees pursuant to Civil Code section 798.85,2 in the amount of $700,000. On appeal defendants raise the following arguments:

1) The superior court's jurisdiction is preempted by the Public Utilities Commission 2) Plaintiff is not entitled to punitive damages for a violation of Civil Code section 798.41, because the statutory remedies contained in Civil Code section 798.863 are the exclusive remedies for violations of provisions of the Mobilehome Residency Law;

3) The punitive damages award impermissibly punished defendants for defending an arguable position on a complex legal issue, for pursuing authorized remedies in the courts and before other tribunals, and for their attorney's "hardball" litigation tactics;

4) The punitive damages award was excessive as a matter of law; and

5) The attorney fee award must be reversed, as plaintiff was not the prevailing party in an action arising from the provisions of the Mobilehome Residency Law, within the meaning of Civil Code section 798.85.

We reject defendants' claim that jurisdiction is preempted by the Public Utilities Commission. However, we agree with their second contention. We find that actual damages plus the statutory penalty provided in Civil Code section 798.86, plus costs and attorney's fees authorized by Civil Code section 798.85, were intended to be the exclusive remedies in a cause of action to enforce the provisions of the Mobilehome Residency Law. Punitive damages would be available upon a proper showing in a tort action, and a plaintiff may elect to recover either punitive damages on a tort cause of action or statutory penalties on a cause of action for violating the statute. However, a plaintiff proceeding only on a statutory violation is limited to the statutory remedies. Punitive damages must be based on tort liability. Here plaintiff alleged tort causes of action but did not pursue them at trial. The jury was not instructed on any tort causes of action. Rather the punitive damages judgment was based only on the directed verdict that defendants had violated section 798.41. Punitive damages are not available for a statutory violation where, as in this case, the statute specifically provides for a penalty. Therefore the punitive damages judgment in this case cannot stand and we shall reverse the judgment.

For guidance in the event of a retrial, we further find that punitive damages in a tort action cannot be based on evidence of defendants' litigation conduct occurring subsequent to the underlying tort, and cannot be based on claims that defendants filed motions, appeals and other proceedings authorized by law.

Because of our disposition reversing the judgment, we also reverse the post-judgment order awarding attorney's fees.

BACKGROUND

De Anza Santa Cruz Mobile Estates is a mobilehome park located within the City of Santa Cruz. Plaintiff and respondent is De Anza Santa Cruz Mobile Estates Homeowners Association (the Association), an association of approximately 200 mobilehome owners who rent space at the park. Defendants and appellants are De Anza Santa Cruz Mobile Estates, et al. (De Anza), and Manufactured Home Communities, Inc., et al. (MHC), two successive groups of owners of the park (collectively referred to as De Anza/MHC).

Prior to August of 1993, the park residents paid a fixed monthly rent to the park owners that included the cost of water provided to the rented spaces. Water was furnished to the park by the City of Santa Cruz Municipal Water Department (the Water Department), which billed the park owners. Regardless of individual usage, each mobilehome owner paid a pro rata share of the park's water bill as part of the monthly space rental.

In 1990, section 798.41 was added to the Civil Code statutes known as the Mobilehome Residency Law (Civ.Code, § 798, et seq., or hereafter sometimes MRL). Section 798.41 was intended to address the concerns of park owners who were experiencing rising costs of utilities but were unable to pass the costs along to their tenants in the rent without running afoul of local rent control ordinances. The statute thus provides a means for billing utilities separately from pure rent. However, in order to protect park residents from an overall increase in rent as a result of the separate billing, the statute further provides that a park owner who begins billing utilities separately must at the same time reduce the rent by an amount equal to the separate charges. Thereafter if utility costs go up, the resident absorbs the increase.

Section 798.41 provides that a park owner "may elect to bill a homeowner separately for utility service fees and charges assessed by the utility" and that such fees and charges "shall not be deemed to be included in the rent charged ..." for purposes of local rent control ordinances. However, the owner who so elects must, "at the time of the initial separate billing," simultaneously reduce the base rent "by an amount equal to the fees and charges separately billed." (§ 798.41, subd. (a).)

In May of 1993, the park managers gave notice to all the residents at the park that De Anza was going to install a submetered water system, and that, beginning in August of 1993, the residents would be billed separately for their individual water use at prevailing rates "pursuant to Civil Code § 798.41." The letter further informed the residents that their base rent would be reduced accordingly, "as required by California Civil Code § 798.41(a)."

The separate meters were installed, and in August of 1993 the park owners began the separate billing for submetered water service. The rental notice sent to the residents for August of 1993 reflected that each resident's base monthly rent had been reduced by $6.30, the average monthly water charge per space over the preceding year. The separate water bill consisted of three components: the charge for the actual use of water at each space at the standard rate charged by the Water Department; a "ready-to-serve" charge of $7.80 for each space, which is what the Water Department would charge to furnish direct service to a separate residence; and a 7 percent "City Tax" on the entire bill. The separate billing amounted to over twice as much as the residents had been paying for water and thus over twice as much as the corresponding rent reduction. Because the park owners now collected more from the residents in water charges than they paid to the Water Department, the use of the separate billing resulted in additional income to the owners.

The park residents informed the managers in writing that they objected to the new charges, on the basis that the new charges were greater than the corresponding reduction in rent and were thus in violation of both section 798.41 and also the local rent control ordinance, Santa Cruz Municipal Code section 22.01.060. The residents' claim reached Barry McCabe, President of De Anza Assets, a management company that managed 30 to 40 different properties in addition to the De Anza Santa Cruz park. McCabe responded by letter in October of 1993. He stated that he believed De Anza was acting "appropriately and within the law" in charging the same rates as the local utility would charge, as provided in Public Utilities Code section 2705.5. He further stated that De Anza had "every intention of operating fairly, reasonably and within applicable law" and that if De Anza had "inadvertently" violated any provision of law, it would make the necessary corrections.

In a subsequent exchange of letters, the representative of the Association, Herbert Rossman, informed McCabe that the residents believed De Anza's separate billing was a clear violation of section 798.41. Rossman stated that he hoped the parties could reach an amicable resolution but that the residents were prepared to seek legal redress. He reminded McCabe that section 798.86 of the Civil Code provided for an award of $500 for each willful violation of the provisions of the Mobile-home Residency Law. McCabe responded, stating that he "fail[ed] to see what we are doing that is unlawful." In his opinion, section 798.41 was not "designed to assure ... an equality of costs" between what De Anza was billing and what it was paying for water. Rather, the law was intended to ensure only that the owners did not charge more than the resident would be charged by the local water company for direct service. McCabe informed Rossman that he respected the residents' right to submit the matter to a court and he said that De Anza would "be prepared to deal with it accordingly."

On November 23, 1993, the Association, represented by counsel, and Herbert Rossman in propria persona, filed an action in superior court, seeking an injunction and damages. They alleged that by...

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