Sierra Lake Reserve v. City of Rocklin, 89-15371

• Decision Date: 09 July 1991
• Docket Number: No. 89-15371,89-15371
• Citation: 938 F.2d 951
• Parties: SIERRA LAKE RESERVE, Plaintiff-Appellant, v. The CITY OF ROCKLIN; the Rocklin Mobile Home Rent Review Commission; Carlos Urrutia; Rusty Selix; Rudolf Michaels; George Paras, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 951

938 F.2d 951

SIERRA LAKE RESERVE, Plaintiff-Appellant, v. The CITY OF ROCKLIN; the Rocklin Mobile Home Rent Review

Commission; Carlos Urrutia; Rusty Selix; Rudolf

Michaels; George Paras, Defendants-Appellees.

No. 89-15371.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Aug. 15, 1990.

Decided July 9, 1991.

William H. Plageman, Jr., and Anthony C. Rodriguez, Thelen, Marrin, Johnson & Bridges, Oakland, Cal., for plaintiff-appellant.

Michelle Marchetta Kenyon, McDonough, Holland & Allen, Sacramento, Cal., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of California.

Before GOODWIN, KOZINSKI and NOONAN, Circuit Judges.

KOZINSKI, Circuit Judge.

Sierra Lake, a mobile home park owner, alleges that the City of Rocklin's rent control ordinances had effected a taking of its property without just compensation; plaintiff also complains of due process and equal protection violations in connection with the passage and implementation of the ordinances.

We consider whether plaintiff's taking claim is ripe for adjudication in federal court despite its failure to exhaust state judicial remedies and whether the district court properly dismissed Sierra Lake's procedural due process and equal protection claims. We also consider whether plaintiff adequately pleaded a substantive due process claim and, if so, whether it was properly dismissed without leave to amend.

Facts

Sierra Lake bought a mobile home park in the City of Rocklin in late 1978, at a time when no rent control was in effect. On September 1, 1979, Sierra Lake raised its rents to cover the cost of improvements. On November 5, the City imposed rent control on Rocklin mobile home parks and set all rents at their July 1979 level--effectively cancelling Sierra Lake's September rent increase.

Sierra Lake continued to make capital improvements and, on October 16, 1984, applied for a rent increase under Ordinance No. 472, the rent control ordinance then in effect. The Rocklin City Manager rejected the application ¹ and advised Sierra Lake to refile under a new rent control ordinance, soon to be enacted.

On April 1, 1985, the City replaced Ordinance No. 472 with Ordinance No. 529. Whereas previous ordinances provided that mobile home park owners could recover all capital expenditures, the new ordinance limited recovery to reasonable expenditures. Expenditures on work completed within the last twelve months were presumed to be reasonable; previously incurred expenditures were subject to review for reasonableness. On August 30, 1985 Sierra Lake refiled its rent increase application under the new ordinance. The City Manager rejected this application because Sierra Lake had not indicated the place of execution. ² The City Manager refused to allow Sierra Lake to cure the defect, even though the application form contained no blank space for indicating the place of execution.

Sierra Lake refiled the application on September 30. The City Manager accepted this application and referred it to mediation. The rent increase finally became effective on December 1, 1985.

Sierra Lake filed suit in district court on September 23, 1987, alleging due process and equal protection violations. In addition, the complaint alleged that the vacancy control provision common to all the City's rent control ordinances effected a taking for which just compensation was due. This provision limited the amount by which Sierra Lake could increase the rent following a vacancy at the park. According to Sierra Lake, this transferred an interest in the rented premises from landlord to tenant, an interest that departing tenants were able to monetize by selling their mobile homes at a premium. ³ The district court granted defendants' motion under Fed.R.Civ.P. 12(b)(6), dismissing all of Sierra Lake's claims without leave to amend.

Discussion

We review the district court's dismissal of plaintiff's claims de novo. We take all material allegations of the non-moving party as true and construe them in the light most favorable to that party. "In this type of action, where the property owner contends that it has been unconstitutionally deprived of property through governmental regulation, motions to dismiss and motions for summary judgment must be viewed with particular skepticism. The importance of the specific facts and circumstances relating to the property and the facts and circumstances relating to the governmental action militate against summary resolution in most cases." Del Monte Dunes at Monterey, Ltd. v. City of Monterey, 920 F.2d 1496, 1508 (9th Cir.1990) (citation omitted).

I. Takings Claim

Plaintiff claims that the rent control ordinance resulted in an unconstitutional taking of its property. The facts of this case are almost identical to those of Hall v. City of Santa Barbara, 833 F.2d 1270 (9th Cir.1987), cert. denied, 485 U.S. 940, 108 S.Ct. 1120, 99 L.Ed.2d 281 (1988). In Hall, we found that a physical taking could result where "the tenant is able to derive an economic benefit from the statutory leasehold by capturing a rent control premium when he sells his mobile home." Id. at 1276. Here, as in Hall, the plaintiff alleges that a rent control ordinance has operated to transfer a valuable possessory interest in the property from the landlord to the tenant, and the tenant is able to capture a premium to which the landlord would otherwise be entitled.

While recognizing that the complaint stated a takings claim under Ninth Circuit law, the district court found the claim unripe under Williamson County Planning Commission v. Hamilton Bank, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985). In Williamson, the United States Supreme Court held that a takings claim cannot be presented in federal court if the state courts are available to provide compensation: "[I]f a State provides an adequate procedure for seeking just compensation, the property owner cannot claim a violation of the Just Compensation Clause until it has used the procedure and been denied just compensation." Id. at 195, 105 S.Ct. at 3121. Interpreting Williamson, we have held that if state law was "unclear or undeveloped" at the time of the alleged taking, plaintiff must first try to recover in state court. Austin v. City and County of Honolulu, 840 F.2d 678, 680 (9th Cir.), cert. denied, 488 U.S. 852, 109 S.Ct. 136, 102 L.Ed.2d 109 (1988). Thus, unless plaintiff can show that "the state courts establish that landowners may not obtain just compensation through an inverse condemnation action under any circumstances, [California] procedures are adequate within the terms of Williamson County." Id. at 681.

At the time of the alleged taking, California state courts consistently took a dim view of takings claims based on rent control ordinances. See, e.g., Fisher v. City of Berkeley, 37 Cal.3d 644, 693 P.2d 261, 209 Cal.Rptr. 682 (1984), aff'd, 475 U.S. 260, 106 S.Ct. 1045, 89 L.Ed.2d 206 (1986); Nash v. City of Santa Monica, 37 Cal.3d 97, 688 P.2d 894, 207 Cal.Rptr. 285 (1984), appeal dismissed, 470 U.S. 1046, 105 S.Ct. 1740, 84 L.Ed.2d 807 (1985); Birkenfeld v. City of Berkeley, 17 Cal.3d 129, 550 P.2d 1001, 130 Cal.Rptr. 465 (1976). Even when they found a rent control ordinance unconstitutional, the remedy they granted was invalidation rather than compensation. See, e.g., Gregory v. City of San Juan Capistrano, 142 Cal.App.3d 72, 191 Cal.Rptr. 47 (1983). ⁴

More germane to our case, the state appellate courts have explicitly rejected compensation under the theory we adopted in Hall. In Oceanside Mobilehome Park Owners' Ass'n v. City of Oceanside, 157 Cal.App.3d 887, 204 Cal.Rptr. 239 (1984), a group of mobile home park owners challenged the vacancy control aspect of a rent control ordinance because it allowed tenants to sell their mobile homes at a premium. The court viewed the claim as a regulatory challenge and rejected it, stating that "[t]he ordinance is structured to establish a fair base rent which reflects general market conditions.... Rents will not be 'reduced more than required for the purposes of the police power.' " Id. at 907, 204 Cal.Rptr. 239.

Two recent state court opinions have refused to follow our decision in Hall. Yee v. City of Escondido, 224 Cal.App.3d 1349, 274 Cal.Rptr. 551 (1990); Casella v. City of Morgan Hill, 230 Cal.App.3d 43, 280 Cal.Rptr. 876 (1991). These courts considered physical takings challenges to mobile home rent control ordinances that were virtually identical to those in Oceanside and Hall. In Yee, the court "reviewed the issue anew in light of Hall," and found "Hall's reasoning unpersuasive and reaffirm[ed] the conclusion ... reached in Oceanside." Yee, 224 Cal.App.3d at 1351, 274 Cal.Rptr. 551. Similarly, the Casella court "repudiate[d] Hall's attempt to bootstrap a mobile home rent control ordinance--an economic regulation--to the Supreme Court's 'very narrow' holding in Loretto [v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982) ]." Casella, 230 Cal.App.3d 43, 52, 280 Cal.Rptr. 876. We accept Oceanside, Yee and Casella as correct statements of California law, there being no contrary authority. Thus, plaintiff does not rely on the "mere generalized hostility of the state courts to takings claims," Schnuck v. City of Santa Monica, 935 F.2d 171, 174 (9th Cir.1991), but instead on its demonstrated inability to "obtain just compensation through an inverse condemnation action under any circumstances." Austin, 840 F.2d at 681. The district court erred in dismissing plaintiff's takings claim. ⁵

II. The Remaining Claims

Noting that "overlapping state remedies are generally irrelevant to the question of the existence of a cause of action under Sec. 1983," Zinermon v. Burch, 494 U.S. 113, 122, 110 S.Ct. 975, 982, 108 L.Ed.2d 100 (1990), the Supreme Court divided the universe of section 1983 claims into three categories. The first consists of claims under an express...