Thomas v. Sea Breeze Venture LP
| Decision Date | 31 July 2020 |
| Docket Number | B297200 |
| Court | California Court of Appeals Court of Appeals |
| Parties | DONNA THOMAS et al., Plaintiffs and Appellants, v. SEA BREEZE VENTURE LP et al., Defendants and Respondents. |
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC671103)
APPEAL from a judgment of the Superior Court of Los Angeles County, Susan Bryant-Deason, Judge. Affirmed.
Los Angeles Center for Community Law and Action, Tyler Anderson and Noah Grynberg for Plaintiffs and Appellants.
Pahl & McCay and Karen K. McCay for Defendants and Respondents.
____________________ Plaintiffs and appellants (hereinafter appellants), a group of current and former tenants at an affordable housing complex owned by defendants and respondents, appeal from a judgment of dismissal resulting from an order sustaining a demurrer and striking appellants' second amended complaint (SAC) as a sham pleading. The trial court issued its order on the SAC after it had granted summary judgment in favor of respondents on appellants' first amended complaint (FAC). Appellants do not appeal the summary judgment ruling.
In this appeal, appellants contend the SAC was not a sham pleading and that it adequately alleged causes of action for common law negligence and statutory retaliation under Civil Code section 1942.5. In the alternative, they argue it was an abuse of discretion to deny leave to amend.
We conclude the trial court properly struck the SAC because appellants added new factual allegations to plead their negligence and retaliation claims, without providing any explanation for why these facts were not, or could not have been, previously alleged. We further conclude that no further opportunity to amend is warranted in this case.
We therefore affirm the trial court's judgment.
Although appellants do not appeal the trial court's summary judgment ruling on the FAC, we rely on some of the documentation submitted by the parties during that phase of the litigation to provide a brief factual background for this appeal. This background has no bearing on the outcome of this court's decision, which turns on the allegations pleaded on the face of each complaint.
Respondent MRK Partners (MRK) is a multifamily real estate investment and asset management firm that specializes in the acquisition and rehabilitation of affordable housing. In late 2015 or early 2016, MRK identified a 92-unit apartment complex (the Property) in the City of Oxnard as a potential affordable housing project.1 At that time, there were no income or rent restrictions at the Property. MRK undertook the task of obtaining financing for the acquisition and rehabilitation of the property under the Low Income Housing Tax Credit (LIHTC) program. LIHTC's are for new construction or projects that create affordable rental housing for low-income households. MRK sought to have the project financed with 4 percent tax credits. To obtain this type of credit, MRK had to first apply for tax-exempt bonds to be issued on its behalf, which would then allow a noncompetitive application for the tax credits.
In April 2016, MRK approached a former defendant in this matter, the California Municipal Finance Authority (CMFA), to apply for the issuance of bonds for the conversion of the apartment complex.2 On April 29, 2016, the CMFA unanimouslyapproved a resolution to issue up to $17.5 million in bonds to MRK and its subsidiary, respondent Sea Breeze Venture (SBV).3
The federal Tax Equity and Fiscal Responsibility Act (TEFRA) requires a public hearing be held before the actual issuance of tax-exempt private activity bonds. The purpose of the TEFRA hearing is to allow interested persons an opportunity to express their views for or against issuance of the bonds. In May 2016, Anthony Stubbs, a financial advisor with the CMFA, requested on behalf of MRK that the Oxnard City Council conduct a TEFRA hearing to approve issuance of the bonds.
The TEFRA hearing for the housing project was held by the Oxnard City Council on June 7, 2016. Prior to the hearing, a representative from the Oxnard Housing Department posed a series of questions to Stubbs via electronic mail, regarding MRK's intentions for the property, including "how many units will be affordable and at what levels, and how will this be accomplished, since, as I understand the units are currently occupied?" Stubbs subsequently forwarded to the city the following response by MRK: 4
The representative from the city followed up with the following concern: Stubbs forwarded the following response by MRK:
On June 7, 2016, the City of Oxnard unanimously passed a resolution to approve the issuance by the CMFA of up to $17.5 million in tax-exempt revenue bonds to finance MRK and SBV's acquisition of the Property.
On October 17, 2016, SBV closed escrow on the property and became the owner of the Sea Breeze Apartments.
Following SBV's acquisition of the property, all existing residents were required to complete an income certification process compliant with the LIHTC program. AMC operated as SBV's management company and led the income certificationprocess. AMC hired the existing property manager, Janet Pintor, who is bilingual, to continue in her role as property manager.
On November 8, 2016, AMC held a meeting with residents, explaining how the certification process would work, what information was required, and what alternatives would be available if a household was not income-eligible. Ivonne Ayala, the compliance director for AMC, who was well-versed with the regulatory requirements of the low income housing program and fluent in English and Spanish, provided translation services at the meeting. Pintor and her supervisor, Shandy Ochoa, also attended this meeting. Following the group meeting, individual notices were sent to each household listing the financial information that was needed and scheduling an interview with management to provide the necessary information and proceed with the certification process.
In or around November 2016, a flyer was distributed by what was identified as the "Seabreeze Tenants Association Affiliated with the Los Angeles Tenants Union" that advised existing residents to not attend interviews or talk with management.
Nevertheless, several households participated in the income-certification process. Some tenants were qualified and signed fixed-term leases. Some units became vacant through natural attrition and were filled with new income-eligible families. Some residents, anticipating they were most likely over-income, voluntarily vacated the premises. Others were determined to be over-income after completion of the verification process, and SBV sought to terminate their tenancies. AMC had a budget to relocate the tenants who were determined to be over-income, and most tenants were offered between $500 and $1,000to vacate their units. A flyer containing information on three nearby rental properties comparable to Sea Breeze Apartments was provided to tenants.
Appellants are 16 current and former tenants who occupied 10 units at the Property. They did not participate in the process to determine their income eligibility under the new affordability restrictions at the property until after steps were taken through the judicial process to terminate their tenancies.5
By the end of 2017, eight of the 10 households were income qualified and living in renovated units at reduced rents pursuant to fixed-term leases, which included a "good cause for eviction" rider.6 As to the other two units, one household vacated with notice to management due to the lease expiration, while the other unit vacated without prior notice to management.
On August 8, 2017, appellants filed a FAC alleging two causes of actions against the CMFA and five causes of action against MRK and SBV.7 All causes of action turned on allegations that MRK and its subsidiary SBV made the following false and misleading statements to the City of Oxnard in seeking the city's approval of the issuance of up to $17.5 million in tax bonds: (1) "That MRK had conducted a review of the income and financial information of current tenants at the Property prior to June 2016 and had determined that 'most current tenants [at the Property] already qualify [to live in the new Sea Breeze housing project]' "; (2) "That MRK did not anticipate that any of the current tenants at the Property including [appellants], would exceed the income limits to live at the Property"; and (3) t...
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