COLONY COVE ASSOCIATION v. CITY OF CARSON 10 (1992)

INTRODUCTION

Plaintiff and appellant Colony Cove Association challenges a City of Carson rent control ordinance, claiming that its lack of a “vacancy decontrol” provision, which would permit the mobilehome park owner to charge market rents to a successor tenant at the time the current tenant sells his or her mobilehome, effected a taking of its property without just compensation.

BACKGROUND

Appellant is the owner and operator of a mobilehome park (the “Park”) located within the City of Carson (the “City”).   The Park contains 404 spaces, or “pads,” which are rented to owners of mobilehomes.

In 1978, the California Legislature adopted the Mobilehome Residency Law (Civ.Code, § 798, et seq.), which provided various protections to tenants of mobilehome parks.   Among these protections were provisions prohibiting a tenant's eviction from a park without good cause, and securing for the tenants the right to sell their mobilehomes, or “coaches,” in place to a buyer of their choosing, who then benefits from the “no evictions” provision of the law.

In 1979, the City adopted a mobilehome rent control ordinance (the “Ordinance”) which regulates the rental rates which can be charged by the Park and does not allow any pad rental increases except upon application and approval by a rent control board.   Over the years appellant applied for and was granted a number of increases in its rental rates.

Appellant filed a complaint in the Superior Court seeking declaratory relief, inverse condemnation and damages for violation of its constitutional rights.   The City unsuccessfully demurred to the complaint, claiming that appellant had failed to state a cause of action for inverse condemnation, and that the statute of limitations barred any challenge to the constitutionality of the Ordinance.   The case proceeded with discovery and was “at-issue” when the Court of Appeal decided Yee v. City of Escondido (1990) 224 Cal.App.3d 1349, 274 Cal.Rptr. 551, a case factually similar to this one.   The Yee court concluded that since the mobilehome park owners did not claim that the Ordinance denied them a fair and reasonable rent, it was not irrational and thus did not constitute a taking.

While Yee's petition for Writ of Certiorari was pending in the U.S. Supreme Court, the City filed a motion for judgment on the pleadings on the grounds that appellant could not state a cause of action under Yee, and that the complaint was barred by the statute of limitations.   The trial court granted that motion, finding both that Yee mandated dismissal on the taking issue, and that the statute of limitations barred the claim.

On April 1, 1992, while this appeal was pending, the Supreme Court announced its decision in Yee v. City of Escondido, 503 U.S. 519, 112 S.Ct. 1522, 118 L.Ed.2d 153.   The court affirmed the Court of Appeal judgment, holding that the rent control ordinance in question did not constitute a physical taking requiring just compensation.   The court left open the question of whether the statute constitutes a regulatory taking, but declined to address that issue as it had not been included in the question on which certiorari had been granted.

ISSUES

Two issues are presented on this appeal:  (1) Does the absence of a vacancy decontrol provision in the Ordinance, coupled with the provisions of the Mobilehome Residency Law, constitute a regulatory taking? ¹ and (2) Does the statute of limitations bar appellant's suit?

DISCUSSION

A motion for judgment on the pleadings is substantially the same as a demurrer.  (6 Witkin, Cal. Procedure (3rd ed. 1985), § 262, p. 563.)   Thus, in reviewing the trial court's decision granting judgment on the pleadings, we review the pleadings to determine whether appellant has stated a cause of action as a matter of law.  (6 Witkin, Cal. Procedure, supra, § 263, p. 565;  Rader Co. v. Stone (1986) 178 Cal.App.3d 10, 20, 223 Cal.Rptr. 806.)

I

 We note first that appellant does not claim that ordinary rent control statutes regulating housing throughout the country violate the Takings Clause.   Rather, it argues that the Ordinance's lack of a vacancy decontrol provision, coupled with the California Mobilehome Residency Law (which in effect grants tenants the right to occupy their pads in perpetuity) and the unique economic relationship between park owners and mobilehome owners (where the latter own their coaches but rent the land on which they sit) leads to this result.   That is, because the mobilehome owner has the right (under the Mobilehome Residency Law) to occupy the pad indefinitely at below market rents, as well as the right to sell the coach in place to a buyer who will then receive not just the coach but the right to occupy the pad indefinitely at below market rents, all coaches in place at the time the Ordinance went into effect immediately realized a substantial increase in value.   This increased value represents the right to occupy the pad indefinitely at below market rates.   Thus, when a tenant sells his or her coach, the tenant receives a premium from the purchaser corresponding to the increased value the coach has by reason of the right to rent the pad in perpetuity at below market rates.   This premium, which appellant argues represents an incident of ownership of the land, will never be recovered by either the park owner or any subsequent tenant.   Indeed, appellant contends that subsequent tenants will in fact incur greater housing costs as a result of the Ordinance, a result in direct opposition to the purpose of the Ordinance (and which would otherwise justify the transfer of wealth from landlord to tenant):  To preserve affordable mobilehome housing by controlling rents.²  Appellant thus concludes that the ordinance, as applied, fails to substantially advance its purpose, and therefore constitutes a regulatory taking requiring compensation.³

The U.S. Supreme Court set forth the standard for evaluating whether a land use regulation constitutes a taking as follows:

“We have long recognized that land use regulation does not effect a taking if it ‘substantially advance[s] legitimate state interests' and does not ‘den[y] an owner economically viable use of his land,’ Agins v. Tiburon, 447 U.S. 255, 260, [100 S.Ct. 2138, 2141, 65 L.Ed.2d 106] (1980).   See also Penn Central Transportation Co. v. New York City, 438 U.S. 104, 127, [98 S.Ct. 2646, 2660, 57 L.Ed.2d 631] (1978) (‘[A] use restriction may constitute a “taking” if not reasonably necessary to the effectuation of a substantial government purpose’).”  (Nollan v. California Coastal Comm'n (1987) 483 U.S. 825, 834, 107 S.Ct. 3141, 3147, 97 L.Ed.2d 677.)

While the court went on to state that its prior decisions had not “elaborated on the standards for determining what constitutes a ‘legitimate state interest’ or what type of connection between the regulation and the state interest satisfies the requirement that the former ‘substantially advance’ the latter,” it noted that it had never adopted, in the takings context, the same standards as those applied to due process and equal protection claims:

“To the contrary, our verbal formulations in the takings field have generally been quite different.   We have required that the regulation ‘substantially advance’ the ‘legitimate state interest’ sought to be achieved, Agins v. Tiburon, 447 U.S. 255, 260, [100 S.Ct. 2138, 2141] (1980) not that the State “could rationally have decided ” that the measure adopted might achieve the State's objective [the standard used in due process and equal protection cases].”  (Nollan v. California Coastal Comm'n, supra, 483 U.S. at p. 834, fn. 3, 107 S.Ct. at 3148.)

Here, appellant alleges that the Ordinance not only failed to substantially advance a legitimate state interest but that it utterly failed to advance its purpose.

 As the City notes, several cases decided after Nollan have questioned whether Nollan's requirement, that a regulation substantially advances a legitimate governmental interest, applies to non-possessory takings.  (See Blue Jeans Equities West v. City and County of San Francisco (1992) 3 Cal.App.4th 164, 4 Cal.Rptr.2d 114, and cases cited therein.)   However, Agins v. Tiburon, supra, 447 U.S. 255, 100 S.Ct. 2138, the very case which enunciated the “substantially advances” test and on which the Nollan court relied, did not present a possessory takings claim but attacked a zoning ordinance as an unconstitutional taking.   Moreover, the Supreme Court in Yee specifically endorsed the Nollan test in the context of a non-possessory taking when it stated that the regulatory taking argument advanced by the mobilehome park owners, which it declined to review, would be subject to an analysis of “whether there is a sufficient nexus between the effect of the ordinance and the objectives it is supposed to advance.”  (Yee v. City of Escondido, supra, 503 U.S. 519, ––––, 112 S.Ct. 1522, 1530, 118 L.Ed.2d 153, 167.)   Therefore, in order for a land-use ordinance to survive a challenge that it constitutes a regulatory taking, the regulation must substantially advance the legitimate state interest which motivated it.  (Nollan v. California Coastal Comm'n, supra, 483 U.S. 825, 834, 107 S.Ct. 3141, 3147;  see also Long Beach Equities, Inc. v. County of Ventura (1991) 231 Cal.App.3d 1016, 1029, 282 Cal.Rptr. 877.)

Although rent control ordinances are antithetical to a free enterprise system, they have been upheld against various constitutional challenges because of their perceived benefits in protecting public welfare.  (See, e.g., Pennell v. San Jose (1988) 485 U.S. 1, 108 S.Ct. 849, 99 L.Ed.2d 1;  Carson Mobilehome Park Owners Assn. v. City of Carson (1983) 35 Cal.3d 184, 197 Cal.Rptr. 284, 672 P.2d 1297.) ⁴  However, rent control, like any other price control, is unconstitutional if arbitrary, discriminatory, or demonstrably irrelevant to the policy the legislature is free to adopt.   (Pennell v. San Jose (1988) 485 U.S. 1, 11, 108 S.Ct. 849, 857, 99 L.Ed.2d 1 [citations omitted].)  If, as appellant claims, the Ordinance not only fails to achieve its purpose of preserving affordable mobilehome housing but, in fact, works to increase the cost of such housing to all tenants except those in place at the time it was enacted, it is demonstrably irrelevant to the policy the legislature is free to adopt, rendering it an unconstitutional taking.

We therefore conclude that appellant's complaint alleges facts which, if proved at trial, establish that the Ordinance as applied constitutes a regulatory taking.

II

The City urges that, regardless of whether appellant has stated a cause of action, the statute of limitations bars prosecution of this matter.   Specifically the City argues that appellant's challenge to the Ordinance is a facial regulatory taking challenge, rendering the Ordinance void ab initio.   The City contends that the limitations period for claims of this type filed prior to January 1, 1990 is five years (relying on Baker v. Burbank–Glendale–Pasadena Airport Authority (1985) 39 Cal.3d 862, 867, 218 Cal.Rptr. 293, 705 P.2d 866, cert. den. 475 U.S. 1017, 106 S.Ct. 1200, 89 L.Ed.2d 314).   Thus, because the Ordinance was enacted over 10 years before appellant filed its suit, the action is barred.

 The City's reliance on the distinction between a “facial” versus an “as applied” challenge to the statute is misplaced for several reasons.   First, the continued enforcement of an unconstitutional statute cannot be insulated by the statute of limitations.  (Virginia Hosp. Ass'n. v. Baliles (1989) 868 F.2d 653, citing Brown v. Board of Education (1954) 347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873.)   Thus, we cannot adopt the City's position that appellant is forever barred from challenging the constitutionality of the Ordinance even though the alleged wrong is continuing.

 Secondly, it is axiomatic that a cause of action for damages does not accrue unless and until the complainant actually suffers damages.  (Allred v. Bekins Wide World Van Services (1975) 45 Cal.App.3d 984, 990, 120 Cal.Rptr. 312.)   Indeed, had appellant filed its complaint after the Ordinance was enacted but before a tenant in its Park had sold a coach, the claim would have been premature.  (Pennell v. San Jose, supra, 485 U.S. 1, 9–10, 108 S.Ct. 849, 856, 99 L.Ed.2d 1.)   For while the vacancy control aspect involved here provides the mechanism for a taking, no taking could occur unless and until a vacancy occurred.   It is the combined effect of the two factors which creates the basis for appellant's regulatory taking claim.   The existence of either factor without the other would result in a non-event.   That is, if the Ordinance allowed the park owner to increase the pad rent to market rates upon a vacancy, then obviously there would be no taking.   And, if there are no vacancies, the terms of the Ordinance, or even the fact that an ordinance exists, would be irrelevant, as no taking would occur.   It is only if the two factors occur together that an injury has been suffered.   Therefore, assuming appellant's allegations are true (as we must for purposes of this appeal), each sale of a coach constitutes a separate taking, and thus creates a discrete cause of action upon which appellant may sue.  (Piccolini v. Simon's Wrecking (1988) 686 F.Supp. 1063, 1073–1077;  see also, Baker v. Burbank–Glendale–Pasadena Airport Authority, supra, 39 Cal.3d 862, 868–869, 218 Cal.Rptr. 293, 705 P.2d 866.)   Accordingly, a new limitations period commenced with the sale of each coach located in the Park, and appellant's claim for damages are limited to those coaches sold within the five-year period prior to the time it filed its complaint.

Finally, we disagree with the City's characterization of appellant's challenge to the Ordinance as either a facial attack which is barred by the statute of limitations, or an as applied challenge which is not ripe for review.   The Ordinance on its face does not mandate that the park owner pay each departing tenant a sum of money representing an incident of ownership in the park owner's land.   And a review of the Ordinance does not reveal that a departing tenant will be able to realize a premium on the sale of his or her coach in place as a result of the combined effects of the Ordinance and the Mobilehome Residency Law.   Rather, appellant claims that the Ordinance, as actually implemented in the real world, in fact effects just such a transfer of wealth, in contravention of the Ordinance's purpose.   Constitutional protections do not vanish simply because the circumstances do not allow for an exact fit completely within a facial challenge or an as applied challenge.

 In addition, to the extent that the City contends that appellant's “as applied” challenge cannot be ripe unless it arises in the context of a challenge to an administrative decision denying a rent increase application after the sale of a coach, we disagree.⁵  Appellant claims that, as a result of the “premium” received by the former tenant, the new tenant is required to pay higher housing costs (typically in the form of higher mortgage payments).   It is preposterous to contend that the City would consider granting appellant permission to increase the pad rent charged to the new tenant who, by paying the “premium,” has already paid the equivalent of advance rent to the former tenant.   An application for a rent increase in these circumstances would be a patently absurd and obviously futile gesture.   We will not require such folly.

The judgment is reversed.   Each party is to bear its own costs on appeal.

FOOTNOTES

FOOTNOTE.  

1.   Appellant has not challenged the trial court's ruling relating to the due process claim so we treat that issue as waived.

2.   The City's petition for rehearing indicates that the purpose of the Ordinance is to prevent excessive rents and to protect the investment of mobilehome owners in their mobilehomes which are expensive and difficult to relocate.   The City argues that this purpose is different than preserving affordable housing.   Preventing excessive rents, or any other form of profit limitation, absent at least an arguable corresponding social harm (e.g. lack of affordable housing) would not be a legitimate state interest, and, the protection of mobilehome investment purpose, assuming arguendo that it is protection as opposed to enhancement, was somewhat eviscerated by the 1983 amendment which made the terms of the Ordinance applicable to recreational vehicles, fold-up collapsible trailers, campers, or any other “portable unit, consisting of a roof, floor and sides, designed to be loaded onto and unloaded from the bed of a pickup truck, and designed for human habitation for recreational or emergency occupancy․”  (City of Carson Ordinance No. 83–659U).   These items are no more expensive or difficult to relocate than any other large vehicle.   We are not bound by the arguments of the parties as to the purpose of the statute.   Its purpose is a question of law.   Whether its purpose is accomplished is a question of fact.  (See, e.g., Nollan v. California Coastal Comm'n (1987) 483 U.S. 825, 837, 107 S.Ct. 3141, 3149, 97 L.Ed.2d 677.)

3.   In its complaint appellant also contended that the Mobilehome Residency Law and the Ordinance together effected a physical taking because they deprived the landowner of its right to exclude others from its property, a usual incident of ownership.   As a result of the United States Supreme Court's holding to the contrary in Yee, supra, appellant has abandoned the physical taking argument on appeal.We also note the City's contention that appellant did not argue the regulatory taking claim below, and thus has waived its right to be heard on that issue.   The record reflects, however, that appellant did indeed argue this issue in its opposition to the City's motion for judgment on the pleadings.   It is therefore properly before us on appeal.

4.   The City's claim that Carson already decided the issues in this case is wrong.   Two contentions were raised in Carson:  First, that this Ordinance failed to provide sufficient standards for its rent review board to avoid an unlawful delegation of legislative power;  and, second, that inherent delays combined with a lack of automatic rent increases made this Ordinance unconstitutionally confiscatory.  (Carson Mobilehome Park Owners' Assn. v. City of Carson, supra, 35 Cal.3d at pp. 190–191, 197 Cal.Rptr. 284, 672 P.2d 1297.)   The fact that the opinion uses somewhat broad language in deciding that these two contentions were unfounded does not expand the issues presented in the case.   Cases are not authority for issues not presented or considered.  (Lubetzky v. Friedman (1991) 228 Cal.App.3d 35, 45, 278 Cal.Rptr. 706.)

5.   The City argues that the opinion issued last month by Division VI of the Court of Appeal of this District, Sandpiper Mobilehome Village v. City of Carpinteria, 10 Cal.App.4th 542, 12 Cal.Rptr.2d 623 (1992) 92 Daily Journal D.A.R. 14162, supports this contention.   That court held that the rent control ordinance of the City of Carpinteria (1) does not constitute a physical taking, (2) does not violate substantive due process, and (3) survives a facial taking challenge.   The court “[did] not consider [the ordinance's] validity as applied because Sandpiper did not allege requisite facts in its complaint to raise this issue.”  (Ibid.)  Because plaintiff in this case does not challenge the Ordinance on the three bases considered by the Sandpiper court, but rather on the one ground not decided in that case, Sandpiper does not provide authority for the instant case.   To the extent, however, that Sandpiper can be read to conclude that a legislative pronouncement of the public benefit of a given piece of legislation shields an Ordinance from judicial review, we respectfully disagree.   As Nollan instructs, a regulation restricting a property owner's use of its land must both have a lawful purpose and further the end advanced as justification for the restriction.  (Nollan v. California Coastal Comm'n, supra, 483 U.S. 825, 837, 107 S.Ct. 3141, 3148.)   The second prong of that test requires a factual inquiry into the actual effects of the regulation as applied;  a legislative pronouncement that a statute is effective or constitutional does not preclude a challenge to that fact.

J.D. LORD, Associate Justice.* FN* Assigned by the Chairperson of the Judicial Council.

FUKUTO, Acting P.J., and NOTT, J., concur.