CC/SPE, LLC v. City of Rancho Mirage

Filed 2/7/08 CC/SPE, LLC v. City of Rancho Mirage CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of Riverside County. Lawrence W. Fry, Judge. Affirmed.

Hart, King & Coldren, Robert S. Coldren, and C. William Dahlin for Plaintiff and Appellant.

Law Office of Toni Eggebraaten and Toni Eggebraaten for Defendants and Respondents.

No appearances for Real Parties in Interest.

Appellant CC/SPE, doing business as Colony Mobilehome Park (Colony), appeals from the trial courts denial of its motion for attorney fees. Colony contends that the court abused its discretion in denying the motion. We disagree.

FACTUAL AND PROCEDURAL BACKGROUND

Colony owns a mobilehome park in Rancho Mirage. Defendant City of Rancho Mirage (the City) has a Mobilehome Park Rent Control Ordinance (the rent control ordinance or the ordinance), which applies to mobilehome parks and their residents located within Rancho Mirage. The ordinance is codified at chapter 9.58 of the Rancho Mirage Municipal Code (RMMC). The Citys Mobilehome Fair Practices Commission (the Commission) is charged with the duty of interpreting, implementing, and applying the ordinance.

In June 2004, Colony served a 90-day Notice of Rent Increase on Lloyd and Therese Gallus (the Galluses), who rented space No. 216 in Colonys mobilehome park. Because the mobilehome space was not the Galluses principal residence, it was exempt from the rent control ordinance. (Civ. Code, 798.21.) Pursuant to the Notice of Rent Increase, Colony increased the Galluses monthly rent from $519.56 to $825. The rent increase went into effect on October 1, 2004. The Galluses did not contest the rent increase and started paying the increased rate as scheduled.

The Galluses Petitionfor Determination

As a result of the rent increase, the Galluses decided to sell their mobilehome. Colony informed them that the rent charged to any subsequent purchaser would be $825, regardless of whether the purchaser utilized the mobilehome as his/her principal residence. The Galluses had difficulty selling their mobilehome, as a result of Colonys expressed intent to charge $825 in rent, regardless of the status of the new tenants. On October 22, 2004, the Galluses filed a petition for determination (the petition) with the Commission, requesting that the Commission rule that when the Galluses sold their mobilehome, the rent level would be decreased to the average rent charged in the mobilehome park, provided that the new tenants made the mobilehome their principal residence. Colony sent a letter to the Commission, objecting to the petition.

The hearing on the petition was held on November 8, 2004. On November 17, 2004, the Commission determined that if the Galluses sold their mobilehome to a person who would use it as his/her principal residence, the maximum rent that Colony could charge was the average of the rents charged for those spaces that were subject to rent control.

Colonys Complaint for Declaratory Relief and Petition for Writ of Administrative Mandamus

On January 21, 2005, Colony filed a complaint for declaratory relief (the complaint) and petition for writ of administrative mandamus (the writ) against the City and the Commission (collectively, defendants), with the Galluses as the real parties in interest. Colony alleged that: 1) defendants waived the $350 filing fee for the Galluses petition, in direct conflict with the provisions of the ordinance; 2) no notice of the hearing on the petition was ever provided to Colony; rather, Colony learned of the hearing by chance; furthermore, the ordinance did not require that notice of a hearing on a petition for determination filed by a mobilehome park resident be served on the mobilehome park owner; 3) the ordinance allowed a resident of the City to file a petition for determination only with respect to a mobilehome space that was subject to the ordinance; defendants improperly allowed the Galluses to file a petition for determination, since they were not subject to the ordinance; 4) the Commission made its ruling on the Galluses petition despite being advised that it lacked jurisdiction to decrease rents at Colonys mobilehome park, except as expressly authorized by the ordinance; furthermore, the Commission acted upon a petition for determination that was improperly accepted since the Galluses were not subject to the ordinance; 5) the Galluses petition did not allege that a decrease in rent was needed because of any decrease in services; 6) the Galluses failed to present any evidence in support of their petition; and 7) the Galluses did not allege or prove that they were subject to the ordinance or that they had standing to file a petition for determination.

In its claim for relief on the writ, Colony specifically alleged that the Commissions determination on the Galluses petition was arbitrary and capricious, contrary to law, in excess of the Commissions jurisdiction, an abuse of discretion, and unsupported by the evidence. Colony specifically alleged that the ordinance did not allow current or base rent to be decreased due to a change in tenancy, and that the defendants conduct acted as a taking of property without just compensation or due process (i.e., the taking of Colonys property interest and right to collect $825 per month for the rental of space No. 216). Colony also reserved its right for independent adjudication in federal court of all federal constitutional questions.

In its claim for relief on the complaint for declaratory relief, Colony specifically alleged that defendants had acted in the past, and intended to act in the future, in a manner that allowed for residents to obtain relief without payment of fees upon request, and specifically, that there was no reason to waive the Galluses filing fee since they owned two homes and had the ability to pay. Colony further alleged that defendants maliciously and with intent to injure [it] and other park owners, had implemented a hearing process that favored tenants and denied it and other park owners due process and equal protection.

Ultimately, Colony requested the court to: 1) issue a declaratory judgment setting forth how the ordinance was invalid and unenforceable, and declaring the defects in the ordinance; 2) issue a peremptory writ of administrative mandamus directing defendants to comply with the ordinance and dismiss the Galluses petition on the grounds that the Commission lacked jurisdiction over it and that neither the current nor base rent could be decreased under the ordinance absent a reduction in services; 3) declare that the ordinance was unconstitutional, void, and unenforceable to the extent it was preempted by state law, that the ordinance was contrary to rudimentary concepts of fairness as contemplated by the due process and equal protection provisions of the California Constitution, and that the ordinance did not provide due process to Colony or other mobilehome park owners; 4) award attorney fees under Government Code section 800; and 5) award costs.

A hearing was held on the writ on August 26, 2005. On January 13, 2006, the trial court granted the motion on the writ and ordered defendants to set aside their November 17, 2004, determination. The court found that defendants were without subject matter jurisdiction or authority under the ordinance to order a decrease in rent for a mobilehome park space unless there was a diminution in services. The court further remanded the matter to defendants to issue a new Notice of Determination on the Gallus petition in accordance with the courts order. Defendants complied.

The City also formally amended the ordinance by deleting the provision of the ordinance which purportedly gave the Commission jurisdiction and authority to hear any form of complaint or grievance by a mobilehome resident. The amended ordinance limited the subject matter jurisdiction of the Commission to rent control issues. The amended ordinance also set forth a procedure by which written notice of any hearing involving a mobilehome park would be provided to the park owner/manager.

After the court ruled on the writ, Colony and the Commission entered into a stipulation whereby Colony agreed to dismiss the declaratory relief portion of the complaint, and the Commission agreed that Colony could file a motion for attorney fees and costs as the prevailing party.

Colonys Motion for Attorney Fees

Colony filed a motion for attorney fees (the motion) on April 21, 2006, and requested fees and costs in the amount of $48,248.94. In its motion, Colony asserted that it was the prevailing party with regard to the writ, since the court granted its motion. Colony further contended that it was the prevailing party as to the declaratory relief claim since that claim caused the City to amend the ordinance to include a notice requirement and to limit the Commissions jurisdiction. Colony also argued that it was entitled to collect attorney fees under Government Code section 800 because defendants actions were arbitrary and capricious. In support of its position, Colony argued that: 1) Colony was not provided with proper written notice or an opportunity to respond to the Galluses petition, and that the ordinance did not expressly require notification to the mobilehome park owner when a petition was filed by a tenant; 2) defendants did not have subject matter jurisdiction to hear the petition since the Galluses space was not subject to the ordinance, and defendants lacked any jurisdiction or authority under the ordinance to decrease current rent for a future tenant who may or may not use the space as a principal residence; 3) the Galluses lacked standing to bring a petition before defendants since their space was not subject to the ordinance; and 4) defendants improperly waived the Galluses filing fee.

Colony further argued that it was entitled to recover attorney fees pursuant to the private attorney general doctrine in Code of Civil Procedure section 1021.5.^[1] Colony asserted that: 1) its lawsuit protected all mobilehome park owners, residents, and the public at large from defendants unconstitutional actions, and will deter other governmental entities from undertaking similar activities; 2) its lawsuit conferred benefits on all mobilehome park owners in the City regarding the new notice requirement in the ordinance; 3) its lawsuit also benefited the entire city of Rancho Mirage, since the ordinance was amended to delete the Commissions unlawful grant of jurisdiction to hear and determine a complaint from a mobilehome resident on any subject matter; the amendment benefited all city residents by conserving defendants time and resources; 4) the suit was brought to enforce the fundamental constitutional rights of due process and equal protection, and therefore benefited the entire public; 5) there was no public agency willing to bring an action, and the financial burden of private enforcement outweighed Colonys personal financial stake in the matter; and 6) there was no pecuniary advantage to Colony for the relief sought and obtained in the declaratory relief claim, which only dealt with the constitutionality of the ordinance; moreover, even though Colony gained a pecuniary benefit from the writ, the benefit to the public was greater since all park owners and residents benefit from a consistent and fair application of the law.

Defendants Opposition to the Motion for Attorney Fees

Defendants responded to Colonys motion by arguing that the only issue that was actually adjudicated was the statutory interpretation of the language of RMMC section 9.58.020(D), which read: If a space in a mobilehome park is voluntarily vacated on or after May 1, 1982, and while this chapter is in effect, the rent may be increased upon the rerental of the space to an amount which does not exceed the average rental rate for comparable space rent in the park. (Italics added by defendants.) Defendants argued that they interpreted the section to limit the adjusted rent, up or down, to the average rental rate for those spaces subject to rent control. The interpretation was made in a good faith effort to reconcile an unexpected gap in the ordinance created by the effect of a state statute passed after the ordinance, whereby a space might be removed from rent control and then returned to rent control when it was re-occupied by a qualifying tenant. Defendants argued that there was no basis for a claim that they were acting in bad faith. Defendants further noted that only a decision made as a result of an administrative hearing could be the subject of a fee request under Government Code section 800; thus, all of Colonys references to matters beyond the scope of the administrative hearing (e.g., the language of the ordinance that the City voluntarily clarified in its amendments) were irrelevant. Defendants also noted that it was not clear that Colony was liable for the attorney fees, since it had redacted the customers name on the fee bills it offered in support of its motion.

In addition, defendants argued that Colony did not meet the standard to collect attorney fees under the private attorney general statute, since its lawsuit would only benefit those who owned the five mobilehome parks in Rancho Mirage. They asserted that the primary effect of the lawsuit was to advance Colonys pecuniary interests. Defendants noted that Colony filed the same challenge to the Citys decision regarding two other mobilehome spaces. Thus, Colony was protecting $10,800 per year in potential income ($300/month x three spaces x 12 months). Finally, defendants asserted that Colonys requested costs were not recoverable. Defendants noted that the City already voluntarily reimbursed Colony its filing fees for the two other writ proceedings that had now been dismissed.

The court denied Colonys motion for attorney fees, stating that Colony had made no showing that the Citys actions were arbitrary or capricious. (Gov. Code, 800.) Colonys motion consisted almost entirely of argument, with no supporting evidence. The court also found that, due to the lack of admissible evidence, Colony failed to make a showing that section 1021.5 applied. The court further found that Colony offered no authority for an award of costs in addition to those for which it had already been reimbursed.

ANALYSIS

I. The Trial Court Properly Denied Colonys Attorney Fees Under Section 1021.5

Colony contends that the trial court abused its discretion when it found that there was no admissible evidence to show that section 1021.5 applied. In other words, there was no evidence that demonstrated that the litigation conferred a significant or widespread benefit on a broad class of citizens. (Concerned Citizens of La Habra v. City of La Habra (2005) 131 Cal.App.4th 329, 334, 336 (Concerned Citizens).) The only apparent people who will benefit from Colonys lawsuit are the owners/managers of mobilehome parks in Rancho Mirage and their tenants.

As to the third requirement, it is unclear from the present record whether the financial burden of private enforcement in this case is such as to make an attorney fee award appropriate under the private attorney general theory. As the Court of Appeal recently explained in County of Inyo v. City of Los Angeles (1978) 78 Cal.App.3d 82, 89, An award on the private attorney general theory is appropriate when the cost of the claimants legal victory transcends his personal interest, that is, when the necessity for pursuing the lawsuit placed a burden on the plaintiff out of proportion to his individual stake in the matter. [Citation.] (Woodland Hills Residents Assn v. City Council of L.A. (1979) 23 Cal.3d 917, 941.) Here, Colony clearly pursued this litigation for its own pecuniary interests. The benefit to Colony of its legal victory is clear. Since the court found that defendants were without subject matter jurisdiction or authority under the ordinance to order a decrease in rent for a mobilehome park space unless there was a diminution in services, Colony was able to keep the Galluses mobilehome space (and those future mobilehome spaces in similar circumstances) free from rent control. Thus, Colony would be able to keep the rent on the Galluses space at approximately $300 per month over the average rent for a space in the mobilehome park. However, there was no evidence that the cost of Colonys legal victory transcended its pecuniary interest.

The fourth requirement is that it was unfair to make Colony pay the fees out of any recovery. Inasmuch as Colonys action produced no actual monetary recovery, this factor was not applicable.

As stated above, the award of attorney fees under section 1021.5 is an equitable function, and the determination of whether the statutory requirements have been met is best decided by the trial court.  (Concerned Citizens, supra, 131 Cal.App.4th at p. 334.) On this record, we cannot conclude that the trial courts determination was a prejudicial abuse of discretion.

II. The Trial Court Properly Denied Attorney Fees Under Government Code Section 800

Colony argues that it was entitled to attorney fees under Government Code section 800 since defendants actions were arbitrary and capricious. It specifically contends that the Commission ignored provisions in the ordinance by: 1) hearing the Galluses petition, even though they lacked standing since their mobilehome space was not subject to the ordinance, and, even though there had been no decrease in park services; 2) ordering a decrease in rent, even though the ordinance did not provide for current rent to be decreased due to a change in tenancy; and 3) improperly waiving the required filing fee for the Galluses. We conclude that the trial court properly found that Colony failed to show that defendants actions were arbitrary or capricious.

A. The Actions of the City and the Commission Were Not Arbitrary or Capricious

Government Code section 800 permits a litigant who successfully challenges the determination of an administrative agency to recover attorney fees if the litigant demonstrates that the agency acted in an arbitrary or capricious manner. [Citation.] The statute sets out four conditions for the recovery of attorney fees: (1) a civil action to review a determination of an administrative proceeding; (2) the complainant prevailed against a public entity or official; (3) arbitrary or capricious action or conduct by a public entity or official; and (4) the complainant is personally obligated to pay the fees. [Citation.] (Zuehlsdorf v. Simi Valley Unified School Dist. (2007) 148 Cal.App.4th 249, 255, fn. omitted (Zuehlsdorf).)

We note that Colony was undisputedly the prevailing party in the litigation. Defendants do, however, dispute whether Colony was obligated to pay the attorney fees, since Colonys counsel deleted the customers name on the fee bills offered in support of its motion. Defendants further assert that [i]t is not beyond the realm of possibilities that counsel was compensated by a park owners association interested in defeating rent control ordinances. We reject defendants claims as pure speculation, and note that the bills clearly state The Colony as the addressee.

The existence of the element of arbitrariness and capriciousness is the key issue in this appeal, since the court found that Colony made no showing that the Citys actions were arbitrary or capricious. The phrase arbitrary or capricious has no precise meaning, and the code does not undertake to define it. (Madonna v. County of San Luis Obispo (1974) 39 Cal.App.3d 57, 61-62.) Whether conduct was arbitrary and capricious is a question of fact within the sound discretion of the trial court. [Citations.] (Zuehlsdorf, supra, 148 Cal.App.4th at p. 256.) The trial courts determination will be sustained on appeal unless an abuse of discretion is shown. (Reeves v. City of Burbank (1979) 94 Cal.App.3d 770, 776.)

In Indian Springs, Ltd. v. Palm Desert Rent Review Bd. (1987) 193 Cal.App.3d 127 (Indian Springs), the sole question was whether the Palm Desert Rent Review Board (the Board) properly interpreted a section of the City of Palm Deserts rent control regulations (the regulations) regarding a mobilehome park owners entitlement to hardship increases in mobilehome rents. (Id. at pp. 129, 133.) The court explicitly disagreed with the Boards interpretation of the regulations and directed the trial court to issue a peremptory writ of mandate instructing the Board to: 1) set aside its previous decision granting the mobilehome park owner a hardship rent increase of $22.05 per space per month; and 2) recalculate the hardship rent increase pursuant to the manner set forth in the regulations. (Id. at pp. 133-137.) In determining that the Board improperly interpreted the regulations, the court declared that the language used in the regulations was unmistakably clear. (Id. at p. 134.) Nonetheless, the court denied the mobilehome park owners request for attorney fees pursuant to Government Code section 800. (Indian Springs, supra, 193 Cal.App.3d at p. 137.) The court held that [a]n erroneous interpretation of the law does not per se suggest that the action of the public entity or an officer thereof was arbitrary or capricious. [Citation.] (Id. at pp. 137-138.) The court stated that it found nothing in the record to justify a conclusion that the Boards actions were arbitrary or capricious. (Id. at p. 138.)

Similarly, the record in the instant case does not disclose evidence of arbitrary conduct or bad faith on the part of defendants. Rather, it merely reflects a bona fide dispute concerning interpretation of the ordinance. The core issue was the statutory interpretation of the language of RMMC section 9.58.020(D), which essentially provided that if a space in a mobilehome park was voluntarily vacated, the rent [could] be increased upon the rerental of the space to an amount which [did] not exceed the average rental rate for comparable space rent in the park. Defendants interpreted the section to limit the adjusted rent, up or down, to the average rental rate for those spaces subject to rent control. Defendants contended that the issue was not that of a rent increase, but simply of the amount of rent that could be charged to subsequent purchasers. In response to Colonys other arguments, defendants asserted that the Commission had jurisdiction to hear the Galluses petition under RMMC section 9.50.070(B), that the Galluses had standing under RMMC section 9.58.080(A), that proper notice was provided to Colony, and that the City properly waived the Galluses filing fee under the provisions of the RMMC. Defendants interpretation of the RMMC was apparently made in good faith, and defendant presented no evidence of arbitrary or capricious conduct.

In sum, a bona fide dispute concerning the interpretation of the RMMC was insufficient to justify the imposition of the statutory sanction. (Von Durjais v. Board of Trustees (1978) 83 Cal.App.3d 681, 688-689.) Thus, the court properly denied Colonys request for attorney fees under Government Code section 800.

DISPOSITION

The judgment is affirmed. Respondents shall recover their costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

/s/ HOLLENHORST

Acting P.J.

We concur:

/s/ RICHLI

J.

/s/ GAUT

J.

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^[1] All further statutory references will be to the Code of Civil Procedure unless otherwise indicated.