McHugh v. Santa Monica Rent Control Board

*388 BROUSSARD, J., Concurring and Dissenting.

I agree that it is not a violation of the separation of powers doctrine to authorize an administrative agency to adjudicate claims between individuals when this power is reasonably necessary to effectuate the agency’s legitimate regulatory purpose, and when the essential judicial power remains in the courts by way of judicial review of agency determinations. (See maj. opn., ante, at p. 372.)

I do not agree that the portion of the Santa Monica Rent Control Ordinance, which permits the rent control board (Board) to order a landlord who has overcharged to pay damages of three times the overcharge, violates this standard. Nor do I agree that a Board order that is effective immediately so inhibits effective judicial review as to make the order unconstitutional.

1. Treble Damages.

The majority distort the scope of judicial review of legislative enactments and ignore the rationale for their own standard in rejecting the treble damage element of the ordinance. They do not question the general power of administrative agencies to impose penalties. They cannot; their own citations demonstrate that the matter is settled at the state and federal levels, and that many of our own state regulations provide for administrative penalties. (See maj. opn., ante, at p. 378, fn. 45.) They conclude, too, that “restitutive” compensatory damages are appropriate in the rent control context. Nonetheless they reject the former provision of the Santa Monica ordinance which provided that the Board may order a landlord who has overcharged on rents to pay the tenant “three (3) times the amount by which the payment . . . received or retained exceeds the maximum lawful rent.” (Santa Monica City Charter, art. XVIII, § 1809(a).) They offer two explanations. The first is that other methods such as “imposition of fines or penalties, awards of costs and attorney fees” could be used to induce compliance with the rent control ordinance, and there is no reason to think these would be insufficient. (Maj. opn., ante, at p. 378.) Second, they worry that the authority to award treble damages will encourage arbitrary and “disproportionate” results. {Ibid.)

The translation for these objections is that the majority do not like treble damages, think other methods of enforcement would work, and think that a treble damage award is too high for the sin being punished. These are proper considerations for legislating, not judging. Our job is to determine whether the provision is constitutional, not if it is a good idea. The provision is constitutional if it is reasonably necessary to the administrative body’s proper regulatory purpose, and if there is judicial review. It is and there is. That should be the end of the matter.

We start with the premise that legislative action is reasonable and constitutional. “‘[A]ll presumptions and intendments favor the validity of a *389 statute and mere doubt does not afford sufficient reason for a judicial declaration of invalidity. Statutes must be upheld unless their unconstitutionality clearly, positively, and unmistakably appears.’ [Citations omitted.] If the validity of the measure is ‘fairly debatable,’ it must be sustained. [Citations omitted.]” (Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 814-815 [ 258 Cal.Rptr. 161 , 771 P.2d 1247 ].) The presumption of constitutionality applies to municipal ordinances. (City of Industry v. Willey (1970) 11 Cal.App.3d 658 [ 89 Cal.Rptr. 922 ].) A heavy burden of proof is assumed by the party challenging the constitutionality of a measure. (2A Sutherland, Statutory Construction (4th ed. 1989 cum. supp.) § 45.11, p. 7.)

The majority fail to abide by these principles of judicial deference to legislative policymaking. We do not sit to determine the wisdom of legislation or the political worthiness of legislative goals or action. (Calfarm Ins. Co. v. Deukmejian, supra, 48 Cal.3d 805, 814 .) If we follow the majority’s lead in this case, we will put ourselves in the business of deciding whether the thousands of administrative regulations that bind up modern commercial activity are a good idea, and whether enforcement mechanisms cause businesses to incur “disproportionate” costs. This judicial encroachment on the legislative sphere will be a violation of the doctrine of separation of powers; what the Santa Monica ordinance authorized is not.

As the majority and the authorities they rely on explain, the reason we require that administrative adjudication be reasonably necessary to a legitimate administrative purpose is to avoid relegating purely private disputes, the traditional core of common law actions, to administrative resolution. (See maj. opn., ante, at pp. 366, 368, 372, 374.) A treble damage award for violating administrative regulations does not endanger judicial hegemony over traditional common law actions.

The treble damage award here is a penalty against the landlord for failing to comply with the ordinance. It is obviously not compensatory, but punitive. The tenant is compensated for the rent overcharge when the Board orders the payment of damages in the amount of the rent overcharge. The portion of the ordinance providing for an award of an additional $500, or three times the overcharge, whichever is greater, is clearly punitive and designed to enhance enforcement.

A penalty against an individual for violating a legitimate state regulation is completely unlike a traditional common law action between individuals. It is inextricably intertwined with the essential regulatory purpose of the Board—to set and enforce stabilized rents. The fact that it is payable to an individual rather than the state does nothing to detract from its essentially regulatory purpose. If we conclude that “restitutive” compensatory damages to remedy individual harm are necessary to the fulfillment of the *390 legitimate regulatory purpose of an administrative agency, punitive damages for violation of the regulatory scheme must be conceded to be reasonably necessary. We may not like the penalty, we may regard it as harsh, but its imposition does not invade the judicial province of adjudicating private disputes between individuals.

The majority are concerned that the power to award treble damages makes the risk of arbitrariness “inherent in any scheme of administrative adjudication” too high. (See maj. opn., ante, at p. 379.) There is a short answer to this concern: judicial review. Any arbitrariness in awarding treble damages is just as susceptible of correction by way of judicial review as arbitrariness in awarding “restitutive” compensatory damages.

2. Effective Date of Order.

The ordinance provides that a tenant “may deduct the penalty from future rent payments in the manner provided by the Board.” A Board regulation provided that its orders were final immediately. In this action, the Board authorized one tenant to withhold rent in the first month following the Board’s decision, and for additional months, and provided that the withholding should not be the basis for an unlawful detainer proceeding based on nonpayment of rent. The majority conclude that the order is unconstitutional because it was immediately enforceable at the “discretion of a private party.”

The majority complain that the tenant could withhold rent and resist an unlawful detainer action before the landlord had an opportunity to obtain judicial review. What is really at stake, however, is the landlord’s ability to seek a stay of the Board’s order pending judicial review. “Before there was an opportunity for the court to pass on whether to stay temporarily the Board’s rent withholding order, tenant Plevka immediately withheld rent, and continued to do so for three months thereafter.” (Maj. opn., ante, at p. 377.) Apparently, this makes the order unconstitutional in the view of the majority, though they never explain why this is so.

The majority’s unspoken assumption is that a tenant who has withheld rent will be unwilling or unable to satisfy a judgment ordering the repayment of the withheld rent. Since the landlord may be faced with a judgment-proof opponent, they conclude that the landlord has not had adequate judicial review. They provide no authority for this view. The fact that one may not be able to collect on a judgment does not mean that one has not had access to the courts. Many litigants take this risk; it is not a risk with constitutional significance.

The narrow holding of this case is only that the Board’s order was unconstitutional because it did not allow the landlord sufficient time to seek *391 a stay. As a factual matter, the only reason that the order here became “self-executing” and the tenant withheld rent before the court had an opportunity to decide whether to stay the order was that the landlord waited three months before requesting a stay. The Board issued its order in March, authorizing rent withholding for April, May and June. Starting in April the tenant withheld rent. Since the order was effective immediately, the landlord could have petitioned for judicial relief immediately, and sought a stay, before the withholding started in April. Instead, the landlord waited until late June to seek judicial relief and a stay.

The majority explain that the Board can avoid the constitutional problem by regularly staying enforcement of its orders for a period of time sufficient to allow an aggrieved party to seek a stay from the superior court. (Maj. opn., ante, at p. 377, fn. 44.) As the facts of the present case demonstrate, such a stay would normally be unnecessary. Since a Board order authorizing withholding of rent authorizes a future act, it may be effective immediately in the sense that the aggrieved party can immediately seek review of the order, but it is not enforceable in the sense that the tenant can immediately do anything unless the order is filed the day the rent is due. Furthermore, even a stay which is sought after the effective date of an order may undo the order and require remedial action pending judicial review. (See Cal. Administrative Mandamus (Cont.Ed.Bar 1966) § 10.8, p. 178.) Thus the status quo ante may be preserved even if the stay is sought and granted after the order became effective. For example, in this very case, once the landlord did request a stay, the court granted one, adding an order to the tenant to pay the withheld rent, retroactive to April 1, into a trust account held by the landlord’s attorney, until the matter had been finally adjudicated in court. The landlord then had unimpaired judicial review and no practical obstacle to enforcing a judgment in his favor.

The majority say that this decision applies only to these facts, and has no effect on other administrative orders having immediate effect, “including immediately effective restitutive orders issued by professional licensing boards.” (Maj. opn., ante, at p. 377, fn. 44.) Yet they provide no basis for distinguishing this case from others in which an immediately effective order is available.

It is established that an agency has the authority to make its orders effective immediately. (Hohreiter v. Garrison (1947) 81 Cal.App.2d 384, 402-403 [ 184 P.2d 323 ]; Cal. Administrative Hearing Practice (Cont.Ed.Bar 1984) § 4.45, p. 246.) The Administrative Procedure Act provides for the many agencies operating under its terms that an agency decision is effective 30 days after it is delivered unless the agency orders that the decision become effective sooner. (Gov. Code, § 11519, subd. (a).) It is obvious that in the case of professional licensing, an immediately effective order may

*392 often be necessary. An incompetent physician or unsafe hospital should not provide services pending judicial review of a suspension or revocation order. In the area of pollution control, it is equally obvious that cease and desist and abatement orders must frequently be effective immediately. Thus, for example, a regional water quality control board may issue a cease and desist order against a party discharging or threatening to discharge prohibited waste. The order is effective immediately and may require immediate compliance. (Wat. Code, § 13303; see Collins, Complete Guide to Hazardous Materials Enforcement and Liability (1985) § 10-6.) Such a board’s cleanup and abatement orders are also effective immediately. (Wat. Code, § 13304.) Similarly, a commissioner of the Department of Food and Agriculture may issue a cease and desist order for improper handling or sale of pesticides, which is effective immediately. (Food & Agr. Code, § 11897.) While these orders are not executed by a third party, as in the rent control situation, they may cause far greater economic losses before judicial review or a stay is available.

Although the majority have no desire to do so, their opinion casts into doubt whether administrative agencies may ever order any act to be done before judicial review or a stay is available. For the purpose of effective judicial review, there is no distinction between an immediately effective order suspending or revoking a license or requiring a licensee to reimburse a sum of money, an order requiring a polluter to cease and desist, and an order authorizing the withholding of rent. I fear that this opinion unwittingly will call into question the legitimacy of administrative action which is widespread and necessary for the protection of the public.

The petition of respondent McHugh for a rehearing was denied November 1, 1989.