Amicus Curiae Brief — Yee v. Escondido

~

y JUL 18 1999

No. 90-1947

CLERK

In The

Supreme Court of the United States

October Term, 1990

+

JOHN K. YEE, et al.,

Petitioners,

THE CITY OF ESCONDIDO,

Respondent.

.

Petition for Writ of Certiorari to the

Fourth Appellate District, Division One,

Court of Appeal for the State of California

¢

BRIEF AMICUS CURIAE OF

PACIFIC LEGAL FOUNDATION IN SUPPORT

OF PETITIONERS JOHN K. YEE, ET AL.

S

RoNALD A. ZUMBRUN

*ANTHONY T. Caso

*Counsel of Record

R. S. RApFrorD

Of Counsel

Pacific Legal Foundation

2700 Gateway Oaks Drive

Suite 200

Sacramento, California 95833

Telephone: (916) 641-8888

Attorneys for Amicus Curiae,

Pacific Legal Foundation

—

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES CITED.................. ii

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I GO GD GeO ccc cccvssccccccseeses 3

SUMMARY OF ARGUMENT....................... 4

tien a hua ve sedus.ebskcntd beabanksesses< 5

THE DECISION BELOW, IF ALLOWED TO STAND,

WILL RESULT IN A TAKING OF PETITIONERS’

PROPERTY WITHOUT JUST COMPENSATION .. 5

I er ee ee ee er ere 12

TABLE OF AUTHORITIES CITED

Page

Cases

Armstrong v. United States, 364 U.S. 40 (1960)....... 7

Federal Communications Commission v. Florida

Power Corp., 480 U.S. 245 (1987) .................. 9

First English Evangelical Lutheran Church of

Glendale v. County of Los Angeles, 482 U.S. 304

CODED . oc eccccscccccncccccuceseubaneauman inane 2

Hall v. City of Santa Barbara, 797 F.2d 1493

oe Re 5, 6, 8, 9, 10, 11

Hodel v. Irving, 481 U.S. 704 (1987)............. 2, 5, 8

Kaiser Aetna v. United States, 444 U.S. 164 (1979) . 5, 7, 8

Keystone Bituminous Coal Association v.

DeBenedictis, 480 U.S. 470 (1987) .................. 2

Loretto v. Teleprompter Manhattan CATV Corp.,

GS UG. Gi CHRD occ ccceccsccensvccusceenuaumeean 7

Nollan v. California Coastal Commission,

UE OL, Fr 2, 5, 8, 9

Pinewood Estates of Michigan v. Barnegat Township

Leveling Board, 898 F.2d 347 (3d Cir. 1990) .... 5, 6, 10

Rohr Aircraft Corp. v County of San Diego,

Re & 8, Fi weer, 6

United States v. Causby, 328 U.S. 256 (1946).......... 7

United States v. General Motors Corp.,

i BS Ek, Pee 7

United States v. Virginia Electric and Power Co.,

SES US. Gae CURSED... ccccccccccscsuseusceueeeiee 7

TABLE OF AUTHORITIES CITED—Continued

STATUTES

Cal. Civ. Code § 798, et seq

RuLes

Supreme Court Rule 10(b)

UNiteD States CONSTITUTION

Article VI, clause 2

MISCELLANEOUS

Hirsch and Hirsch, Legal-Economic Analysis of

Rent Controls in a Mobile Home Context: Place-

ment Values.and Vacancy Decontrol, 35 UCLA

L. Rev. 399 (1988)

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Page

No. 90-1947

¢

In The

Supreme Court of the United States

October Term, 1990

¢

JOHN K. YEE, et al.,

Petitioners,

V.

THE CITY OF ESCONDIDO,

Respondent.

*

Petition for Writ of Certiorari to the

Fourth Appellate District, Division One,

Court of Appeal for the State of California

o

BRIEF AMICUS CURIAE OF

PACIFIC LEGAL FOUNDATION IN SUPPORT

OF PETITIONERS JOHN k.. YEE, ET AL.

S

Pursuant to Supreme Court Rule 37, Pacific Legal

Foundation (PLF) respectfully submits this brief amicus

curiae in support of the petition for writ of certiorari.

Written consent to the filing of this brief has been granted

by counsel for all parties. Copies of the letters of consent

have been lodged with the clerk of this Court.

+

INTEREST OF AMICUS

Pacific Legal Foundation is a nonprofit, tax-exempt

corporation organized under the laws of the State of

California for the purpose of engaging in litigation in

matters affecting the public interest. PLF has over 20,000

contributors and supporters located throughout the coun-

try and maintains its principal office in Sacramento, Cali-

fornia. Policy is set by a Board of Trustees composed of

concerned citizens, the majority of whom are attorneys.

PLF’s Board evaluates the merits of any contemplated

legal action and authorizes such action only where the

Foundation’s position has broad support within the gen-

eral community. PLF’s Board has authorized the filing of

an amicus curiae brief in this matter.

Amicus seeks here to augment the argument in the

petition for writ of certiorari. It is believed that PLF’s

public policy perspective and litigation experience in

support of private property rights will provide an addi-

tional viewpoint with respect to the constitutional issues

presented. PLF has participated in numerous cases

involving issues arising under the Takings and Due Pro-

cess Clauses of the Fifth and Fourteenth Amendments to

the United States Constitution. Its attorneys were counsel

of record in Nollan v. California Coastal Commission,

483 U.S. 825 (1987), and PLF participated as amicus curiae

in Keystone Bituminous Coal Association v. DeBenedictis,

480 U.S. 470 (1987); Hodel v. Irving, 481 U.S. 704 (1987);

and First English Evangelical Lutheran Church of Glendale v.

County of Los Angeles, 482 U.S. 304 (1987).

The present case involves an egregious violation of

federal constitutional rights in the guise of local land use

regulation. The opinion below upholds a mobile home

rent control scheme that effectively transfers a fee interest

from the owners of mobile home parks to the owners of

mobile home coaches situated in those parks. This regula-

tory wealth transfer is substantially identical to schemes

struck down by two federal Circuit Courts as violating

the Takings Clause. The ordinance also violates this

Court’s tests for regulatory takings by failing to substan-

tially advance legitimate governmental interests and by

depriving park owners of economically viable use of their

property.

This amicus believes the opinion below places Cali-

fornia state courts in direct conflict with federal case law

on a question of federal constitutional rights. Moreover,

the opinion below conflicts with this Court’s decision in

Nollan and other regulatory takings cases. If allowed to

stand, the opinion below will constitute a serious setback

for individual rights by undermining the constitutional

prohibition against taking private property without just

compensation.

STATEMENT OF THE CASE

Petitioners, owners of mobile home parks in the City

of Escondido, brought an action in state court challeng-

ing, as a taking without compensation, the city’s mobile

home rent control ordinance. The ordinance, in concert

with the state Mobilehome Residency Law (Cal. Civ. Code

§ 798, et seq.), gives well-behaved tenants a perpetual

right to occupy their mobile home pads at below market

rents. Someone buying a mobile home coach from a ten-

ant in an Escondido park will acquire that same right.

Petitioners allege that the price of used mobile homes

in Escondido has increased dramatically since passage of

the rent control ordinance. They allege that this increase

is due entirely to the fact that existing tenants are able to

monetize the value of perpetual occupancy of the owners’

property at controlled rents. Yee v. City of Escondido, 224

Cal. App. 3d 1349, 1352 (1990). Rather than let petitioners

prove these allegations at trial, the trial court sustained

the city’s demurrer, without leave to amend, and dis-

missed the action. The California Court of Appeal

affirmed, ruling that the complaint did not state a cause

of action for an uncompensated taking under the Fifth

Amendment to the United States Constitution.

6

SUMMARY OF ARGUMENT

In holding that petitioners have not stated a claim

under the Takings Clause, the court below expressly

rejects the contrary rulings of two federal Circuit Courts.

Yee v. City of Escondido, 224 Cal. App. 3d at 1354-59. This

creates a direct conflict between the federal courts and

California state courts on a question of federal constitu-

tional law.

Moreover, the holding below rejects the clear teach-

ing of this Court. The regulation at issue in this case

confiscates a marketable interest in real property from the

owners of mobile home parks and transfers it to the

owners of certain mobile homes. The relevant property

interest—in effect, a servitude—-is well within the main-

stream of those recognized by this Court as qualifying for

protection under the Takings Clause.

The servitude taken by the Escondido ordinance is a

valuable commodity that is routinely bought and sold in

the open market. The fair market value of the servitude is

measured by the resale premium commanded by mobile

home coaches located in petitioners’ mobile home parks,

compared with identical coaches located on unregulated

sites. See Hirsch and Hirsch, Legal-Economic Analysis of

Rent Controls in a Mobile Home Context: Placement Values

and Vacancy Decontrol, 35 UCLA L. Rev. 399 (1988).

The Escondido ordinance simply seizes this valuable

commodity from petitioners and transfers it, without

compensation, to third parties.

This Court has repeatedly held that regulations

which confiscate a discrete, marketable property interest

without compensation violate the Takings Clause of the

Fifth Amendment. E.g., Kaiser Aetna v. United States,

444 U.S. 164 (1979); Hodel v. Irving, 481 U.S. 704; Nollan v.

California Coastal Commission, 483 U.S. 825. By any consis-

tent application of this Court’s precedent, the same con-

clusion must apply to the Escondido ordinance at issue in

this case.

ARGUMENT

THE DECISION BELOW, IF ALLOWED TO STAND,

WILL RESULT IN A TAKING OF PETITIONERS’

PROPERTY WITHOUT JUST COMPENSATION

The Court of Appeal readily admitted that two fed-

eral Circuit Courts (the Ninth Circuit in Hall v. City of

Santa Barbara, 797 F.2d 1493 (9th Cir. 1986) and the Third

Circuit in Pinewood Estates of Michigan v. Barnegat Town-

ship Leveling Board, 898 F.2d 347 (3d Cir. 1990)) would

hold that these allegations do state a claim for a taking.

Yee v. City of Escondido, 224 Cal. App. 3d at 1354-59. But

the Court of Appeal, noting that lower federal court

decisions are not binding upon the state courts even on

questions of federal law (Rohr Aircraft Corp. v. County of

San Diego, 51 Cal. 2d 759, 764 (1959)), rejected the reason-

ing of the federal courts. Yee, 224 Cal. App. 3d at 1358-59

n.12. Thus a direct conflict now exists between the federal

courts and the California state courts. Supreme Court

Rule 10(b).

The federal courts in Hall and Pinewood Estates found

that, when buyers are willing to pay a premium for a

mobile home coach located on a rent-controlled pad, they

are purchasing more than just the coach. Rather, they are

acquiring a property interest—a type of servitude—in the

site itself. The servitude entitles a coach owner to perpet-

ually occupy the property of another without paying fair

market rent.

This servitude represents a freely marketable interest

in the real property of the park owner. The regulations at

issue transfer this property interest to the owners of

mobile home coaches occupying sites in the park. The

federal courts concluded that this transfer of a freely

marketable property interest comprises a per se taking,

requiring just compensation under the Takings Clause.

The California Court of Appeal in Yee disagreed with

this view. According to the Court of Appeal, “[t}he criti-

cal question is whether such a transfer can be justified by

a rational governmental purpose,” and whether the con-

trolled rents are “fair and reasonable.” Yee, 224 Cal. App.

3d at 1354.

This rejection of the per se rule is more than just a

rejection of the reasoning of two federal courts, as

claimed by the Court of Appeal. It is instead the rejection

of a substantial body of United States Supreme Court

precedent which is binding on state courts under the

Supremacy Clause. U.S. Const. Art. VI, cl. 2.

There can be no doubt that the servitude transferred

to the owners of mobile heme coaches is a protected

property interest under the Fifth Amendment. This Court

has defined the interests subject to constitutional protec-

tion as all those rights inhering in an individual’s relation

to the thing owned, including the rights of possession,

use, and disposal. United States v. General Motors Corp.,

323 U.S. 373, 378 (1945). Protected property interests

include not just fee interests and leaseholds, but “every

sort of interest the citizen may possess.” Id. Specific prop-

erty interests that have been recognized by this Court

under the Takings Clause have included the use of air

space, United States v. Causby, 328 U.S. 256 (1946); flowage

easements, United States v. Virginia Electric and Power Co.,

365 US. 624 (1961); liens, Armstrong v. United States,

364 US. 40 (1960); the right to exclude third parties,

Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419

(1982); and the right to exclude the general public, Kaiser

Aetna v. United States, 444 U.S. 164. The freely marketable

servitude confiscated by the Escondido ordinance falls

well within the mainstream of property interests qualify-

ing for constitutional protection.

In the absence of the regulations at issue, mobile

home coach owners could have purchased a servitude

from park owners guaranteeing them a perpetual coach

site at below-market rents. The fair market value of the

servitude would have been determined through negotia-

tion, and the park owner would have received this

amount in exchange for his property interest. The Escon-

dido ordinance in the case at bar, like the Santa Barbara

ordinance in Hall, simply confiscates this servitude and

transfers it to coach owners, without compensating peti-

tioners for the loss of their property.

Similar issues have come before this Court. In Kaiser

Aetna v. United States, 444 U.S. 164, for example, the

federal government sued the owner of a pond which had

been connected to the ocean by the owner’s construction

of a channel. The government sought a declaration that,

by connecting the pond to the navigable waters of the

United States, the public had obtained a servitude giving

them “a right of access to what was once petitioners’

private pond.” Id. at 166. This Court held that the govern-

ment’s attempt to seize such a servitude “goes so far

beyond ordinary regulation . .. as to amount to a taking.”

Id. at 178.

Again, in Hodel v. Irving, 481 U.S. 704, Congress

attempted to transfer small common tenancy interests in

land from the Indians who owned them to the tribe. Id.

at 708-09. Likening the case to the attempted seizure of a

servitude in Kaiser Aetna, this Court ruled that transfer-

ring even these small fractionalized interests amounted to

an unconstitutional taking.

In Nollan v. California Coastal Commission, 483 U.S.

825, a state agency required a property owner to convey

an easement as a condition to the issuance of a building

permit. This Court first considered whether such a con-

veyance could be demanded by simple legislative fiat—

such as the Escondido ordinance in the case at bar. On

that question, the Nollan Court held:

“Had California simply required the Nollans to

make an easement across their beachfront avail-

able to the public . . . rather than conditioning

their permit ... we have no doubt there would

have been a taking.” Id. at 831.

It should be noted that the property owners in Nollan

already freely permitted people to traverse their beach.

Id. at 858 (Brennan, J., dissenting). Nevertheless, the

demand that they forfeit a property interest giving the

public a formal right of occupancy was held to violate the

Takings Clause. The same was true of Hall and, by any

consistent application of precedent, the same is true of

the case at bar. The Court of Appeal’s observation that

owners of mobile home parks are not forced to involun-

tarily accept the occupation of their property by third

persons (Yee, 224 Cal. App. 3d at 1358) does nothing to

distinguish these cases from the relevant line of Supreme

Court precedent.

The court below hoped by that observation to portray

Hall and its progeny as inconsistent with Federal Commu-

nications Commission v. Florida Power Corp., 480 U.S. 245

(1987). It should first be noted that Florida Power did not

change the rule regarding per se takings. Both Hodel v.

Irving and Nollan were decided after Florida Power. Fur-

ther, Florida Power did not involve the outright confisca-

tion and transfer of a property interest. If the cable

companies who were the beneficiaries of regulation in

Florida Power decided to remove their cables from peti-

tioner’s utility poles, they retained no rights in the poles

to sell to other cable companies. In the instant case, the

10

City of Escondido slices away petitioners’ property and

gives it to others who can freely market it. This clearly

goes far beyond mere regulation.

In contrast to the federal courts in Hall and Pinewood

Estates, the court below failed to comprehend that the

premium paid for coaches in rent-controlled parks repre-

sents the value of an interest in the park owner’s prop-

erty. The Court of Appeai asserts that this premium is

paid for the coach itself, contending that coaches and

pads are complementary guods like popcorn and popcorn

poppers. Yee, 224 Cal. App. 3d at 1352-53.

As pointed out in the dissent, this reasoning illus-

trates the dangers of judges relying on their own lay

opinions rather than allowing factual questions to go to

trial. If there had been a trial, with real economists pro-

viding expert testimony (see, e.g., Hirsch and Hirsch,

Legal-Economic Analysis of Rent Controls in a Mobile Home

Context: Placement Values and Vacancy Decontrol, 35 UCLA

L. Rev. 399), the Court of Appeal might have learned that

if mobile home pads and coaches were truly complemen-

tary goods, the price of new coaches would rise in the

showroom when rent control is enacted. But this does not

happen. Only those coaches already situated on pads in

regulated mobile home parks command such a premium.

The selling price of these mobile homes increases because

they carry with them the value of the servitude confis-

cated by Escondido’s regulation. Identical coaches out-

side rent controlled parks comiend no premium because

their value does not include a servitude confiscated from

park owners.

11

The facts alleged by petitioners show that an actual

transfer of a property interest has occurred, an interest

which coach owners can freely sell on the open market.

The Court of Appeal’s rejection of the per se taking rule,

and its substitution of reasoning expressly rejected by the

federal courts, is far more than a disagreement with two

United States Circuit Courts of Appeals. It is a rejection of

this Court’s well-established precedent.

While there are times when California may be justi-

fied in departing from federal precedent in order to

afford its citizens more constitutional protection than the

federal courts have provided, that is not the case here.

Here the California Court of Appeal is depriving Califor-

nia citizens of property rights recognized by the federal

courts.

“The right to occupy property in perpetuity is surely

the type of interest that is protected by the ta king clause.”

Hall, 797 F.2d at 1498 (footnote omitted). By the plain

language of the Fifth Amendment, the Escondido ordi-

nance must be struck down as an unconstitutional taking

without just compensation.

12

CONCLUSION

For the reasons stated above, it is respectfully sub-

mitted that the petition for writ of certiorari should be

granted.

DATED: July, 1991.

Respectfully submitted,

Ronatp A. ZuMBRUN

"ANTHONY T. Caso

“Counsel of Record

R. S. Raprorp

Of Counsel

Pacific Legal Foundation

2700 Gateway Oaks Drive

Suite 200

Sacramento, California 95833

Telephone: (916) 641-8888

Attorneys for Amicus Curiae,

Pacific Legal Foundation