Amicus Curiae Brief — Yee v. Escondido

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OV 25 (99)

No. 91-1947

: OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

JOHN K. YEE and IRENE S. YEE, et al.,

Petitioners,

VS.

CITY OF ESCONDIDO,

Respondent.

ON WRIT OF CERTIORARI

TO THE CALIFORNIA COURT OF APPEAL

FOURTH APPELLATE DISTRICT, DIVISION ONE

BRIEF AMICUS CURIAE OF

CALIFORNIA MOBILE HOME PARKOWNERS

ALLIANCE IN SUPPORT OF PETITIONERS

PROF. GEORGE LEFCOE MICHAEL M. BERGER

UNIV. OF SOUTHERN Counsel of Record

CALIF. LAW CENTER of BERGER & NORTON

University Park A Law Corporation

Los Angeles, CA 90089 1875 Century Park East

(213) 740-0148 Suite 600

Los Angeles, CA 90067

JOEL G. HIRSCH (310) 788-1700

Law Offices of

DAVID A. LAPIN

10100 Santa Monica Blvd.

Los Angeles, CA 90067

(310) 556-C833

Attorneys for Amicus Curiae

Lawyers Brief Service * Appellate Bnef Printers * (213) 383-4457 * (714) 720-1510

ia

No. 91-1947

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1991

JOHN K. YEE and IRENE S. YEF, et al.,

Petitioners,

VS.

CITY OF ESCONDIDO,

Respondent.

ON WRIT OF CERTIORARI

TO THE CALIFORNIA COURT OF APPEAL

FOURTH APPELLATE DISTRICT, DIVISION ONE

BRIEF AMICUS CURIAE OF

CALIFORNIA MOBILE HOME PARKOWNERS

ALLIANCE IN SUPPORT OF PETITIONERS

PROF. GEORGE LEFCOE MICHAEL M. BERGER

UNIV. OF SOUTHERN Counsel of Record

CALIF. LAW CENTER of BERGER & NORTON

University Park A Law Corporation

Los Angeles, CA 90089 1875 Century Park East

(213) 740-0148 Suite 600

Los Angeles, CA 90067

JOEL G. HIRSCH (310) 788-1700

Law Offices of

DAVID A. LAPIN

10100 Santa Monica Blvd.

Los Angeles, CA 90067

(310) 556-0833

Attorneys for Amicus Curiae

ai

TABLE OF CONTENTS

TABLE OF AUTHORITIES

INTEREST OF AMICUS CURIAE

SUMMARY OF ARGUMENT

FACTUAL SUMMARY

ARGUMENT

“THE POLITICAL ETHICS REFLECTED

IN THE FIFTH AMENDMENT REJECT

CONFISCATION AS A MEASURE OF

JUSTICE.”

A A Complete Takeover of Property

Would Unarguably be a Taking

B A Compelled Transfer of a Recog-

nizable Interest in Property is a

Taking

C A Taking Occurs When Govern-

ment Commands a_ Property

Owner to Stand Aside and Permit

Permanent Physical Occupation

of Property by Another

10

10

10

13

15

THE KIND OF MOBILE HOME RENT

~ CONTROL ORDINANCES BEFORE

THIS COURT FAIL TO SUBSTAN-

TIALLY ADVANCE A_ LEGITIMATE

STATE INTEREST

A Rent/Vacancy Control Harms the

Park Owner and Does Not Protect

the Incoming Tenant

B- Rent/Vacancy Control is Not

Needed to Protect the Departing

Tenant

HOW FAR IS “TOO FAR”?

CONCLUSION

Page

17

19

21

24

29

- lil -

TABLE OF AUTHORITIES

Page

Cases

Arverne Bay Constr. Co. v. Thatcher

(N.Y. 1938)15 N.E.2d 587 12

Azul Pacifico, Inc. v. City of Los Angeles Ame

___ F.2d ____ (9th Cir. 1991) 19, 21, 23

Berman v. Parker (1954)

348 U.S. 26 4,5, 13

Casella v. City of Morgan Hill (1991)

230 Cal.App.3d 43, 280 Cal.Rptr. 876 3

FCC v. Florida Power Corp. (1987)

480 U.S. 245 17

First English Evangelical Lutheran Church

v. County of Los Angeles (1987)

482 U.S. 304 2,11, 23, 24

Goldblatt v. Hempstead (1962)

369 U.S. 590 18, 20, 22

Hall v. City of Santa Barbara

833 F.2d 1270 (9th Cir. 1986) 3

Hawaii Housing Authority v. Midkiff (1984)

467 U.S. 229 4,5, 13

Hodel v. Irving (1987)

481 U.S. 704 11, 15, 16, 26

-iv-

Page

Hoshour v. County of Contra Costa (1962)

203 Cal.App.2d 602, 21 Cal.Rptr. 714 12

Kaiser Aetna v. U.S. (1979)

444 U.S. 164 15-17, 24, 27

Keystone Bituminous Coal Assn.

v. DeBenedictis (1987)

480 U.S. 470 25

Loan Assn. v. Topeka (1875)

87 U.S. (20 Wall.) 655 29

Loretto v. Teleprompter Manhattan

CATV Corp. (1982)

458 U.S. 419 15-17, 27, 28

Nectow v. City of Cambridge (1928)

277 U.S. 183 18, 20

Nollan v. California Coastal

Commn. (1987) 2, 15-18

483 U.S. 825 20, 24, 27, 28

Oceanside Mobilehome Park Owners’

Assn. v. City of Oceanside (1984)

157 Cal.App.3d 887,

204 Cal.Rptr. 239 3

Penn Central Transp. Co. v. City

of New York (1978) 15, 18, 20

438 U.S. 104 22, 24, 25

Pennell v. City of San Jose (1988)

485 U.S. 1 26

Pennsylvania Coal Co. v. Mahon (1922)

260 U.S. 393

Pinewood Estates of Michigan v. Barnegat

Township Leveling Bd.

898 F.2d 347 (3d Cir. 1990)

Ruckelshaus v. Monsanto Co. (1984)

467 U.S. 986

U.S. v. Cors (1949)

337 U.S. 325

U.S. v. Security Indus. Bank (1982)

459 U.S. 70

Webb’s Fabulous Pharmacies, Inc. v.

Beckwith (1980)

449 U.S. 155

Winger v. Aires (Pa. 1952)

89 A.2d 521

Yee v. City of Escondido (1988)

224 Cal.App.3d 1349,

274 Cal.Rptr. 551, cert. granted

Statutes

California Civil Code:

§798.55

§798.56

§798.74

Page

24

3, 4, 19, 20

14-16, 25

10

15

14

3, 4, 18

oo OO OO

eS

Page

Constitution

United States Constitution 2-4, 6, 11, 15

Fifth Amendment 18, 23, 27, 29, 30

Publications

Michelman, Property, Utility, and Fairness:

Comments on the Ethical Foundations

of “Just Compensation” Law (1967)

80 Harv. L. Rev. 1165 10

Tribe, American Constitutional Law

(2d ed 1988) §9-5 17

Miscellaneous

Escondido Municipal Code,

Art. V., §29-103 8

California Dept. of Housing & Community

Dev., Mobile Home Parks in California

— a Survey of Mobile Home Park Owners

Pursuant to S.B. 1835 (1986) 2

California Dept. of Housing & Community

Dev., Mobilehome Parks in California:

a Survey of Park Operators and Tenants 22

No. 90-1947

In The

SUPREME COURT OF THE UNITED STATES

October Term, 1991

JOHN K. YEE and IRENE S. YEE, et al.,

Petitioners,

vs.

CITY OF ESCONDIDO,

Respondent.

BRIEF AMICUS CURIAE OF

CALIFORNIA MOBILEHOME PARKOWNERS

ALLIANCE IN SUPPORT OF PETITIONERS

The California Mobilehome Parkowners Ailiance has

received the consent of the parties to file this brief as

Amicus Curiae in support of the Petitioners and has filed

the letters of consent with the Clerk of this Court.

INTEREST OF AMICUS CURIAE

The California Mobilehome Parkowners Alliance is a

nonprofit corporation with more than 350 members

throughout California. Most of the members are small

“mom and pop” type businesses which own only one

small mobile home park. Some are now subjected to

ordinances like the Escondido ordinance before this

Court, while others are threatened with enactment of

such ordinances. All have a vital interest in the issues

now before this Court.

x

Philosophical differences between landlords and

tenants are hardly new. Nor are they strangers to this

Court. However, the “solutions” now being devised by

some municipalities (sometimes by city councils, some-

times — as here — by voter initiative measures voted in

by the tenants themselves) to perceived problems in the

mobile home park setting have gone beyond anything

devised for any other residential rental setting. Compul-

sory, uncompensated transfers of interests in property

are becoming commonplace.

The legality of transferring most of the indicia of

ownership from mobile home park owners to mobile

home park tenants is a serious issue. This Amicus is

vitally concerned that an answer comporting with con-

Stitutional precepts be clearly given so that the state

courts in California will understand it.'

A decision from this Court outlining appropriate

standards could go far toward eliminating litigation

which is as voluminous as it is contentious. While

mobile homes represent only about 4.5% of California’s

housing stock,’ they represent a disproportivnately

| Not wishing to engage in overkill, it can nonetheless be said that

being a property owner in California these days isn’t the proverbial

bowl of cherries. Even after this Court twice chastised the Califor-

nia judiciary in 1987 for its failure to understand the protection

required by the Just Compensation Clause (First English Evangeli-

cal Lutheran Church v. County of Los Angeles [1987] 482 U.S. 304,

311; Nollan v. California Coastal Comma. [1987] 483 U.S. 825,

839), California courts continue to ignore the teachings of this Court

and U.S. Courts of Appeals on Fifth Amendment issues, as graphi-

cally demonstrated by the conflicting decisions of the California

_ courts and the Ninth Circuit Court of Appeals on the issue at bench.

See, e.g., California Dept. of Housing & Community Dev.,

Mobile Home Parks in California — A Survey of Mobile Home Park

Owners Pursuant to S.B. 1835.(1986) at 1.

if.

large amount of the state’s rent control litigation, as the

recent conflicting decisions of the California appellate

courts and the Ninth Circuit Court of Appeals attest.

Part of the reason for that is the directly transferred

property interest which only mobile home rent control

ordinances impose on property owners. Resolution of

the invalidity of that practice would eliminate much

litigation.

SUMMARY OF ARGUMENT

In this direct conflict of decisions, which places the

Third and Ninth Circuit U.S. Courts of Appeals on one

side’ and the California state courts on the other,’ there

is one thing on which all courts seem agreed: the com-

bined effect of the type of mobile home rent control

regulations now before this Court create a direct transfer

of property and redistribution of wealth from the owners

of mobile home parks to their tenants.

In holding that such regulations could violate the

Fifth Amendment, the Third Circuit concluded:

“... the effect of the law is to transfer

the interest, without compensation,

from the landlords to the tenants... .

[The landlords] receive nothing at all

Pinewood Estates of Michigan v. Barnegat Township Leveling

Bd. (3d Cir. 1990) 898 F.2d 347; Hall v. City of Santa Barbara (9th

Cir. 1986) 833 F.2d 1270; Azul Pacifico, Inc. v. City of Los Angeles

(9th Cir. 1991)__F.2d_.

4 Yee v. City of Escondido (1988) 224 Cal.App.3d 1349, 274

Cal.Rptr. 551, cert. granted [the case at bench); Casella v. City of

Morgan Hill (1991) 230 Cal.App.3d 43, 280 Cal.Rprt. 876; Ocean-

side Mobilehome Park Owners’ Assn. v. City of Oceanside (1984)

157 Cal.App.3d 887, 204 Cal.Rptr. 239.

+.

for the taking of the alienable physical

property interest vested in_ their

tenants.” (Pinewood, 898 F.2d at 353)

Almost simultaneously, while reaching the opposite

legal conclusion and holding that such regulations do not

offend the Fifth Amendment, the California Court of

Appeal said in the case at bench:

— “No one can dispute that Escon-

dido’s rent control ordinance, like the

ordinance in Oceanside, effects a

transfer of value from landlords to

tenants.” (Yee, 224 Cal.App.3d at

1354)

The difference in approach is that the federal appel-

late courts have held that this redistribution of property

transgresses the protection of the Fifth Amendment,

while the California appellate courts have essentially

said, “So what?”

The answer to that implicit question is the Fifth

Amendment’s Just Compensation Clause. Although this

Court has permitted property and wealth redistribution

schetnes in the past, it has never done so unless the party

whose property was being taken was compensated.

Indeed, the presence of compensation has been the key

to upholding such schemes. (Hawaii Housing Authority

v. Midkiff [1984] 467 U.S. 229; Berman v. Parker [1954]

348 U.S. 26) As this Court put it in Berman, when ex-

plaining why it was permitting a forced transfer of prop-

erty from one citizen to another through the govern-

ment’s coercive eminent domain power:

“The rights of these property own-

ers are satisfied when they receive

that just compensation which the Fifth

YP

Amendment exacts as the price of the

taking.” (348 U.S. at 36)

In contrast to the teaching of Berman and Hawaii

Housing Authority, what the City of Escondido has done

in the guise of regulating mobile home parks is to:

@ limit the rent which the landlord can

charge (the “rent control” part of the

ordinance);

@ maintain that controlled rent level

when old tenants leave and new

ones arrive (a restriction known as

“vacancy control”); and

@ grant to the departing tenants the

right to choose their replacements as

tenants.

As a consequence of these multi-layered controls, the

old mobile home (owned by the tenant) commands a

substantial bonus price in the market (regardless of

condition). That bonus is demonstrable and measurable

in every mobile home market. For example, in a case

that went to trial (in contrast to the case at bench, which

was decided on pleadings alone), the following occurred:

“One Mrs. Morrison ... testified that

she bought a coach in Azul Pacifico’s

park for $77,000 and immediately

sold it for $5000 and had it removed

from the pad. When asked why, she

responded: ‘The use of the land was

what I paid for more than the place.’ ”

(Azul Pacifico, _F.2dat_)

That last thought bears repetition: “The use of the

land was what I paid for ...” Ordinarily, one would

expect payment for “the use of the land” to be made to

the owner of the land. However, under rent/vacancy

e

control the payment for “the use of the land” was made

to the former tenant, not the owner of the land. Absent

rent/vacancy controls like Escondido’s, all the tenant

had to sell was a mobile home coach which the buyer

thought was worth almost nothing. Yet the price it com-

manded was substantial. The $72,000 difference’ was

the combined effect of rent control and vacancy control

in the mobile home park context.

The combination of these elements is the key. Unless

all are present, the Fifth Amendment problem that

brought the Yees and their friends to court does not

arise. That is what ‘istinguishes this kind of mobile

home rent/vacancy control from more routine rent con-

trol ordinances affecting apartments. The departing

tenant owns a tangible, salable asset (the right to live in

a rent controlled space) and a tangible, salable item on

which to hang a price tag (the mobile home). Giving

tenants the right to sell their occupancy in a controlled

mobile home park transfers ownership and receipt of that

price from the landlord to the tenant.

Absent this stringent combination of controls, the new

tenant would pay the same overall price. He or she

would simply pay it all to the landlord in rent, rather

than paying part to the landlord and part to the departing

tenant disguised as the purchase price for the mobile

home.

The City, its allies, and the California courts focus on

what they view as the needs and problems of mobile

home park tenants. Neither the members of the Califor-

nia Mobilehome Parkowners Alliance nor, we suspect,

5 Please note that this $72,000 represents the windfall to a tenant

on only one space in a large mobile home park. Multiplied by the

entire park, the value of the property taken from the landlord is

substantial.

=

Mr. and Mrs. Yee and their neighbors, are unsympathetic

to the problems of their tenants. The members repre-

sented by this Amicus, for example, are not large, face-

less, corporate bureaucracies out of touch with the real

world. Most of these parks are small “mom and pop”

operations.

The problem arises when simplistic solutions are

chosen for complex problems; when, in haste, one-sided

“cures” are devised. That aspect of the problem is ac-

centuated in this case because the ordinance at issue was

enacted by a citizen initiative, rather than City Council

action. The mobile home park tenants of Escondido

voted themselves a jackpot bonus. The means chosen by

those tenants are now before this Court.

To meet their perceived needs, the mobile home

tenants of Escondido have cast their net too broadly.

They have transferred palpable interests in property from

their landlords to themselves. Without compensation.

That, the constitution forbids.

FACTUAL SUMMARY

The operative facts can be succinctly stated, as this

case was decided below on the pleadings.

Mobile home park owners own the land on which the

park is located and on which mobile home coaches are

placed. The mobile home coaches themselves are owned

by their occupants. Thus, while they are referred to as

“tenants,” they are tenants only with respect to the land.

The tenants own their mobile homes. The “mobile”

homes are mobile in little more than historic nomencla-

ture. These are not the historic “trailers” that can be

hooked on the back of the family station wagon and

_

driven off. These are substantial structures which need

special (though not expensive) handling to move.

Escondido’s mobile home rent control ordinance was

enacted by citizen initiative. The voters of Escondido

(of which far more are tenants than landlords) enacted

these regulations for themselves.

The combined effect of state statutes and city or-

dinances on mobile home park owners in Escondido is

that:

@ the rental rate is controlled by the city

(Escondido Munic. Code, Art. V.,

§29-103);

@ the rental rate remains unchanged

when an old tenant departs and a new

one takes his or her place (Escondido

Munic. Code, Art. V., §29-103);

@ the departing tenant has the absolute

right to decide who will buy his mo-

bile home and be the new tenant (Cal.

Civ. Code §798.74);

@ when a tenant sells his mobile home

and vacates the premises, the park

owner must rent the pad to the mobile

home purchaser (Cal. Civ. Code

§798.74);

@ the park owner must renew pad rental

agreements (Cal. Civ. Code §§798.55,

798.56);

@ the park owner may not terminate

rental agreements except for sharply

limited reasons (Cal. Civ. Code

§§798.55, 798.56).

a YS

The upshot of this system, as the California Court of

Appeal noted in this case, is that an interest in the real

property is actually transferred — without compensation

— from the property owner to the tenants. That interest

is definable and marketable. It has measurable value.

That value is captured by the tenant when he or she sells

the mobile home (with its rent controlled location) to a

successor.

Thus, the combined effect of these state and local

restrictions is that two things have happened to the total

amount which a landlord would be able to charge as rent

in an uncontrolled world: (1) the amount of rent has an

arbitrary upper limit placed on it; and (2) the departing

tenant collects part of the remaining amount as a

monumental windfall for selling his or her coach in the

rent controlled park. This windfall payment to the

tenants who happen to occupy mcbile home parks at the

time a rent/vacancy control ordinance is enacted, is

unrelated to any interest which legitimately belongs to

the tenant. It is related solely to the location of the

parcel in a rent controlled park. But the value of the

location belongs to the land owner, not the tenant. The

size of this windfall is usually substantial, running to the

tens of thousands of dollars per space. The illustration

noted above, in which a tenant pocketed $72,000 as her

windfall payment, is an exemplar of the scope of the

property transfers effected by rent/vacancy control

ordinances. As a generality, the trial court in Azul

Pacifico found that the size of the windfall at that

park averaged $20,000 per space. (Azul Pacifico,

__F.2dat_)

= =

ARGUMENT

“THE POLITICAL ETHICS RE-

FLECTED IN THE FIFTH AMEND-

MENT REJECT CONFISCATION

AS A MEASURE OF JUSTICE.” °

It is hard to improve on this Court’s vintage words.’

However, what the California courts have approved is

the precise opposite of this Court’s simple and fair sum-

mary of the Just Compensation Clause’s mandate.

A

A Complete Takeover of Property

Would Unarguably be a Taking

Perhaps, by contrast, a hypothetical can illustrate the

reality facing owners of mobile home parks in California

today.

Suppose that the City of Escondido decided that

mobile home parks housed the city’s poorest citizens

and, to protect them from joining the ranks of the home-

less, the city decided to acquire all mobile home parks to

maintain as low income housing. To accomplish that,

the city assembled the owners of Escondido’s mobile

home parks and informed them that the city was taking

over the parks. A sort of coup de park. In exchange for

® U.S. v. Cors (1949) 337 U.S. 325, 332.

Professor Michelman’s expansion on that thought is worth

noting: “any measure which society cannot afford or, putting it

another way, is unwilling to finance under conditions of full

compensation, society cannot afford at all.” (Michelman, Property,

Utility, and Fairness: Comments on the Ethical Foundations of

“Just Compensation” Law [1967] 80 Harv. L. Rev. 1165, 1181)

ofj-

title to their properties, the owners would receive con-

tracts to manage the new city-owned parks and would be

paid a salary based on a percentage of the rent collected.

But the city would set the rent; the rental rates would

change only when the city decided they could; funds for

upkeep, insurance, and maintenance would have to come

from the rents collected or money borrowed by the

“managers,” as the city would invest no money of its

own; and the tenants could either remain in perpetuity or

designate their successors in interest.

Had the City of Escondido actually commandeered

title to the properties and placed it in the City’s name,

there is no doubt that a Fifth Amendment violation

would have occurred. Property would have been taken

for public use without any compensation changing

hands. The acquisition of title would have made the

taking obvious.

As this Court recently explained:

‘

‘... government action that works a

taking of property rights necessarily

implicates the ‘constitutional obliga-

tion to pay just compensation.’ [Cita-

tion.]” (First English Evangelical

Lutheran Church v. County of Los

Angeles [1987] 482 U.S. 304, 315;

emphasis added)

When legislation is enacted which takes property with

no intent to provide compensation, the legislation is

invalid. (Hodel v. Irving [1987] 481 U.S. 704)®

8 The statute in Irving was intended to solve a problem caused by

intestate succession to miniscule Indian estates. In the process,

however, the recognized property right of devise and descent was

taken from current owners without any intent to pay for that taking.

As a result, this Court struck down the statute.

i.

How does the actual hijacking of title from the park

owners in the hypothetical differ from what the

Escondido ordinance actually did to these park owners?

In only one meaningful way: In the hypothetical, the

owners would be relieved of the dubious honor of paying

taxes on the property, as they would no longer hold title

to it. As the New York Court of Appeals put it in its

classic exposition on the difference between overt and

covert confiscation:

“The only substantial difference, in

such case, between restriction and

actual taking, is that the restriction

leaves the owner subject to the burden

of payment of taxation, while outright

confiscation would relieve him of that

burden.” (Arverne Bay Constr. Co. v.

Thatcher (N.Y. 1938] 15 N.E.2d 587,

592)?

Aside from the taxation issue, the Escondido or-

dinance has stripped mobile home park owners of all

useful indicia of ownership as effectively as if refugee

Party apparatchiks from eastern Europe had taken over

the town and “socialized” it. Hyperbolic as this may

sound, it is the reality. Rent/vacancy control has

reduced the ownership of a mobile home park in

Escondido to something akin to a public utility, where

all decisions are made by the government and the titular

owners of the properties have lost not only control over

what they can charge and who they can rent to, but have

’ Similarly, an older California case characterized the impact of

overly stringent regulation as leaving the property owners “nothing

... but bare ownership and the burden of taxation.” (Hoshour v.

County of Contra Costa [1962] 203 Cal.App.2d 602, 603, 21

Cal.Rptr. 714)

ait.

been compelled to transfer substantial financial interests

to their tenants with no compensation whatever.

B

A Compelled Transfer of a Recog-

nizable Interest in Property is a

Taking

As noted earlier, this Court approved Hawaii’s plan

for land reform and its use of the power of eminent

domain to accomplish the breakdown of a feudal land

tenure system (Hawaii Housing Authority v. Midkiff),

and also approved the concept of urban redevelopment

and its use of the power of eminent domain to assemble

large tracts of land for resale to developers who would

redevelop decayed city cores (Berman v. Parker).

In neither case, however, was there any doubt that

compensation was a key element in the package. Indeed,

the entire discussion in Hawaii Housing Authority was

directed at the “public use” issue because, as the unani-

mous opinion put it, “we assume for purposes of these

appeals that the weighty demand of just compensation

has been met ....” (467 U.S. at 245) Absent this

Court’s ability to make that crucial assumption, the land

title reform system which compelled the transfer of fee

simple title from landlords to tenants could not have

passed constitutional muster.

Nor is this surprising. The extent of the power of

eminent domain has been described in terms more suited

to breathless ingenues than judges :

“The power of eminent domain, next

to that of conscription of man power

for war, is the most awesome grant of

power under the law of the land.”

s Be

(Winger v. Aires (Pa. 1952) 89 A.2d

521, 522)

When recognized property interests are compulsorily

transferred from a private citizen on orders from the

government, Compensation is mandated:

“This Court has stated that a sover-

eign ‘by ipse dixit, may not transform

private property into public property

without compensation .... This is

the very kind of thing that the Taking

Clause of the Fifth Amendment was

meant to prevent.’ (Ruckelshaus v.

Monsanto Co. [1984] 467 U.S. 986,

1012; quoting Webb’s Fabulous Phar-

macies, Inc. v. Beckwith [1980] 449

U.S. 155, 161.)

In the context at bench, there is no issue that such a

transfer has taken place. Wordplay alone stands between

these mobile home park owners and the property right

which has been taken from them and given to their

tenants. All of the courts to examine the mobile home

rent/vacancy control ordinances involved here agree that

property interests have been transferred. Given that

judicial agreement about the actual transfer of interests

from landlords to tenants, it is sophistry to deny that a

taking has occurred and monstrous to deny the protec-

tion of those portions of the constitution designed to

shield individuals from the hand of government when it

overreaches.

=

C

A Taking Occurs When Govern-

ment Commands a Property Owner

to Stand Aside and Permit Perma-

nent Physical Occupation of Prop-

erty by Another

The Escondido scheme goes beyond mere wealth

transfer. It commands property owners to permit perma-

nent physical cccupation of their property by strangers.

Physical invasion has always been viewed by this

Court as a particularly obnoxious form of governmental!

intrusion, one which can more readily be seen as a Fifth

Amendment violation. (Penn Central Transp. Co. v.

City of New York [1978] 438 U.S. 104, 122; Loretto v.

Teleprompter Manhattan CATV Corp. [i982] 458 U.S.

419, 436)

“Property” consists of many things. Indeed, the con-

cept is so complex that this Court has repeatedly used

the bundle of sticks analogy to help illustrate it, conclud-

ing that either the taking of an entire “stick” from the

“bundle” or the taking of a part of all “sticks” in the

“bundle” violates the Taking Clause of the Fifth Amend-

ment.

10 E.g., Kaiser Aetna v. U.S. (1979) 444 U.S. 164, 176; Loretto v.

Teleprompter Manhattan CATV Corp. (1982) 458 U.S. 419, 433,

435; U.S. v. Security Indus. Bank (1982) 459 U.S. 70, 76; Ruckel-

shaus v. Monsanto Co. (1984) 467 US 986, 1011; Hodel v. Irving

(1987) 481 U.S. 704, 716; Nollan v. California Coastal Commun.

(1987) 483 U.S. 825, 831.

The “sticks” obviously affected here are the right to exclude

others from one’s property, the right to possession of one’s property

and, because of the wealth transfer aspects of the ordinances, the

right to alienate one’s property.

1. =

One “stick” which has received special protection

from this Court has been the right of the property owner

to exclude others from his property. This Court has

repeatedly referred to the right to exclude otheis as “.. .

one of the most essential ...”'! and “. .. most treasured

strands in an owner’s bundle of property rights.”

Moreover, the Court has been particularly protective

against governmental actions which permit strangers to

invade the property of others:

“This is not a case in which the Gov-

ernment is exercising its regulatory

power in a manner that will cause

an insubstantial devaluation of peti-

tioners’ private property; rather, the

imposition of the navigable servitude

in this context will result in an actual

physical invasion of the privately

owned marina.” (Kaiser Aetna, 444

U.S. at 180; emphasis added; see also

Loretto, 458 U.S. at 436)

Like Kaiser Aetna, this case does not involve

“insubstantial devaluation” of property. The actual

physical transfer of interests effected by the rent/

vacancy control ordinance causes injury to the park

owners which is measured in tens of thousands of dollars

per space.

This Court later explained its rule as affording protec-

tion to a property owner against “an interloper with a

ut Kaiser Aetna, 444 U.S. at 176; Loretto, 458 U.S. at 433:

Ruckelshaus, 467 U.S. at 1011; Irving, 481 U.S. at 716; Nollan, 486

U.S. at 831.

12 Loretto, 458 U.S. at 435.

+ F

government license.” (FCC v. Florida Power Corp.

[1987] 480 U.S. 245, 253)'> That analogy seems apt

here, where the Escondido ordinance permits — or, more

properly, requires — an unending stream of strangers to

occupy the mobile home parks.

Coerced acceptance of physical invasion is enough —

by itself — under this Court’s precedents to find a

taking. In fact, however, the Escondido intrusion may

be qualitatively worse than the others already con-

demned by this Court. For here we are not talking about

boats on a waterway (Kaiser Aetna) or strollers on a

beach (Nollan) or wires in a building (Loretto). Here,

we are talking about living quarters. The landlords have

lost all ability to determine who will live in their parks.

That control has shifted to tenants who no longer have

any particular interest in who will live in the parks,

because it is a power exercised only when they are

departing.

THE KIND OF MOBILE HOME

RENT CONTROL ORDINANCES

BEFORE THIS COURT FAIL TO

SUBSTANTIALLY ADVANCE A

LEGITIMATE STATE INTEREST

Much of the history of litigation involving the Bill of

Rights has been over the way that governmentally

chosen means fit with the governmentally sought ends.

This Court has long been concerned that, to be valid, it

is necessary for municipal land use regulations to sub-

stantially advance legitimate state interests. The reason

a3 Or, as Professor Tribe colorfully expressed it, “. . . government-

invited gatecrashers ...” (Tribe, American Constitutional Law (2d

ed 1988) §9-5 at 602)

- 18 -

has been to ensure that such regulations comport with

the fundamental protections of the Fifth Amendment

rights of those being regulated. These concerns began at

least as early as this Court’s 1928 decision in Nectow v.

City of Cambridge (1928) 277 U.S. 183, 187-188 and

have continued through the 1962 decision in Goldblatt v.

Hempstead (1962) 369 U.S. 590, and the 1978 decision

in Penn Central Transp. Co. v. City of New York (1978)

438 U.S. 104, 127 to the 1987 decision in Nollan v.

California Coastal Commission (1987) 483 U.S. 825,

834 fn 3, 841.

Nollan also emphasized that, particularly “where the

actual conveyance of property” is involved (483 U.S. at

841) a more precise quantum of scrutiny of the govern-

ment’s rationale is required than the traditional “rational

basis” rubric would afford (483 U.S. at 834, fn 3).

Here, the California Court of Appeal put the issue

starkly. It acknowledged that the Escondido ordinance

“... effects a transfer of value from landlords to

tenants.” (Yee, 224 Cal.App.3d at 1354) However, it

concluded that, because the ordinance could be justified

by a rational purpose, and Mr. and Mrs. Yee’s taking

claim was based solely on that forced transfer,'* there

was no unconstitutional “taking” of what was plainly

“taken” from them. (Yee, 224 Cal.App.3d at 1354)

The question addressed in this section is whether this

Stringent combination of Escondido requirements is

14 One should be able to presume —— at least in the present

procedural posture of a case dismissed on the pleadings —— that Mr.

and Mrs. Yee pursued a narrow issue because the law on that issuc

was clear: when property is transferred, there must be compensa-

tion. That being the case, there was no need for the Yees to jump

through the numerous procedural hoops placed in the path of those

who seek compensation for other types of regulatory takings.

-19-

rationally needed to advance any legitimate state inter-

est?'> Examination of the way that rent/vacancy control

operates at mobile home parks will demonstrate that

there is no need for such radical measures to accomplish

any legitimate state goals.

A

Rent/Vacancy Control Harms the

Park Owner and Does Not Protect

the Incoming Tenant

The park operator owns the land. He generally pro-

vides pads and connections for gas, electricity, and

water. The tenant purchases his own mobile home,

either new or, more often, from a departing tenant.

When rents are controlled (i.e., artificially restrained by

the government at less than their market level would

otherwise be) and there is no vacancy control, then the

property owner has the ability, when the tenants move,

to raise the rent of individual spaces to their market level

from the artificially low controlled level. Future in-

creases are then controlled.

But when you add vacancy control to a mobile home

park, the departing tenant obtains a windfall: he gets not

merely the market value of his personal property, i.e.,

the mobile home (to which he is entitled), but also a very

large premium (tens of thousands of dollars for each

space) above that value which represents the value of the

location of his mobile home in a rent-controlled park

with the controlled, below market, rent already set.

(Pinewood, 898 F.2d at 353; Azul Pacifico, _F.2dat_)

15 This issue is separate from the physical invasion issue. A

holding that the physical invasion, by itself, violates the Just

Compensation Clause, as this Amicus believes it does, obviates the

need for this kind of ends and means analysis.

- 2.

That result does not comport with the Nectow /

Goldblatt / Penn Central /Nollan requirement that the

governmental action substantially advance a legitimate

State interest. Certainly not in the extreme form present

in the Escondido initiative ordinance.

The general purpose of vacancy control is said to be

to protect the incoming tenant from exorbitant rent in-

creases. In an apartment building, where the old tenant

is not selling the apartment unit to the incoming tenant,

vacancy control can serve its purpose. The new tenant’s

cost is the controlled rental rate.

Under regimes like Escondido’s, however, the new

tenant receives no protection. While the rent may be

limited by the control ordinance, nothing restricts the

price which the departing tenant can demand for the old

mobile home which sits on the rent controlled pad.

(Pinewood, 898 F.2d at 353)'® As the Ninth Circuit

Court of Appeals analyzed it:

“[VJacancy control does not help

incoming tenants in the case of mobile

homes. The coach buyer will pay the

same effective rent for the pad

whether or not the landlord is permit-

ted to raise the rent at vacancy. To

the potential buyer, the total product

— housing — is the relevant cost;

how that cost is allocated between

rent for the pad and mortgage pay-

ments on the coach is largely ir-

relevant. For example, a buyer who

can afford to spend $1000 each month

o be Pinewood, the Third Circuit Court of Appeals commented on

the irony in restricting only the rent but not the price of the coaches.

(898 F.2d at 353 fn 9)

- 23.

on housing is indifferent between a

coach with a $500 mortgage payment

on a $500 pad and one with an

$800 payment on a $200 pad.” (Azul

Pacifico, _F.2dat »*?

Thus, assuming that the protection of incoming

tenants from increased occupancy costs is a legitimate

state interest, the Escondido ordinance does not substan-

tially advance that interest. Indeed, it causes that interest

actual harm.

B

Rent/Vacancy Control is Not

Needed to Protect the Departing

Tenant

The only other interest which such an ordinance might

be said to serve is the protection of departing tenants’

ability to obtain the fair market value of their mobile

home coaches on sale to new tenants. Without vacancy

control, it has been suggested that it would be possible

for the landlord to raise the rent for the incoming tenant

not merely to the “market” value of an empty pad, but to

a level above that value sufficient to deter the incoming

tenant either from purchasing the old coach from the

departing tenant or from purchasing it at its full, Blue

Book value.

17 Please note that the ordinance at bench is substantially more

restrictive than the Los Angeles ordinance which was struck down in

Azul Pacifico. When pad tenancy changed hands, the Azul Pacifico

property owners were permitted to increase the rent either by 10%

or to the highest rent charged for acomparable pad. (__ F.2dat_)

Here, in stark contrast, NO rent increase could be made without city

permission.

- 22 «

There is an argument that this asserted concern for the

departing tenant ignores the fact that there is an inflated

element in what some see as the “value” of the coach

which, in reality, originated as the uncompensated taking

from the landlord of an interest in the location of the

coach. If that is true, as this Amicus believes the evi-

dence would show were this case permitted to go to trial,

then the departing tenant is in no need of protection, as

his only threatened “loss” in value was not legitimately

his to begin with.

| Assuming, arguendo, that there is a legitimate state

interést in protecting the departing tenant, the solution

devised by Escondido fails to pass constitutional muster

because it goes far beyond what is necessary.

Let’s return, for a moment, to the Ninth Circuit's

example of a tenant with $1000 per month to spend on

housing. If the Blue Book value of the coach is the

capitalized value of $400 per month, but the landlord

raises the pad rental to $700 per month, then the new

tenant has only $300 per month to pay for the coach.'®

So, assuming that some protection for departing

tenants would be justified, the question before this Court

is whether the Escondido solution complies with this

Court’s standards of constitutionality. In Goldblatt and

Penn Central this Court said that “a use restriction on

real property may constitute a ‘taking’ if not reasonably

necessary to the effectuation of a substantial public

purpose ....” (Penn Central, 438 U.S. at 127; emphasis

18 a .,

In reality, this is an unlikely event. The cost of moving a

mobile home is measured in the low hundreds of dollars. (See

California Dept. of Housing & Community Dev., Mobilehome Parks

in California: A Survey of Park Operators and Tenants at 49.)

Thus, if the park owner raised the pad rental too high, the tenant

could, at minimal cost, simply move to another location.

- 23.

added). Therefore, careful examination of the Escondido

ordinance is needed to determine whether this ordinance

is “reasonably necessary” for the job. Put another way,

the question is whether the city could accomplish legiti-

mate goals in a manner which is less intrusive on the

rights of the park owners.

The Escondido ordinance uses a cannon where a fly

swatter would do. Rather than confiscating property

interests from landlords and providing windfalls for

those tenants fortunate enough to be living in the mobile

home parks when the initiative measure was passed,

there are manifold ways to protect the departing tenants.

For example, the Los Angeles method of modified

vacancy control discussed in Azul Pacifico might be

used. In Los Angeles, the landlords are permitted to

increase rents when tenancy changes by the lesser of

10% or the price at which vacant pads are rented in the

park.

Or administrative redress could be provided. All rent

control ordinances (Escondido’s included) establish an

administrative system for the processing of requests for

rent increases. That system could also hear complaints

from new tenants who believe they are being over-

charged.

Undoubtedly other potential solutions, each far less

intrusive on the rights of the mobile home park owners

but equally effective at protecting the rights of departing

tenants (other than their windfall profit “rights”) could

be devised.'? The point here is that the Escondido

9 Thus, assuming, arguendo, that Escondido had a valid goal in

mind when it enacted the scheme at bench, neither that validity nor

the city’s reasonableness or good intentions would save the or-

dinance if it authorizes the taking of private property for public use

without compensation. As this Court held in First English, the Fifth

(continued )

- 24 -

ordinance casts its net too broadly. In the guise of

resolving a relatively minor problem, it has made a fun-

damental change in the ownership of mobile home parks,

forcefully transferring an interest in the landlords’ prop-

erty to their tenants. That property transfer is not needed

to protect the legitimate interests of departing tenants. If

Escondido believes that the idea is otherwise worthwhile

then, as this Court put it in Nollan, “... it must pay for

it.” (483 U.S. at 842)

HOW FAR IS “TOO FAR”?

Whether one views this mobile home rent control/

vacancy control situation as a physical occupation (as

the Third and Ninth Circuit Courts of Appeals have

done) or as a regulatory matter (as the California appel-

late courts have done), there is a minimum threshold

beyond which this Court has not permitted government

to go. From 1922’s Pennsylvania Coal Co. v. Mahon

(1922) 260 U.S. 393, 415, through 1987’s First English,

482 U.S. at 316, this Court has held consistently that the

focal point in takings litigation is to determine how far

the government action goes, because if it goes “too far,”

it is a taking which requires compensation.

This Court has also consistently refused to develop

any precise template or formula for determining the

location of that line, opting instead for “ad hoc factual”

inquiries in each case. (E.g., Penn Central Transp. Co.

v. City of New York [1978] 438 US 104, 124; Kaiser

(fn. continued)

Amendment requires “... compensation in the event of otherwise

proper interference amounting to a taking.” (482 U.S. at 315:

emphasis added; Court’s emphasis omitted.)

3.

Aetna v. U.S. [1979] 444 US 164, 175; Ruckelshaus v.

Monsanto Co. [1984] 467 US 986, 1005.)

Thus, to try to locate the line separating “ok” from

“too far,” a brief examination of some of this Court’s

decisions on both sides of the line may be of service.

In Penn Central, the New York landmarks protection

ordinance required maintenance of Grand Central Termi-

nal and precluded some development. However, it did

not interfere with the way the owners of the property had

traditionally used it, did not preclude future additional

development, did not prevent the owners from making a

profit on their investment, and offered “transferrable

development rights” as compensation.

Penn Central goes on the “ok” side of the line. Thus,

if mobile home rent/vacancy controls permitted the park

owners to continue to manage as they had in the past,

and offered some form of compensation in exchange for

any property taken, such an ordinance would not be a

taking.

In Keystone Bituminous Coal Assn. v. DeBenedictis

(1987) 480 U.S. 470, the Pennsylvania anti-subsidence

statute required coal mine operators to leave enough coal

in the ground to support the surface of the land. It there-

fore reduced the amount of coal which could be ex-

tracted from the mines. However, in the overall context

of the coal mining business, the amount of coal required

to be left in the ground was minimal (some had to be left

anyway simply to support the tunnels), the mine owners

retained control over the use of their facilities, and the

regulations did not interfere with the profitability of the

mines.

Keystone also goes on the “ok” side of the line. Thus,

if mobile home rent/vacancy controls had only a de

~ P

minimis economic impact and left control over the parks

in the hands of the owners, there would be no taking.

Pennell v. City of San Jose (1988) 485 U.S. 1 in-

volved an apartment rent control ordinance. Declining

to reach an intriguing issue about using the tenant’s

ability to pay as a factor in setting rental rates (because

it had not yet been applied), the ordinance was upheld

against a general facial attack because, while the or-

dinance regulated the way the landlords could do busi-

ness, it did not physically interfere with them or deprive

them of the ability to control the use of their property.

Pennell is on the “ok” side of the line. Thus, if

mobile home rent/vacancy controls do not physically

interfere with, or deprive the park owners of the ability

to control the use of their property, there would be no

taking.

In Irving, the Congressional enactment was designed

to eliminate a massive bookkeeping problem for the

Bureau of Indian Affairs. Intestate transfer of interests

in Indian estates had evidently so divided the interests in

thousands of properties that the interests were virtually

worthless. They were certainly worth less than the

administrative cost of keeping track of them. So Con-

gress decreed that such miniscule estates could not pass

by intestacy. Upon a death intestate, the decedent’s

interest would escheat to his or her tribe. However,

although the interference appeared almost nonexistent,

this Court held that it destroyed the recognized “stick” in

the property rights bundle of the dying Indian called the

right to devise property — even if only by operation of

law. The statute was struck down because of the coerced

and uncompensated taking of that property interest.

The statute in /rving went “too far.” Thus, if mobile

home rent/vacancy controls remove a recognizable stick

from the property rights bundle, there would be a taking.

2.

In Kaiser Aetna, the Corps of Engineers had already

granted a permit to private parties to develop a marina.

They did so. After the fact, the Corps decided to require

public access to the marina, thus interfering with the

owners’ exclusive possession and granting an easement

to the public to use the property. This Court held that

such action would be a taking.

Kaiser Aetna is on the “too far” side of the line.

Thus, if mobile home rent/vacancy controls interfere

with che park owners’ right to exclusive possession and

grant an interest in the property to others, there would be

a taking.

Loretto involved cable TV access to apartment build-

ings. A New York statute purported to require landlords

to permit cable companies to install cables. a Not-

withstanding the miniscule nature of the invasion,” this

Court concluded that all permanent physical occupations

are takings per se. This forced transfer of an interest in

the property could not be squared with the Fifth

Amendment.

Loretto is on the “too far” side of the line. Thus, if

mobile home rent/vacancy controls permit permanent

physical occupation by third parties, there would be a

taking.

Nollan involved a California Coastal Commission

condition to a building permit, requiring the dedication

of an easement along the sandy beach 1/3 of the

property. The condition would have opened the property

to continuous physical invasion by unknown numbers of

unknown members of the general public. This Court

struck down the condition.

20 This Court characterized the space occupied as “no bigger than

a breadbox.” (458 U.S. at 438, fn 16)

- 28 -

Nollan, follows Lorretto and is on the “too far” side

of the line.

Attempting to locate a “takings line” by graphing

those points yields some guidance and insight.

First. If the government action merely regulates the

way business can be conducted, without transferring

interests to others, without invading the premises, and

without interfering with profits, then no taking occurs.

Second. If the property owner remains in substantial

control of his or her property, then there is no taking.

Third. If there is physical invasion of the property,

there is a taking.

Fourth. If there is the transfer of an interest in

property, there is a taking.

Attempting to place the case at bench on this graph

seems relatively easy. Because of the conceded transfer

of property interests from the property owners to their

tenants, the dispossession of the property owners, and

the subjection of their property to continuous occupation

by strangers who have bought their right of occupancy

from other strangers, the facts of this case are on the

“too far” side of the line. In fact, this case is quite far

over the line. At this point, it bears reiterating that:

@ ll courts agree that a definite, cog-

nizable, and marketable interest in

property was transferred; and

@ no compensation was paid to the

landowners for this coerced property

transfer.

Under this Court’s clear precedents, that cannot happen.

If a non-governmental entity attempted any such action,

it would immediately be condemned as piracy. It is no

less so when done with the imprimatur of government.

- 29.

This initiative measure was a high-handed land grab.

Nothing more. It merits this Court’s constitutional

censure.

CONCLUSION

And so we return to basics:

“It must be conceded that there are

such rights in every free government

beyond the control of the State. A

government which recognized no such

rights, which held the lives, the

liberty, and the property of its citizens

subject at all times to the absolute

disposition and unlimited control of

even the most democratic depository

of power, is after all but a despotism.

It is true it is a despotism of the many,

of the majority, if you choose to call it

so, but it is none the less a des-

potism.” (Loan Assn. v. Topeka

[1875] 87 U.S. [20 Wall.] 655, 662)

The Fifth Amendment’s Just Compensation Clause

was designed to stand as a bulwark against tyrannical

majorities. Mobile home park owners are in need of that

protection today. Here, the citizens of Escondido (far

more of whom are tenants than landlords) proposed and

adopted an initiative measure by which they voted them-

selves a windfall bonus at the expense of mobile home

park owners. Property interests were concededly trans-

ferred when the final votes were counted.

At bottom, the core of the Fifth Amendment is its

insistence on fairness. Mobile home park owners have

not been the recipients of fair treatment by the California

. -

courts. It is time for this Court to send an unmistakable

message that the Fifth Amendment means what it says

and that it applies even in California.

Dated: November 25, 1991.

Respectfully submitted,

MICHAEL M. BERGER

Counsel of Record

of BERGER & NORTON

PROFESSOR GEORGE LEFCOE

UNIVERSITY OF SOUTHERN

CALIFORNIA LAW CENTER.

JOEL G. HIRSCH

LAW OFFICES OF

DAVID A. LAPIN

Attorneys for Amicus Curiae

California Mobilehome Parkowncrs

Alliance