Amicus Curiae Brief — Yee v. Escondido

IN THE

Supreme Court of the Unite

OCTOBER TERM, 1991 mee ”

JOHN K. YEE AND IRENE S. Yee, H.N.

and FRANCIS C. BERGER FOUNDATION,

MOUNTAIN SHADOWS MoBiILE HOME ESTATES,

RICHARD C. KUEBLER, dba MOONGLOW

MosBiLeé HOME ESTATE, VISTA VERDE, LTD..,

IMPERIAL ESCONDIDO MOBILE ESTATES and

MILDRED D. Tacey,

Petitioners,

VS.

THE City oF ESCONDIDO,

Respondent.

ON APPEAL FROM

THE COURT OF APPEAL OF CALIFORNIA

AMICUS CURIAE BRIEF OF

THE CALIFORNIA ASSOCIATION OF REALTORS®

AND NATIONAL ASSOCIATION OF REALTORS®

IN SUPPORT OF PETITIONERS

JOHN E. MUELLER*

MARGUERITE MARY LEONI

NIELSEN, MERKSAMER,

HODGSON, PARRINELLO & MUELLER

591 Redwood Highway, #4000

Mill Valley, California 9494]

(415) 389-6800

WILLIAM M. PFEIFFER LAURENE K. JANIK

Sr. Vice President & General Counsel

General Counsel RALPH W. HOLMEN, Sr. Counsel

JupitH K. HERZBERG, Sr. Counsel NATIONAL ASSOCIATION OF

CALIFORNIA ASSOCIATION Of REALTORS®

REALTORS® 430 North Michigan Avenue

525 South Virgil Avenue Chicago, Illinois 6061 |

Los Angeles, California 90020

*Counsel of Record

No. 91-1947

ooo

IN THE

Supreme Court of the United States

OCTOBER TERM, 199]

JOHN K. YEE AND IRENE S. YEE, H.N.

and FRANCIS C. BERGER FOUNDATION,

MOUNTAIN SHADOWS MoBILE HOME ESTATES,

RICHARD C. KUEBLER, dba MOONGLOW

MosiLt HOME EstTATE, VISTA VERDE, LTD..,

IMPERIAL ESCONDIDO MOBILE ESTATES and

MiILpReD D. Tacey,

Petitioners,

VS.

THe City oF ESCONDIDO,

Respondent.

ON APPEAL FROM

THE COURT OF APPEAL OF CALIFORNIA

AMICUS CURIAE BRIEF OF

THE CALIFORNIA ASSOCIATION OF REALTORS®

AND NATIONAL ASSOCIATION OF REALTORS®

IN SUPPORT OF PETITIONERS

JOHN E. MUELLER*

MARGUERITE MARY LEONI

NIELSEN, MERKSAMER,

HODGSON, PARRINELLO & MUELLER

591 Redwood Highway, #4000

Mill Valley, California 9494]

(415) 389-6800

WILLIAM M. PFEIFFER LAURENE K. JANIK

Sr. Vice President & General Counse!

General Counsel Race W. Hoimen, Sr. Counsel

JupitH K. HERZBERG, Sr. Counsel NATIONAL ASSOCIATION Of

CALIFORNIA ASSOCIATION OF REALTORS®

REALTORS® 430 North Michigan Avenue

525 South Virgil Avenue Chicago, Illinois 6061 |

Los Angeles, California 90020

*Counsel of Record

TABLE OF AUTHORITIES

INTEREST OF AMICUS CURIAE ...............

SUMMARY OF ARGUMENT

ARGUMENT

A.

OF CONTENTS

The Mobile Home Rent Control Law

Constitutes A Per Se Taking Requiring

TT co we ceveecuceces

1. The Mobile Home Rent Control

Law Extinguishes Valuable Real

Property Possessory Interests Of

Nc ee ee

Imposition Of The Escondido Mobile

Home Rent Control Law Results In A

EE Sa wesecwcces cece

l. The Regulatory Taking Analysis

Requires A Factual Ad Hoc

Ee

i a ft — ne eee eee ee ee a8 @ 6 8 Ce

2. The Economic Impact Of The

Mobile Home Rent Control Law Is

6d 0 ne had a

3. The "Character Of The

Governmental Action" Is That It

Substantially Interferes With The

Landowners’ Real Property

Pee Pe Te ee ee

4. The Mobile Home Rent Control

Law Frustrates Landowners’

Reasonable Investment-Backed

PTT TT Tee

5. This Regulation Goes "Too Far" .

6. The Policy Consideration Of

Avoiding Unfair Burdens On

Private Individuals Supports The

Conclusion That The Challenged

Law Constitutes A Regulatory

WE cesksts dsnidacenbehees

ed The Mobile Home Rent Control

Ordinance Does Not Further A Legitimate

PU SOUND oes wedenadaeseeudvas

ee PUOTEET TTT TERT TC Te Te rere

12

16

17

18

TABLE OF AUTHORITIES

Page

Cases

Armstrong v. United States, 364 U.S. 40 (1960) ......... 10

Azul Pacifico Incorporated v. City of Los Angeles,

1991 U.S. App. LEXIS 26335

oe a SS | eer ree 8, 12, 18, 21, 22

Connolly v. Pension Benefit Guaranty Corp.,

Gee Gas Ue CE 6 6 6h e6Se esc ceccccncvess 10

First English Evangelical Church of Glendale v. County

of Los Angeles, 482 U.S. 304 (1987) .......... 17

Hall v. City of Santa Barbara,

833 F.2d 1270 (9th Cir. 1986), cert. denied

sub nom. Santa Barbara v. Hall,

ee 7, 8, 9, 21

Kaiser Aetna v. United States,

og 13, 16

Keystone Bituminous Coal Ass'n v. De Benedictis,

Pee er eer eee eee 14

-iv-

Loretto v. Teleprompter Manhattan CATV Corp.,

GP Bs PEON ob kh 6 cdc cccccccacaccecs 8

Monongahela Navigation Co. v. United States,

Io ib we se Nes bce dceces sec 19

Nollan v. California Coastal Commission,

Gr Se IP OUTE 6 cv cv ccwececceses 18, 19, 22

Penn Central Transportation Co. v. City

of New York, 438 U.S. 104 (1978) ...... 10, 12, 13,

15, 16

Pennsylvania Coal Co. v. Mahon,

po eee 10, 13, 17

Pinewood Estates of Michigan v. Barnegat

Township Leveling Board, 898 F.2d 347

ee 7, 9, 20

PruneYard Shopping Center v. Robins,

GPF Wi PU CEUEED ccc ccecces scene ios. toa

United States v. Causby,

ee ove keeéacg eh secede enue 9

United States v. General Motors Corp.,

Be WE UD oid whee cece cccecnevess 13

United States v. Sperry Corp.,

Ge GA BE OD 6 sv ecwecceccesceveoncees 15

Williamson County Regional Planning Commission v.

Hamilton Bank of Johnson City,

— | |. 3 PPT PEEP eTer Tree ere 17

Yee v. City of Escondido,

224 Cal.App.3d 1349, 274 Cal. Rptr. 551 (1990),

review denied, Cal. LEXIS 353 (Cal. Jan 24. 1991) . 6

Statutes

CAL. CIv. Code

ON erry reer 9, 14

Miscellaneous

Epstein, An Outline of Takings,

41 U. MIAMI L. REV. 3 (1986) .............. 1]

Hirsch & Hirsch, Legal-Economic Analysis of Rent

Controls in a Mobile Home Context:

Placement Values and Vacancy Decontrol,

35 UCLA L.REV. 399 (1988) ..... ee ee

Kmiec, The Original Understanding of the

Taking Clause is Neither Weak nor Obtuse,

88 COLUM. L. REV. 1630 (1988) ............ 1]

sth.

Mandelker, Jnvestment-Backed Expectations:

Is There a Taking?, 31 J. OF URB.

AND CONTEMP. L. 3 (1987) .............05. 1]

Michelman, Takings,

88 COLUM. L. REV. 1600 (1988) ............ 11

Rose-Ackerman, Against Ad Hocery: A Commentary

on Michelman, 88 COLUM. L. REV. 1697 (1988) . 11

No. 91-1947

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1991

JOHN K. YEE AND IRENE S. YEE, H.N.

AND FRANCES C. BERGER FOUNDATION,

MOUNTAIN SHADOWS MOBILE HOME ESTATES,

RICHARD C. KUEBLER, dba MOONGLOW

MOBILE HOME ESTATE, VISTA VERDE, LTD.,

IMPERIAL ESCONDIDO MOBILE ESTATES and

MILDRED D. TACEY,

Petitioners,

THE CITY OF ESCONDIDO,

Respondent.

INTEREST OF AMICUS CURIAE

Pursuant to Supreme Court Rule 37, the California

Association of REALTORS® and the National Association of

REALTORS® respectfully submit this amicus curiae brief in

support of Petitioners.

«%-

Amicus curiae California Association of REALTORS®

("C.A.R.") is a voluntary trade association whose members

consist of local Boards of REALTORS® in California and those

persons licensed by the state of California as real estate brokers

and salespersons who are members of local boards. C.A.R. is

the largest state trade association in the United States and has

180 affiliated Boards of REALTORS® and over 135,000

members.

The mission of C.A.R. is to serve in developing and

promoting programs and services that will enhance the

members’ freedom and ability to conduct their individual

businesses successfully with integrity and competency.

Moreover, C.A.R. serves to promote, through collective action,

the preservation of private property rights.

Amicus curiae National Association of REALTORS®

("N.A.R.") is also a voluntary, non-profit association, comprised

of over 750,000 persons engaged in all phases of the real estate

business, including, but not limited to, brokerage, appraisal,

management, and counseling. N.A.R. also includes among its

members approximately 1,900 State and local Boards and

Associations of REALTORS®, including C.A.R.

N.A.R. was created in 1908 to promote and encourage

the highest and best use of the land, to protect and promote

~

private ownership of real property, and to advance professional

competence in the rendition of real estate services.

The members of C.A.R. and N.AR. (hereinafter

collectively referred to as "REALTOR® Amici") further believe

that every person should have the right to acquire real property

with confidence and certainty that the value of such property

will not be unduly diminished or jeopardized by governmental

action at any level unless just compensation is paid.

REALTOR® Amici believe the continuing demand for

rental housing can best be met by private investors willing to

take Ie ig-term capital risks, and support a mutually beneficial

owner-rental occupant relationship which will encourage a

continuing supply of adequate and affordable housing. With the

extensive proliferation of land use regulations that greatly

restrict the uses of private property, REALTOR® Amici, their

members and all the property owners they represent have a

significant interest in the outcome of this case and the law it

establishes.

Not only is there a need to resolve the conflict between

the decision of the California Court of Appeal and those of the

United States Courts of Appeals for the Third and Ninth

Circuits, there is a need for further guidance from this Court as

to when 4 governmental regulation so undermines private

atie

property rights that compensation under the United States

Constitution is required.

Counsel for REALTOR® Amici are familiar with the

questions involved and the scope of their presentation and

believe that further argument on the issues discussed by this

amicus curiae brief will be helpful to this Court.

SUMMARY OF ARGUMENT

The decision of the California Court of Appeal is

incorrect as the combined effect of the California Mobile Home

Residency Law and the Escondido mobile home rent control

ordinance is to deprive petitioners of their property without just

compensation. REALTOR® Amici agree with the United

States Courts of Appeals for the Third and Ninth Circuits that

such mobile home rent control laws effect a physical occupation

of property constituting a per se taking requiring compensation

for the value of the real property interests taken from mobile

home park owners and transferred to mobile home tenants.

REALTOR® Amici submit that the rent control law also

constitutes a regulatory taking entitling petitioners to just

compensation. Whether governmental action amounts to a

regulatory taking requires evaluation of the character of the

governmental action, its economic impact and its interference

with reasonable investment-backed expectations. Even though

” #

this case comes to this Court upon a demurrer, there is no real

dispute that the challenged law effects a transfer of fundamental

real property rights and corresponding wealth from the

landowner to the tenant, a drastic governmental action which

has a severe economic impact completely at odds with a

landowner’s investment expectations.

While this Court has identified the above general criteria

‘to be applied in the takings clause analysis, it has also expressly

recognized that such evaluation is difficult because of the lack

of precise rules and detailed guidelines. This case presents an

opportunity for this Court to provide desperately needed

guidance to lower courts as well as to lawmakers with respect

to jurisprudence concerning regulatory takings.

Finally, the rent control law is invalid because it does not

substantially advance a legitimate governmental interest. It does

not further the goal of providing more affordable housing.

Indeed, its likely ultimate result is less available housing and

more expensive mobile homes.

1. The Mobile Home Rent

Control Law Extinguishes

Valuable Real Property

Possessory Interests Of

The Landlord. _

Petitioners’ complaint alleges that the mobile home rent

control law has effected a transfer of valuable possessory

interests in their real property to their tenants. Even though

this case is at the pleading stage, there is no question that this

is the result of the law. Indeed, the California Court of Appeal

in this case states, "No one can dispute that Escondido’s rent

contro! ordinance, like the ordinance in Oceanside, effects a

transfer of value from landlords to tenants." Yee v. City of

Escondido, 224 Cal.App.3d 1349, 1354, 274 Cal.Rptr. 551

(1990), review denied, Cal. LEXIS 353 (Cal. Jan 24, 1991).

In a challenge to a similar mobile home rent control

scheme, the Third Circuit Court of Appeals noted that it was

alleged that the tenants "are given valuable and alienable

~ -

possessory interests to occupy park pads with a controlled rent -

- a possessory interest which belongs to the appellants."

Pinewood Estates of Michigan v. Barnegat Township Leveling

Board, 898 F.2d 347, 352 (3rd Cir. 1990). In fact, the tenant

who receives the transferred property interests, for nothing,

realizes monetary compensation when that tenant sells the

mobile home to an incoming tenant. The Court of Appeals

found that the premium paid by the new tenant is a payment

"to the departing tenant of what amounts to rent for the use of

the pad. This ‘rent’ is for the possessory interest of the

landlord. Thus, this is a case where other persons, tenants, have

been granted interests in property which properly belongs [sic]

to the appellants, the landlords." /d. at 353; see also Hirsch &

Hirsch, Legal-Economic Analysis of Rent Controls in a Mobile

Home Context: Placement Values and Vacancy Decontrol, 35

UCLA L.REV. 399, 420-423 (1988) (hereinafter cited as Hirsch

& Hirsch).

Similar allegations were made in Hall v. City of Santa

Barbara, 833 F.2d 1270, 1276 (9th Cir. 1986), cert. denied sub

nom. Santa Barbara v. Hall, 485 U.S. 940 (1988) about another

comparable California mobile home rent control law. In Hall

the Court concluded that mobile home park owners would have

a constitutional right to compensation for the taking of their

property if they could prove,

x 3

that the .. . [challenged ordinance]

has transferred a possessory

interest in their land to each of

their . . . tenants; that this interest

consists of the right to occupy the

property in perpetuity while paying

only a fraction of what it is worth

in rent; and that this interest is

transferrable, has an established

market and a market value.

Hall v. City of Santa Barbara, 833 F.2d at 1276. Applying

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

(1982), the Courts in Pinewood Estates and Hall opined that

valid causes of action had been pleaded and that if these

elements were satisfied, the rent control ordinances would effect

a physical occupation of the landowner’s property constituting

a per se taking under the Fifth Amendment.

The Ninth Circuit Court of Appeals subsequently held

that with respect to a mobile home rent control scheme virtually

identical to that imposed in Escondido, there was a "physical

occupation" of the real property constituting a per se taking

requiring just compensation. Azul Pacifico Incorporated v. City

of Los Angeles, 1991 U.S. App. LEXIS 26335 (9th Cir. Nov. 1,

1991). It affirmed the District Court’s finding, after trial on the

-9.-

merits, that each of the elements identified in Hall and

Pinewood Estates had been satisfied in that case. Jd. at 1-2.

While REALTOR® Amici agree that the California Mobile

Home Residency Law (CAL. Civ. Code §§ 798 - 799.6

(Deering’s 1990), hereinafter cited as "MHRL") and the

Escondido mobile home rent control ordinance necessarily

effect a physical occupation of a landlord’s property, they

submit that this constitutes a regulatory taking as well.

B. Imposition Of The Escondido Mobile

ent Control Law Results In A

Regulatory Taking.

1. The Regulatory Taking Analysis

Fa Hoc Evaluation.

Decisions of this Court establish that governmental

regulation short of physical invasion may constitute a taking

because such action may result in "as complete [a loss] as if the

[government] had entered upon the surface of the land and

taken exclusive possession of it." United States v. Causby, 328

U.S. 256, 261 (1946).) While this Court has recognized that

there is no "set formula" to determine a regulatory taking and

indeed, that the “question of what constitutes a ‘taking’ for

purposes of the Fifth Amendment has proved to be a problem

of considerable difficulty," (Penn Central Transportation Co. v.

= -

City of New York, 438 U.S. 104, 123 (1978)) it has identified the

following factors which must be considered in such an

evaluation: "The economic impact of the regulation on the

claimant and, particularly, the extent to which the regulation has

interfered with distinct investment-backed expectations are, of

course, relevant considerations. .. . So, too, is the renin of

the governmental action." Jd. at 124 (citation omitted); see also,

ren v. Pension Benefit Guaranty Corp., 475 U.S. 211, 224-25

). |

— As Justice Holmes advised, "{I]f regulation goes too far

it will be recognized as a taking." Pennsylvania Coal Co. v

Mahon, 260 U.S. 393, 415 (1922). In addition, the "Fifth

Amendment’s guarantee . . . [is] designed to bar government

from forcing some people alone to bear public burdens which

in all fairness and justice, should be born by the public as ;

whole." Armstrong v. United States, 364 U.S. 40, 49 (1960)

Since there is no set formula for determining when a takinz es

occurred, the question of "whether a particular restriction will

be rendered invalid by the government’s failure to pay for any

soneae proximately caused by it depends largely ‘upon the

particular circumstances [in that] case.” Penn Central

Transportation v. City of New York, 438

, U.S. at itati

omitted). at 124 (citation

S

This case presents the Court with an opportunity to

apply and further define the above multifactor test. Although

many commentators have written about "investment-backed

expectations” and the other factors mentioned in the leading

regulatory cases, none have been able to discern a consistent

definitional framework sufficient to place owners and regulators

on notice of the consequences of their actions.| REALTOR®

Amici specifically urge this Court to clarify that regulations such

as this mobile home rent control law improperly interfere with

property owners’ rights and investment-backed expectations so

as to constitute a compensable taking.

2. The Economic Impact Of The

Mobile Home Rent Control Law

Is Severe.

As noted above, the economic impact of the law is an

immediate, irrevocable transfer of wealth from landlord to

tenant. The economic impact is massive. For example, in Azul

‘See, e.g, Rose-Ackerman, Against Ad Hocery: A Commentary on

Michelman, 88 Co.um. L. Rev. 1697 (1988) (arguing that the uncertainty created

by ad hoc inquiry is detrimental to the real estate community and the economy

as a whole); Epstein, An Outline of Takings, 41 U. Mant L. Rev. 3 (1986);

Kmiec, The Original Understanding of the Taking Clause is Neither Weak nor

Obtuse, 88 Co.um. L. Rev. 1630 (1988); Mandelker, Investment-Backed

Expectations: Is There a Taking?, 31 J. Or Urs. Ano Contemp. L. 3 (1987)

(concluding that the test may as well be ignored); Michelman, Takings, 88 Covus.

L. Rev. 1600 (1988).

- 12-

Pacifico the district court calculated damages, based on "the

average premium charged on" sale, at $20,880 per mobile home

sold. Azul Pacifico v. City of Los Angeles, 1991 U.S. App.

LEXIS at 14. "Diminution in property value, standing alone"

may not establish a taking. Penn Central Transportation v. City

of New York, 438 U.S. at 131. Yet, the challenged rent control

law so dramatically impacts the financial aspects of mobile

home park ownership and so radically changes the economic

and legal relationship between landlord and tenant that it

constitutes a regulatory taking.

3. The "Character Of The

Governmental Action" Is That It

Substantially Interferes With The

Landowners’ Real Property

Rights. _

"In deciding whether a particular governmental action

has effected a taking, this Court focuses . . . both on the

character of the action and on the nature and extent of the

interference with the rights. . . " Penn Central Transportation v.

City of New York, 438 U.S. at 130.

The necessary magnitude of interference with property

rights has not been precisely set forth or addressed by this

Court under the factual and legal circumstances presented by

_ =

this case. However, the Court "must consider whether the

interference with appellants’ property is of such a magnitude

that ‘there must be an exercise of eminent domain and

compensation to sustain [it]."". Penn Central Transportation v.

City of New York, 438 U.S. at 136 (quoting Pennsylvania Coal v.

Mahon, 260 U.S. at 413).

The critical property rights have been described “as the

rights to possess, use and dispose of it." United States v. General

Motors Corp., 323 U.S. 373, 377-378 (1945). In addition, "one

of the essential sticks in the bundle of property rights is the

right to exclude others." PruneYard Shopping Center v. Robins,

447 U.S. 74, 82 (1980); Kaiser Aetna v. United States, 444 US.

164, 179-180 (1979). Any interference with such right must be

evaluated to determine whether there has been a taking.

The state and local mobile home laws substantially

interfere with landlords’ property rights by transferring them in

perpetuity to the tenant. The impact is severe. The tenant is

given a lifetime possessory interest in the property owner’s land

(mobile home pad) which the tenant can sell, use or dispose of

as the tenant desires. "This perpetual estate in essence

transmutes an at-will tenancy into a relatively permanent estate

in land. The result of these changes in the law is that a tenancy

... [has] become tantamount to a fee ownership, .. ." Hirsch

& Hirsch, supra p. 7, at 421.

sft.

Even if all aspects of property ownership were not

extinguished by the rent control law, that will not preclude a

finding that there has been a regulatory taking.

[W]e have recognized that regulations --

unlike physical invasions -- do not typically

extinguish the ‘full bundle’ of rights in a

particular piece of property. ... This

characteristic of regulations frequently

makes unclear the breadth of their impact

on identifiable segments of property, and

has required that we evaluate the effects

in light of the ‘several factors’ enumerated

in Penn Central Transportation.

Keystone Bituminous Coal Ass'n v. De Benedictis, 480 U.S. 470,

516 (1987) (Rehnquist, C.J., dissenting).

Here the dramatic redistribution of property rights by the

Escondido rent control law operating in combination with the

MHRL demonstrates that there has been a taking.

In ruling that a New York law restricting development of

the air space above Grand Central Station did not violate the

takings clause, this Court cautioned that "the question of the

severity of the impact of the law on appellants’ parcel, and its

resolution in turn requires a careful assessment of the impact of

i.

the regulation on the . . . site.". Penn Centra! Transportation v.

City of New York, 438 U.S. at 136. The impact on a mobile

home park owner’s site is not only dramatic but no alternatives

are available to the landlord to stake up his loss.

Thus, this case is distinguishable from Penn Central

Transportation, in which the New York law did not transfer any

of Penn Central’s real property possessory interests to anyone

else. Penn Central was not even prohibited from ll

construction above the Grand Central terminal site. In fact it

was allowed to recoup any loss it might sustain at that site by

transferring development rights it held with regard to the

terminal to other land parcels nearby. Penn Central

Transportation v. City of New York, 438 U.S. at 137.

More is involved here than a "mere loss of money" or

"profit" as respondent asserts. This is not like United States v.

Sperry Corp., 493 U.S. 52 (1989), in which no interests in real or

personal property were involved. While monetary values, of

course, are being transferred, so too are fundamental possessory

interests in real property.

ees ei

- 16-

4. The Mobile Home Rent

Control Law Frustrates

Landowners’ Reasonable

Investment-Backed

Expectations. _

As this Court recognized in Penn Central Transportation,

"[A] state statute that substantially furthers important public

policies may so frustrate distinct investment-backed expectations

as to amount to a ‘taking.”” Penn Central Transportation v. City

of New York, 438 US. at 127. Thus, in Kaiser Aetna v. United

States, 444 U.S. at 178, this Court found that the "Government’s

attempt to create a public right of access to the improved pond"

interfered with Kaiser Aetna’s “reasonable investment backed

expectations.” PruneYard Shopping Center v. Robins, 447 US.

at 84.

The challenged mobile home rent control law

contravenes the reasonable investment-backed expectations of

the owner of the property. Because the rent control ordinance

depresses rents below market, the value of the mobile home

upon sale by the existing tenant is increased by a premium in a

comparable amount; this premium, a windfall to the tenant and

loss to the landowner, clearly was not anticipated by the

landowner when making the investment in the mobile home

park. It is not a reasonable expectation of landowners that

= FP

valuable, marketable and alienable possessory interests in their

land will be transferred to their tenants in perpetuity without

any compensation to them.*

5. This Regulation Goes "Too

Far."

While the determination of what constitutes a regulatory

taking admittedly may be ad hoc, the challenged rent control

law, in the words of Justice Holmes, "has gone too far," because

it immediately and irrevocably causes a massive transfer of

wealth and real property possessory rights from one private

party to another. In Williamson County Regional Planning

Commission v. Hamilton Bank of Johnson City, 473 U.S. 172

(1985), although unable to decide on the merits of the case

because of procedural deficiencies, this Court made a statement

that could be construed to clarify the concept of when a

regulation goes "too far" as "the point at which the regulation

becomes so onerous that it has the same effect as an

appropriation of the property through eminent domain or

physical possession." Jd. at 199 (footnote omitted); see also,

Pennsylvania Coal v. Mahon, 260 U.S. at 413. The challenged

rent control law is obviously onerous. It also "has the same

@As this Court held in First English Evangelical Church of Glendale v. County

of Los Angeles, 482 U.S. 304 (1987), even a temporary unexpected restriction of

use of property can constitute a regulatory taking.

- 18 -

effect as an appropriation of property"; it is tantamount to a

physical occupation depriving landowners of their basic property

rights.

6. The Policy Consideration Of

Avoiding Unfair Burdens On

Private Individuals Supports The

Conclusion That The Challenged

Law Constitutes A Regulatory

Taking. _

The policy underlying the takings clause, that the public

should not force upon one individual more than his just share

of the burdens of government, applies in this case. See, Nollan

v. California Coastal Commission, 483 U.S. 825, 841 (1987);

Monongahela Navigation Co. v. United States, 148 U.S. 312, 325

(1893). Assuming arguendo that any legitimate governmental

murpose is served by the mobile home rent control law, the

monetary burden is more properly imposed on society as a

whole rather than upon individual mobile home park owners.

As the Ninth Circuit Court of Appeals correctly acknowledged:

"The city may choose to create such a windfall for current coach

owners. If it does so, however, it must spread the burden on all

its citizens, not target one small class of individuals to foot the

bill." Azul Pacifico v. City of Los Angeles, 1991 US. App.

LEXIS at 36. It may be that governments faced today with

- 19-

diminishing tax revenues may find it more economically

"acceptable" to utilize land use regulations rather than eminent

domain in an attempt to satisfy a community’s needs. It is

certainly more politically expedient and less expensive to pass

an onerous regulation than to condemn property or fund social

programs. However, if governments choose to attempt to

accomplish such goals by destroying fundamental property rights

and concurrently transferring wealth from one private party to

another, particularly under the circumstances of this case, then

there must be just compensation for such a taking.

Ordinance Does Not Further A

Lesiti Public I "

To be valid at all, a regulation must pass very close

scrutiny demonstrating that it substantially advances a legitimate

state interest. Nollan v. California Coastal Commission, 483

U.S. at 841. Yet, the Escondido mobile home rent contro! law

does not substantially accomplish the goal of providing more

affordable housing for tenants. By restricting an owner’s ability

to adjust rents when mobile homes are sold in place, the

ordinace obliges incoming tenants to pay large premiums,

nominally for the used mobile home, but in actuality for the use

of the owner’s property. The increase in sales price in actuality

represents additional rent for the use of the space which

rightfully belongs to the landlord.

5 -

[T]he purchaser of a mobile home

who pays a premium for the right

to keep the home in a mobile

home park pays for the cost of the

tenancy rather than for the mobile

home. Thus, the premium is

nothing more than rent for the pad

which, depending upon whether the

purchase is financed or paid for in

cash, the new tenant pays during

his tenancy or in advance.

Pinewood Estates v. Barnegat Township, 898 F.2d at 353

(footnote omitted). Similarly, in Hall v. City of Santa Barbara,

the Court stated that, assuming appellants’ allegations therein

were true,

the Santa Barbara ordinance will

do little more than give a windfall

to current mobile park tenants at

the expense of current mobile park

owners. If, as appellants allege, the

ordinance has resulted in a

substantial increase in the market

price of mobile homes subject to

the ordinance, this may well hinder

rather than assist lower-income

>

families seeking access to rental

units in mobile park homes.

Hall v. City of Santa Barbara, 833 F.2d at 1281.

Indeed, by increasing the sales price rather than

amortizing the value as rent over the period of the lease, the

rent control law makes it more difficult for new tenants who

must marshal greater assets for a down payment for purchase

of the coach. In an empirical study it was found that, "rent

control tends to raise the housing cost of all mobile home

owners, other than those who were renting at the time the rent

control ordinance was enacted." Hirsch & Hirsch, supra p. 7, at

432; Hall v. City of Santa Barbara, 833 F.2d at 1281. In Azul

Pacifico the Court found: "[V]Jacancy control does not help

incoming tenants in the case of mobile homes. The coach buyer

will have to pay the same effective rent for the pad whether or

not the landlord is permitted to raise the rent at vacancy." Azul

Pacifico v. City of Los Angeles, 1991 U.S. App. LEXIS at 18.

Thus, the departing tenant will receive monetary

consideration that the landlord would otherwise get. The Court

of Appeal in Azul Pacifico declared that it was "unable to see

how this transfer of wealth from one group of citizens to

another can serve any rational governmental purpose." /d. at

19.

x

The Court in Azul Pacifico did conclude that the

ordinance therein served a "governmental purpose" of

protecting existing tenants "from being forced to sell their

coaches at distress-sale prices in the event the landlords were to

set rents for new tenants so high that no one would want to buy

the coach." Jd. at 20. However, this is pure speculation.

Apparently this was based on some testimony in Azul Pacifico

“from mobile home tenants” that they believed they would have

difficulty selling their mobile homes because landlords would

raise the rents too high. Jd. This testimony was obviously

conjecture since the rent control law was in effect. Such

unproven theory does not satisfy the rigorous "nexus" test

recently enunciated by this Court in Nollan v. California Coastal

Commission, 483 U.S. at 837. Indeed, since the trial court in

Azul Pacifico enjoined enforcement of the rent control

ordinance in that case, presumably because it was invalid, it

necessarily concluded there was no substantial public benefit

furthered by it.

There is no evidence in the record in this case that in

mobile home parks not subject to rent control, tenants are

unable to sell their mobile homes because the rents are raised

too high. Rather, there is a market for used mobile homes

whose value is computed by traditional "blue book" methods for

personal property. Hirsch & Hirsch, supra p. 7, at 401 n.5.

~ 2

Rather than rely on unproved speculation, REALTOR®

Amici respectfully direct this Court to the following conclusion

of the aforementioned empirical study:

"In conclusion, if the purpose of rent control is to assure

deserving tenants housing at a reasonable rent, the extent to

which mobile home tenants are able to appropriate these

benefits makes rent controls in a mobile home context unfair

and perhaps even counterproductive in the long run." Hirsch &

Hirsch, supra p. 7, at 448.

CONCLUSION

The decision of the California Court of Appeal should be

reversed.

Respectfully submitted,

JOHN E. MUELLER*

MARGUERITE MARY LEONI

NIELSEN, MERKSAMER, HODGSON,

PARRINELLO & MUELLER

WILLIAM M. PFEIFFER

JUDITH K. HERZBERG

CALIFORNIA ASSOCIATION OF

REALTORS®

LAURENE K. JANIK

RALPH W. HOLMEN

NATIONAL ASSOCIATION OF

REALTORS®

Counsel for Amicus Curiae

*Counsel of Record

November 27, 1991.