Sierra Lake Reserve v. The City of Rocklin the Rocklin Mobile Home Rent Review Commission Carlos Urrutia Rusty Selix Rudolf Michaels George Paras

GOODWIN, subject expenditures Before KOZINSKI and curred were to review NOONAN, August Judges. On Circuit reasonableness. "wrongful! Complaint rejection at 4. 1. Sierra Lake CR ](cid:127)” and circum specific facts appli- tance of its rent increase Lake refiled Sierra and the relating City stances The the new ordinance. cation under relating to the facts and circumstances rejected application because Manager against sum action militate governmental place of not indicated the Lake had Sierra in most cases.” Del mary resolution City Manager refused The execution.2 Monterey, Ltd. defect, Monte Dunes even to cure the Lake allow Sierra (9th Cir. Monterey, 920 no form contained though application omitted). 1990) (citation exe- indicating place space for blank cution. Takings application on I. Claim Lake refiled City Manager accepted The September 30. rent control Plaintiff claims that the it media- referred to application and in an unconstitutional ordinance resulted finally ef- The rent increase became tion. of this taking property. The facts of 1, 1985. fective on December to those of Hall v. are almost identical case on (9th filed suit in district court Barbara, Lake 833 F.2d 1270 City Santa of alleging 940,

September Cir.1987), denied, 485 U.S. 108 cert. In Hall, violations. addi- equal protection (1988). and 1120, 281 In 99 L.Ed.2d vacancy tion, complaint alleged that the physical taking could re found that a we City’s all the provision common to control an “the tenant is able to derive sult where ordinances effected a rent control statutory lease benefit from economic just compensation was due. This for premium which by capturing a rent control hold Sier- provision limited the amount which at his mobile home.” Id. when he sells following a could increase the rent Here, Hall, alleg ra Lake plaintiff in 1276. as According vacancy park. to Sierra at operat has that a rent control ordinance es Lake, an interest this transferred possessory inter to transfer a valuable ed tenant, premises landlord to an rented from to the property from the landlord est to departing that tenants were able tenant, interest capture is able to and the tenant by selling homes at a monetize their mobile the landlord would oth premium to which granted de- premium.3 The district erwise be entitled. motion under Fed.R.Civ.P.

fendants’ recognizing complaint that While 12(b)(6), dismissing all of Sierra Lake’s takings claim under Ninth Circuit stated a claims without leave to amend. law, un court found the claim the district County Planning ripe under Williamson

Discussion Bank, 473 U.S. v. Hamilton Commission (1985). 3108, L.Ed.2d 126 court’s dismissal We review the district Williamson, Supreme In the United States plaintiff’s de novo. We take all claims takings claim cannot be non-moving par- Court held that a allegations material of the if the state light presented in federal court ty true and construe them the compensa provide are party. type that “In this courts available most favorable to action, provides adequate property con- tion: a State where the owner “[I]f compensation, procedure seeking just for unconstitutionally it has tends that been governmental owner cannot claim violation deprived property through Compensation until it and of the Just Clause regulation, motions to dismiss motions procedure and been denied summary judgment must be viewed has used at impor- just compensation.” Id. at particular skepticism. The with home, City Manager the home remains on the rent-con also bile 2. Sierra Lake "non-statutory rejected application resulting higher price space, trolled in a unilaterally arbitrarily imposed grounds ... and space subject buyer than a home on a city manager Appel- Brief for Barbara, himself.” City rent control. See Hall v. Santa lant at 7. Cir.1987), de cert. 833 F.2d 1273-74 nied, 1120, 99 L.Ed.2d name, Despite are not all 3. their mobile homes (1988). Thus, a tenant sells his mo that mobile. when Williamson, it, Interpreting latory challenge rejected stating we have and or unde if state law was “unclear held that ordinance is structured to estab “[t]he taking, alleged time of the veloped” at the general lish a fair base rent which reflects try in state must first to recover market conditions.... Rents will not be County court. Austin v. required pur ‘reduced more than for the ” Honolulu, 840 F.2d (9th Cir.), Id. at poses police power.’ 204 Cal.Rptr. 239. (1988). plain unless opinions Two recent state court re have courts estab can show that “the state tiff decision Hall. Yee fused to follow our just may not obtain lish that landowners Escondido, Cal.App.3d through condem compensation an inverse circumstances, any (1990); Cal.Rptr. nation action under Casella procedures adequate are within Hill, Morgan Cal.App.3d [California] 280 Cal. ” County. Williamson the terms of Rptr. These courts considered physical takings challenges to mobile home rent control alleged taking, virtually ordinances that were At the time of the Califor consistently courts took a dim identical to those in Oceanside and Hall. nia state takings on rent con view of claims based Yee, In the court “reviewed the issue anew See, e.g., City Fisher v. ordinances. trol Hall,” and found “Hall’s reason- light in of of 644, 261, 209 Berkeley, 37 Cal.3d 693 P.2d ing unpersuasive and the con reaffirmed] ” (1984), 260, aff'd, Cal.Rptr. 682 475 U.S. Yee, Oceanside. clusion ... reached 1045, Nash (1986); 106 S.Ct. 89 L.Ed.2d 206 1351, Cal.App.3d 224 Cal.Rptr. 274 Monica, 97, 688 City v. Santa 37 Cal.3d of the Casella Similarly, “repudiate[d] 894, appeal (1984), Cal.Rptr. P.2d 207 285 Hall’s attempt bootstrap to a mobile home dismissed, 1740, 84 regu rent control ordinance —an economic City v. (1985); L.Ed.2d 807 of Birkenfeld Supreme ‘very lation —to the Court’s nar 129, 1001, Berkeley, 17 Cal.3d 550 P.2d 130 Teleprompter Loretto v. holding in row’ (1976). Cal.Rptr. they 465 Even when Corp., Manhattan 419, CATV 458 102 U.S. found a rent control ordinance unconstitu 3164, (1982) Casel 868 ].” tional, remedy they granted was invali la, Cal.App.3d Cal.Rptr. 230 280 See, e.g., compensation. dation rather than Oceanside, Yee and Casel- accept 876. We Gregory City Capistrano, v. San Juan of law, la as correct statements of California 72, (1983).4 Cal.App.3d Cal.Rptr. 142 191 47 being contrary authority. there no case, germane ap- More to our the state rely gener does not on the “mere pellate explicitly rejected courts have com- hostility alized of the state courts to tak adopted in pensation theory under the we City v. claims,” Schnuck Santa ings of Hall. Mobilehome Park Oceanside In Monica, 171, (9th Cir.1991), Oceanside, v. Owners’ Ass’n inability instead on its demonstrated to but (1984), Cal.App.3d Cal.Rptr. a compensation through an in just “obtain group park home chal- mobile owners any cir verse condemnation action under lenged vacancy aspect control a Austin, cumstances.” 840 F.2d at 681. it ten- control ordinance because allowed dismissing plain erred in The district court premi- ants to sell their mobile homes at a takings regu- um. The court viewed the claim as a tiff’s claim.5 English, Supreme prior 4. The Court has since held that com- to First “California law did not pensation required compensation permit is for losses incurred while for a landowners to seek regulation taking through regulatory an invalid was in effect. See First an action in inverse English Evangelical County condemnation”). Lutheran Church v. 304, 318-19, Angeles, Los 107 S.Ct. concurrence, 2378, 2387-88, (1987). Contrary suggestion The rele- to the 96 L.Ed.2d 250 inquiry issue v. vant date for an as to the status of the the substantive decided Hall note, law, however, taking. not before We how- state is the time of the Santa Barbara is ever, us. Williamson, only address this See 3120; 473 U.S. at 105 S.Ct. at other circuit to Dunes, (hold- interpreting after Del Monte 920 F.2d at 1507 issue reached the same result ing ripe pre-1987 Supreme did in Hall. a claim for a because the same Court cases as we 2704-05, 564, 568-69, Remaining The Claims II. L.Ed.2d 548 state “overlapping remedies Noting that in property a Plaintiff first claims question of generally irrelevant are allowable under in the rent increases terest action under cause of existence of a 529 on ac predecessors to Ordinance Burch, 494 U.S. 1983,” Zinermon § capital im expenditures made for count of L.Ed.2d 100 property. controlled provements to the rent the uni- (1990), Supreme divided Court noted, 529 all ex prior to Ordinance As into three cate- claims of section 1983 verse improvements could penditures on of claims under first consists gories. The increases, through rent be recovered provision that express constitutional expenditures whereas under Ordinance state action. In prohibits some its terms 12 months completed more than on work cases, occurs and be- such violation adjudged application have to be prior to the Id., injury. the time of actionable at comes mediators, subject to review reasonable category con- second 110 S.Ct. at 983. The in claims that it by arbitrators. Plaintiff com- the “substantive sists of claims under in reliance variety expenditures curred Process ponent Due Clause] [of law, interest prior and that wrongful govern arbitrary, certain bars impaired the law diminished or when was ‘regardless of the fairness of ment actions retroactively deny so changed ” implement them.’ procedures used al justified by expenditures rent increases Williams, 474 U.S. (quoting Daniels theory, ready incurred. Under this (1986)). L.Ed.2d 662 deprivation from the action of resulted claims, like claims Substantive making passing Ordinance 529 pro express constitutional for violations it retroactive. violation; visions, time of the arise at the Second, if it plaintiff that even claims regardless plaintiff “may invoke § it property rights at the time had no vested remedy might that be avail any state-tort improvements, spent money the for compensate deprivation him for the able to rights Lake at- such vested when Id.; rights.” also of these Shah v. a rent tempted application to file its for 797 F.2d 743 County Angeles, Los increase, 529 went into before Ordinance Cir.1986). plaintiffs substan We discuss application Plaintiff was effect. claims pp. process 957-58 tive due claims infra. City Manager wrongfully rejected by the procedural category The final consists refile after the new who told Sierra Lake to cases, process In these due claims. the into Under this sec- ordinance went effect. does not occur and is therefore violation City ond scenario it was action the and until the not actionable “unless State Manager wrongfully rejecting in Zinermon, provide process.” fails due that application, increase and his directive at 983. 494 U.S. at We application refiled until the new not be process plaintiffs procedural due discuss alleged passed, caused law immediately claims below. deprivation. Finally, claims a Sierra Lake Process A. Procedural Due cost-of-living rent in one-month’s interest According procedural increase under Ordinance 529.6 A claim for violation Lake, properly First, it a process components. presented has to Sierra due two application protected prop filled out under Ordinance plaintiff must that a show Second, Manager August it but erty interest was taken. must safeguards rejected arbitrary it for and insubstantial procedural sur show that supra. rejection, The inadequate. reasons. note rounding deprivation were See Lake, Roth, in according to Sierra resulted a one- Regents See Board of exempts Barnegat Township from review cost-of- Lev- 6. Ordinance 529 See Pinewood Estates living (3d Cir.1990). on a formula derived Bd., rent increases based eling 353-54 Price Index. from the California Consumer — -, approval of the rent U.S. L.Ed.2d delay in the month (1990); (Easterbrook, J., increase, higher rent to id. at 1408 costing it a month’s J., concurring); (Cudahy, joined at 1410 entitled. id. it was otherwise which JJ., Posner, by Cummings dissenting). simply theory, first it plaintiffs As to fray need not enter the at this time We procedural due fails to state a claim plaintiff’s because claims about the assuming that had process. Even Manager’s equally action can well be stated increases al- in the rent a interest vested Where, process as substantive due claims. law, pro- all the prior it received lowed here, plaintiff alleges that the denial officials City’s elected cess due it when process of due consists of an official’s arbi- responsibilities discharged legislative their action, trary a claim for violation of sub- by law. prescribed in While the manner indistinguishable process stantive due is challenge legislative action on plaintiff may procedural from a claim for violation of due grounds compensa- or demand substantive process. Supreme Because Court held taking, if amounts to a it tion the action process due Zinermon substantive process may procedural raise a due subject claims are not to diversion to state the action challenge to such action. When Parratt, court under see 110 S.Ct. at nature, due complained legislative of is procedur- we need not consider whether the legislative process is satisfied when claims, process standing alone, al due responsibilities in the body performs its would have to be so diverted. by law.7 prescribed normal manner theories, and third Plaintiff’s second B. Substantive Due Process alleged prop although involving different interests, hinge upon a claim that erty both noted, procedur As Sierra Lake’s plaintiff’s appli City Manager treated process al due claims can also be stated as arbitrarily, depriving wrongfully and cation process claims. a substantive due While property right a that had vested under process may claim arise substantive due allegations can amount to state law. Such procedural same facts as a due out of the pro procedural a claim for denial claim, the claims are different Ass’n v. cess. Sinaloa Lake Owners respects. important Whereas several Valley, 882 F.2d 1405- Simi challenges claim procedural due — U.S. -, (1989), effecting depriva procedures used (1990). 1317, 108 L.Ed.2d 493 Wheth tion, process due claim chal a substantive by v. er such a claim is barred Parratt lenges governmental the action itself. Be 527, 101 S.Ct. Taylor, 451 U.S. pro due the harm of a substantive cause (1981), is unclear after Ziner- L.Ed.2d 420 at the time of the cess violation occurs plaintiff held that a must mon. Parratt action, plaintiff’s government wrongful bringing pursue first state remedies when wrong action arises when the section 1983 procedural pro due a claim for violation of Zinermon, 110 is taken. ful action random, acts of cess based on unauthorized requirement plaintiff that 983. Parratt’s officials; appears state Zinermon to allow of state tort remedies does avail itself by federal claims in similar situations fo process claims. apply to substantive due cusing authority and function of the on the of our sister question. state official in Two violation of To establish a substan conflicting views on circuits have taken prove Lake “must strong process, due Sierra raising dis tive subject, each case ‘clearly action government’s Hardy, 905 F.2d 858 sents. v. See Caine unreasonable, J., having no (Jones, arbitrary sub (5th Cir.1990); dissent and id. at 863 health, public Felder, relation to the safe 910 F.2d stantial ing); Easter House v. ” banc), denied, morals, (7th Cir.1990) (en ty, general or welfare.’ Sinaloa cert. give procedur- legislators rise to a consider here whether a claim of of 7. We need not —would legislative process— major corruption process al due claim. acceptance of bribes one or more such as the reasonable return plaintiff will receive a Owners, (quoting 882 F.2d at Lake plain- To the extent expenditures.9 Co., those Realty v. Ambler Village Euclid of increases allowed alleges that the rent tiff 114, 121, 365, 395, 272 U.S. merely capital improvements of on account v. (1926)); also Bateson see L.Ed. (or improvements the cost of those offset (9th Cir.1988). Geisse, 857 F.2d of less), a claim for a violation it has stated com allegations of the According to the Guaranty under due substantive City and its officials obstructed plaint, the National.10 applications at rent increase Lake’s Sierra substan alleges Lake also Sierra turn, finally allowed every and then almost the en process violation based on tive due still less than what increase that was provision of vacancy control actment of adequate. It is well Lake considers Sierra ordinance, pp. supra. To 953-54 plaintiff possibility the realm within claim, must Lake prevail on this Sierra City’s actions establish that could relationship exists rational show that no wrongful applications were processing and vacancy provision control between arbitrary. could Given or purpose of the ordinance. See Boone claim, the state a substantive Redevelopment Agency San v. dismissing erred in without district court Cir.), (9th Jose, 841 F.2d Hall, n. 833 F.2d at 1274 leave to amend. 6; Li see also McCalden California (1988). Sierra Lake cannot L.Ed.2d 526 Ass’n, 546-47 Cir. brary 919 F.2d may heavy Although it meet this burden. 1990).8 in some cases true that the ordinance be puts it money from the landlord takes may also have a sub Sierra Lake longer no pocket of a tenant who into process claim to the extent it stantive due could park, resides at the Council deprived it of complains that Ordinance 529 majority reasonably believe that in return on its a “fair and reasonable” public the ordinance serves the valid cases denying it increases on vestment keeping home rent from purpose of mobile pri capital improvements made account of See, becoming prohibitively high. e.g., by limiting the to its enactment and or Jose, Pennell v. San may recover on account of later- amount improvements. Guaranty Na made purpose the ordinance serves this How well Gates, 916 F.2d tional Insurance Co. question, the court will legislative is a one (9th Cir.1990). n. 4 512-14 & not consider. National, every Guaranty dollar Under Equal Protection Claims C. property by way puts the landlord into improvements constitutes an in- Lake also that it in the for which a “fair vestment equal protection the laws. was denied and reasonable” return must be allowed. protection equal Plaintiff can establish an Breaking enough; the law must even is not showing of Rocklin by claim provide profit a on one’s investment. applied the law in an arbi or its officials p. at 515. Ordinance 529 must do discriminatory manner. trary invidiously or pass simply equal protection challenges more than allow Although costs; fun- through action that does not certain must ensure that state “trammel[ ] remand, remand, profit. On the district 8. On the district court will have to able ap Ordinance 529 in fact determine whether the initial rent increase should determine whether plication the initial rent allows a reasonable return on investment. was valid. If increase valid, application was not then there was no deprivation, and therefore Sierra Lake would principle of "fair and reasonable return 10. The only damages. See Zin be entitled to nominal may support takings a claim as on investment” ermon, 110 well as a substantive due claim. Dep’t Public Mountain Water Co. v. Montana 593, (9th Regulation, 9. Sections F.2d 600 Cir. 2.46.200A & B of Ordinance 529 Serv. Barasch, 1990) (citing Light permit only passing Duquesne Co. v. a could be construed to 609, (1989)). L.Ed.2d 646 through for a U.S. of costs without allowance reason- implicate[] a rights or personal damental only rational receive classification” Blanca Rosa

suspect relation test ECHEVERRIA-HERNANDEZ, rational scrutiny, “the basis by officials state Petitioner, sustain conduct will not malicious, plainly arbi- irrational or that is Kayfetz, trary.” Lockary v. Monte also Del Cir.1990); (9th AND NATURALI- IMMIGRATION U.S. (citing Nollan v.

Dunes, at 1509 920 F.2d SERVICE, Respondent. ZATION Comm’n, 483 U.S. Coastal California & n. n. No. 89-70236. 835 & context, plain- (1987)). In this L.Ed.2d Appeals, United States Court identical to protection claim is equal tiffs Ninth Circuit. claim, and first substantive the same court for the district we reverse July reason.11

Conclusion WALLACE, Judge, Before Chief judgment is reversed. The district court’s TANG, BROWNÍNG, HUG, proceedings con- for further

We remand FLETCHER, FARRIS, SCHROEDER, opinion. this sistent with ALARCON, POOLE, PREGERSON, D.W. NELSON, CANBY, NORRIS, GOODWIN, concurring. Judge, Circuit REINHARDT, BEEZER, HALL, rent con that the Rocklin Today we hold WIGGINS, BRUNETTI, KOZINSKI, ordinance, phys in a applied, results trol O’SCANNLAIN, NOONAN, THOMPSON, reach property. We private ical FERNANDEZ, LEAVY, TROTT, circuit is the law of the result because NELSON, RYMER, and THOMAS G. Barbara, Santa found in Hall v. Judges. Circuit Cir.1987), 833 F.2d 1270 1120, 99 L.Ed.2d 281 ORDER compulsion prece- under the I concur majority a of nonre- Upon the vote of dent, I to note that for the record want but court, it regular judges of this cused active difference be- forgotten I have reheard that this case be is ordered metaphysical. physical and the tween the Rule pursuant to Circuit en banc court legislative re- a commendable Hall reached 35-3. calling regulatory ordinance sult in somewhat taking. I am

physical upon first myself I found position as

same Wade, Roe

reading (1973), applauding the method. None- by the

result but disturbed

theless, proven policy, and stare decisis is a

I concur. Moreno, (citing equal USDAv. at 598 Lake raises To the extent Sierra (1973)). if the 37 L.Ed.2d 782 challenge of Ordi protection enactment only were to find court on remand challenge district could succeed such a nance hostility reflected govern of Ordinance 529 legitimate enactment ordinance served “no if the group, obli it would be as a impermissible toward landlords purpose animus and if mental legitimacy, as analyze gated the statute for unpopular group prompted the stat toward an Co., rationality. opposed to mere Mountain Water enactment.” ute’s

Case Details

Case Name: Sierra Lake Reserve v. The City of Rocklin the Rocklin Mobile Home Rent Review Commission Carlos Urrutia Rusty Selix Rudolf Michaels George Paras

Court Name: Court of Appeals for the Ninth Circuit

Date Published: Jul 9, 1991

Citation: 938 F.2d 951

Docket Number: 89-15371

Court Abbreviation: 9th Cir.