court talk
No End In Sight
by Clifford E. Fried
Manufactured Home Communities, Inc. v. County of San Luis Obispo
In Manufactured Home Communities v. County of San Luis Obispo, the court said that the Constitution protects everyone: the poor, the wealthy, the weak, the powerful, the guilty and the innocent. Its guarantees extend to lawyers, dogs and even politicians. And, in this case, the court adds mobile home park owners.
This is an encouraging statement from the court. We were all wondering if landlords had any constitutional rights. The MHC court ruled that a hearing at the San Luis Obispo Rent Board violated standards of due process because the board’s findings rested on testimony of tenants who were not subject to cross-examination. Although this is a mobile home park case, the ruling will have an impact on our local rent boards.
MHC, a mobile home park owner, served nine of its tenants with rent increase notices. Those tenants petitioned the appropriate rent board, claiming that the increases violated San Luis Obispo County’s mobile-home rent-control ordinance.
At the rent board hearing, one tenant claimed that MHC fraudulently represented to him that the rents were covered by rent control. He also testified that MHC engaged in “mob-like corporate bullying tactics.” Other tenants also testified that the landlord deceived them into believing that rents would be regulated by rent control, but that the rent increases given far exceeded those increases permitted by rent control.
MHC’s attorney asked to cross-examine the tenants at the hearing. The tenants’ attorney objected, claiming that his clients weren’t prepared (lawyer talk for coaching witnesses on how to testify) and that the Rent Ordinance didn’t permit cross-examination. The rent board ruled that the tenants couldn’t be cross-examined, stating that it “always allows people to speak without fear of cross-examination, because it is a fearful thing.”
The rent board ruled that although the tenancies could have been exempt from rent control, MHC and the prior owner treated the tenancies as rent controlled and therefore the rent increases were invalid. (Lesson: if your property is exempt from the rent laws, don’t treat it as though it were subject to rent or eviction controls!) MHC also lost its court challenge to the rent board decision.
On appeal, MHC argued that the rent board decision was in error because the board permitted the tenants to testify without being subject to cross-examination and made findings against MHC based upon that testimony. It claimed that these errors made the rent board hearing fundamentally unfair and unconstitutional.
The Court of Appeal said that the right to cross-examine witnesses in a quasijudicial administrative proceeding is considered as fundamental an element of due process as it is in court trials. The right is especially important where findings against a party are based on an adverse witness’s testimony. The court pointed out that cross-examination at the rent board was essential in this case because the findings were based upon the tenants’ testimony, which the board found to be credible and never rebutted.
Not allowing cross-examination gave the tenants an unfair advantage. They could select the facts they wanted the board to hear, and then avoid questions concerning those facts. The court also noted that the tenants gave narrative statements and one read from a prepared text. Tenants frequently present their evidence this way at our local rent board hearings.
The Court of Appeal held that because the rent board exercised “judicial-like” powers, where it makes a decision based on a party’s testimony, the adversary is entitled to question his or her opponent.
In a recent case I had at the San Francisco Rent Board, a decision was made based upon notes, in the rent board file, of a telephone conversation between a senior administrative law judge and the tenant. Neither the tenant nor the judge appeared at the rent board hearing to testify. I couldn’t cross-examine the notes. My client was also denied the right to cross-examine the witnesses against her.
On appeal, most of the rent board commissioners recognized the constitutional problem raised and remanded the case back to further hearings. At the rehearing, no witnesses appeared and the right of cross-examination was again denied. But the ALJ found another reason, other than the notes in the file, to rule against the owner.
While there may be justice in San Luis Obispo County, San Francisco landlords continue to fight for their constitutional rights.
Andrew S. Gombiner v. Daniel B. Swartz
Here’s a landlord-tenant battle that has gone on for more than 10 years. After hearing the details of this case, see if you can guess how much the parties have paid their lawyers to date.
Landlord Swartz converted his Los Angeles house into two residential units and signed a two-year lease with tenant Gombiner. The tenant agreed to pay $3,500 per month for the first year and $4,000 per month for the second year. The landlord lived in the ground floor unit and the tenant lived in the unit above him.
A year later, the tenant sued the landlord for fraudulently misrepresenting the property as a single-family home. Los Angeles law exempts single-family homes from rent control. The case settled, with the landlord paying the tenant $25,000 and restoring the property back to a single-family residence and the rent staying
at $4,000 per month. About a year later, the rent was increased to $5,900 per month by a lease amendment.
Several years later, trouble reemerged when the tenant expressed displeasure with the landlord’s delay in repairing a broken hot water heater. The tenant made the repair and deducted the cost from his rent. The landlord demanded the tenant pay his rent in full and assessed a $300 late fee (the lease provided for a late fee of only $25).
The tenant responded by claiming the rent control law applied to his unit and insisting that the landlord reimburse him for $83,400 in illegal rent increases. The landlord retaliated by serving eviction notices. A week later, the tenant filed a civil action against the landlord for overcharges in rent. The landlord cross-complained for breach of the settlement agreement made several years earlier and for return of the $25,000 settlement payment. The landlord also filed an unlawful detainer action against the tenant to recover possession of the property following the expiration of a notice of termination of tenancy.
In the unlawful detainer action, the judge found that the landlord expended great sums of money to create two separate units within a single-family structure. Each unit had its own full kitchen, laundry area, driveway, and mailbox and garbage pickup location. The landlord and tenant used separate entries and exits, had their own telephone and cable television lines, and did not interact while in their homes. Therefore, the building was a duplex and the rent control law applied. Judgment was entered for the tenant because rent increases were limited to approximately 3% a year. Following victory in the eviction action, the tenant stopped paying rent to offset the excessive rent collected in the past by the landlord. So, the landlord filed a second unlawful detainer action, this time for nonpayment of rent.
The tenant responded by amending his claim in the civil action to include a charge of retaliatory eviction and claiming that the judge’s ruling in the first unlawful detainer action was binding and that the building was a duplex and subject
to the rent laws.
The judge in the civil case found that the original settlement agreement was binding and that the property was converted back to a single-family home. The judge instructed the jury that the negotiated rent increases in the original settlement agreement and afterwards were valid because they were agreed to by the parties. While the jury found that the landlord overcharged late fees and retaliated against the tenant, the tenant received only a nominal award of damages. The jury then awarded the landlord back rent and a refund of the $25,000 the landlord had paid under the original settlement agreement. After calculating interest, attorney’s fees and costs, the landlord was awarded $453,000.
The judgment was reversed on appeal. The California Court of Appeal ruled that the judgment in the first unlawful detainer action was binding in the civil action filed by the tenant. Since the judge in the unlawful detainer action ruled that the property was subject to the rent laws and the rent increases were illegal, the judge in the subsequent case couldn’t rule differently. When litigants to an unlawful detainer action fully try other issues, besides possession, the judgment is conclusive as to those other issues.
The appellate court also ruled that the settlement agreement was invalid because a landlord cannot, even with the tenant’s acquiescence or by mutual agreement, circumvent the rent increase limitations of the law. Because the jury received improper instructions, the judgment was reversed. The case was remanded and there will be a new jury trial on the issues of whether the tenant has breached the lease and if the tenant may recover excess rent paid.
So, 11 years after the tenant first sued his landlord, the parties will have another opportunity to seek justice in court—and to incur even more attorneys’ fees. How much justice can this landlord and tenant afford? This must be a very nice residence.
The information within this article is general in nature. Consult an attorney for any specific problem. Clifford E. Fried is a partner with Wiegel & Fried, LLP, 415-552-8230. Copyright © 2009 by Wiegel & Fried, LLP. All rights reserved.