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MHC Financing Limited Partnership Two v. City of Santee

October 13, 2010

MHC FINANCING LIMITED PARTNERSHIP TWO, PLAINTIFF,
v.
CITY OF SANTEE; AND DOES 1 THROUGH 100, DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER GRANTING DISMISS DEFENDANT'S MOTION TO [Doc. No. 46]

In this action brought under 42 U.S.C. § 1983, Plaintiff MHC Financing Limited Partnership Two ("MHC") has asserted takings and due process claims against Defendant City of Santee ("the City"). Presently before the Court is the City's motion to dismiss MHC's First Amended Complaint ("FAC") under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). MHC filed an opposition, and the City filed a reply. The Court heard oral argument on September 17, 2010. For the reasons stated herein, the Court GRANTS the City's motion to dismiss.

BACKGROUND

On or about November 27, 1998, the City of Santee ("the City") began enforcing Ordinance 381, a mobile home rent control ordinance that was adopted by the City Council pursuant to an initiative petition. (FAC ¶ 7.) Ordinance 381 restricted rent increases more severely than the prior rent control ordinance, Ordinance 324/329. (Id.) Shortly after the adoption of Ordinance 381, the City was alerted that the version of Ordinance 381 adopted by the City Council differed from the petition circulated to the voting public. (FAC ¶ 8.) Accordingly, on or about January 24, 2001, the City adopted Ordinance 412 ("Original Ordinance 412"), which was intended to cure the error in the adoption of Ordinance 381. (FAC ¶ 9.) The City began enforcing Original Ordinance 412 on February 23, 2001. (Id.) Original Ordinance 412 expressly provided that it was retroactive to the effective date of Ordinance 381.

MHC Challenges Original Ordinance 412 in State Court

On October 29, 2001, Plaintiff MHC, the owner and operator of the Meadowbrook Mobilehome Park ("Meadowbrook"), filed an action styled MHC Financing Limited Partnership Two v. City of Santee, San Diego County Superior Court, Case No. GIC 777094 (hereinafter, "Downtown State Court Action"), against the City seeking a judicial declaration that both Ordinances 381 and 412 were null and void because Ordinance 381 and Original Ordinance 412 were enacted in violation of California law. (FAC ¶ 10.) MHC reserved all federal claims pursuant to England v. Louisiana Board of Medical Examiners, 325 U.S. 411 (1964). (Id.) MHC also contended the City's enforcement of Ordinances 381 and Original Ordinance 412 impermissibly chilled MHC's right of petition for rent increases. (Id.)

Judge Haden of the San Diego County Superior Court agreed with MHC, finding that the City illegally adopted Ordinances 381 and Original Ordinance 412 and the ordinances were thus void. (FAC ¶ 12.) Judge Haden also found that the City's enforcement of assessments and fee-shifting provisions of Ordinances 381 and Original Ordinance 412 chilled MHC's right to petition for rent increases in violation of the California Constitution. (Id.)

On appeal, the California Court of Appeal found that the City could retroactively apply Original Ordinance 412 to the effective date of Ordinance 381, and thus reversed Judge Haden's determination that Original Ordinance 412 was void. (FAC ¶ 14.) The Court of Appeal affirmed Judge Haden's decision in all other respects, including his finding that the assessment and fee-shifting provisions of Ordinance 381 and Original Ordinance 412 had a chilling effect on MHC's right to petition for rent increases. (Id.) The Court of Appeal held, however, that those provisions could be severed from the remainder of the ordinance. The Court remanded the case to determine (1) whether MHC suffered injury as a result of any differences between Original Ordinance 412 and Ordinance 381 and the retroactive application of Original Ordinance 412 to the effective date of Ordinance 381; (2) whether MHC suffered any injury as a result of the assessment and fee-shifting provisions found unconstitutional; and (3) the proper remedy for such injury. (Id.)

In August and September 2007, Judge Enright of the San Diego Superior Court held a bench trial in accordance with the Court of Appeal's 2005 remand order. (FAC ¶ 22.) During the course of that proceeding (hereinafter, the "Remand Proceeding"), MHC claimed it had been injured by the City's enforcement of the chilling provisions declared invalid by the Court of Appeal and from the City's retroactive application of the differences between Ordinances 381 and 412. (FAC ¶ 24.) Those injuries included (1) denial of market rents; and (2) denial of the right to discretionary rent increase process. (Id.) The City disputed any damages were owed, arguing the Commission would not have awarded MHC any rent increases because MHC had failed to pay annual assessments. (FAC ¶ 26.) Judge Enright determined that MHC failed to establish any legally remediable injury. See Pl.'s Opp'n at 11.

MHC's First Federal Challenge to Original Ordinance 412

In 2001, one month after filing the "Downtown State Court Action," MHC commenced an action in the Southern District of California before Judge Benitez, challenging Original Ordinance 412 on federal and state takings, substantive due process, and equal protection grounds ("2001 Federal Action"). (Def.'s RJN, Ex. B.) MHC asserted Original Ordinance 412 caused a taking of its property without compensation and without substantially advancing a legitimate purpose in violation of the Fifth Amendment of the United States Constitution. (Id.) MHC also alleged that Original Ordinance 412 constituted a taking for private use in violation of the public use clause of the Fifth Amendment of the Constitution. (Id.)

Judge Benitez granted summary judgment in favor of the City, holding that MHC's as-applied challenges to Original Ordinance 412 were not ripe, that MHC's facial claims were barred by the statue of limitations for 42 U.S.C. § 1983 claims, and that MHC's claims were also moot because the California Superior Court had enjoined the City from enforcing the ordinance. (Def.'s RJN, Ex. B.) In reference to MHC's as applied claims, Judge Benitez noted: "[s]ince MHC has not yet pursued compensation for its as-applied 'taking' it has not yet been denied just compensation and the as-applied takings claim is not yet ripe for decision." (See id. at 6.)

On appeal to the Ninth Circuit, MHC argued that its claims were ripe because, inter alia, it allegedly already sought full compensation through its litigation of the "Downtown State Court Action." (Def.'s RJN, Ex. J.) The Ninth Circuit disagreed and affirmed. (Def.'s RJN, Ex. K.) Introduction of Revised 412 Ordinance

On or about December 15, 2005, the City's staff presented the Commission an ordinance entitled "Ordinance 412-Revised by Court Decision." (FAC ¶ 16.) It is this "Revised Ordinance 412" that is the subject of this suit.

Revised Ordinance 412 deleted the provisions that the State Court of Appeal had specifically identified as unconstitutionally chilling MHC's ability to request rent increases. (FAC ¶ 17.) It also deleted certain provisions that neither Judge Haden (the judge who first declared parts of the ordinance unconstitutional in the "Downtown State Court Action") nor the Court of Appeal identified by number, including section 2.44.170(F)(1) and the fee-shifting provision 2.44.100(c)(3). (Id.) Last, Revised Ordinance 412 also changed a cross reference contained in Section 2.44.100(c)(2) of the ordinance from 2.44.110(C) to Section 2.44.100(c)(1). (FAC ¶ 19.) This was apparently to correct a typo in the original ordinance. The original provision read: "[i]n the event a park owner believes that the net operating income will be less than provided for in section 2.44.110(C)(1) a park owner shall be entitled to elect instead of the ...


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