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Dunex, Inc. v. City of Oceanside

November 2, 2010

DUNEX, INC.; CAVALIER MOBILE ESTATES, PLAINTIFFS,
v.
CITY OF OCEANSIDE; MANUFACTURED HOME FAIR PRACTICES COMMISSION; ET AL., DEFENDANTS.



The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge

ORDER: (1) GRANTING DEFENDANTS' MOTION TO DISMISS; (2) GRANTING IN PART AND DENYING IN PART DEFENDANTS' REQUEST FOR JUDICIAL NOTICE; AND (3) GRANTING IN PART AND OCEANSIDE DENYING IN PART PLAINTIFFS' REQUEST FOR JUDICIAL NOTICE (Doc. Nos. 5, 5-2, 8)

Presently before the Court is Defendants City of Oceanside and Manufactured Home Fair Practices Commission's (collectively, Defendants') motion to dismiss. (Doc. No. 5.) Also before the Court are Plaintiffs' opposition and Defendants' reply. (Doc. Nos. 7 (Opp'n), 9 (Reply).) Having fully considered the parties' arguments and the law, the Court GRANTS Defendants' motion to dismiss.

BACKGROUND

Defendant City of Oceanside (City) enacted Ordinance 82-27 in response to a perceived shortage of rental spaces for the location of manufactured homes. OCEANSIDE, CAL., CODE § 16B.1(a) [hereinafter Ordinance 82-87]. "This inequitable market situation . . . resulted in low vacancy rates and contributed . . . to rapidly escalating rents." Id. Ordinance 82-27 aims to "protect the owners and residents of manufactured homes from unreasonable space rental increases while simultaneously recognizing and providing for the need of park owners to receive a just and reasonable return on their property." Id. § 16B.1(d).

Ordinance 82-27 sets a rental base or "space rent ceiling" using the rent that a park owner charged on December 31, 1979. Id. § 16B.8. When Ordinance 82-27 went into effect, park owners were entitled to an initial adjustment of the space rent ceiling equal to the lesser of (1) an eight percent increase per year since the base year or (2) the percentage increase of the Consumer Price Index (CPI) from the end of the base year. Id. § 16B.9(b)(1). From 1983 on, park owners are entitled to an annual adjustment of the space rent ceiling equal to the lesser of (1) an eight percent increase per year or (2) 75% of the percentage increase in the CPI for the calendar year in which the adjustment application is filed. Id. § 16B.9(c)(1). If a park owner "believes he would not receive a just and reasonable return on his investment in the park after receiving the maximum permissive adjustment . . . , a park owner may file an application with the [Manufactured Homes Fair Practices Commission (MHFPC)] for an alternative adjustment of the of the space rent ceiling based upon the park's net operating income (NOI)." Id. § 16.B.9(c)(2); see also id. § 16.9(b)(2) (providing for initial adjustment of the space rent ceiling based on NOI). In the event that application of the permissive and NOI adjustments does not result in a just and reasonable return to the park owner, the park owner may apply for an additional "special adjustment." Id. § 16B.10(d).

Plaintiff Dunex, Inc. is the general partner of Plaintiff Cavalier Mobile Estates (CME), a California limited partnership (collectively, Plaintiffs). (Doc. No. 1 (Compl.) ¶ 3.) Plaintiff CME owns Cavalier Mobile Estates (the Park), a mobile home park located in Oceanside, California. (Id.) In 2008, pursuant to Ordinance 82-27, Dunex submitted a special adjustment application for the Park. (Id. ¶¶ 3, 13.) Dunex's application proposed three alternative adjustment methodologies, which would have increased the Park's space rent ceiling between $68.81 and $320.00 per space, per month. (Id. ¶¶ 13(a)--(c).)

The City hired outside consultant Dr. James Gibson to evaluate Dunex's application. (Id. ¶ 15.) Based on the financial information included in Dunex's application and the Park's tax basis, Dr. Gibson concluded that Plaintiffs were earning a just and reasonable return on their investment in the Park. (Id. ¶ 16.) Based on Dr. Gibson's conclusion, City staff prepared a report recommending that the MHFPC deny Dunex's application. (Id. ¶ 17.) After a public hearing on Dunex's application, the MHFPC adopted Resolution 09-R0237-MHFP. (Id. ¶¶ 18--19.) In adopting the resolution, the MHFPC agreed that Plaintiffs were earning a just and reasonable return and therefore were not entitled to a special adjustment. (Id. ¶ 19.)

On April 29, 2009, Plaintiffs appealed the MHFPC's decision. (Id. ¶ 20.) The hearing officer, retired San Diego Superior Court Judge Kevin Midlam, denied Plaintiffs' appeal. (Id. ¶¶ 20--21; see Doc. No. 5-2 (Def.'s RJN) Ex. D, at 9--10.) Judge Midlam concluded that the MHFPC's evidence that Plaintiffs were earning a just and reasonable return was, in the context of rent control, "more credible and consistent with the purpose of such regulation than that of [Plaintiffs'] experts." (Def.'s RJN Ex. D, at 10.)

In August 2009, Plaintiffs petitioned for a writ of administrative mandate pursuant to California Civil Procedure Code section 1094.5 challenging the Defendants' final decision to deny Dunex's special adjustment application. (Compl. ¶ 22; see Def.'s RJN Ex. A.) On June 29, 2010, San Diego Superior Court Judge Jacqueline Stern entered judgment denying Plaintiffs' petition. (Compl. ¶ 23; see Def.'s RJN Ex. C.) Judge Stern held that Dr. Gibson's report and testimony constituted substantial evidence supporting the MHFPC's and Judge Midlam's conclusions that Plaintiffs were earning a just and reasonable return and therefore were not entitled to a special adjustment. (See RJN Ex. C, at 8--10.) Plaintiff does not intend to appeal Judge Stern's decision.*fn1 (Opp'n 3 n.2.)

On July 16, 2010, Plaintiffs filed the instant complaint. (See Compl.) Plaintiffs' complaint alleges five causes of action: (1) an as-applied equal protection claim, (2) an as-applied private taking claim, (3) an as-applied regulatory taking claim, (4) an as-applied substantive due process claim, and (5) an inverse condemnation claim.*fn2 (Id. ¶¶ 24--51.) On August 12, 2010, Defendants moved to dismiss Plaintiffs' complaint. (Doc. No. 5.)

ANALYSIS

Defendants move to dismiss Plaintiffs' claims on three grounds. First, Defendants contend that Plaintiffs' taking claims are unripe. (Mem. ISO MTD 7--13; Reply 5--6.) Second, Defendants contend that the prior judgment in the state writ of mandate action (the state action) imposes a res judicata bar to Plaintiffs' claims in this action. (Mem ISO MTD 5--7; Reply 3--5.) And third, Defendants contend that Plaintiffs fail to state claims upon which relief can be granted. (Mem. ISO MTD 9--19; Reply 5--10.) The Court addresses Defendants' first two arguments and, finding them sufficient to support Defendants' motion to dismiss, declines to address the third.

I. Requests for Judicial Notice

Both parties move the Court to take judicial notice of certain documents in ruling on Defendants' motion to dismiss. (See Def.'s RJN; Doc. No. 8 (Pl.'s RJN).) Generally on a motion to dismiss, a court may only consider three things: (1) "allegations contained in the pleadings," (2) "exhibits attached to the complaint," and (3) "matters properly subject to judicial notice." Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007) (citation omitted).

Defendants ask the Court to take notice of (1) Plaintiffs' first amended petition for writ of administrative mandate in the state action (Def.'s RJN Ex. A); (2) the notice of entry of judgment in the state action (id. Ex. C); and (3) Judge Midlam's decision on Plaintiffs' appeal from Defendants' denial of Dunex's special adjustment application (id. Ex. D). Plaintiffs ask the Court to take notice of (1) the notice of entry of judgment in the state action (Pl.'s RJN Ex. 1); (2) Plaintiffs' first amended petition for writ of administrative mandate in the state action (id. Ex. 2); (3) Plaintiffs' memorandum of points and authorities in support of their petition for writ of administrative mandate (id. Ex. 3); and (4) Plaintiffs' reply in support of their petition for writ of administrative mandate (id. Ex. 4). The Court finds that each of these documents is properly judicially noticed. See United States ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992) ("We may take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to the matters at issue." (internal quotation marks omitted)); see also Fed. R. Evid. 201. They are matters of public record and the parties do not dispute the authenticity of any document. Accordingly the Court GRANTS the parties requests for judicial notice of the above-listed documents.

Both parties also ask the Court to take judicial notice of Ordinance 82-27. The Court has duly considered the ordinance and considers judicial notice of it improper. See United States v. Marty, 2009 WL 2365556, at *1 & n.3 (E.D. Cal. July 29, 2009) (finding judicial notice of statutes unnecessary). The ...


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