Opinion
G053798
12-17-2018
FLOYD M. CHODOSH et al., Plaintiffs and Appellants, v. PALM BEACH PARK ASSOCIATION, Defendant and Respondent.
Law Office of Patrick J. Evans and Patrick J. Evans for Plaintiffs and Appellants. Lewis Brisois Bisgaard & Smith, Jeffry A. Miller, Cary L. Wood and Allison A. Arabian; Allan B. Weiss & Associates, Allan B. Weiss, Allen L. Thomas and Allison A. Arabian for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2010-00423544) OPINION Appeal from a judgment of the Superior Court of Orange County, Robert J. Moss, Judge. Affirmed in part, reversed in part and remanded with directions. Law Office of Patrick J. Evans and Patrick J. Evans for Plaintiffs and Appellants. Lewis Brisois Bisgaard & Smith, Jeffry A. Miller, Cary L. Wood and Allison A. Arabian; Allan B. Weiss & Associates, Allan B. Weiss, Allen L. Thomas and Allison A. Arabian for Defendant and Respondent.
I. INTRODUCTION
A group of seven appellants who have resided in the Palm Beach mobilehome park in San Clemente appeal from a single judgment in which each is held individually liable to the Palm Beach Park Association (PBPA) for unpaid rent on their spaces. Each appellant faces liability in varying amounts, ranging from $82,000 to about $160,000.
Regulations issued by California's Department of Housing and Community Development require mobilehome park operators to assure that every unit in a mobilehome park is properly installed, as evidenced by (as the case may be) either a certificate of occupancy or a "Mobilehome Installation Acceptance." (See Cal. Code Regs., tit. 25, §§ 1102, 1366.) However, there is an exception for recreational vehicles (RV's). (See Health & Saf. Code, § 18008, subd. (a) [RV's not within definition of mobilehome]; Cal. Code Regs., tit. 25, § 1320(d) [regulatory installation requirements do not include RV's].) In this case, it is undisputed that there is no certificate of occupancy or mobilehome installation acceptance showing any of the units owned by the seven appellants were properly installed. However, we do not know, on the trial court record, whether the appellants' units are "mobilehomes," as distinct from RV's, within the definition of the Health and Safety Code. That depends on an issue of fact: Whether those units exceed 320 square feet. (See § 18008, subd. (a) [defining mobilehome as structure exceeding 320 square feet.)
In this opinion all "section" references are to the Health and Safety Code unless otherwise indicated. All references to any "regulation" will be to title 25 of the California Code of Regulations.
Assuming appellants' units do exceed 320 square feet, under this court's decision in Espinoza v. Calva (2008) 169 Cal.App.4th 1393 (Espinoza) the absence of either a certificate of occupancy or a statement of mobilehome installation acceptance is a defense to the PBPA's claim for unpaid rent. We thus must reverse the judgment against the seven appellants and remand this case for further proceedings to determine the applicability of the regulations cited above. If it turns out that a unit does not exceed 320 square feet, the judgment against that unit owner must be reinstated.
We affirm the rest of the judgment without qualification. That judgment declares the seven appellants have no real property interest in the park.
There are seven appellants in this appeal. We cannot say whether each appellant remains a resident of the park at this late date, and in any event their current status turns out to be irrelevant in light of our determination that they have no real property interest in the park. We will refer to them as "appellants" because there was a group of nine plaintiffs at the trial level, but only seven of those plaintiffs are parties to this appeal. When we refer to "plaintiffs" it is in the context of what happened at the trial level or in the pleadings.
II. BACKGROUND
This litigation is now in its eighth year. Trial involved no less than four separate phases spread over six years, handled by two different judges. This court, on appeal, has made two separate requests for supplemental briefing.
During the pendency of this appeal appellants have filed numerous requests for judicial notice and to take evidence. We are not, however, a trial court. The normal function of a trial court is to find facts - it was never intended that appellate courts find facts in the first instance. (E.g., Comerica Bank v. Runyon (2017) 16 Cal.App.5th 473, 483.) If, in a case involving so sensitive a topic as whether an adoption in a dependency proceeding was working out, our Supreme Court admonished appellate courts not to take evidence on appeal (see In re Zeth S. (2003) 31 Cal.4th 396, 407-410), how much less should we indulge in appellate fact finding here. This is a real property case that was tried over a period of more than half a decade resulting in a record too voluminous as it is. We therefore deny all outstanding motions brought by appellants seeking to expand what is already an oppressively large record. These include all outstanding motions to take judicial notice, motions to augment, and motions for discovery or for evidentiary hearing in this court.
We now proceed to outline the essential facts of this case from the trial court record: The Forster family acquired what would eventually become the mobilehome park land in the 1840's, and by the 1950's trailers were being parked on the property. In 1958, the Forsters leased the land to the Ketchesons for 60 years, which meant the lease would expire in 2018. The Ketchesons turned the property into a mobilehome park known as Palm Beach Park. The park is on a slope near the ocean, and has 126 spaces. Not all spaces are equally situated. There is a group of very small spaces at the bottom of the park known as the "bungalows."
In 1965, the Ketchesons subleased the property to the Corrells. In 1979, tenants in the park formed the PBPA. That very year the PBPA purchased the Correll's sublease, with both the Forsters and the Ketchesons consenting. As part of the Forsters' consent, the Forsters granted to the PBPA a right of first refusal, on 30 days notice, should the Forsters ever elect to sell the property. Formal articles of incorporation of the PBPA filed in 1997 declared that the PBPA was a nonprofit mutual benefit organization. Those articles also expressly restricted the park to residents 55 years of age or older.
In August 2007, a real estate holding company offered the Forsters $24.75 million for the property. The offer triggered the need for PBPA to act on its right of first refusal.
The terms of the right of first refusal required the PBPA to give the Forsters notice and - within 30 days - execute the same terms and conditions as the offer. Events thus unfolded rapidly in August and September 2007. Added pressure to consummate the purchase came from the knowledge the Ketcheson's 60-year lease on the property would be up in 2018, which meant the residents of the park faced potential eviction if the Forsters' buyers decided to do something else with the land in 2018 other than use it for a mobilehome park.
The real estate holding company's offer was effective August 13, 2007. The PBPA received notice of it two days later on August 15. The members of the PBPA voted to exercise the right of first refusal on August 25 (119 yes, 0 no, 2 abstentions). Five days later, the PBPA directors voted to assess each member on a per capita basis the cost of buying the park, i.e., assess each member 1/126th of the cost. That figure turned out to be $200,000 each. On September 12, 2007, PBPA formally accepted the offer under the right of first refusal and opened escrow.
Most of the money for the purchase came from a third party lender, Thrivent Financial for Lutherans, which lent directly to the PBPA. The balance came from members who could pay the $200,000 immediately. Those who could not - and that included all the appellants - were given the opportunity to borrow the money directly from the PBPA by signing a promissory note. The collateral was the respective borrower's membership in, and member lease with, the PBPA. The note would be paid back in installments of $1,330.61 over 48 months. In the event of a default the entire balance would become due and payable.
At the time each member was paying a "base rent" to the association. In the period from September through December all members were required to sign new leases. Those leases continued the base rents but the obligation of repaying the note added $1,330.61 for those who had to borrow the money for the assessment. The new leases also had an addendum to the effect that the nonpayment of the loan was a material breach of the lease.
The new higher payments proved difficult for some of the members, most of whom lived in the bungalow region of the park. The member who would later become the lead plaintiff (and appellant) in this litigation, Floyd Chodosh, stopped paying by February 2008, and the PBPA suspended his membership in November 2009.
By 2010, all the appellants had ceased making their payments, and eventually all would have their memberships suspended. But the association did not commence eviction proceedings. In November of 2010 a group of nine residents filed the original complaint. This appeal is from a judgment based on their fourth amended complaint (the 4AC), filed in June 2012, asserting eleven causes of action. The 4AC charged that under their original member leases, the plaintiffs were entitled to have the PBPA become a common interest development under former Civil Code section 1353, part of the Davis Stirling Act. (The Davis Stirling Act is now found at Civil Code section 4000 et seq.) Their theory was that they had been promised they would be owners of their own spaces, but instead ended up as mere residents in a resident-owned mobilehome park governed by Civil Code section 799 et seq.
The causes of action in the 4AC were: (1) breach of contract; (2) violation of governing documents, articles and bylaws; (3) violation of statutes; (4) negligent misrepresentation; (5) breach of fiduciary duty; (6) negligence; (7) declaratory relief; (8) violation of the Truth in Lending Law or TILA; (9) quiet title; (10) wrongful eviction; and (11) slander of title.
For its part, in September 2012, the PBPA filed a verified cross-complaint against all nine plaintiffs - who were now living on the land without paying the PBPA - seeking unpaid rent and ejectment. The plaintiffs filed a verified answer, asserting no less than 32 separate affirmative defenses (not counting the defense of reserving the right to add any additionally discovered defenses). However, neither the lack of certificates of occupancy or statements of mobilehome installation, nor any breach of the implied warranty of habitability, were among the affirmative defenses listed.
In 2013, the first of four separate phases of trial began. Phase 1 was tried in April 2013 before Judge Nancy Wieben Stock, and concerned three issues: (1) What was the nature of the park? - a Davis Stirling Common Interest Development, or a "resident-owned" mobilehome park? Judge Stock ruled it was a "resident-owned" park. (2) Did the PBPA have the "legal authority" to impose the $200,000 assessment? Judge Stock ruled it did not. And (3), did the PBPA have the "authorization and authority" to obtain the $16.1 million loan from Thrivent? Judge Stock said yes.
The minute order did not say anything more than "No."
Judge Stock retired in late 2013 and was replaced by Judge Robert J. Moss, who heard phase 2 in September 2014. Phase 2 concerned these issues: (1) What was the nature of the plaintiffs' ownership interest in the park's real property under section section 799, subdivision (c)? Judge Moss said each plaintiff only owned a "fractional interest" in the PBPA. (2) Did the plaintiffs have any real property interests, and if so what was the nature of those interests? Judge Moss said no: The membership interest was "personal property" and while each plaintiff's lease may "technically" have been an estate in real property, those interests were governed under rules applicable to personal property. (3) Could the PBPA grant Thrivent any right, lien, or interest in the real property underneath the park, and if it could, did it? Judge Moss ruled that while the PBPA could and did convey an interest to Thrivent, given that the plaintiffs had no interest in the park property, they had no standing to challenge the PBPA's ability to convey that interest. (4) Were the new member leases subordinate to Thrivent's deed of trust? As to those issues, the court noted that everybody agreed the plaintiffs did "not own the land under the[ir] mobile home at this time." Judge Moss thus concluded the issue was not "ripe for determination" because Thrivent had not foreclosed on its loan.
Phase 3 was tried in April 2015. It focused on plaintiffs' causes of action for breach of contract, violation of governing documents by the $200,000 assessment, violation of statutes, violation of the federal Truth in Lending or TILA, quiet title and slander of title.
As to the breach of contract, the court found no promise by the PBPA that plaintiffs would ever receive a fee interest in the space they rented. The articles of incorporation had only promised that the purpose of the PBPA was to "facilitate the purchase and operation" of the park "by its residents" and that is what the PBPA did.
Also in that regard, the court recognized that Judge Stock had earlier ruled the PBPA did not have the authority under the bylaws to have authorized the assessment, but noted that in the interim (in 2013) the members had voted to ratify that assessment, curing "the problem found by Judge Stock." The court added that while the original leases could not be terminated just because the PBPA acquired the land ("the leases specify the grounds for early termination and land acquisition is not one of them"), each of the plaintiffs consented to the new leases, thus extinguishing any claim of breach of contract.
As to the violation of governing documents, the court ruled there was no actual promise to convert the park to a common interest development under the Davis-Stirling Act, only a statement of anticipation to do so if the membership voted to approve such a conversion, and, to date, the membership had not voted to do that. In fact, in 2010, the membership had voted against converting the property to a common interest development.
On the violation of statutes cause of action, the court went through them one by one. Of these, only Civil Code section 799.1 is complained of in the opening brief. Civil Code section 799.1 is a general provision to the effect that where there is no recorded subdivision declaration or condominium plan, the rights of tenants in a mobilehome park are to be governed under the rights afforded in the Mobilehome Residency Law (MRL) found in Civil Code sections 798 et seq. Judge Moss ruled Civil Code section 799.1 was not violated because the plaintiffs had failed to explain how it was violated.
On the causes of action for quiet title and slander of title, the judge ruled that because those claims had not been mentioned in either opening statements or arguments, they had been abandoned.
However, in phase 3 the plaintiffs prevailed on their cause of action for violation of the federal TILA. Judge Moss held TILA had been violated and declared the loans made by the PBPA to each plaintiff rescinded. Thus the plaintiffs were entitled to restitution for any sums they had already paid to the association. However, the amount of that restitution was deferred to the next phase of trial to see what the plaintiffs might owe on the association's cross-complaint for unpaid rent.
Finally, phase 4 was heard in December 2015. Phase 4 focused on the two remaining plaintiffs' causes of action - negligent misrepresentation and breach of fiduciary duty by the PBPA qua a homeowners' association. Phase 4 also dealt with the PBPA's cross-complaint.
The theory of the negligent misrepresentation cause of action was that the plaintiffs should have been told about the PBPA's right of first refusal when they bought into the association. The court ruled that it wouldn't have made any difference - the plaintiffs still would have become members, particularly since they all knew the leases were set to expire in 2018.
As to the breach of fiduciary duty, Judge Moss concluded the plaintiffs had failed to meet their burden of proof because they never actually specified "precisely what acts by defendant constituted a breach of fiduciary duty." Rather, plaintiffs had taken a "shotgun approach" which had failed to show a breach.
The court also briefly noted that plaintiffs had argued there were "numerous violations of law," including violation of the Subdivision Map Act, the Subdivided Lands Act, and the absence of "required" certificates of occupancy. Judge Moss ruled that the plaintiffs had failed to specify what provisions of the first two acts had been violated, but in any event noted the court had already found there was no subdivision of the park in the first place, i.e., it was but one parcel. The association owned that parcel; the plaintiffs in turn owned part of the association. As to the certificates of occupancy, the plaintiffs had failed to explain how it would "translate into a cause of action" even if the court found such certificates were necessary. Essentially the court said the absence of certificates of occupancy was irrelevant.
Then the court addressed the cross-complaint. The plaintiffs, had, after all, not paid rent for "varying periods of time." The court awarded damages against each accordingly, giving credit for amounts paid on the TILA-violative loans. The amounts ranged from $81,172.09 against Chodosh himself to $159,327.77 against plaintiff Todd Peterson.
A judgment was filed in April 2016, specifying the amounts owed by each one of the plaintiffs on PBPA's cross-complaint. It also awarded the PBPA writs of possession directing the Orange County Sheriff to remove the plaintiffs from their various spaces. Seven of the nine plaintiffs filed this appeal in July 2016.
III. DISCUSSION
A. The Absence of Certificates of Occupancy or Mobilehome Installation Acceptances
1. Should We Even Consider the Issue?
Normally, affirmative defenses not raised in the answer to a cross-complaint are waived. (E.g., Quantification Settlement Agreement Cases (2011) 201 Cal.App.4th 758, 813.) As related above, appellants did not include, as an affirmative defense to the PBPA's cross-complaint, the absence of certificates of occupancy (or statements of mobilehome installation acceptance) for their units. So it is not surprising that appellants' counsel, in his opening brief, hastens to assure us several times that illegality can be raised at any time," i.e., it should make no difference that the defense of the appellants' leases being illegal was not pleaded in the answer to the cross-complaint. Appellants' authority for the idea that illegality can be raised "at any time" is the oft-cited Lewis & Queen v. N. M. Ball Sons (1957) 48 Cal.2d 141, 147-148 (Lewis & Queen).
In Lewis & Queen, the state awarded a contract for construction of part of what would later become the Hollywood Freeway. The general contractor hired a subcontractor for certain work, but the subcontractor was not licensed for that work. The subcontractor sought compensation from the general contractor for the "reasonable rental value" held beyond the term of one of the subcontracts, but the issue was not raised in the general contractor's answer. That made no difference, said our Supreme Court: "Whatever the state of the pleadings, when the evidence shows that the plaintiff in substance seeks to enforce an illegal contract or recover compensation for an illegal act, the court has both the power and duty to ascertain the true facts in order that it may not unwittingly lend its assistance to the consummation or encouragement of what public policy forbids. [Citations.] It is immaterial that the parties, whether by inadvertence or consent, even at the trial do not raise the issue. The court may do so of its own motion when the testimony produces evidence of illegality. [Citation.] It is not too late to raise the issue on motion for new trial [citation], in a proceeding to enforce an arbitration award [citation], or even on appeal. [Citation.]" (Lewis & Queen, supra, 48 Cal.2d at pp. 147-148, italics added.)
But the rule is not as unqualified as appellants' counsel thinks. Two California Supreme Court cases decided after Lewis & Queen - Fomco, Inc. v. Joe Maggio, Inc. (1961) 55 Cal.2d 162 (Fomco), and Apra v. Aureguy (1961) 55 Cal.2d 827 (Apra) - both rejected posttrial defenses of illegal contract because the illegality defense had not been raised in the trial court. (See Fomco, supra, 55 Cal.2d at p. 166; Apra, supra, 55 Cal.2d at p. 831.) In fact, language in Fomco suggests that the high court actually rejected Lewis & Queen's dicta that the issue of illegal contract could be raised for the first time on appeal.
Said Fomco, referring to Lewis & Queen: "In that case [Lewis & Queen] the issue of illegality was first raised during the trial and not for the first time on a motion for new trial." (Fomco, supra, 55 Cal.2d at p. 166.)
That said, in this case the issue of the absence of certificates of occupancy was raised at trial - even if obliquely as part of a shotgun blast of allegations of illegality. Indeed, the trial judge found as a matter of fact there were no certificates of occupancy, he just didn't think that absence could translate into a judgment in appellants' favor. The issue having been raised at the trial level, its consideration at the appellate level comes within Lewis & Queen and outside the rule of Fomco and Apra. (Accord, Yoo v. Robi (2005) 126 Cal.App.4th 1089 (Yoo).) Of course, appellants' tardiness in raising the issue means at least one more evidentiary hearing at the trial level. As we said, we aren't triers of fact.
There, an unlicensed talent agent sought to recover under a management contract from one of the original members of the Platters. Even though the defense of lack of license had not been pleaded as an affirmative defense, the appellate court said the case fell "squarely within the well-settled rule a defense of illegality based on public policy is not waived by the defendant's failure to include it as an affirmative defense in the answer to the complaint." (Id. at p. 1103) Yoo then went on to quote from the same passage from Lewis & Queen we have quoted above.
2. The Merits
One of our requests for supplemental briefing asked the parties about the absence of any certificates of occupancy for the appellants' units. In particular, we asked whether the PBPA was ever required to have or obtain such certificates for the spaces occupied by each appellant's unit. The supplemental briefing revealed two undisputed facts regarding each of the appellant's units: (1) All appellants purchased their units from prior owners whose units were already on PBPA property; and (2) none of appellants' units have been attached to permanent foundations. We may also note here that it was established at trial that the PBPA did not have any certificates of occupancy for any of the appellants' units, though there were a handful of such certificates for other units in the park.
For a discussion of the sort of effort required to permanently attach a mobilehome to a foundation, see Escondido Union School Dist. v. Casa Suenos De Oro, Inc. (2005) 129 Cal.App.4th 944, 955-956.
The Legislature has required, in section 18551, that the state Department of Housing and Community Development issue regulations governing, among other things, the installation of mobilehomes. Section 18551 is quite clear that mobilehomes may be permanently attached to the land in which case they become a "fixture" of that land, i.e., become real property themselves. Alternatively, mobilehomes may be left free standing, in which case they remain as "chattel," i.e., personal property. The statute is also clear that mobilehomes do not need be placed on a foundation system.
The statute provides in part: "The department shall establish regulations for manufactured home, mobilehome, and commercial modular foundation systems that shall be applicable throughout the state. When established, these regulations supersede any ordinance enacted by any city, county, or city and county applicable to manufactured home, mobilehome, and commercial modular foundation systems. The department may approve alternate foundation systems to those provided by regulation if the department is satisfied of equivalent performance. The department shall document approval of alternate systems by its stamp of approval on the plans and specifications for the alternate foundation system. . . ."
Section 18551 goes on to say: "A manufactured home, mobilehome, or commercial modular may be installed on a foundation system as either a fixture or improvement to the real property, in accordance with subdivision (a), or a manufactured home or mobilehome may be installed on a foundation system as a chattel, in accordance with subdivision (b)."
Section 18551, subdivision (e) provides: "No local agency shall require that any manufactured home or mobilehome located in a mobilehome park be placed on a foundation system." (Italics added.)
Even so, the installation of mobilehomes is the subject of considerable regulation by the state Department of Housing and Community Development. These regulations are found in chapter 2 of division 1 of title 25 of the California Code of Regulations. These regulations provide for things like proper water outlets (regulation 1308), provisions for basic plumbing (regulation 1246), utility connections (regulation 1333.5), supports (regulation 1337), leveling of the chassis of the unit (regulation 1348), water connectors (regulation 1356), and drains (regulation 1358).
Most important for our purposes is that a permit must be obtained from the relevant "enforcement agency" every time a mobilehome unit is installed "on any site for purpose of human habitation" (regulation 1324). Proper installation is reflected by the issuance of either a "Mobilehome Installation Acceptance" or the more traditional "Certificate of Occupancy" (regulation 1366). The difference is that installation acceptances are used when the unit remains chattel (see § 18551, subd. (b)), while certificates of occupancy are used when the unit is affixed to a foundation and becomes a fixture of the real property. Because both sides agree that since the units in this case were never affixed to permanent foundations, statements of mobilehome installation acceptances, as distinct from certificates of occupancy, were required.
Regulation 1324 provides: "(a) A permit shall be obtained from the enforcement agency each time an MH-unit, is located or installed on any site for the purpose of human habitation or occupancy. Permits are not required to locate recreational vehicles in a park."
Regulation 1366 provides: "A 'Mobilehome Installation Acceptance' or 'Certificate of Occupancy' shall not be issued until it is determined that the MH-unit installation complies with the provisions of this chapter. The enforcement agency shall provide copies of the statement of MH-unit installation acceptance or certificate of occupancy for the MH-unit to the installer or other person holding the permit to install and the buyer or registered owner or their representative. The M-H unit installation acceptance shall be provided for MH-units installed pursuant to section 18551(b) or 18613 of the Health and Safety Code. The certificate of occupancy shall be provided for MH-unit installed on foundation systems pursuant to section 18551(a) of the Health and Safety Code."
To be sure, as PBPA reminds us, under section 18551, the responsibility to obtain an installation permit is on the owner of the mobilehome unit or that owner's installation contractor. But that is not the end of the analysis.
Section 18551, subdivision (a)(1) provides: "Prior to installation of a manufactured home, mobilehome, or commercial modular on a foundation system, the manufactured home, mobilehome, or commercial modular owner or a licensed contractor shall obtain a building permit from the appropriate enforcement agency. To obtain a permit, the owner or contractor shall provide the following: . . . ."
Another regulation, regulation 1102(d), puts the onus on the park operator to police the installation and use of units within the park to assure compliance with chapter 2 of Division 1, of Title 25. It is not a passive matter. The language effectively requires park operators to ascertain proper installation: "The operator of a park shall not permit a unit, accessory building or structure, building component, or any park utility to be constructed, installed, used, or maintained in the park unless constructed, installed, used, and maintained in accordance with the requirements of this chapter." (Italics added.)
The import of regulation 1102, when read in conjunction with regulations 1324 and 1366, and the undisputed facts regarding the appellants' units, is hard to escape. On this record, it appears that the PBPA (or perhaps even its predecessor in interest) allowed units to be both installed and maintained without installation permits.
We thus have a situation analogous to that in Espinoza, supra, 169 Cal.App.4th 1393. In Espinoza, this court squarely held that a landlord could not collect rent when there had been no certificate of occupancy. "The absence of certificate of occupancy rendered the lease illegal." (Id. at p. 1400.)
To Espinoza we would add the decisions of the Court of Appeal in Carter v. Cohen (2010) 188 Cal.App.4th 1038 (Carter) and Gruzen v. Henry (1978) 84 Cal.App.3d 515 (Gruzen). Both Carter and Gruzen also squarely held that rental agreements for premises that had no certificate of occupancy were unenforceable.
We see no principled distinction between a mobilehome park's lease of land beneath a unit without an installation acceptance and the rental of an apartment unit without a certificate of occupancy. At least one published opinion, City of Los Angeles v. Los Olivos Mobile Home Park (1989) 213 Cal.App.3d 1427, 1435 (Los Olivos) has squarely equated the two.
The Los Olivos case was not specifically mentioned in appellants' opening supplemental briefing, but the argument that units not affixed to a foundation should receive installation acceptances was made in that opening supplemental brief, giving the PBPA the chance to respond to it. Regardless of the Los Olivos case, though, the statutory and regulatory structure we have examined would compel the same conclusion. As noted, certificates of occupancy are used when mobilehome units are affixed to real property and become real property, while installation acceptances are used when they are not affixed and remain chattel. The take-away is that just as the absence of a certificate of occupancy precluded an action for rent in Espinoza, so must the absence of mobilehome installation acceptance preclude an affirmative attempt to collect rent from appellants here.
PBPA's supplemental briefing makes four arguments in favor of keeping the judgment as it is. Three are unavailing. The fourth will require remand for further evidence:
(1) Because appellants' units are not affixed to permanent foundations there was no need for installation permits. We cannot agree, because section 18551 contemplates installations without being fixed to permanent foundations and regulation 1366 requires statements of installation acceptances for installations not affixed to permanent foundations. In this regard we also note that section 18008, which defines mobilehomes, uses the phrase "with or without a foundation system," confirming our conclusion that the regulations pertaining to "mobilehomes" include units not on permanent foundations.
(2) Because appellants stipulated (back in phase 2) that their units were "personal property," no certificates of occupancy were needed. This argument ignores the equivalence of certificates of occupancy with statements of installation acceptance. As noted, under section 18551 mobilehomes which are not permanently affixed remain "chattel," but permits are still required for their installation under regulation 1366.
(3) Even assuming that statements of installation acceptance were required, appellants have never shown the PBPA did anything to violate regulation 1102; if there are no required statements, that's appellants' fault. This argument fails because regulation 1102 is plain that park operators must assure the proper installation of units in their park. As we said, regulation 1102 requires some affirmative action. The park operator must "not permit" installations without a permit. The operator cannot therefore just assume responsibility rests entirely with the unit owners.
(4) Appellants' units never qualified as "mobilehomes" under section 18008 requiring installation permits, they really are recreational vehicles, so neither certificates of occupancy or mobilehome installation acceptances were ever required.
This argument requires remand for an evidentiary hearing. As noted, regulation 1320(d) exempts RV's from the need for installation permits. If appellants' units really are RV's, then PBPA's quest for back rent is perfectly legal, just as any RV park owner's effort to collect space rent would be.
Appellants, in their supplemental briefing, stress the fact that the PBPA's president testified all spaces in the park were occupied by "mobilehomes" and there were no RV's in the park. But we cannot treat this testimony as some sort of judicial admission or substantial evidence that appellants' units were necessarily "mobilehomes." At best it was one person's opinion; at worst a thoughtless figure of speech. Similarly, we do not treat appellants' counsel's own statement in his opening supplemental brief that "The RV area homes are not mobilehomes" (page 11) as a judicial admission. (If we did, we would affirm the judgment right here). In context, counsel's statement appears to have been improvident hyperbole, directed to making the point that appellants' units were "bootleg" units that did not rise to the level of real mobilehomes.
Rather, we hold the issue of whether appellants' units were "mobilehomes" within the meaning of section 18551, and regulations 1102 and 1366 must be returned to the trial court for proper findings of fact. In particular, we note the definition of "mobilehome" from section 18008: "'Mobilehome,' for the purposes of this part, means a structure that was constructed prior to June 15, 1976, is transportable in one or more sections, is eight body feet or more in width, or 40 body feet or more in length, in the traveling mode, or, when erected onsite, is 320 or more square feet, is built on a permanent chassis and designed to be used as a single-family dwelling with or without a foundation system when connected to the required utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained therein." (Italics added.)
We know that appellants' units pass the "use as single family dwelling" and "with or without a foundation system" clauses of section 18008. But we don't know whether those units exceed 320 square feet. There is no statement to that effect in appellants' supplemental briefing. Indeed, we are told by appellants' counsel that the bungalow units were "old travel trailer[s]" that were merely attached to bathroom buildings. Such a description ("travel trailer") might plausibly encompass a small structure that does not exceed 320 square feet - certainly we cannot say on this record the appellants' units necessarily exceeded 320 square feet.
The judgment against appellants for unpaid rent must therefore be reversed and the case remanded for an evidentiary hearing, if for no other reason than to examine the factual question of whether each of appellants' units exceed 320 square feet. If the hearing reveals that a given appellants' unit is less than 320 square feet, the judgment is to be reinstated against that appellant.) But there two other reasons for reversing the existing judgment and remanding the case to the trial court:
One, assuming that appellants' units are not RV's (as defined by section 18008), the trial court will need to recalculate how much the PBPA owes each appellant for payments on the $200,000 loans they have already made.
However, we must emphasize, this does not include recovery by appellants of any rent payments already made. This is where the pleading makes a difference: For all their various theories, plaintiffs never sought reimbursement in their 4AC for rent payments already made on the theory of a lack of certificates of occupancy or statements of installation acceptance. It is one thing for a court not to "unwittingly lend its assistance to the consummation or encouragement of what public policy forbids" (Lewis & Queen, supra, 48 Cal.2d at p. 148), but it is quite another to allow a party to affirmatively recover on an unpled theory of illegality, particularly one where the transaction was completed long ago. (Cf. Tri-Q. Inc. v. Sta-Hi Corp. (1965) 63 Cal.2d 199, 218-219 [enumerating factors ameliorating rule against enforcement of illegal contracts].) "It is elementary that a party cannot recover on a cause of action not in the complaint." (Griffin Dewatering Corp. v. Northern Ins. Co. of New York (2009) 176 Cal.App.4th 172, 179, italics added.)
Two, we must be fair to PBPA given the belatedness of the certificate of occupancy issue. Because the issue was never properly pleaded by appellants' counsel in the answer to the cross-complaint, PBPA never had the opportunity to assert whatever exceptions to the general rule against the enforcement of illegal contracts might apply. (See, e.g., Medina v. Safe-Guard Products, Internat., Inc. (2008) 164 Cal.App.4th 105 (Medina).) B. What's Left
As this court said there: "[t]he courts have recognized that there are circumstances when the innocence of a party to an illegal contract must be taken into account in what is called the "in pari delicto" exception. As McIntosh v. Mills (2004) 121 Cal.App.4th 333, 347 recently observed: 'Because of the harsh results that might be visited on innocent parties to a contract when their agreement is voided for illegality, courts have fashioned exceptions [to a rule of invalidity]. . . . [¶] . . . [¶] Perhaps the most common exception to the rule of invalidity . . . is the in pari delicto exception. At its most fundamental level, the exception allows an illegal contract to be enforced "so long as the party seeking its enforcement is less morally blameworthy than the party against whom the contract is being asserted, and there is no overriding public interest to be served by voiding the agreement."'" (Medina, supra, 164 Cal.App.4th at p. 110.)
Turning from an issue that was not fully briefed until we asked for supplemental briefing on appeal, we now take the contentions made in the opening brief.
There are nine subheadings in the opening brief under the general heading "PBPA Illegality Itemized." Of these, we have already dealt with two of them, concerning the lack of certificates of occupancy and the corollary argument the spaces on which appellants' mobilehomes rested were non-permitted. Appellants have obtained at least a temporary reversal of the judgment on those two. Additionally, one of the nine subheadings focuses on the violation of TILA, but that is a point the trial court decided in appellants' favor and appellants are not aggrieved by that decision. The PBPA has taken no cross-appeal on the issue.
That leaves two arguments concerning permits under the Subdivided Lands Law, an argument on the original $200,000 assessment, an argument on the pay down of the Thrivent loan, and two arguments about the internal affairs of the PBPA. In addition, given the disproportionate amount of space the opening brief devotes to the issue, we first address its leitmotif that judicial bias somehow rendered the entire judgment a "nullity."
1. Judicial misconduct. Appellants' counsel Patrick J. Evans feels that Judge Moss is biased against him. That bias is, in fact, the major theme of his opening brief. Time and time again, Attorney Evans complains that Judge Moss turned a blind eye to "illegality" and what Evans describes as a "real estate crime scene."
These are unfair allegations, their unfairness underscored by the fact it was Evans' own fault he didn't raise the issue of certificates of occupancy or mobilehome installation acceptances in the answer to the cross-complaint. Indeed, the concept of statements of installation (in lieu of certificates of occupancy) did not appear in the opening brief at all. Statements of installation were not mentioned until we asked for supplemental briefing.
Under such circumstances, Judge Moss can hardly be faulted for not immediately ruling in favor of appellants when the certificate of occupancy (misnamed at that) was brought to his attention. We would remind Attorney Evans of this helpful passage from a practice guide concerning his very theme of "illegality": "Compare - illegality: Public policy against enforcement of illegal contracts is so strong that illegality can be raised even if not pleaded in the answer. Indeed, the court can raise the matter on its own motion, even if neither party raises it. [Citation.] [¶] . . . PRACTICE POINTER: Even in these cases, it is better practice to plead them as affirmative defenses. Otherwise, a judge might disagree as to whether they are at issue, and you might end up having to fight the issue out on appeal." (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2018) ¶¶ 6:442-6:443, p. 6-133, italics added.) That is exactly what happened here.
Apart from the issue of illegality as such, Evans' opening brief asserts the entire judgment is a "nullity" because of Judge Moss' alleged misconduct. However, most of his argument is based not on what happened in this case, but in another, related case, back in December 2015: Haugen v. PBPA, Orange County Superior Court Case No. 30-2010-00423544. (Plaintiff Ole Haugen is also one of the appellants in the case now before us.) By way of background, this court denied Haugen's request for a writ of mandate disqualifying Judge Moss at that time. Evans' attempts to disqualify Judge Moss were clearly untimely.
And as far as this case is concerned, we note that not once in the 60 pages of the appellants' opening brief does appellants' counsel ever actually quote anything Judge Moss said or wrote that shows any sort of bias or preconception. Quite the opposite: We've been through this record and can only compliment Judge Moss for extreme judicial restraint. All Judge Moss did - besides hold his temper - was to rule against appellants on a number of occasions. It is well established that adverse rulings - even many erroneous adverse rulings - are no basis for a claim of judicial bias. (Andrews v. Agricultural Labor Relations Bd. (1981) 28 Cal.3d 781, 795-796.)
But one more point must be made: Attorney Evans has engaged in a pattern of inflammatory accusations against any number of judges who have ruled against him, including not only Judge Moss but the Presiding Justice of this Division. Worse, at oral argument in this court, he practically invited us to hold him in contempt for accusing Judge Moss of fixing the result. (See In re Koven (2005) 134 Cal.App.4th 262.)
To repeat: A number of the adverse rulings made by Judge Moss against Attorney Evans' clients were nothing but the natural outcome of the fact Attorney Evans did not raise issues timely or otherwise poorly articulated them. Even the fairest judge sometimes cannot make up for poor pleading or poor research by a litigant's counsel.
As recounted above, Judge Moss noted that Attorney Evans had failed to explain how Civil Code section 799.1 was violated, and took a "shotgun approach" to allegations of violation of breach of fiduciary duty on the part of the PBPA.
Another example: In the companion Eicherly case (Eicherly v. Palm Beach Park Association, G052396) involving a challenge to the 2013 ratification election, Evans did not cite to the trial court the key statute on which he builds his case on appeal, former Civil Code section 1303.3.
We choose not to set contempt proceedings for Attorney Evans for the calumnies he has casually hurled at Judge Moss, nor for those directed at this court. We conclude he craves the attention of such a hearing more than he would suffer from its result. We choose to deny him that attention and write off his intemperance to an excess of zeal on behalf of vulnerable and elderly clients. We now turn to the issues more discreetly raised in the opening brief:
The general idea being that the Courts of Appeal are engaged in a grand conspiracy to cover up injustice perpetrated by trial judges. Our primary sin, it seems, was to reject Attorney Evans' petition for writ of mandate to remove Judge Moss from the case.
2. Absence of a securities permit under Business and Professions Code section 11010 .8. This argument fails because no such permit was ever required. A permit is only required if a person "intends to offer subdivided lands within this state for sale or lease[.]" (Bus. & Prof. Code, § 11010, subd. (a).) But the PBPA here never went through with any actual subdivision; in fact the members voted against subdividing in 2010. Appellants can hardly be aggrieved by the lack of permits for a subdivision that never happened. (See In re K.C. (2011) 52 Cal.4th 231, 236 [appellant must have grievance to have standing to appeal].)
3. The validity of the original $200,000 assessment in 2007. This court requested supplemental briefing on the issue of whether the $200,000 assessment might have violated appellants' rights under the MRL, and particularly under Civil Code section 798.31 as it stood in 2007. Our purpose was not, as Attorney Evans wrote in his supplemental brief, to conduct "a lost fishing expedition to try and salve and cure massive fiduciary fraud, illegality, and wrongdoing, enable by demonstrated judicial bias and corruption." Attorney Evans seems to have leaped to the conclusion that we were biased against him. Rather, our purpose was quite the opposite: We asked for that briefing cognizant of the unique vulnerability of mobilehome owners. We were concerned that the $200,000 assessment in 2007 was a raw deal for the poorer residents in the park.
Mobilehomes are, generally speaking, not mobile. Typically, mobilehome owners do not own the land beneath their unit, and the prospect of actually moving their unit must seem as expensive and technically difficult as a moon shot. Thus mobilehome owners face the worst of both worlds of renting and owning. As owners they must make a substantial financial investment in their dwellings, but unlike conventional property owners, they also face rent increases from a third-party landlord. And as renters they are vulnerable to rent increases but cannot easily pull up stakes and move. These facts are well known to the California Legislature. (See generally Rich v. Schwab (1998) 63 Cal.App.4th 803, 813-814 (Schwab) [citing Stats. 1978, ch. 1031, § 1, p. 3178].)
Accordingly, the Legislature enacted the MRL in 1978 to provide certain protections for mobilehome park unit owners. (See Schwab, supra, 63 Cal.App.4th at p. 813; see also § 798.55.) While there is no statewide mobilehome rent control law, section 798.31 does limit the kinds of monetary costs that can be imposed on mobilehome park tenants. In this case, as a practical matter, all the appellants saw their cost just to stay in their mobilehomes in the wake of the 2007 assessment go up from something like $300 or $400 a month to something like $1,600 a month. At least at first glance, the quadrupling of necessary cost to maintain their residence in the park seemed to us to be incompatible with the protections afforded mobilehome park tenants under Civil Code section 798.31.
However, even though violation of Civil Code section 798 is mentioned in the opening brief (though it only devotes all of five lines to the issue, including a citation to an appellate decision that has been disapproved by the California Supreme Court), in the supplemental briefing Attorney Evans expressly abandoned any reliance on the MRL protections, specifically arguing that section 798 et seq. did not apply. Very well. We need only add that the matter has, in any event, become academic since the appellants now face - ironically thanks to the much-vilified Judge Moss' decision on the TILA violation - no liability at all for the $200,000 assessment (either in 2007 or in 2013).
4. Alleged Illegal Pay Down on the Thrivent Loan. The opening brief says that the PBPA's paydowns on the Thrivent loans were "illegal." If we understand the argument correctly, the theory is that residents who paid off their $200,000 assessments were entitled to have any liens released on their homes. The opening brief fails to explain how appellants - who have all refused to pay the assessments - could possibly have been aggrieved by any pay downs of the Thrivent loan. (See Cal. Rules of Court, rule 8.204(a)(1)(B).) We did not even get five lines on that point, and "Issues not supported by argument or citation to authority are forfeited." (Needelman v. DeWolf Realty Co., Inc. (2015) 239 Cal.App.4th 750, 762.)
5. Lack of annual financial statements and failure to account for allegedly missing reserves. Since appellants refused to pay the assessments, they lost their memberships in the PBPA. The issue of their derivative claims against the PBPA was litigated in the Haugen decision. It now constitutes a classic case of collateral estoppel. In Haugen we held that one of the plaintiffs here, Ole Haugen, could not maintain a derivative action against the PBPA because he was no longer a member of the association. Haugen is now final. Appellants here were in unquestionable privity with the appellant in Haugen, and also represented by the same counsel. Appellants are thus collaterally estopped to complain of PBPA internal management because, under Haugen, they have no standing to do so.
IV. DISPOSITION
The judgment is reversed to the extent it provides that the appellants owe any money to PBPA. The matter is remanded to the trial court to determine whether appellants' various units are "mobilehomes" within the meaning of section 18008, i.e., whether those units exceed 320 square feet. If not, the judgment as to units not exceeding 320 square feet shall be reinstated. If so, the PBPA shall have the opportunity to offer whatever exceptions it might deem appropriate to appellants' theory that collecting rent from them would be illegal as contrary to regulation 1102. Assuming appellants prevail on the illegality issue, the trial court is to calculate how much each appellant paid PBPA by way of payments on the $200,000 loans made by PBPA in violation of TILA, and to enter a new judgment providing for the reimbursement of those monies to each appellant. In all other respects the judgment is affirmed.
Being familiar with this voluminous record and the history of this litigation - which is even more complex than today's decision might make it seem - we think our decision in this appeal is substantively a split one. Each side will thus bear its own costs on appeal.
For example, the vast majority of the opening brief is devoted to issues other than the winning Espinoza unpaid rent issue. --------
BEDSWORTH, ACTING P. J. WE CONCUR: IKOLA, J. THOMPSON, J.