Judge James C. Chalfant, Case Number: 23STCP03188, Date: 2024-01-16 Tentative Ruling

7520 S. Broadway, LLC v. County of Los Angeles 23STCP03188

Tentative decision on demurrer: overruled

Respondent County of Los Angeles (“County”) demurs to the Petition filed by Petitioner 7520 S. Broadway, LLC (“Broadway”).

The court has read and considered the moving papers, opposition, and reply,[1] and renders the following tentative decision.

Petitioner Broadway filed a Petition for administrative mandamus against Respondent County on September 5, 2023. The Petition alleges in pertinent part as follows.

Broadway holds title to the real property and improvements located at 7520 S. Broadway, Los Angeles, CA 90003 (the “Property”). Pet., ¶1. Respondent County operates the Department of Public Health (“DPH”). Pet., ¶2.

On August 3, 2022, DPH Inspector Maria Diaz Padilla (“Padilla”) inspected Units F and G of the Property, as well as the exterior of the Property as part of a “Routine Inspection.” Pet, ¶3. Padilla identified 30 “Non-Critical Violations” in her “Official Inspection Report.” Pet., ¶3. Reinspection was set for August 25, 2022. Pet., ¶3.

On August 25, 2022, Inspector Padilla inspected the Property and issued a “Official Inspection Report” confirming resolution of the 30 “Non-Critical Violations” in the August 3, 2022 report. Pet., ¶4. Padilla added three new violations and set an inspection date of September 15, 2022. Pet., ¶4.

On September 23, 2022, Inspector Padilla inspected the Property and closed the violations from the August 25, 2022 inspection. Pet., ¶5. Padilla added three more violations and set a telephonic “Compliance Review” with Chief Inspector Bria Nash on September 28, 2022 to discuss outstanding violations in Units F and G. Pet., ¶5.

The telephonic “Compliance Review” was held on September 28, 2022, and Chief Inspector Nash indicated that the units at the Property had to be fumigated monthly rather than four units per month. Pet., ¶6. An inspection was scheduled for October 14, 2022. Pet., ¶6.

On October 14, 2022, Inspector Padilla inspected the property and closed several violations, leaving 12 non-critical violations pending and adding new violations. Pet., ¶8. Padilla set an inspection date for October 18, 2022. Pet., ¶8.

On October 18, 2022, Inspector Padilla inspected the Property and closed several violations, leaving five violations pending, including new violations. Pet., ¶9. Padilla set an inspection date for November 9, 2022. Pet., ¶9.

On October 24, 2022, Broadway spoke with DPH’s Chief Inspector Nash to address concerns regarding Inspector Padilla’s approach to the inspection process. Pet., ¶10. Broadway claimed that Padilla predetermined what new violations would be included in the inspection report before the inspection began. Pet., ¶10. Broadway asked that Padilla be replaced as the inspector for the November 9, 2022 inspection. Pet., ¶10. DPH refused to replace Padilla but agreed to assign another inspector to jointly inspect the property with Padilla on October 27, 2022. (Pet. 10.)

On October 27, 2022, Inspectors Padilla and Martinez arrived at the Property for an inspection. Pet., ¶11. The Inspectors declined to inspect the units because the tenants were absent. Pet., ¶11. Broadway emailed Chief Inspector Nash to complain that the inspection could have proceeded without the tenants present and the inspectors’ refusal to proceed in the tenants’ absence indicated a pattern of unfair conduct towards it and favoring tenants. Pet., ¶11, Ex. 8. Broadway voiced these same concerns in an email sent on October 31, 2022. Pet., ¶12, Ex. 9.

In response, Chief Inspector Nash set a new inspection date of November 10, 2022. Pet., ¶12. Nash indicated during a phone conversation that DPH would accept photographs of completed work and close the inspection if the tenants were not present on November 10, 2022. Pet., ¶12, Ex. 9.

On November 9, 2022, Nash advised Broadway that it would have to fumigate for rodents, explaining that prior services were for roaches. Pet., ¶13. Broadway responded by email to Nash and complained that the process seemed pointless because DPH refused to accept and trust the reports of third-party vendors. Pet., ¶13.

On November 10, 2022, Inspectors Padilla and Martinez inspected the Property. Pet., ¶15. Afterwards, DPH issued a report adding a new violation for rodents only, clearing all other violations and providing a new inspection date of November 24, 2022. Pet., ¶15, Ex. 11.

On November 14, 2022, Broadway and DPH’s agents had a conference call. Pet., ¶16. Broadway voiced concern over the method by which DPH’s inspectors were conducting the inspections. Pet., ¶16. Broadway also indicated that the tenants had been planting evidence for the violations to keep the case file on the Property open. Pet., ¶16. DPH’s agents indicated Broadway would have to walk the property with the pest control company to determine potential paths of rodent entry, have the pest company revisit the property to verify the work and provide a clean report indicating there were no outstanding issues with rodent entry. Pet., ¶16, Ex. 12.

Broadway complied with DPH’s orders regarding the rodent entry issues and all repairs and pest control company inspections were completed on December 8, 2022. Pet., ¶17. Broadway forwarded a completed report from Pest Innovations to DPH Branch Director Contreras on December 13, 2022. Pet., ¶17, Ex. 13. On December 21, 2022, Chief Inspector Nash requested more pictures of the work completed to which Broadway complained on December 23, 2022. Pet., ¶18, Ex. 14.

On January 12, 2023, Inspectors Castillo and Nareh Derhartounyan inspected the Property. Pet., ¶19. Although there were no rodents found, new violations were issued for rat droppings not cleaned up by the tenants. Pet., ¶20. A February 8, 2023 email to Broadway scheduled an inspection for the next day, February 9, 2023. Pet., ¶21.

On February 9, 2023, Inspectors Castillo and Dehrartounyan inspected the premises. Pet., ¶22. The violations for rodent droppings from the January 12, 2023 inspection were closed. Pet., ¶22. A new violation for rodent droppings in a new location in the unit was added and an inspection date was set for February 23, 2023. Pet., ¶22, Ex. 9.

The inspection was rescheduled for March 9, 2023 at Broadway’s request. Pet., ¶¶23-27. On March 9, 2023, Inspectors Carillo and Jordan Teramae inspected the Property and all violations were closed except for one based on a tenant complaint that there were roaches inside an electrical outlet. Pet., ¶27. Another inspection was set for March 29, 2023 and later rescheduled for April 6, 2023. Pet., ¶27.

On April 6, 2023, Inspector Castillo and Vasquez inspected the Property and added seven new violations. Pet., ¶30. An inspection was set for April 20, 2023. Pet., ¶30. The inspection was rescheduled for May 9, 2023. Pet., ¶31.

On May 9, 2023, Inspectors Castillo and Vasquez inspected the Property and added more violations, including a damaged and removed screen door on the balcony. Pet., ¶31. An inspection was scheduled for May 23, 2023 and rescheduled for June 6, 2023. Pet., ¶¶32-33. Broadway asked that the inspection be rescheduled, and DPH unilaterally set the inspection date for July 25, 2023. Pet., ¶34. The inspection date was rescheduled for August 15, 2023 by Inspector Castillo. Pet., ¶34.

Broadway thereafter emailed DPH on August 3, 2023, objecting to the fact that the inspection had been open for one year and yet DPH refused to close the inspection. Pet., ¶34. Broadway also asked that the inspection date be rescheduled. Pet., ¶34.

Broadway did not receive a response rescheduling the inspection date. Pet., ¶37. Broadway’s agent awaited the DPH inspectors at the Property on August 15, 2023. Pet., ¶37. No agent appeared. Pet., ¶38.

On August 23, 2023, Broadway emailed DPH, objecting to the failure of its inspectors to maintain neutrality in inspecting the Property. Pet., ¶38. Broadway also alleged that the tenants were sabotaging the inspections to keep the DPH file open on the Property. Broadway requested a meeting regarding the DPH file on the Property. In response, DPH’s Manager, Tsiebos, threatened an enforcement action against Broadway if the violations set forth in the May 9, 2023 inspection report remained unresolved. Pet., ¶38, Ex. 32.

After this threatened enforcement action, Broadway filed the Petition on September 5, 2023.

Petitioner Broadway asks that a writ of mandate issue pursuant to CCP §1094.5 compelling Respondent County to vacate the Notice and Order to Comply of August 3, 2022. Broadway also asks the court to stay any further action by County regarding the Property pending adjudication of this matter. Broadway seeks an award of fees and costs pursuant to CCP section 1021.5.

“[N]o deduction shall be allowed for interest, taxes, depreciation, or amortization paid or incurred in the taxable year with respect to substandard housing located in this state,” with the exception of “deductions from income derived from property rendered substandard solely by reason of a change in applicable state or local housing standards, unless the violations cause substantial danger to the occupants of the property.” Revenue & Taxation (“R&T”) Code §§17274(a), 24436.5(a).

“Substandard housing” is defined as “occupied dwellings from which the taxpayer derives rental income or unoccupied or abandoned dwellings for which both of the following apply: (1) Either of the following occurs: (A) For occupied dwellings from which the taxpayer derives rental income, a state or local government regulatory agency has determined that the housing violates state law or local codes dealing with health, safety, or building…(2) Either of the following occurs: (A) After written notice of violation by the regulatory agency, specifying the applicability of this section, the housing has not been brought to a condition of compliance within six months after the date of the notice or the time prescribed in the notice, whichever period is later.” R&T Code §§17274(b), 24436.5(b).

When the six-month period to comply under R&T Code §§17274(b) and 24436.5(b) expires without compliance, “the government the government regulatory agency shall mail to the taxpayer a notice of noncompliance. The notice of noncompliance shall be in a form and shall include information prescribed by the Franchise Tax Board, shall be mailed by certified mail to the taxpayer at his or her last known address, and shall advise the taxpayer of (A) an intent to notify the Franchise Tax Board of the noncompliance within 10 days unless an appeal is filed, (B) where an appeal may be filed, and (C) a general description of the tax consequences of that filing with the Franchise Tax Board. Appeals shall be made to the same body and in the same manner as appeals from other actions of the regulatory agency. If no appeal is made within ten days or if after disposition of the appeal the regulatory agency is sustained, the regulatory agency shall notify, in writing, the Franchise Tax Board of the noncompliance.” R&T Code. §§17274(c)(1) and 24436.5(c)(1).

Demurrers are permitted in administrative mandate proceedings. CCP §§1108, 1109. A demurrer tests the legal sufficiency of the pleading alone and will be sustained where the pleading is defective on its face.

Where pleadings are defective, a party may raise the defect by way of a demurrer or motion to strike or by motion for judgment on the pleadings. CCP §430.30(a); Coyne v. Krempels, (1950) 36 Cal.2d 257. The party against whom a complaint or cross-complaint has been filed may object by demurrer or answer to the pleading. CCP §430.10. A demurrer is timely filed within the 30-day period after service of the complaint. CCP §430.40; Skrbina v. Fleming Companies, (1996) 45 Cal.App.4th 1353, 1364.

A demurrer may be asserted on any one or more of the following grounds: (a) The court has no jurisdiction of the subject of the cause of action alleged in the pleading; (b) The person who filed the pleading does not have legal capacity to sue; (c) There is another action pending between the same parties on the same cause of action; (d) There is a defect or misjoinder of parties; (e) The pleading does not state facts sufficient to constitute a cause of action; (f) The pleading is uncertain; (g) In an action founded on a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct; (h) No certificate was filed as required by CCP sections 411.35 or 411.36. CCP §430.10.

A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. CCP §430.30(a); Blank v. Kirwan, (1985) 39 Cal.3d 311, 318. The face of the pleading includes attachments and incorporations by reference (Frantz v. Blackwell, (1987) 189 Cal.App.3d 91, 94), but it does not include inadmissible hearsay. Day v. Sharp, (1975) 50 Cal.App.3d 904, 914.

The sole issue on demurrer for failure to state a cause of action is whether the facts pleaded, if true, would entitle the plaintiff to relief. Garcetti v. Superior Court, (1996) 49 Cal.App.4th 1533, 1547; Limandri v. Judkins, (1997) 52 Cal.App.4th 326, 339. The question of plaintiff’s ability to prove the allegations of the complaint or the possible difficulty in making such proof does not concern the reviewing court. Quelimane Co. v. Stewart Title Guaranty Co., (1998) 19 Cal.4th 26, 47.

The ultimate facts alleged in the complaint must be deemed true, as well as all facts that may be implied or inferred from those expressly alleged. Marshall v. Gibson, Dunn & Crutcher, (1995) 37 Cal.App.4th 1397, 1403. This rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken. Vance v. Villa Park Mobilehome Estates, (“Vance”) (1995) 36 Cal.App.4th 698, 709.

For all demurrers filed after January 1, 2016, the demurring party must meet and confer in person or by telephone with the party who filed the pleading for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer. CCP §430.31(a). As part of the meet and confer process, the demurring party must identify all of the specific causes of action that it believes are subject to demurrer and provide legal support for the claimed deficiencies. CCP §430.31(a)(1). The party who filed the pleading must in turn provide legal support for its position that the pleading is legally sufficient or, in the alternative, how the complaint, cross-complaint, or answer could be amended to cure any legal insufficiency. Id. The demurring party is responsible for filing and serving a declaration that the meet and confer requirement has been met. CCP §430.31(a)(3).

“[A] demurrer based on a statute of limitations will not lie where the action may be, but is not necessarily, barred. [Citation.] In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred.” State ex rel. Metz v. CCC Information Services, Inc., (2007) 149 Cal.App.4th 402, 413.

If a demurrer is sustained, the court may grant leave to amend the pleading upon any terms as may be just and shall fix the time within which the amendment or amended pleading shall be filed. CCP §472a(c). However, in response to a demurrer and prior to the case being at issue, a complaint or cross-complaint shall not be amended more than three times, absent an offer to the trial court as to such additional facts to be pleaded that there is a reasonable possibility the defect can be cured to state a cause of action. CCP §430.41(e)(1).

Respondent County demurs to the Petition on the basis that (1) the court lacks subject matter jurisdiction because Petitioner Broadway failed to exhaust its administrative remedies, and (2) the Petition requests inappropriate relief by asking that Respondent’s DPH refrain from enforcing the Los Angeles County Health Code.

Respondent County met and conferred with Broadway’s counsel via email after Petitioner failed to respond to a voicemail. Jensen Dec., ¶2. Broadway’s counsel indicated that it would seek a decision from the court on the County’s demurrer. Jensen, Dec., ¶2.

The exhaustion doctrine has been described as “a jurisdictional prerequisite to resort to the courts.” Abelleira v. District Court of Appeal, (1941) 17 Cal.2d 280, 293. The exhaustion doctrine contemplates that the real issues in controversy be presented to the administrative body, which must be given the opportunity to apply its special expertise to correct any errors and reach a final decision, thereby saving the already overworked courts from intervening into an administrative dispute unless absolutely necessary. Farmers Ins. Exchange v. Superior Court, (1992) 2 Cal.4th377, 391.

The failure to allege exhaustion of administrative remedies or facts excusing the failure to exhaust renders the petition subject to demurrer for failure to state a cause of action. See, e.g., Stenocord Corp. v. City & County of San Francisco, (1970) 2 Cal.3d 984, 990. A mere allegation that petitioners have exhausted their administrative remedies has been held to be conclusory and insufficient to survive demurrer. Pan Pacific Property v. County of Santa Cruz, (1978) 81 Cal.App.3d 244, 251; Lund v. Ca. State Employees Assn., (1990) 222 Cal.App.3d 174, 182-83. On the other hand, such an allegation has also been held sufficient to survive demurrer. Wong v. Regents of University of California, (1971) 15 Cal.App.3d 823, 829. Therefore, the court has discretion in determining whether the allegation is adequate.

County demurs on the grounds that Broadway failed to exhaust administrative remedies. County argues that the Petition does not allege that it has complied with the appeals process set forth in R&T Code sections 17274 and 24436.5. Dem. at 7-8. County’s demurrer is not well taken for several reasons.

First, the Petition alleges exhaustion of administrative remedies as follows: “Petitioner has exhausted its administrative remedies required to be pursued by requesting a hearing on the Notice(s) and Order(s); which was cancelled by Respondent.” Pet., ¶43. This allegation is not a bare allegation of exhaustion; it alleges that Broadway requested a hearing on the multiple Notices of Violation, which County cancelled. Although the Petition does not allege a specific County code or regulation authorizing a hearing, it is sufficient to allege that a hearing was demanded and refused.

Second, R&T Code sections 27374 and 24436.5 pertain to the denial of tax deductions for substandard housing. R&T Code section 24436.5(c)(1) provides that a regulatory agency shall notify the taxpayer of non-compliance, the agency’s intent to notify the Franchise Tax Board (“FTB”) of the same unless there is an appeal, and where an appeal will be filled. The subject matter of this appeal process is tax deductions, not a local agency’s finding of substandard housing, and it is not at all clear that an appeal must be exhausted to dispute DPH’s Notice and Order to Comply of August 3, 2022.

Third, County points to no appeal procedure established by ordinance or rule that it makes available for either a substandard housing determination or a Notice and Order to Comply. Nor did County give notice to Broadway of an appeal procedure as required by R&T Code section 24436.5(c)(1). The notices to Broadway in DPH’s inspection reports merely stated that the six-month clock in R&T Code sections 1274 and 23336.5 had started and that FTB would be notified:

“Section 17274 and 24436.5 of the State Revenue and Taxation code provide, in part, that a taxpayer, who derives rental income from housing determined by the local regulatory agency to be substandard by reason of violation of State or local codes dealing with health, safety, or building, cannot deduct from State personal income tax and bank and corporation income tax, deductions for interest, depreciation or taxes attributable to such substandard structure where the substandard conditions are not corrected within six (6) months after notice of violation by the regulatory agency. THE DATE OF THIS NOTICE MARKS THE BEGINNING OF THAT SIX-MONTH PERIOD. The Department is required by law to notify the Franchise Tax Board of failure to comply with these code sections.” Pet., Ex. 1, p. 2; Ex. 2, p. 2; Ex. 3, p. 3; Ex. 6, p. 2; Ex. 11, p. 2; Ex. 16, p. 2; Ex. 19, p. 2; Ex. 22, p. 2; Ex. 25, p. 2 and Ex. 26, p. 3.

Fourth, County relies on inadmissible evidence. County argues that it sent Broadway a Notice of Intent to Notify Franchise Tax Board of non-compliance pursuant to R&T Code sections 17274 and 24436.5 on October 24, 2023. Dem. at 8-9. The October 24, 2023 notice informed Broadway that DPH would notify the FTB of noncompliance unless a Notice of Appeal was received within 15 days. Dem. at 9; Jensen Decl., ¶3. An extension was purportedly granted on November 14, 2023. Jensen Decl., ¶3. These facts do not appear on the face of the Petition or its exhibits. Jensen’s declaration is extrinsic evidence that may not be considered on demurrer. Blank v. Kirwan, supra, 39 Cal.3d at 318.

County fails to show that Broadway has not exhausted its administrative remedies.

County also argues the Petition fails to state a claim for administrative mandate because the requested relief would require it to refrain from enforcing the law. County argues it is entitled under Article XI, Section 7 of the California Constitution to promulgate and enforce its ordinances and regulations, including sanitation ordinances. Cal. Const., Art. XI, § 7, (“A county or city may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws.”) Broadway admits there are still violations that have not yet been cured (Pet., Ex. 26) and the request for a writ of mandamus requiring closure of the DPH file on the Property would require County to refrain from enforcing the law.

Broadway does not respond to County’s argument that the requested relief is improper. In any event, County’s argument is not both procedurally improper and not well taken. When there is a defect in a pleading’s prayer, the opposing party’s proper remedy is a motion to strike, not a demurrer. This is particularly true because the Petition seeks both a writ of mandate compelling County to vacate the Notice and Order to Comply of August 3, 2022 and a stay of any further action by County.

County also misstates the grounds for the second relief. The Petition contends that DPH created and is maintaining an open file on the Property in violation of the law. Since there are no actual violations at the Property, Broadway seeks a stay of further DPH action. This relief would not prevent County from enforcing the law against legitimate violations unless future violations arose.

The demurrer to the Petition is overruled. County is ordered to file an answer only in 20 days.

[1] Broadway failed to lodge a courtesy copy of the complaint in violation of the Presiding Judge’s First Amended General Order Re: Mandatory Electronic Filing. Its counsel is admonished to provide courtesy copies in all future filings.