Judge: Mary H. Strobel, Case: 21STCP03569, Date: 2023-02-02 Tentative Ruling

Case Number: 21STCP03569    Hearing Date: February 2, 2023    Dept: 82

             Petitioner 1433 Euclid Street, LLC (“Petitioner”) petitions for a writ of administrative mandate directing Respondent Santa Monica Rent Control Board (“Respondent” or “Board”) to set aside its final administrative decision finding that Petitioner charged excess rent to Real Party in Interest Joanna Palacios (“Palacios”) and that the current lawful rent for Palacio’s unit is $865/month. 

Background

The Unit, and Tenant History

            Petitioner is the owner of real property located at 1433 Euclid St., Unit 3, Santa Monica, CA (the “Unit”).  (AR 10.)  Petitioner has owned the property since around September 16, 2016.  (AR 10; but see AR 143 [purchase date of 9/21/16].)  The Unit has been described as a one-bedroom apartment, but also a studio with a den.  (AR 344-345.)

            Irene Bomba and Sharka Jajko occupied the Unit as of August 23, 1995.  (AR 31.)  Bomba was named on the lease.  (Ibid.)  At some point thereafter, Jajko moved out and Bomba lived alone in the Unit.  (Ibid.)

            Palacios moved into the Unit in January 2011, after Jajko had already vacated and lived with Bomba.  Palacious was not added to the lease, in part because Jajko was still on the lease and Roque & Mark (the manager) said it could not list more than two individuals on the lease.  (AR 31-32, 346-351.)  Palacios testified that she paid the full rent with her own money and Bomba would give her some cash each month toward expenses.  (AR 32, 346-353.) 

            On or about August 27, 2016, Bomba and Palacios signed a tenant estoppel certificate indicating that they were both tenants of the Unit.  (AR 32, 281, 378-379.)

            In approximately May 2017, Bomba, moved out.  Palacios remained in the Unit by herself and continued to pay rent.  (AR 33, 356-358.)   

            Bomba passed away in May 2018.  (AR 33, 298.)  Palacios did not immediately tell the management company of Bomba’s death, but did inform management by approximately November 2018.  (AR 33, 359.)  

The management company offered Palacios a buy-out agreement with both her and Bomba’s names as tenants, which Palacios initially accepted.  (AR 33-34, 289-295.)  For reasons not relevant to this writ petition, Palacios subsequently rescinded the buy-out agreement.  (AR 360-361.)

Administrative Proceedings

            In December 2019, Petitioner served a 60-day notice of rent increase on Palacios alleging that the Unit was no longer occupied by the original tenants and was subject to a rent increase to a market rate.  (AR 34, 272-273.)  In response, Palacios filed a complaint for excess rent with Respondent.  (AR 48-58.) 

            An administrative hearing was held on the complaint before a hearing officer on November 5, 202.  (AR 007.)  On January 27, 2021, the hearing officer issued a lengthy written decision finding that Palacios had an implied tenancy for the Unit prior to Petitioner’s attempts to increase the rent, and that the rent increases therefore violated the rent control law.  (AR 2-38.)

Writ Proceedings

            On October 27, 2021, Petitioner filed a petition for writ of mandate and complaint for declaratory relief.  Respondent answered.  Palacios has not filed an answer. 

            On February 8, 2022, the court stayed the second cause of action for declaratory relief until the court rules on the writ petition. 

            On December 7, 2022, Petitioner filed its opening brief in support of the petition.  The court has received Respondent’s opposition, Petitioner’s reply, the administrative record, and the joint appendix. 

Standard of Review

Petitioner seeks a writ of administrative mandate pursuant to CCP section 1094.5.  Under section 1094.5(b), the pertinent issues are whether the respondent has proceeded without jurisdiction, whether there was a fair trial, and whether there was a prejudicial abuse of discretion.  An abuse of discretion is established if the agency has not proceeded in the manner required by law, the decision is not supported by the findings, or the findings are not supported by the evidence.  (CCP § 1094.5(b).)

In cases reviewing decisions that do not affect a fundamental vested right, as in this one, the court is directed to review the record for substantial evidence supporting the administrative findings.  (JKH Enterprises, Inc. v. Dept. of Industrial Relations (2006) 142 Cal.App.4th 1046, 1057; Cobb v. San Francisco Residential Rent Stabilization and Arbitration Bd. (2002) 98 Cal.App.4th 345, 350-351.)  Substantial evidence is relevant evidence that a reasonable mind might accept as adequate to support a conclusion (California Youth Authority v. State Personnel Board (2002) 104 Cal. App. 4th 575, 584-85), or evidence of ponderable legal significance which is reasonable in nature, credible, and of solid value. (Mohilef v. Janovici (1996) 51 Cal. App. 4th 267, 305 n. 28.)  “Courts may reverse an [administrative] decision only if, based on the evidence …, a reasonable person could not reach the conclusion reached by the agency.”  (Sierra Club v. California Coastal Com. (1993) 12 Cal.App.4th 602, 610.)  

“[A] trial court must afford a strong presumption of correctness concerning the administrative findings.”  (Fukuda v. City of Angels (1999) 20 Cal. 4th 805, 817; see also Evid. Code § 664.)  Petitioner bears the burden of proof to demonstrate, by citation to the administrative record, that substantial evidence does not support the administrative findings.  (Strumsky v. San Diego County Employees Retirement Assn. (1974) 11 Cal.3d 28, 32; Steele v. Los Angeles County Civil Service Commission (1958) 166 Cal. App. 2d 129, 137; see Local Rule 3.231(i)(2).) A reviewing court “will not act as counsel for either party to an appeal and will not assume the task of initiating and prosecuting a search of the record for any purpose of discovering errors not pointed out in the briefs.” (Fox v. Erickson (1950) 99 Cal.App.2d 740, 742.) 

“‘On questions of law arising in mandate proceedings, [the court] exercise[s] independent judgment.’ …. Interpretation of a statute or regulation is a question of law.” (Christensen v. Lightbourne (2017) 15 Cal.App.5th 1239, 1251.)

Analysis

Summary of Costa-Hawkins Act

The Costa-Hawkins Act governs whether Petitioner could increase Palacios’ rent.  “The Costa-Hawkins Act establishes vacancy decontrol for residential dwelling units where the former tenant has voluntarily vacated, abandoned or been legally evicted…. Thus, ‘[n]otwithstanding any other provision of law, an owner of residential real property may establish the initial rental rate for a dwelling or unit,’ except in specified situations. (Civ. Code, § 1954.53, subd. (a).)”  (Cobb v. San Francisco Residential Rent Stabilization and Arbitration Bd. (2002) 98 Cal.App.4th 345, 351.) 

            As relevant to this case, Civil Code section 1954.53(d) of the Costa-Hawkins Act states:

(d)(1) Nothing in this section or any other provision of law shall be construed to preclude express establishment in a lease or rental agreement of the rental rates to be applicable in the event the rental unit subject thereto is sublet….

(2) If the original occupant or occupants who took possession of the dwelling or unit pursuant to the rental agreement with the owner no longer permanently reside there, an owner may increase the rent by any amount allowed by this section to a lawful sublessee or assignee who did not reside at the dwelling or unit prior to January 1, 1996.

(3) This subdivision does not apply to partial changes in occupancy of a dwelling or unit where one or more of the occupants of the premises, pursuant to the agreement with the owner provided for above, remains an occupant in lawful possession of the dwelling or unit, or where a lawful sublessee or assignee who resided at the dwelling or unit prior to January 1, 1996, remains in possession of the dwelling or unit…..[¶]

            Interpreting these provisions, the Court of Appeal has held that Costa-Hawkins does not allow the landlord to increase the rent of a co-occupant of an original tenant that became a tenant in her own right through payment of rent before the landlord sought to increase the rent under section 1954.53(a).  (Cobb v. San Francisco Residential Rent Stabilization and Arbitration Bd. (2002) 98 Cal.App.4th 345; see also Miller and Starr, Cal. Real Estate 4th § 34:249 [“Co-occupants with original tenant are protected.”].) 

Petitioner Does Not Meet Its initial Burden Under CCP Section 1094.5

Respondent contends that the “Board’s conclusion that an implied tenancy was established was supported by detailed findings,” and that Petitioner has not met its burden under CCP section 1094.5 in challenging those findings.  (Oppo. 9.)  The court agrees.

When an appellant challenges “’the sufficiency of the evidence, all material evidence on the point must be set forth and not merely [his] own evidence.” (Toigo v. Town of Ross (1998) 70 Cal.App.4th 309, 317.)  “[T]he challenger must identify (with citations to the record) the factual findings made by the board that he or she is challenging …. And in doing so, the challenger cannot simply ignore the evidence in the record that was relied upon by the board …. Rather, the challenger must explain why that evidence is insufficient to support that finding.”  (Shenouda v. Veterinary Medical Bd. (2018) 27 Cal.App.5th 500, 513.)

            A finding of implied tenancy depends on the circumstances and is fact-specific.  (AR 17; see also Getz v. City of West Hollywood (1991) 233 Cal.App.3d 625, 629-630 [“Whether consent and acceptance of rent created a landlord-tenant relationship depends of course on the particular circumstances of each case.”].) 

            In the opening brief, Petitioner does not discuss the hearing officer’s detailed findings that Palacios had an implied tenancy for the Unit prior to Petitioner’s attempts to increase the rent.  (AR 20-38.)  Nor does Petitioner discuss the detailed evidence relied upon by the hearing officer for those findings.  While Petitioner makes new arguments in reply, Petitioner does not show good cause to do so.  (Balboa Ins. Co. v. Aguirre (1983) 149 Cal.App.3d 1002, 1010.)  For these reasons, Petitioner has not met its burden of proof under CCP section 1094.5. 

            While the court could deny on the petition on this basis, the court has also considered the parties’ record citations and cited authorities, as analyzed below.

Substantial Evidence Supports the Findings

“A tenancy may be created without a formal agreement, by consent and acceptance of rent. (Parkmerced Co. v. San Francisco Rent Stabilization & Arbitration Bd. (1989) 215 Cal.App.3d 490, 494 [263 Cal.Rptr. 617]; …. Such conduct can create a landlord-tenant relationship despite the absence of a lease. [Citations.] Such a ‘tenant’ may be entitled to invoke the protection of rent control laws.”  (Getz v. City of West Hollywood (1991) 233 Cal.App.3d 625, 629-630.)

In Cobb, supra, Restoni moved into an apartment unit in 1984 pursuant to a lease agreement.  Her son, Passalacqua, moved into the apartment in 1996 without the landlord’s permission.  In May 1998, Restoni vacated the apartment due to ill health.  Thereafter, the landlord accepted rent from Passalacqua and negotiated only a slight rent increase a few months later.  In September 1999, the landlord served Passalacqua a notice raising the rent to market under Civil Code section 1954.53(d)(2).  In reviewing Passalacqua’s challenge to the rent increase, the Court of Appeal held that Passalacqua had become a tenant in his own right through payment of rent and that the landlord could not raise the rent to market by treating him as a sublessee or assignee.  (Cobb, supra, 98 Cal.App.4th at 352-353.)

Here, the hearing officer explained at length the basis upon which she found Palacios had an implied tenancy for the Unit prior to Petitioner’s attempts to increase the rent.  (AR 20-38.)  Substantial evidence supports these findings.  Palacios testified that she had a friendly relationship with Roque & Mark, the manager when she moved in, and did most of the communicating with management.  (AR 19, 369-370.)  While Bomba gave Palacios cash each month for expenses, Palacios testified that she paid the rent with her own money.  She either deposited the money order in the drop box at Roque & Mark’s main office or walked it inside and handed it to the person at the front desk.  (AR 19, 351-352.)       On or about August 27, 2016, before Petitioner purchased the property, Bomba and Palacios signed a tenant estoppel certificate indicating that they were both tenants of the Unit.  Substantial evidence supports that management received or knew of this certificate.  (AR 32, 281, 378-379.)  After Bomba passed away, the management company offered Palacios a buy-out agreement with both Palacios’ and Bomba’s names as tenants.  (AR 33-34, 289-295.)  After Petitioner purchased the property, its management company (Concord) communicated directly with Palacios about the Unit, did not question her occupancy, and accepted rental checks from Palacios’ and Bomba’s joint checking account.  (AR 20, 352-356, 370-372.)  When WestStar took over management in 2018, they emailed Palacios directly how to set up an online rent payment account.  Palacios testified that she inputted her own name and account information in this system to make rent payments.  Palacios also communicated with WestStar about the subject Unit.  (AR 20, 367-369.) 

All of these interactions with management and payments of rent occurred before Petitioner served the rental increase notice in December 2019.  The hearing officer could reasonably conclude from this evidence that Palacios had formed an implied tenancy with Petitioner’s predecessor and with Petitioner prior to the rental increase.  Accordingly, substantial evidence supports the finding that the rental increase was not authorized by the Costa-Hawkins Act.  (Cobb, supra, 98 Cal.App.4th at 352-353.)

Petitioner contends that “[t]here is absolutely no evidence in the record that Petitioner knew about Ms. Palacios sole occupancy prior to the summer of 2019 or that Petitioner intended to waive the rights under the Costa–Hawkins Act prior to the rent increase notice served in December of 2019.”  (OB 7.)  However, as discussed, Petitioner does not even mention the implied tenancy finding in the opening brief and does not provide a comprehensive discussion of the evidence, as required to show an abuse of discretion.  The evidence summarized above reasonably supports a conclusion that the landlord’s management companies, who are authorized agents, accepted rent directly from Palacios and discussed the Unit with her.  Also, the management companies apparently received a tenant estoppel certificate with Palacios’ name as a tenant and offered Palacios a buy-out agreement as a tenant.  The court cannot reweigh this evidence, which reasonably supports the decision.

Petitioner argues that Palacios was a sublessee.  (OB 8, citing AR 400, 32, 373.)  As found by the hearing officer, Petitioner “presented no evidence that there was a sublessor/sublessee agreement between Ms. Palacios and Ms. Bomba.”  (AR 22.)  In its writ briefing, Petitioner does not challenge that finding and it cites no evidence of a sublease agreement.  On substantial evidence review, the evidence that Palacios was able to move all her belongings in her car does not negate the finding that she was not a sublessee, but rather became a tenant.  (AR 400.) 

Petitioner argues that “[r]ent decontrol occurs when all occupants who took possession prior to 1996 vacate the premises.”  (OB 8.)  Petitioner ignores Cobb, supra, which is binding. 

In reply, Petitioner develops new arguments based on record evidence.  “The salutary rule is that points raised in a reply brief for the first time will not be considered unless good cause is shown for the failure to present them before.”  (Balboa Ins. Co. v. Aguirre (1983) 149 Cal.App.3d 1002, 1010; see also Regency Outdoor Advertising v. Carolina Lances, Inc. (1995) 31 Cal.App.4th 1323, 1333.)  This action has been pending since October 2021, and the administrative record was available to Petitioner since before the opening brief was filed.  Petitioner does not show good cause to raise new arguments in reply. 

Even if considered, Petitioner’s reply arguments are not persuasive.  Petitioner contends that its “representative testified that since the rent checks were issued by the named tenant Irena Bomba and thus there was no issue in accepting it.” (Reply 3, citing AR 439.)  However, the representative also conceded that Palacios’ name was on the checks.  Petitioner states that the tenant estoppel was “unsigned,” but the cited copy shows Palacios’ signature as a tenant.  (Reply 3, citing AR 281.)  Petitioner cites no evidence that this certificate was not received by the management company.  (See Reply 3, citing AR 445.)  Petitioner cites no evidence that management objected to Palacios being listed as a tenant.  Under substantial evidence review, this evidence does not detract from the findings. 

Petitioner states that “it was understood that the Original Tenant [Bomba] was 80 years age and Ms. Palacios was authorized to stay in the unit as a live-in aide.”  (Reply 3, citing AR 445.)  The hearing officer rejected that contention below, and Petitioner fails to address the material findings.  As stated by the hearing officer, “Palacios adamantly denied moving into the unit as Ms. Bomba’s caregiver.”  (AR 22; see e.g. AR 397-398.)  Palacios also testified, without contradiction, that she paid her own rent. (AR 32, 346-353.)  While it’s possible the hearing officer could have reached a different conclusion, the court does not reweigh the evidence.  Substantial evidence supports the hearing officer’s conclusion Palacios was a co-tenant. 

Petitioner argues that Palacios was deceptive in that she did not inform management immediately that Bomba had passed away and when she executed a buy-out agreement.  (Reply 4.)  The hearing officer reasonably addressed those contentions, and Petitioner does not discuss the material findings.  (See AR 22-25.)  Having considered Petitioner’s record citations, the court finds substantial evidence in support of the findings.  Notably, Petitioner did inform management that Bomba passed away when WestStar offered the buy-out agreement, and WestStar told Palacios she could “just sign it.”  (AR 360.)  The hearing officer could reasonably conclude that Palacios was not seeking to deceive management during the period of time she neglected to inform management that Bomba had passed away.  Further, as noted by the hearing officer, Respondent accepted rent from Palacios directly even after being informed of Bomba’s death. (AR21.)

Petitioner contends that Miller & Desatnik Management Co. v. Bullock (1990) 221 Cal.App.3d Supp. 13, 15 is a “close analog.”  (Reply 6-7.) The court disagrees.  That case involved issues of unlawful detainer not relevant here.  Also, “[a]lthough she continued to pay rent after her daughter's death, [the mother] did so under the subterfuge that her deceased daughter was the one making the payments.”  (Miller, supra, at 20.)  The “respondent was neither a tenant, subtenant, lessee, or a sublessee under the rental agreement; nor was she entitled to the use or occupancy of the apartment under the agreement.”  (Ibid.)  Here, in contrast, Petitioner “does not contest Ms. Palacios’s right to occupy.”  (Reply 5.)  Miller is inapposite.   

Petitioner contends: “The HO reached a conclusion that the Petitioner had knowledge of Ms. Palacios being the sole occupant of the subject unit is in contravention with the evidence presented by the Petitioner. Ms. Palacios did not provide a single document confirming that she put the Petitioner on notice about her sole occupancy of the unit.”  (Reply 5.)  These and other arguments made by Petitioner ask the court to reweigh the evidence, which the court cannot do.  Having considered all of Petitioner’s record citations and cited authority, the court finds that substantial evidence supports the findings and decision. 

Conclusion

The petition for writ of mandate is DENIED.

At the hearing, Counsel should address whether the court’s ruling disposes of the cause of action for declaratory relief.