Court Opinion

ID: 9535098
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:45:25.465461+00
Date Added: 2024-06-11T13:33:10.197744
License: Public Domain

MOSK, J.
I dissent.
As Justice Frankfurter wrote in Bay Ridge Co. v. Aaron (1948) 334 U.S. 446, 484 [92 L.Ed. 1502, 1527, 68 S.Ct. 1186], “On the question you ask depends the answer you get.”
In this case if the question is whether a municipality may exercise its police power to reasonably regulate the rental business, the answer is: generally it may do so. But if the question is whether a city may compel a landlord to remain in business against his will, and give him only the alternative of a forced sale, the answer is: not in a democratic society.
The majority primarily consider the former question. In my view the latter issue is relevant under the facts of this case. Thus our answers differ.
I begin with the disbelief of the United States Supreme Court that one may be prevented from going out of business. In Textile Workers v. Darlington Co. (1965) 380 U.S. 263, 270 [13 L.Ed.2d 827, 834, 85 S.Ct. 994], Justice Harlan wrote for a unanimous court: “A proposition that a single businessman cannot choose to go out of business if he wants to would represent such a startling innovation that it should not be entertained without the clearest manifestation of legislative intent or unequivocal judicial precedent .... We find neither.”
This is followed by the opinion of Judge J. Skelly Wright in Robinson v. Diamond Housing Corporation (D.C. Cir. 1972) 463 F.2d 853, 867: “None of this is to say that the landlord may not go out of business entirely if he wishes to do so or that the jury is authorized to inspect his motives if he chooses to commit economic harakiri. There would be severe constitutional problems with a rule of law which required an entrepreneur to remain in business against his will.”
Curiously the city relies on the district court opinion in Flood v. Kuhn (S.D.N.Y. 1970) 316 F.Supp. 271, 274, affd. 443 F.2d 264, affd. 407 U.S. 258 [32 L.Ed.2d 728, 92 S.Ct. 2099], in which it was held that a baseball player is bound by his contractual obligations “subject only to his right to retire from baseball.” Here the petitioner is bound by the city rent ordi*112nance, but apparently not subject to his right to retire from the rental business.
The earliest modern instance of rent control was the wartime Emergency Price Control Act of 1942. Two years after its enactment, the United States Supreme Court held the act did not constitute a taking under the Fifth Amendment only because it provided that it shall not be construed “to require any person to sell any commodity or to offer any accommodations for rent.” (Bowles v. Willingham (1944) 321 U.S. 503, 517 [88 L.Ed. 892, 905, 64 S.Ct. 641].)
Section 1803, subdivision (t) of the Santa Monica ordinance is in conflict with Bowles, in that the landlord is required to maintain his property as “accommodations for rent” and to offer the rentals under the terms ordered by the city. He is not permitted to opt out.
The city suggests that the property owner may avoid its draconian order by the forced sale of his property to another who would in turn be compelled to continue in the rental business. Assuming arguendo that such a person could be found—a doubtful assumption under these circumstances—the city’s rationale leaves much to be desired. The city’s theory is deceptively simple: “Once a landlord, always a landlord—or sell the property.” The contention is, in effect, that the property owner has a duty to relieve the municipality of its invalid order by dispossessing himself of his property. Or to put it another way: persons who do not choose to abjectly submit to the city violating their fundamental rights should get out of town.
If the city forces this owner to involuntarily transfer his property to a third person, the result is no less a taking than if the municipality itself were to assume title to the property. Thus if the city insists upon its asserted public purpose of maintaining these six rental units ad infinitum, it must condemn the building and pay just compensation therefor. Neither the federal nor state Constitutions permit the city to achieve its purpose by impressing this owner and his property into the mold of a public utility bound in perpetuity to provide, maintain, and operate a housing business.
Contrary to the city’s contention, cases involving historical landmarks are not relevant to the rights of a property owner of a strictly commercial structure that is of no known historical value.
The majority rely on Fresh Pond Shopping Center v. Callahan (1983) 464 U.S. 875 [78 L.Ed.2d 215, 104 S.Ct. 218], a case that has produced no prevailing written opinion at any level. The trial court published no opinion, the Supreme Court of Massachusetts summarily affirmed the judgment by a *113tie vote (446 N.E.2d 1060), and the United States Supreme Court summarily dismissed a purported appeal for want of a substantial federal question. That scenario creates no persuasive, let alone binding, authority for anything.
The majority obtain the facts from the only opinion written in Fresh Pond: the dissent of Justice Rehnquist from the dismissal. But they ignore his conclusion: i.e., that he believes the rent control ordinance is the equivalent of “a physical occupation of the appellant’s property,” which, pursuant to Loretto v. Teleprompter Manhattan CTAV Corp. (1982) 458 U.S. 419 [73 L.Ed.2d 868, 102 S.Ct. 3164], constitutes a taking without just compensation.
Since the Supreme Court majority declared there is no substantial federal question in Fresh Pond, we are free, as was Massachusetts in that case, to decide the present issue entirely on the basis of state authority. I am convinced that although petitioner has not asserted a taking by the city, the implications of California Constitution, article I, sections 1 and 19, cannot be avoided, and are controlling to prevent the arbitrary actions of the city herein. Also persuasive is Department of Public Works v. San Diego (1932) 122 Cal.App. 159, 169 [10 P.2d 102], in which an act was found to be within the city’s police power, but its provisions “do not extend to the point where the owner . . . may be compelled to continue its operation or directly compelled to perform specific work which might be necessary to any such continuance.”
The majority appear to adopt a simplistic view of the rental business, i.e., that it stems easily and inexorably from the ownership of property and involves a mere passive investment. Landlords undoubtedly wish that were so, but the realities of the economic world require them to perform numerous personal services and assume onerous obligations and serious potential liability. Indeed, under many circumstances that liability can be financially devastating. (See, e.g., Kwaitkowski v. Superior Trading Co. (1981) 123 Cal.App.3d 324, 329-332 [176 Cal.Rptr. 494], and cases cited [landlord liable for rape that occurred on premises]; Stoiber v. Honeychuck (1980) 101 Cal.App.3d 903 [162 Cal.Rptr. 194] [landlord liable for property damage suffered by tenant because of breach of warranty of habitability, and also liable for intentional infliction of emotional distress]; O’Hara v. Western Seven Trees Corp. (1977) 75 Cal.App.3d 798 [142 Cal.Rptr. 787] [landlord liable for rape that occurred in plaintiff’s apartment]; Brennan v. Cockrell Investments Inc. (1973) 35 Cal.App.3d 796 [111 Cal.Rptr. 122] [landlord must exercise ordinary care in management of premises, even those under tenant’s control]; Evans v. Thompson (1977) 72 Cal.App.3d 978 [140 Cal.Rptr. 525] [landlord liable for property damage from fire]; Golden v. Conway (1976) 55 Cal.App.3d 948, 960 [128 Cal.Rptr. 69] [landlord strict*114ly liable for property damage when premises equipped with an appliance that proves to be defective]; Uccello v. Laudenslayer (1975) 44 Cal.App.3d 504 [118 Cal.Rptr. 741, 81 A.L.R.3d 628] [landlord liable for personal injuries received when tenant’s dog bit an invitee of the tenant]; People v. Greene (1968) 264 Cal.App.2d 774 [70 Cal.Rptr. 818] [landlord subject to prosecution for nuisance for condition on property not of his own making].)
The foregoing cursory sampling of cases illustrates that being a landlord entails active and vigilant management. Thus when the city compels one to remain a landlord against his will, it is not merely freezing an investment, it is requiring him to perform constant personal services. Since 1865 involuntary personal service has been an anathema in a free society.
After relying on Fresh Pond, a case without a prevailing opinion, the majority seem to desperately seek some relevant authority; they therefore cite Hawaii Housing Authority v. Midkiff (1984) 467 U.S. 229 [81 L.Ed.2d 186, 104 S.Ct. 2321], That Hawaiian landowners may have their property taken upon payment of just compensation is small comfort to this plaintiff who must remain a landlord under compulsion and perform the personal services imposed on landlords by case law, or in the alternative involuntarily dispose of his property to someone willing to undertake the required duties of a landlord. Hawaii Housing Authority does not purport to approve of such draconian conduct by a public agency.
I find the unanimous opinion of the Court of Appeal to be persuasive and therefore adopt the views of Presiding Justice Klein and Justices Lui and Danielson as my own. Their opinion follows in full, except that I omit their concluding discussion of the validity of other sections of the rent control law and attorney’s fees:
The City of Santa Monica and the Santa Monica Rent Control Board (collectively Santa Monica) appeal the issuance of a writ of mandate ordering them to give Jerome J. Nash (Nash) a demolition permit. The writ was granted on the grounds that section 1803, subdivision (t) of the Santa Monica Rent Control Charter Amendment which rendered Nash ineligible for a demolition permit was unconstitutional.
Because the demolition permit requirement of section 1803, subdivision (t) in its application to the fact situation before us violates article I, section 7, subdivision (a) of the California Constitution, we affirm.
Facts and Procedural History
In 1978, Nash purchased a six-unit apartment building which is the subject of this controversy. After operating the apartment for a time, Nash decided that he did not like being a landlord.
*115In 1979, the citizens of Santa Monica by initiative added article XVIII to the city’s charter. This new article provided for a rent control board with the authority to set and adjust maximum rents and to control the removal of rental units from the housing market. (§ 1803.)1 The rent control law also regulates tenant evictions. (§ 1806.) Section 1803 subdivision (t)2 of the rent control law requires a landlord to obtain a permit before demolishing a building. Where the landlord both owns habitable property and does not wish to rebuild, a demolition permit will be granted only upon a finding that (1) the building is not occupied by persons of low or moderate income, (2) cannot be afforded by persons of low or moderate income, (3) removal will not adversely affect the housing supply and (4) owner cannot make a reasonable return on investment.
On or about December 3, 1979, Nash petitioned the rent control board for a demolition permit. Although required to do so by regulation, Nash did not concurrently file a petition for rent increase. He justified this omission on the grounds that he did not want to change the rents; he wanted to destroy the structure. The rent control board returned his petition for a demolition permit as incomplete.
Rather than complete the petition, Nash filed a petition for a writ of mandate with the trial court. After a hearing, the trial court determined that Nash had no adequate administrative avenue for obtaining the demolition permit as he could not comply with section 1803, subdivision (t). The trial court found that Nash was capable of making a fair return on his investment and that the building was affordable to and currently rented by persons of moderate or lower incomes.
*116Based on those findings, the trial court concluded as a matter of law that the rent control board’s refusal to issue the demolition permit amounted to a deprivation of property without due process of law, and a taking for public use without just compensation. A peremptory writ of mandate was issued commanding the rent control board to issue Nash a removal permit. An appeal was timely filed on September 1, 1980.
Contentions
On appeal, Santa Monica claims that the demolition restrictions are squarely within the ambit of the police power. Nash contends that the restrictions exceed the bounds of the police power by impermissibly impinging on his right to go out of the landlord business.
The issue3 before this court is therefore whether section 1803, subdivision (t), insofar as it restricts the right of a landowner to go out of business by tearing down his building, violates the due process clause of the California Constitution. (Cal. Const., art. I, § 7, subd. (a).)
Discussion
1. Standard of review is strict scrutiny.
Generally, an exercise of the police power will withstand a substantive due process challenge so long as it is “ ‘reasonably related to a proper legislative goal.’” (Perez v. City of San Bruno (1980) 27 Cal.3d 875, 889 [168 Cal.Rptr. 114, 616 P.2d 1287]; Hale v. Morgan (1978) 22 Cal.3d 388, 398 [149 Cal.Rptr. 375, 584 P.2d 512].) In reviewing police power regulations, the court’s role is usually very limited. “The wisdom of the legislation is not at issue [and] the availability of less drastic remedial alternative [will not] invalidate a statute.” (Ibid.; see also Weaver v. Jordan (1966) 64 Cal.2d 235, 258-259 [49 Cal.Rptr. 537, 411 P.2d 289] (Mosk, J., dis.).)
However, where the rights affected by legislation are “so fundamental or ‘implicit in the concept of ordered liberty’ (Palko v. Connecticut (1937) 302 U.S. 319, 325 . . .) as to require equivalent protection,” a more searching level of scrutiny is applied. (Perez v. City of San Bruno, supra, 27 Cal.3d at pp. 889-890.) Our task therefore is to determine the nature of the rights involved here and the appropriate standard of review.
*117Under section 1803 subdivision (t) as long as the structure is habitable and low or moderate income people can afford the apartments, the owner cannot get a permit to withdraw the rental units from the market. A landlord cannot terminate his business4 by evicting all the tenants and letting the building stand empty, since evictions are carefully regulated. (See § 1806.) Additionally, because conversion permits are available only under the same conditions as demolition permits, an owner cannot cease being a landlord by selling the units as condominiums.5 The only possible way out is to sell to someone who is willing to be a landlord. To do so, however, may cause substantial financial hardship if the value of the property has dropped as a result of rent control. A landowner who wishes to keep the land is therefore compelled to stay in the residential rental housing business. Thus, the rent control law impinges upon the individual’s right to go out of business.
Having demonstrated that the right involved is the right to go out of business, we must now determine whether infringements of that right are subject to strict scrutiny. The resolution of this issue turns on the nature of the right.
The right to cease operating a business has not been widely discussed, hence its contours and boundaries are not clear. We do not purport here to define fully the extent of the right to go out of business, since its very core is infringed upon by the statute before us. Generally speaking, it is the right of the individual to stop working in a given occupation or the operation of a given business.6 Although the right does not restrict the state’s power to regulate the conduct of a business voluntarily engaged in, it restricts the government’s ability to force the individual to participate in a particular enterprise. Because it touches the individual’s ability to make a choice which greatly affects his or her life style, the right to go out of business is a personal freedom. Its title, which makes it sound like an economic right, is therefore deceptive.
The group of rights protected by strict judicial scrutiny is not limited to rights expressly set forth in the Constitution, but “extends to basic values ‘implicit in the concept of ordered liberty.’ [Citation.]” (City of Carmel-by-the-Sea v. Young (1970) 2 Cal.3d 259, 266 [85 Cal.Rptr. 1, 466 P.2d 225, *11837 A.L.R.3d 1313]; Serrano v. Priest (1976) 18 Cal.3d 728, 767 [135 Cal.Rptr. 345, 557 P.2d 929].) Therefore, that the right to go out of business is neither an express nor a widely acknowledged right does not bar the application of strict scrutiny.
There exists an undefined yet real notion of freedom which is violated by the idea of compelling an individual to work in a given business. This freedom is protected from the most egregious infringements by the Thirteenth Amendment of the United States Constitution. Yet the degree to which the individual is restricted need not rise to the level of involuntary servitude before it offends this notion of personal liberty. For example, employment contracts for personal services are not specifically enforceable against either the employee or the employer. (Civ. Code, § 3390; see also § 3423, subd. Fifth.)
Indeed, California courts have even been reluctant to force landowners to use property in a specified manner. In Dept. of Public Works v. San Diego (1932) 122 Cal.App. 159, 166-167 [10 P.2d 102], the court stated: “While the police power may limit and restrict the uses to which an owner may put his property, it may not compel him to use such property for a particular purpose if he prefers to abandon such a use thereof.” The right to cease to operate a business, impacting as it does on the work efforts of the proprietor, is one aspect of this more general freedom.
The right of an individual not to work in a certain occupation is closely analogous to the “ ‘right to work for a living in the common occupations of the community.’” (Sail’er Inn, Inc. v. Kirby (1971) 5 Cal.3d 1, 17 [95 Cal.Rptr. 329, 485 P.2d 529, 46 A.L.R.3d 351]; Purdy & Fitzpatrick v. State of California (1969) 71 Cal.2d 566, 576 [79 Cal.Rptr. 77, 456 P.2d 645, 38 A.L.R.3d 1194].) Deemed “essential to the pursuit of life, liberty and happiness,” the right to work in a common occupation is protected from unjustified interference by strict scrutiny review. (Sail’er Inn, Inc. v. Kirby, supra, 5 Cal.3d at p. 17; but cf. D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 18 [112 Cal.Rptr. 786, 520 P.2d 10] [right to work in technical or complex field not protected by strict scrutiny].)
Like the right to enter an occupation, the right to terminate a business involves a personal decision concerning the individual’s role in the economy. Both protect the individual’s ability to use his or her talents and resources in the manner best suited to bring life satisfaction and economic security.
Given the close relationship between the right to go out of business and other rights which are fundamental, the rational basis standard of review *119seems improper. Accordingly, we shall use heightened scrutiny in evaluating laws which infringe upon the right to go out of business.
In their supplemental brief Santa Monica contends that even if the right to go out of business is fundamental, section 1803, subdivision (t) should not be analyzed under strict scrutiny. They argue section 1803, subdivision (t) is just a land use regulation subject to rational basis scrutiny and that any infringement on the right is merely incidental. In support of this argument, Santa Monica cites Associated Home Builders etc., Inc. v. City of Livermore (1976) 18 Cal.3d 582 [135 Cal.Rptr. 41, 537 P.2d 473, 92 A.L.R.3d 1038], That case however is clearly distinguishable. In Associated Home Builders the court refused to apply strict scrutiny to an exclusionary zoning ordinance despite appellants’ claim that the right to travel was involved. In reaching this conclusion the court noted that the ordinance did not penalize the right to travel, but rather only made its exercise more difficult. (Id., at p. 603.)
Here section 1803, subdivision (t) does not just make it hard for a property owner simultaneously to keep his land yet cease being a landlord, it makes it impossible. Therefore, although it appears on the surface that section 1803, subdivision (t) is a purely economic regulation, it fundamentally affects a personal right and strict scrutiny must be applied.
2. Section 1803, subdivision (t) fails to meet the strict scrutiny test.
“When rights of such fundamental nature are involved, ‘regulations limiting these rights may be justified only by a “compelling state interest,” [citations] and . . . legislative enactments must be narrowly drawn to express only the legitimate state interests at stake.’ ” (Perez v. City of San Bruno, supra, 27 Cal.3d 875 at p. 890, fn. 11.) Assuming arguendo that Santa Monica’s interest in preserving the stock of rental housing is compelling, we must decide whether the statute is drawn closely enough to pass constitutional muster.
A nonexhaustive survey of other rent control acts reveals that the Santa Monica act imposes the greatest limits on a landowner’s ability to go out of the rental business. Most liberal was the federal rent control act enacted during World War II, and even this wartime measure provided that “[njothing in this Act shall be construed to require any person to sell any commodity or to offer any accommodations for rent.” (Emergency Price Control Act of 1942, as quoted in Bowles v. Willingham (1944) 321 U.S. 503, 517 [88 L.Ed. 892, 905, 64 S.Ct. 641].)
Several jurisdictions expressly permit tenant evictions to facilitate demolitions. (1970 Mass. Acts, ch. 842, § 9(a) 9; 1969 Mass. Acts, ch. 797 [rent *120and eviction controls for Boston, Mass.]; Berkeley, Cal. city ordinance, Stats. 1972 (Reg. Sess.) res. ch. 96, p. 3372, declared unconstitutional on other grounds, Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129 [130 Cal.Rptr. 465, 550 P.2d 1001].)
Only the New York Emergency Housing Rent Control Act (N.Y. Unconsol. Laws, § 8581 et seq.) comes close to the Santa Monica law. It requires rental commission approval before a unit can be withdrawn from the market where such withdrawal involves the eviction of a tenant. (N.Y. Unconsol. Laws, § 8590(4).) However, under the New York law, a landlord could demolish a building if it is to be replaced with a nonresidential structure, which is not true in Santa Monica. (N.Y. Unconsol. Laws, § 8585, subd. 2(d)(ii); cf. Housing Element, Santa Monica Master Plan, Program 10.)
These other laws demonstrate that it is possible to pursue the goals of avoiding the depletion of the housing stock and preventing upward pressure on rents without forcing a landowner to be in the residential housing business against his/her will.
The Santa Monica law may be marginally more effective than those of other jurisdictions. Realistically, however, few landowners will prefer to see their land lying fallow instead of producing income; thus, the practical effect of such strong removal restrictions on the housing stock is probably minimal.
Additionally, we note that the vacancy rate in surrounding communities is higher than in Santa Monica.7 Therefore, a fractional decrease in Santa Monica’s housing stock should not have a strong adverse effect on the public as alternative accommodations are available. While Santa Monica has the right to preserve housing regardless of what occurs in neighboring jurisdictions, greater housing opportunities in the surrounding areas make the Santa Monica controls less “compelling.” On the other hand, the incursion on the right to go out of business is strong.
The state has the burden of demonstrating the necessity of regulations that infringe on fundamental interests. (Subriar v. City of Bakersfield (1976) 59 Cal.App.3d 175, 199-200 [130 Cal.Rptr. 853].) Here there has been an insufficient showing of such a necessity that the benefits received outweigh the strong burden on a personal freedom.
*121Santa Monica may be concerned that less stringent regulation of removals would permit the circumvention of the rent control law by allowing landlords to demolish their buildings and then replace them with newly constructed units which are not subject to rent control. While this concern is legitimate, (see discussion in Flynn v. City of Cambridge (1981) 383 Mass. 152 [418 N.E.2d 335, 339, 21 A.L.R.4th 1075]), less intrusive means may be found for achieving it. Santa Monica could make new construction on lots formerly containing rent controlled property subject to rent control.
Because the demolition permit requirement of section 1803, subdivision (t) infringes more than is necessary in this limited fact situation for the effectuation of its goals, it violates the due process clause of article I, section 7, subdivision (a). We do not hold that all demolition controls are constitutionally infirm. We find only that the current Santa Monica ordinance is too restrictive to pass constitutional muster. [End of Court of Appeal opinion.]8
I would affirm the judgment.
Crosby, J.,* concurred.

Unless otherwise indicated all section references are to Santa Monica City Charter, article XVIII.

Section 1803, subdivision (t) provides as follows: “(t) Removal of Controlled Rental Unit From Rental Housing Market: Any landlord who desires to remove a controlled rental unit from the rental housing market by demolition, conversion or other means is required to obtain a permit from the Board prior to such removal from the rental housing market in accordance with the rules and regulations promulgated by the Board. In order to approve such a permit, the Board is required to make each of the following findings: [t] (1) That the controlled rental unit is not occupied by a person or family of very low income, low income or moderate income. [|] (2) That the rent of the controlled rental unit is not at a level affordable by a person or family of very low income, low income, or moderate income, [f] (3) That the removal of the controlled rental unit will not adversely affect the supply of housing in the City of Santa Monica, [f] (4) That the landlord cannot make a fair return on investment by retaining the controlled rental unit, [f] Notwithstanding the foregoing provisions of this subsection, the Board may approve such a permit: [f] (1) If the Board finds that the controlled rental unit is uninhabitable and is incapable of being made habitable in an economically feasible manner, or [K] (2) if the permit is being sought so that the property may be developed with multifamily dwelling units and the permit applicant agrees as a condition of approval that the units will not be exempt from the provisions of this Article pursuant to Section 1801(c) and that at least fifteen (15) per cent of the controlled rental units to be built on the site will be at rents affordable by persons of low income.”

Nash did not seek to defend the trial court’s conclusion that section 1803, subdivision (t) constituted a compensable taking. Because of our resolution of the due process issue, we need not consider whether the resolution of the taking issue was correct.

Neither party disputes that renting housing is a business. (See Marina Point, Ltd. v. Wolfson (1982) 30 Cal.3d 721,731 [180 Cal.Rptr. 496, 640 P.2d 115, 30 A.L.R.4th 1161].)

In addition to the regular permitting requirement, Santa Monica has recently instituted a temporary moratorium on condominium conversion, thereby completely eliminating conversion as a method of going out of business. (See Housing Element, Santa Monica Master Plan, Program 25.)

We note that the right to go out of business does not apply to public utilities, which hold a special place both in relation to the public welfare and in the law. (See Cal. Const., art. XII, § 3.)

The vacancy rate in early 1981 in West Los Angeles was 2.12 percent. (City of Los Angeles Housing Statistics, Dept, of City Planning.) The vacancy rate in Santa Monica using 1980 census data was 1.7 percent. (Technical Rep. to Housing Element, p. 165.)
We take judicial notice of statistics from the department of city planning pursuant to Evidence Code section 452, subdivision (h).

The commendable solicitude of the City of Santa Monica for tenants apparently does not apply when the city itself is a landlord. (See, e.g., Harmon v. Superior Court, City of Santa Monica Real Party in Interest, 2 Civ. B003391.)

Assigned by the Chairperson of the Judicial Council.