Opinion
A151013
10-24-2018
ADORIA LIM et al., Plaintiffs and Appellants, v. SAN FRANCISCO RESIDENTIAL RENT STABILIZATION AND ARBITRATION BOARD, 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (City & County of San Francisco Super. Ct. No. CPF-16-515110)
This is an appeal from judgment after the trial court sustained the demurrer of defendant San Francisco Residential Rent Stabilization and Arbitration Board (hereinafter, Board). Plaintiffs Adoria Lim and Hanh Truong, owners of a three-unit residential dwelling in San Francisco, brought this lawsuit as a petition for a writ of administrative mandamus (Code Civ. Proc., § 1094.5) to challenge the Board's decision to uphold the administrative law judge's (ALJ) finding that two of the three rental units in their dwelling fell outside an exemption to the San Francisco rent control ordinance and, thus, were subject to this ordinance. The trial court dismissed the one-count writ petition after concluding plaintiffs had failed to join as necessary and indispensable parties the tenants residing in their rental units, and that the 90-day limitations period for joining them had passed, requiring its dismissal. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
On June 16, 2016, plaintiffs filed their petition for writ of administrative mandamus (petition) in the San Francisco Superior Court. This petition requested an order directing the ALJ to set aside as a misinterpretation of law his decision that an exemption to the San Francisco rent control ordinance did not apply to two of plaintiffs' rental units.
The merits of plaintiffs' arguments before the ALJ, that each of its rental units falls within an exemption to the San Francisco rent control ordinance, are not relevant to the sole issue on appeal, relating to the trial court's dismissal of their petition for failure to join a necessary and indispensable party or parties. Accordingly, we only briefly describe herein the underlying dispute. Succinctly stated, plaintiffs argued before the ALJ that all three of their dwelling's rental units were exempt from rent control following the previous owners' 1980-1983 conversion of the dwelling to three separate units. In so arguing, they pointed to Rent Board Rules and Regulations, section 1.17, subdivision (e), which provides that "newly constructed rental units for which a certificate of occupancy was first issued after June 13, 1979," are exempt from the rent ordinance. The tenants argued to the contrary that one or more of the units was not so exempt because the building was originally constructed pre-1979, and was " 'only "extended" and not demolished' " in the 1980-1983 conversion.
On November 1, 2016, the Board demurred to the petition on the sole procedural ground that plaintiffs failed to join the tenants of their property as parties, that their tenants are necessary and indispensable parties to the action, and that the applicable 90-day statute of limitations (Code Civ. Proc., § 1094.6, subd. (b)) had run, such that their tenants could no longer be joined. Accordingly, the Board argued that dismissal of the petition was required. Following a hearing on November 30, 2016, the trial court accepted the Board's argument, sustained the demurrer and dismissed plaintiffs' petition. Judgment was thus entered in the Board's favor, prompting this timely appeal.
DISCUSSION
On appeal, plaintiffs have "the burden to show either that the demurrer was sustained erroneously or that the court abused its discretion in sustaining the demurrer without leave to amend. [Citations.] We accept as true all matters properly pled in the complaint, but may consider matters that may be judicially noted." (Pinnacle Holdings, Inc. v. Simon (1995) 31 Cal.App.4th 1430, 1434-1435 (Pinnacle).)
Where, as here, the trial court sustained the demurrer on the ground that the plaintiff failed to join a necessary and indispensable party, Code of Civil Procedure section 389 (section 389) governs. (Van Zant v. Apple Inc. (2014) 229 Cal.App.4th 965, 973-974 (Van Zant).) Under subdivision (a) of this statute, "A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. If he has not been so joined, the court shall order that he be made a party." (Code Civ. Proc., § 389, subd. (a), italics added.)
Subdivision (b) of section 389, in turn, provides: "If a person as described in paragraph (1) or (2) of subdivision (a) cannot be made a party, the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed without prejudice, the absent person being thus regarded as indispensable. The factors to be considered by the court include: (1) to what extent a judgment rendered in the person's absence might be prejudicial to him or those already parties; (2) the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; (3) whether a judgment rendered in the person's absence will be adequate; (4) whether the plaintiff or cross-complainant will have an adequate remedy if the action is dismissed for nonjoinder."
"When a demurrer has been sustained for a failure to join under section 389, we review the trial court's ruling for an abuse of discretion." (Van Zant, supra, 229 Cal.App.4th at p. 974.) "However, ' "[t]o the extent that the [trial] court's determination whether a party's interest is impaired involves a question of law, we review de novo." ' [Citations.]" (Ibid.)
Applying these standards herein, we address in turn plaintiffs' contentions that, one, the trial court misapplied the law when finding the tenants are necessary and indispensable parties to this action and, two, even if they are indispensable parties, the court nonetheless abused its discretion by dismissing this action with prejudice without appropriately weighing the equitable considerations implicated by such dismissal.
I. Are the Tenants Necessary and Indispensable Parties?
We first address plaintiffs' argument that, contrary to the trial court's finding, California law does not permit, much less require, tenants to be joined as parties to a petition for writ of administrative mandamus. In so arguing, plaintiffs rely wholly on Pinnacle, supra, 31 Cal.App.4th at p. 1436.
There, the owner of a mobilehome park submitted an application with the city's mobilehome rent review board for a discretionary rental increase on its property. Four of the several hundred tenants of the mobilehome park appeared at the hearing to protest the owner's proposed rental increase. (Pinnacle, supra, 31 Cal.App.4th at pp. 1432-1435.) The board granted a rent increase that was less than the owner proposed. The owner then filed a petition for writ of mandate/administrative mandamus and complaint for declaratory relief to challenge the board's discretionary decision, naming the board as well as the four tenants appearing at the hearing. (Ibid.) The trial court, however, sustained the tenants' demurrer without leave to amend on the ground that they were not proper parties to the owner's declaratory relief action. On appeal, the owner then argued that declaratory relief was necessary to determine the rights and obligations of the parties because an actual controversy existed between them. (Ibid.) The appellate court disagreed and affirmed, concluding (inter alia) that the owner, by his petition, sought relief only from the board—to wit, the owner disagreed with, and sought to overturn, the board's discretionary ruling to limit the amount by which rent could be increased to less than the owner proposed. Accordingly, the reviewing court affirmed the trial court's finding that the tenants were not proper defendants for the owner's action. (Pinnacle, supra, 31 Cal.App.4th at pp. 1437-1438.)
Thus, in essence, the Pinnacle court determined on equitable grounds that the small subset of tenants (four out of more than 300 on the owner's property) were not properly named as defendants in the owner's writ petition because the owner sought relief from the board's discretionary ruling against it; it did not seek and could not recover any relief from the four tenants. (Pinnacle, supra, 31 Cal.App.4th at pp. 1436-1437 ["Pinnacle has requested no relief from respondents nor can respondents grant any relief. Those facts are dispositive"].) The owner was therefore precluded from effectively forcing these tenants to litigate rights that had not yet been asserted in a legal forum. (Ibid.; see Van Zant, supra, 229 Cal.App.4th at pp. 974-975 ["[§] 389(a)(2) sets forth two prongs under which a party may be deemed necessary—(a)(2)(i) and (ii). But both prongs are subject to the same predicate condition: that the absent party 'claims an interest relating to the subject of the action' "].)
Our circumstances differ. Plaintiffs here are challenging a Board ruling that followed a contested hearing before an ALJ where both plaintiffs and the tenants appeared as opposing parties and had their rights adjudicated. Indeed, it is the very fact that the ALJ ruled in favor of the tenants and against plaintiffs, and that the Board upheld this ruling, which has brought plaintiffs to this court. These essential facts are absent in Pinnacle.
Our conclusion in this regard is supported by a decision from our colleagues in Division Four of this Appellate District, Liang v. San Francisco Residential Rent Stabilization & Arbitration Bd. (2004) 124 Cal.App.4th 775, 776-777 (Liang). There, the trial court dismissed a tenant's petition for review of the board's denial of her rent reduction request and also denied her motion for reconsideration. The trial court reasoned that, comparable to our circumstances, the tenant had failed to join her landlord, an indispensable party to the rent-rate proceedings, and could not now do so because the 90-day period to seek judicial review had passed. (Ibid.) Our colleagues affirmed this result, reasoning as follows: "In a variety of contexts where administrative proceedings implicate a third person's property rights, courts have held: 'The controlling test for determining whether a person is an indispensable party is, "Where the plaintiff seeks some type of affirmative relief which, if granted, would injure or affect the interest of a third person not joined, that third person is an indispensable party . . . ." ' (Save Our Bay, Inc. v. San Diego Unified Port Dist. (1996) 42 Cal.App.4th 686, 692 [(Save Our Bay)], quoting Sierra Club, Inc. v. California Coastal Com. (1979) 95 Cal.App.3d 495, 501 ; see Beresford Neighborhood Assn. v. City of San Mateo (1989) 207 Cal.App.3d 1180, 1188-1189 [following Sierra Club].) Liang's landlord clearly meets the standard of an indispensable party. The subject of the proceedings before the administrative law judge and the Board was the amount of rent the landlord could collect from Liang. As shown in the prayer of her amended petition, Liang was also asking the trial court for what amounted to a rent rollback. Without question, the ability to collect the contractual rent qualifies as 'an interest relating to the subject of the action' (Code Civ. Proc., § 389, subd. (a)), an interest that would be injured if Liang prevailed (Save Our Bay, Inc. v. San Diego Unified Port Dist., supra, at p. 692). As the trial court noted, and as we have repeatedly concluded in analogous contexts, because the petition was not timely filed, the absence of an indispensable party could not be corrected. (See Kaczorowski v. Mendocino County Bd. of Supervisors (2001) 88 Cal.App.4th 564, 570-571 ; Beresford Neighborhood Assn. v. City of San Mateo, supra, at pp. 1189-1190.)" (Liang, supra, 124 Cal.App.4th at pp. 778-779.)
We agree with our colleagues' result and reasoning and, thus, apply it herein. While the plaintiff in Liang was a tenant rather than, as here, a landlord, the significant fact in both cases is nonetheless the same: In adversarial legal proceedings relating to the amount of rent payable by one party (a tenant) to another party (a landlord), both are necessary and indispensable parties. Accordingly, following Liang, we affirm the trial court's finding that plaintiffs' tenants are necessary and indispensable parties not joined within the 90-day statute of limitations.
II. Did the Trial Court Abuse Its Discretion by Dismissing the Petition with Prejudice?
Remaining for our consideration is plaintiffs' alternative argument that, even if their tenants are indispensable parties, the trial court nonetheless abused its discretion by dismissing their case without paying due consideration to the dictates of "equity and good conscience," as required by section 389, subdivision (b).
"A determination that a party is a necessary party is the predicate for the determination of whether the party is indispensable. Thus, subdivision (b) of section 389 sets forth the factors the court should consider in determining 'whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed without prejudice, the absent person being thus regarded as indispensable.' " (County of Imperial v. Superior Court (2007) 152 Cal.App.4th 13, 26.) Thus, in other words, "[a] court has the power to proceed with a case even if indispensable parties are not joined." (Ibid.) However, in deciding how to exercise this power, the California Supreme Court has warned courts to " 'be careful to avoid converting [section 389 from] a discretionary power or a rule of fairness . . . into an arbitrary and burdensome requirement which may thwart rather than accomplish justice.' " (Countrywide Home Loans, Inc. v. Superior Court (1999) 69 Cal.App.4th 785, 793, quoting Bank of California v. Superior Court (1940) 16 Cal.2d 516, 521.)
As set forth above, section 389 identifies the following four factors to assist a court in determining whether, in "equity and good conscience," an action should proceed or be dismissed: (1) to what extent a judgment rendered in a person's absence might be prejudicial to that person or those already parties; (2) whether measures exist by which said prejudice can be lessened or avoided; (3) whether the judgment ultimately rendered would be adequate in the party's absence; and (4) whether the plaintiff would have an adequate remedy if the action is dismissed. (Code Civ. Proc., § 389, subd. (b).) --------
"The subdivision (b) factors are not arranged in a hierarchical order, and no factor is determinative or necessarily more important than another." (County of Imperial v. Superior Court, supra, 152 Cal.App.4th at p. 35.)
Addressing these factors in light of our particular record, we first consider whether a judgment rendered in the tenants' absence would be prejudicial to them. The trial court implicitly found that it would be, and we agree. As noted above, plaintiffs are challenging the ALJ's ruling, in the tenants' favor, that two of the three rental units in plaintiffs' dwelling are subject to San Francisco's rent control ordinance. Even if plaintiffs are correct that a judgment in this case would not legally bind the tenants, there can be no doubt a decision by this court to overturn the ALJ's determination, already affirmed in the administrative appeal, would prejudice them, given the benefit a tenant receives from the legal restriction placed by law on a landlord's power to raise rent. At minimum, if such a decision were reached on appeal in this case, the tenants would need to collaterally attack it in order to preserve their legal rights to rent control.
Next, the second statutory factor calls upon the court to consider whether the judgment could include one or more protective provisions designed to ameliorate or eradicate prejudice to the unnamed party or parties. Again, the trial court's decision does not expressly address this factor. Plaintiffs, on appeal, argue there are possible protective or ameliorative measures to lessen the prejudice to the tenants from an order to set aside the ALJ's favorable determination. However, they offer little by way of concrete legal steps or guidance, aside from suggesting that the court could "carve[] the tenants out of [the] judgment . . . ." As the Board notes, the administrative agency's ruling applies to both the current tenants, as well as future tenants, and plaintiffs cite no authority, statutory or in the case law, instructing how the trial court could apply the rent control ordinance to prospective tenants without applying it to the current tenants, notwithstanding the agency's prior adjudication of plaintiffs' and the tenants' rights in the tenants' favor. We conclude that, because the trial court implicitly found potential prejudice in this case, plaintiffs' failure to propose in concrete, workable legal form a protective or ameliorative option for avoiding prejudice to the tenants supports the trial court's finding of indispensability. (See County of Imperial v. Superior Court, supra, 152 Cal.App.4th at p. 37 [where "the trial court found potential prejudice, the County's silence as to any fashioning of relief to avoid prejudice supports the trial court's finding of indispensability"].) The law is quite clear in this regard: Where a trial court exercises its discretion to dismiss an action, " ' " 'unless a clear case of abuse is shown and unless there has been a miscarriage of justice a reviewing court will not substitute its opinion and thereby divest the trial court of its discretionary power. [Citations.] The burden is on the party complaining to establish an abuse of discretion.' " ' (Blank v. Kirwan (1985) 39 Cal.3d 311, 331 [216 Cal.Rptr. 718, 703 P.2d 583], quoting Denham v. Superior Court (1970) 2 Cal.3d 557, 566 [86 Cal.Rptr. 65, 468 P.2d 193].)" (Marra v. Mission Foods Corp. (1993) 19 Cal.App.4th 724, 727, italics added.)
Further, with respect to whether the judgment ultimately rendered would be adequate in the tenants' absence, we conclude the record here supports the trial court's decision to dismiss given the differing and possibly conflicting interests of both the named and unnamed parties involved in this dispute. Both parties recognize that, in the tenants' absence, a judgment reached in this case would not bind them. Plaintiffs suggest, nonetheless, that the Board will adequately protect the interests of the tenants and any future tenants; however, landlords, tenants and municipal agencies each possess unique interests with respect to the amount of rent chargeable for a specific property. While landlords and tenants generally have opposing interests in this regard (with landlords preferring the highest, and tenants the lowest, rate of rent in a given market), the Board is charged with applying a municipal ordinance in a manner consistent with the law and its underlying policy concerns. Plaintiffs identify no basis on this record for finding the trial court abused its discretion when weighing this factor in favor of dismissal.
Finally, we address whether, as plaintiffs argue, by dismissing their case, the court deprived them of "the only adequate remedy to which [plaintiffs] had access" given that the 90-day limitations period has already run. Even assuming this factor weighs in plaintiffs' favor, this circumstance would not, without more, require us to reverse the judgment. As stated above, no one of the four statutory factors is determinative. (County of Imperial v. Superior Court, supra, 152 Cal.App.4th at p. 35.) And, as the Board aptly notes, dismissal "is an unavoidable result in any case where an indispensable party is not joined and the limitations period has run." (Save Our Bay, supra, 42 Cal.App.4th at p. 699; accord, Liang, supra, 124 Cal.App.4th at pp. 776-777.)
Thus, having considered the discretionary factors identified in section 389, subdivision (b), it appears to this court that plaintiffs have not established any abuse of discretion by the trial court. Indeed, plaintiffs have essentially asked us to reweigh these discretionary factors in their favor. This, we cannot do. Because the record reflects that the trial court was aware of, and appropriately considered, the various relevant factors before determining that, on balance, equity would be best served by dismissing this action for failure to name the tenants, we defer to the trial court's judgment.
DISPOSITION
The judgment in favor of the Board is affirmed.
/s/_________
Jenkins, J. We concur: /s/_________
Siggins, P. J. /s/_________
Pollak, J.