In Manufactured Home Communities, Inc. v. County of San Luis Obispo, (— Cal.Rptr.3d —, 2008 WL 4571882, Cal.App.2 Dist., Oct. 15, 2008), a California Court of Appeal considered whether an administrative proceeding involving the issue of rent control violated the standards of due process because the findings of the government entity rested on the testimony of tenants who were not subject to cross-examination by the property owner. The Court of Appeal concluded that the proceeding violated due process standards because the government entity undermined the fairness of the proceeding by preventing the property owner from questioning the tenants and then made its findings against the property owner based on the unchallenged testimony.
MHC Operating Limited Partnership (“MHC”), who owns a mobilehome park, served nine of its tenants with notices that their rent would be increased. The tenants petitioned the County of San Luis Obispo Rent Review Board (“Board”) asserting that the proposed increases violate the County of San Luis Obispo’s mobilehome rent control ordinance. The County “ordinance exempts from rent control tenancies covered by leases or contracts that provide for more than a month-to-month tenancy.” MHC’s tenants had signed twelve-month leases which provided that MHC could “increase rents at any time upon 90 days’ notice and as allowed by state and local laws.”
The Board held a hearing at which MHC claimed that it was exempt from rent control. Several MHC tenants testified at the hearing. One tenant testified that MHC’s manager informed him that the rent was covered by the rent control ordinance and rent would be adjusted yearly. An attorney for MHC asked to cross-examine the tenant. The Board ruled that the tenants could not be cross-examined. One of Board’s members stated that the Board allows “people to speak without fear of cross-examination.” Other tenants testified about oral representations and statements made by MHC.
Based on the tenants’ testimony, the Board found that although the tenants entered into twelve-month leases, which would make the leases exempt from the rent control ordinance, the prior owner of the park and the tenants “treated the tenancies as if they were subject to” the rent control ordinance. The Board found that MHC continued this practice, it did not explain the leases, and it also misrepresented the leases. The Board concluded that “the tenants rescinded the leases which became month-to-month tenancies subject to rent control, and the proposed rent increases were invalid.”
County’s Board of Supervisors adopted the Board’s decision. MHC filed a petition for writ of administrative mandamus alleging that it was denied a fair trial because the Board refused to allow it to cross-examine any of the witnesses. The trial court denied MHC’s petition.
The Court of Appeal held that the administrative process was fundamentally unfair. The Board permitted the tenants to testify without being subject to cross-examination and then Board based its decision, one that went against MHC, on the tenants’ testimony. The Court of Appeal concluded that MHC was denied due process.
“The right to cross-examine witnesses in quasi-judicial administrative proceedings is considered as fundamental an element of due process as it is in court trials.” The court stated that, although the right “applies in a wide variety of administrative proceedings,” the right “is especially important where findings against a party are based on an adverse witness’s testimony.” In this case, the cross-examination was essential because the Board’s findings were based on the tenants’ testimony about MHC inducing the tenants to sign leases and misleading the tenants. The court found that the “tenants had an unfair advantage.”
The hearing was an adversarial one at which the tenants asked the Board to find against MHC. The Board exercised “judicial-like” powers in deciding the questions before it. The court concluded that the Board undermined the fairness of the proceeding by prohibiting cross-examination of the tenants and then basing its decision on the tenants’ testimony. Because the improper denial of the right of cross-examination constituted a denial of due process, the Board is required to have a new hearing.
The leases at issue are exempt from the rent control ordinance because they provide for more than a month-to-month tenancy. However, the tenants claim that the leases do not describe the true nature of the tenancies and that their testimony is needed to establish that the parties orally agreed the tenancies were subject to rent control ordinances. In other words, documents alone will not disclose the parties’ intent. The court found that the Board correctly determined that testimony was needed, but it improperly restricted the testimony.
The Court of Appeal’s decision in this case is important because it demonstrates the trend of courts to give more due process rights in administrative and quasi-judicial proceedings before city and county boards. In Nightlife Partners, Ltd v. City of Beverly Hills (2003) 108 Cal.App.4th 81, a California Court of Appeal considered whether a new administrative hearing was required because a city attorney had participated in an application renewal process and the administrative review of that same application process. In this case, cabaret operators submitted an application to the City of Beverly Hills for renewal of a regulatory permit. City’s staff, under the advice of an assistant city attorney, denied the application. The operators requested an administrative hearing. The hearing was presided over by the City’s risk manager, who received advice and assistance from the assistant city attorney. An additional attorney served as the City’s advocate at the hearing. The cabaret operators asserted that the city attorney’s dual participation deprived them of their right to due process. The Court of Appeal agreed that the operator’s due process rights were violated. When counsel performs as an advocate or a prosecutor in a case, he or she is precluded from advising a decision-making body in the same case. The Court of Appeal sent the case back for a new hearing with instructions that the hearing should not be conducted by any person who served as an advocate in the case.
This trend is also apparent in Sinaiko v. Superior Court (2004) 122 Cal.App.4th 1133. In Sinaiko, another California Court of Appeal found that, when the Medical Board of California (“MBC”) disqualified a doctor’s experts, the MBC rendered the doctor’s hearing fundamentally unfair. The MBC filed an accusation alleging that the doctor was negligent in caring for several of his patients. A hearing was held at which the doctor presented expert testimony to support his claim that the care he provided to his patients did not fall below generally accepted standard of care. The MBC completely disregarded the testimony of the doctor’s experts. The MBC found that that the experts were credible in their fields, but concluded that the experts were not qualified for purposes of the hearing. The Court of Appeal held that “the wholesale disqualification of [the doctor’s] experts rendered the administrative proceedings unfair as a matter of law.” The court stated, “Denying a party the right to testify or to offer evidence is a denial of a fair hearing and requires reversal.”
What This Means To You
California law regarding procedural due process has been evolving over time. California courts have become increasingly vigilant in applying due process protections in the administrative, quasi-judicial and land use context. The hearing granted by the agency must be fair, which includes at a minimum, unbiased reviewers, an opportunity to review the evidence considered by the agency and to be heard. This case makes it clear that these principles include the right to cross examine an adverse witness. When public agencies hold administrative and quasi-judicial proceedings, the agency must make certain that a fair hearing is conducted.
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