SAN FRANCISCO — Eight years ago, the City of Santa Monica passed one of the strictest rent-control laws in the nation. In its wake came hundreds of complaints to a newly established rent control board accusing landlords of charging excessive rents.
In one case, the board found that Haidy McHugh had overcharged two tenants living in her $400-a-month units and awarded them $4,390.99 in damages--triple the amount of the overcharge for what the board said was a willful violation of the law.
McHugh, a consultant for the RAND Corp., no longer rents the apartments, but her battle with the board goes on. She filed suit in 1982 challenging the five-member elected body's authority to make the kind of monetary awards it imposed on her.
"They're very arbitrary," she said. "They are the judge, jury and executioner."
The dispute has finally reached the state Supreme Court, and the outcome could affect scores of administrative agencies that assert a wide assortment of quasi-judicial powers in California.
At issue before the court is whether the Santa Monica board infringed on the historic authority of the judiciary to award money damages.
The case, to be argued this week in Sacramento, comes before the justices as administrative agencies are steadily expanding their role in state and local government--holding hearings, issuing licenses and imposing civil penalties in complex and specialized proceedings.
The trial judge in the McHugh case held that the Santa Monica rent control board had improperly assumed judicial power in violation of the state Constitution. The judge issued an order barring the board from receiving complaints, holding hearings and awarding damages in excessive-rent disputes.
In 1985, however, a state Court of Appeal overturned that ruling, finding instead that administrative agencies such as the board were entitled to such authority whenever it is "directly responsive and integral" to enforcing laws within their jurisdiction.
To hold otherwise, the three-judge panel said, would undermine the enforcement abilities of a variety of agencies providing important consumer protections, ranging from the authority of the state Fair Employment and Housing Commission to award damages to victims of discrimination to the power of the Bureau of Automotive Repair to grant restitution to consumers forced to correct faulty mechanical work.
In their subsequent appeal to the state Supreme Court, McHugh's attorneys contend that the appellate panel decision infringed on the power of the judiciary and could limit access to the courts, which traditionally have been the most independent and least partisan branch of government.
"The ruling is very open-ended," said Christopher M. Harding, a Santa Monica lawyer representing McHugh. "It could have a profound impact, particularly at the state level."
Harding contended that the panel's decision will invite administrative agencies to assume broad, quasi-judicial authority. If rent control boards are allowed to make monetary awards in disputes between private parties, what is to stop the Department of Motor Vehicles from awarding damages in automobile accident cases? he asked.
On the other side, attorneys for the Santa Monica board defend its assertion of authority as a practical and legitimate means of enforcing rent control laws.
"As the Court of Appeal pointed out, administrative proceedings like this provide a much more accessible and quick remedy for people involved in such disputes," said Joel Martin Levy, general counsel for the board. "The proceedings are designed to promote the regulatory goals of the agency by deciding who owes what to whom. . . It is regulatory, not judicial."
In a past decision, the justices have already upheld the authority of municipalities to adopt rent controls. Now the question is what measures are permissible to enforce those regulations--and the outcome is being watched closely in cities with rent control.
Rely on Courts
Berkeley and San Francisco are among the cities with enforcement systems similar to Santa Monica's. Others, such as Los Angeles, rely on the courts to penalize landlords who charge excessive rents.
In Los Angeles, authorities can bring misdemeanor charges against offending landlords but in most instances will drop the case if the landlords agree to compensate aggrieved tenants. Less than 1% of the 3,000 complaints filed annually result in prosecution, officials said.
"If the evidence indicates the landlord is doing something illegal, most of the time he will comply," said James C. Fleck, an analyst for the Community Development Department. "Very few are willing to fight City Hall."
The McHugh case arose after the enactment of a rent control initiative in Santa Monica in 1979. The measure is one of the strictest of its kind in the nation.
The board was established under the law to enforce its provisions, determine maximum allowable rents and regulate the eviction of tenants.