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In re Narrows Real Estate, Inc.

Court of Appeals of Washington, Division 2

July 25, 2017

IN RE: NARROWS REAL ESTATE, INC., dba RAINIER VISTA MOBILE HOME PARK, Respondent/Cross-Appellant,
v.
MHDRP, CONSUMER PROTECTION DIVISION, OFFICE OF THE ATTORNEY GENERAL, Appellants/Cross-Respondents.

          LEE, J.

         Lucila Santiago filed a complaint with the Manufactured/Mobile Home Dispute Resolution Program (MHDRP)[1], complaining that her landlord, Narrows Real Estate, Inc., doing business as Rainier Vista Mobile Home Park (Rainier Vista), was overcharging her for the water utility. After an investigation, the MHDRP issued a notice of violation, finding that Rainier Vista had charged tenants more than the "actual utility costs" in violation of RCW 59.20.070(6)[2] and ordering Rainier Vista to reimburse the tenants $35, 240-the difference between what the utility provider charged Rainier Vista for water and what Rainier Vista charged its tenants for water. Rainier Vista appealed to the Office of Administrative Hearings (OAH). The OAH affirmed the finding that Rainier Vista had violated RCW 59.20.070(6) on partial summary judgment, but imposed its own remedy by using a different reimbursement calculation that totaled $88, 445.77. Rainier Vista appealed the OAH orders to the superior court, which affirmed that a RCW 59.20.070(6) violation had occurred but reversed the OAH's remedy based on a different reimbursement calculation than that used by the MHDRP. Rainier Vista then appealed to this court the superior court's order affirming the violation, and the MHDRP appealed the superior court's reversal of the OAH's remedy.

         On appeal to this court, we are asked to determine: (1) the meaning of "actual utility costs" as it is used in RCW 59.20.070(6); (2) whether the MHDRP had authority to issue a notice of violation that included Rainier Vista's violations with respect to tenants who had not filed a complaint; (3) whether Rainier Vista was denied due process during the MHDRP's investigation and the OAH's proceedings; and (4) whether the OAH exceeded its statutory authority when it imposed its own remedy by using a different reimbursement calculation than that used by the MHDRP in determining Rainier Vista's excessive charges for water.

         We hold that (1) the term "actual utility costs, " as it is used in RCW 59.20.070(6), prohibits a landlord from charging tenants a utility fee that exceeds the amount that the landlord can show was in fact charged by, or paid to, the utility provider for providing the utility; (2) the MHDRP had discretion to investigate complaints and is required to consider the impact of the complained-of violations on the entire community; and (3) Rainier Vista was not denied due process. However, we hold that the OAH exceeded its statutory authority when it imposed its own remedy by utilizing a different reimbursement calculation than that used by the MDHRP. Therefore, we affirm the OAH's determination that Rainier Vista violated RCW 59.20.070(6), but we reverse the OAH's determination of the amount of the overcharge and remand for the OAH to determine whether a preponderance of the evidence supports the MHDRP's calculation of the overcharge.

         FACTS

         A. Background

         Rainer Vista is a mobile home park in Olympia. Santiago rented one of the approximately 151 lots in Rainier Vista. The rental agreement between Rainier Vista and Santiago provided in pertinent part:

2. ADDITIONAL CHARGES. In addition to the monthly rental and any other charges or fees specified in this Agreement, Tenant agrees to pay to Landlord the following charges: Water Service

         Administrative Record (AR) at 587; Clerk's Papers (CP) at 592.

         The city of Lacey (City) provided water to Rainier Vista. There was one water meter for the entire mobile home park that calculated the amount of water the City provided to Rainier Vista. The individual lots in Rainier Vista did not have their own water meters to measure the water use of the individual lot. Once the water from the City reached Rainier Vista, Rainier Vista used its own infrastructure to distribute the water to the tenants.

         Rainier Vista charged tenants a monthly fee for "water service." AR at 581. Rainier Vista calculated its "water service" charge for each lot based on the estimated occupancy[3] of each lot, the cost of the water from the City, and the estimated costs Rainier Vista incurred in getting the water to each lot. AR at 580-82. More specifically, Rainier Vista calculated the amount charged to each lot by first adding the amount the City charged for the water to costs Rainier Vista estimated it incurred in getting the water to each lot, [4] then dividing that sum by the total number of occupants estimated to be in the park, and finally multiplying that fraction by the number of occupants estimated to reside at each lot.

         B. The Complaint and MHDRP's Decision

         On June 29, 2011, Santiago filed her complaint against Rainier Vista with the MHDRP. Santiago claimed that the water bills she received from Rainier Vista were excessive. AR at 948-51. The MHDRP conducted an investigation. The investigation found that:

• in 2010, the City charged Rainier Vista $106, 090.06 for the water the City provided; the same year, Rainier Vista charged its tenants $112, 494.48 for the water service;
• in 2011, the City charged Rainier Vista $116, 022.36 for the water the City provided; the same year, Rainier Vista charged its tenants $131, 613.28 for the water service;
• in January through October of 2012, the City charged Rainier Vista $124, 262.34 for the water the City provided; for the same months, Rainier Vista charged its tenants $137, 507.00 for the water service.

         CP at 32-33, 51-52.[5] Based on its investigation, the MHDRP concluded that Rainier Vista had overcharged its tenants by $35, 240. The MHDRP calculated this amount based on the sum of each year's differences between what the City charged Rainier Vista and what Rainier Vista charged its tenants.

         The MHDRP issued a notice of violation. The notice of violation stated that Rainier Vista violated RCW 59.20.070(6) of the Manufactured/Mobile Home Landlord-Tenant Act (MHLTA) when it "charged tenants a utility fee in excess of the actual utility cost." AR at 9. The notice of violation stated that Rainier Vista was charging more than the "actual utility cost" because it based each lot's bill on a "subjective" calculation of the number of occupants and Rainier Vista was charging tenants more than it was being charged by the City. AR at 9. As a result, the MHDRP ordered Rainier Vista to reimburse tenants the $35, 240 within 30 days.

         C. Appeal of MHDRP's Decision

         Rainier Vista appealed the notice of violation to the OAH. Rainier Vista and the MHDRP filed cross motions for summary judgment with the OAH. The OAH granted partial summary judgment to the MHDRP and denied Rainier Vista's motion.[6] The OAH's order ruled that

as a matter of law that Rainier [Vista] violated RCW 59.20.070(6) from 2010 through 2012, by charging tenants a utility fee for water in excess of the actual utility costs for water, such that Rainier [Vista] collected more money from the tenants than the amount that Rainier paid to the City of Lacey for the cost of water. However, the amount of the overcharge remains an issue of fact and will be decided at the hearing.

         CP at 29. The OAH's order further ruled that the MHDRP could find a violation that pertained to all tenants, rather than just the complaining tenant.

         The OAH administrative law judge held a hearing to determine the amount of the overcharge. To support identifiable expenses, Rainier Vista presented estimates and incomplete documentation that had not been produced before and was not confirmed. As such, the OAH administrative law judge ruled that Rainier Vista "did not present sufficient evidence to support identifiable expenses for the cost of water that would offset the overcharge." CP at 53.

         After the hearing, the OAH issued a Final Order. The Final Order affirmed the MHDRP's notice of violation. However, while the notice of violation required Rainier Vista to reimburse the $35, 240 overcharge to the tenants, the Final Order provided a different amount. The Final Order stated that the proper calculation was to determine the amount each tenant should have been charged each year and to reimburse each tenant by the amount he or she was overcharged. The OAH determined that the tenants were overcharged a total of $88, 445.77.

         D. Appeal to Superior Court

         Rainier Vista appealed the OAH's Final Order to the superior court.[7] The superior court concluded that "Rainier [Vista] violated RCW 59.20.070(6) when it charged complainant Lucila Santiago more than the actual utility cost for water"; the MHDRP "did not have statutory authority to expand its investigation beyond Ms. Santiago's original complaint to encompass the entire Park"; and the MHDRP "did not have statutory authority to require that Rainier [Vista] reimburse tenants who had not filed a complaint." CP at 907-08. Accordingly, the superior court ordered Rainier Vista to reimburse Santiago $1, 796.11. MHDRP appeals and Rainier Vista cross appeals.

         ANALYSIS

         A. Legal Principles

         The Washington Administrative Procedures Act (APA)[8] governs our review of this case. RCW 59.30.040(10). Under the APA, the party challenging an agency action has the burden of demonstrating the action is invalid and must show substantial prejudice. RCW 34.05.570(1)(a), (d). A reviewing court may reverse an administrative order if the order violates the constitution, exceeds statutory authority, or involves an error in interpreting or applying the law. RCW 34.05.570(3)(a)-(b), (d).

         "We sit in the same position as the superior court and apply the APA to the administrative record." Cornelius v. Dep't of Ecology, 182 Wn.2d 574, 585, 344 P.3d 199 (2015). We review questions of law, and the agency's application of the law to the facts, de novo, but we afford "great weight" to the agency's interpretation of law "where the statute is within the agency's special expertise." Id. at 585. Where the agency makes a finding that goes unchallenged, that finding becomes a verity on appeal. Darkenwald v. Emp't Sec. Dep't, 183 Wn.2d 237, 244, 350 P.3d 647 (2015). Where, as here, the rulings were made on summary judgment, we review those rulings de novo. Cornelius, 182 Wn.2d at 585.

         B. Timing of Challenges to the OAH's Findings of Fact

         As an initial matter, the MHDRP contends that the findings that Rainier Vista did not challenge in its appeal to the superior court are now verities on appeal to this court. Br. of MHDRP at 13. In its petition for review to the superior court, Rainier Vista broadly referenced the specific findings of fact challenged in this appeal; however, Rainier Vista provides no argument in its briefing as to how findings of fact 6.11.4, 6.11.8, 6.23, 6.24, 6.25, and 6.29 are erroneous. Therefore, findings of fact 6.11.4, 6.11.8, 6.23, 6.24, 6.25, and 6.29 are verities on appeal. Cowiche Canyon ...


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