This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
STATE OF MINNESOTA
IN COURT OF APPEALS
Sally Renish and Barbara Stanley
on behalf of themselves and all
others similarly situated,
Hometown America, L.L.C.,
d/b/a Rosemount Woods Manufactured
Filed August 29, 2006
Dakota County District Court
File No. C8-04-9373
Kay Nord Hunt, Barry A. O’Neil, Valerie Sims, Lommen, Abdo, Cole, King & Stageberg, P.A., 2000 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for respondents)
John F. Bonner III, Robyn K. Johnson, Bonner & Borhart LLP, 1950 U.S. Bank Plaza, 220 South Sixth Street, Minneapolis, MN 55402 (for appellant)
Considered and decided by Willis, Presiding Judge, Lansing, Judge, and Forsberg, Judge.
Sally Renish and Barbara Stanley are residents of Rosemount Woods Manufactured
Home Community (Rosemount Woods), which is owned and operated by appellant
Respondents’ lease and state law allow appellant to modify the lease with 60 days’ notice, but the changes must be reasonable; changes that substantially modify the lease or rules will not be effective. Minn. Stat. §§ 327C.01, subds. 8, 11 (defining reasonable rule and substantial modification), .02, subd. 2 (requiring 60 days’ notice for rule changes) (2004).
In 1998, appellant notified residents that it was planning to install meters and bill residents directly for water and sewer services. After the water meters were installed, appellant advised the residents that they would begin receiving sample invoices and that appellant would read the meters for three to four months to calculate average consumption and costs. Residents were also advised that they would receive a rent reduction when they were billed individually for the utilities. Effective March 1, 1999, residents were charged for their individual water and sewer usage, and rent was reduced $16 per month.
In August 2004, respondents brought this lawsuit, asserting that the imposition of the water and sewer charges violated the Manufactured Home Park Lot Rentals Act, Minn. Stat. §§ 327C.01-.15 (2004), and breached the terms of the lease agreement. They sought actual damages and an injunction precluding appellant from imposing these charges for water and sewer services. The district court approved class certification.
residents of another manufactured home park also owned by appellant had
prevailed in a similar lawsuit against appellant after a jury trial. Schaff
v. Chateau Cmty., Inc., No. A04-1246, 2005 WL 1734031 (Minn. App. July 26, 2005),
review denied (
In the present case, respondents moved for summary judgment and sought permanent injunctive relief. The district court ordered a permanent injunction on the grounds that appellant was collaterally estopped under Schaff; and that, in any event, the undisputed facts established that appellant violated the act because the change was a substantial modification of the lease and the change to the metering was arbitrary and unreasonable. This appeal followed.
an appellate court will review a grant of an injunction under an
abuse-of-discretion standard. Cherne Indus., Inc. v. Grounds &
Assocs., Inc., 278 N.W.2d 81, 91 (
Appellant contends that the district court erred as a matter of law in determining that imposing separate utility bills was a substantial modification of the rules and was arbitrary and unreasonable.
Manufactured Home Park Lot Rentals Act, Minn. Stat. §§ 325C.01-.15 (2004),
was an attempt by the legislature to regulate mobile home park lot rentals,
“with a view to balancing the positions of park owners and residents.” Lea v.
Pieper, 345 N.W.2d 267, 270 (
owner must give residents at least 60 days’ notice in writing of any rule
change. Minn. Stat. § 327.02, subd.
2. But the legislature limited changes owners
may make to existing leases as follows:
“A rule adopted or amended after the resident initially enters into a
rental agreement may be enforced against
that resident only if the new or amended rule is reasonable and is not a
substantial modification of the original agreement.” Id.
(emphasis added). Substantial
modification is defined to mean “any change in a rule which: (a) significantly diminishes or
eliminates any material obligation of the park owner; (b) significantly
diminishes or eliminates any material right, privilege or freedom of action of
a resident; or (c) involves a significant new expense for a resident.” Minn. Stat. § 327C.01, subd. 11. These are in the alternative, and meeting any
of these three definitions can constitute substantial modification.
When there is a determination that
the provisions of Minn. Stat. §§ 327C.01-.14, addressing manufactured home
park lot rentals, are violated, the district court is authorized to grant
injunctive relief to prevent and restrain violations of law.
Appellant argues that the issue of
whether a rule constitutes a substantial modification is essentially a factual
question and contends that the district court erred by ruling that the
undisputed facts showed that the rule was a substantial modification as a
matter of law. First, the pertinent
facts here are undisputed. Second, when
a district court must resolve an issue of whether rule changes constitute a
substantial modification under Minn. Stat. § 327C.02, it is faced with a
question of law. See, e.g., Sargent v. Bethel Properties, Inc., 653 N.W.2d 800, 802
address whether the district court properly ruled that a substantial
modification occurred. We first address
whether the lease change “significantly diminishes or eliminates any material
obligation of the park owner.”
Appellant argues that the rule change requiring the residents to pay their own utility charges did not eliminate a material obligation of appellant, but instead simply changed the form in which the obligation was carried. Appellant argues that initially it absorbed the cost of utilities directly and passed them along in the form of rent. When it began billing the residents directly, it offset this obligation by reducing their rent by $16 per month. Appellant contrasts its actions to several cases in which the court found there was a substantial modification when the owner imposed additional financial obligations on the residents without a reduction in rent. In Sargent, the owner, who argued that the new utilities charge was actually a rent increase, did not reduce the rent when it began charging for utilities. 653 N.W.2d at 802; see also Lemke, 436 N.W.2d at 786 (no assertion of rent decrease to offset financial liability for repairs).
The new rule eliminated a material obligation of appellant because previously, the risk and cost of the monthly fluctuation in utility usage was placed on appellant. With metering, appellant moved that risk and cost from itself to the residents. Further, in Sargent, 653 N.W.2d at 803, this court held that imposing separate water and sewer charges was a substantial modification as a matter of law, and in Lemke, 436 N.W.2d at 787, this court reached the same conclusion when a rule was changed to require residents to be responsible for certain repairs. The rent reduction here does not change the result because the rule change imposed the risk and expense of the monthly fluctuation on the residents.
We also review the second definition
of substantial modification, which is any change in a rule that significantly
diminishes or eliminates any material right, privilege, or freedom of action of
Appellant contends that this definition was not met because water and sewer services are provided just as before, except that now residents are given the right to control their utility usage and resulting expenses. But previously, residents were not subject to additional charges based on their individual water usage, and their monthly expenses were certain. Under the change, this is no longer the case, and a substantial modification occurred under this second definition. In light of our conclusion that the first two definitions of substantial modification were met, we need not reach the final definition.
After a determination that a rule
change was a substantial modification, “a court may consider” mitigating
factors, including “(a) any significant changes in circumstances which have
occurred since the original rule was adopted and which necessitates the rule
change; and (b) any compensating benefits which the rule change will produce
for the residents.”
Appellant focuses on the second factor, contending that the rule change provided compensating benefits for the residents, because they received a rent reduction of $16 per month when they were made responsible for their individual utilities costs. It further contends that their costs are now unaffected by the usage of others, they can control their costs by controlling their use, and the cost of utility services is fairly distributed. It also asserts that whether these mitigating facts preclude a finding of substantial modification is another factual issue that should be resolved by trial.
Appellant’s arguments are essentially the same ones made in support of the claim that there was no substantial modification, which we rejected. Further, the benefits appellant cites do not compensate the residents for the risk and cost of the monthly fluctuation in utility usage that they would face under the rule change. On the undisputed facts, the district court did not err.
The district court also held that the rule was arbitrary and unreasonable as a matter of law. Minn. Stat. § 327C.01, subd. 8, defines a “reasonable rule” in relevant part as a park rule:
(a) which is designed to promote the convenience, safety, or welfare of the residents, promote the good appearance and facilitate the efficient operation of the park, protect and preserve the park premises, or make a fair distribution of services and facilities; [and] (b) which is reasonably related to the purpose for which it was adopted.
Appellant argues that on the record, a fact-finder could conclude that the rule change was designed to facilitate park operations and make a fair distribution of services and facilities because it fairly distributes costs of utilities according to individual resident usage and fairly implements the rule by the residents’ receipt of the rental reduction. Appellant contends that the district court’s decision without factual discussion or reference to the rule was arbitrary and unreasonable as a matter of law. The relevant facts were undisputed and the district court cited the rule and statute. The residents do not receive additional services as a result of the new rule, and the district court’s decision is correct as a matter of law.
The decision of the district court ruling that appellant’s rule change constituted a substantial modification to the lease and was arbitrary and unreasonable and granting an injunction is affirmed. In light of our decision on these issues, we do not reach the issue of whether the district court properly relied on collateral estoppel to reach the same result.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.