Spiros Zorbalas, d/b/a S1322, Inc., Relator, vs. City of Minneapolis, Respondent.

Spiros Zorbalas, d/b/a S1322, Inc., Relator, vs. City of Minneapolis, Respondent. A05-2141, Court of Appeals Unpublished, December 5, 2006.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-2141

 

Spiros Zorbalas,
d/b/a S1322, Inc.,
Relator,
 
vs.
 
City of Minneapolis,
Respondent.

 

Filed December 5, 2006

Affirmed

Stoneburner, Judge

 

Minneapolis Department of Licenses and Consumer Services

Malcolm Terry, Nicholas J. Eugster, Messerli & Kramer, P.A., 1800 Fifth Street Towers, 150 South Fifth Street, Minneapolis, MN 55402-4218 (for relator)

 

Jay M. Heffern, Minneapolis City Attorney, Joel M. Fussy, Assistant City Attorney, 333 South Seventh Street, Suite 300, Minneapolis, MN 55402-2453 (for respondent)

 

            Considered and decided by Toussaint, Chief Judge; Shumaker, Judge; and Stoneburner, Judge.

U N P U B L I S H E D  O P I N I O N

 

STONEBURNER, Judge

 

            Relator challenges respondent city's revocation of a rental dwelling license as based on errors of law.  Relator asserts that the city erred by failing to follow notice and service provisions contained in its ordinance and by basing the revocation decision on allegations not formally charged without giving relator the opportunity to be heard.  Because we conclude that notice was sufficient under the circumstances of this case, relator was not denied the opportunity to be heard, and the record demonstrates that revocation was based on issues of which relator had notice, we affirm.

FACTS

 

            The essential facts of this case are not in dispute.  Relator Spiros Zorbalas, who does business as S1322 Inc., held a rental license for an apartment complex located at 3121 Cedar Avenue South (the building) in respondent City of Minneapolis (the city).  S1322, Inc. was listed on the license application as the owner of the building, and Zorbalas was listed as the contact agent responsible for maintenance and management of the building.  Zorbalas lives in Florida, but indicated on the application for the license that his address was 800 Franklin Avenue, which is the address for the building's rental office.  S1322, Inc. has a Florida address.

            Under Minn. Stat. § 504B.171 (2004) and Minneapolis, Minn., Code of Ordinances § 244.2020 (2006), a landlord is to take appropriate action to remedy criminal activity at a rental property, and if three such violations exist within 12 months, the rental license can be revoked.

            It is undisputed that on November 6, 2004; December 11, 2004; and February 18, 2005, police arrested residents at the building for various controlled substance violations.  In response to the November 6, 2004 violation, Karen Skrivseth, a crime prevention specialist for the third precinct of the Minneapolis Police Department, mailed a "first notice" of disorderly conduct to Zorbalas, noting the conduct and informing Zorbalas of his responsibility to take appropriate action.  The notice was dated November 16, 2004, and was sent by certified mail to 800 Franklin Avenue.  The notice was unclaimed, because, as Zorbalas later explained, agents at the rental office are not authorized to accept delivery of certified mail.[1]  The notice was returned to Skrivseth as "unclaimed."  Skrivseth did not attempt to send the notice by regular mail, personally deliver it, or post it at the building.

            In response to the December 11, 2004 violation, Skrivseth mailed a "second notice" of disorderly conduct to 800 Franklin Avenue by certified mail.  The notice was dated January 4, 2005 and informed Zorbalas of his responsibility to take appropriate action.  The notice also requested that he submit a written management plan within 10 days of receiving the notice.  This notice was also returned to Skrivseth as "unclaimed."

            On February 18, 2005, Skrivseth and police officer Judy Perry went to the rental office and attempted to give the second notice to one of the rental staff members.  The staff member refused to accept the notice, and Skrivseth taped the notice to the exterior door of the rental office and resent the notice by regular first-class mail to the Franklin Avenue address.  On the evening of the same day, the third controlled substance violation occurred at the building.

            On February 21, 2005, Zorbalas contacted Skrivseth about the second notice.  Skrivseth described her conversation with Zorbalas as "difficult."  She informed Zorbalas that he needed to submit a management plan and informed him of the third controlled substance incident that had occurred on February 18.  Zorbalas told Skrivseth that he had instructed the rental staff not to accept certified mail or sign for anything.  After this conversation, Skrivseth sent the first and second notice to Zorbalas by regular mail and, because there had been three incidents at the building, referred the matter to the licensing authority.

            On March 8, 2005,[2] Zorbalas faxed Skrivseth a one-page "management plan" discussing the lack of notice and stating that Zorbalas had given the offender a notice to vacate.  On April 4, 2005, Officer Perry sent Zorbalas a "NOTICE OF RECOMMENDATION DUE TO THE THIRD INCIDENT OF DISORDERLY USE: SECTION 244.2020 CONDUCT ON LICENSED PREMISES."  On April 20, 2005, the city sent Zorbalas a notice of revocation.  Zorbalas filed a timely appeal to the city's Rental Licensing Board of Appeals (the board).

            The board held an evidentiary hearing at which Zorbalas represented himself.  The board heard testimony from Skrivseth, Perry, and Zorbalas.  Based on the evidence surrounding the issues of notice and Zorbalas's management plan, the board recommended that Zorbalas's rental license be revoked.  The board concluded, in part, that notice, under the circumstances, was adequate; that Zorbalas had failed to take timely, appropriate action in response to notice of disorderly incidents at the building; and that the building "has been the source of repeated criminal, disorderly and nuisance activity."

            The Public Safety and Regulatory Services Committee of the city council (the committee) considered a motion to affirm the board's recommendation to revoke Zorbalas's rental license but stay the associated vacation of the building's tenants for sixty days.[3]  Zorbalas was represented by counsel at this hearing.  Each side outlined its position to the committee.  The committee admitted letters from tenants about conditions at the building unrelated to the criminal violations into the record.  The committee discussed the effects of revocation on the tenants and the poor condition of the building and other lower-income rental buildings in the city.  The committee approved the motion to revoke Zorbalas's license based on the board's findings and recommendations and forwarded the matter to the city council.

            The full city council considered the Zorbalas matter.  In the course of discussion, several council members made impassioned statements about the deplorable conditions in the building and other rental buildings in the city.  Council member Schiff clarified that revocation of Zorbalas's license was not based on the conditions of the building but on Zorbalas's failure to "put forth a statement about what he would do to improve the safety of his building."  The city council adopted the committee's recommendations, revoking Zorbalas's rental license with a 60-day stay on the vacation of the building's tenants.  Zorbalas subsequently sold the building but seeks review of the revocation of his rental license in this certiorari appeal.

D E C I S I O N

 

I.          Mootness

            Initially, we address the city's argument that this issue is moot because Zorbalas no longer owns the building.  An appeal is not moot "where the issue raised is capable of repetition yet evades review or where collateral consequences attach to the judgment."  In re McCaskill, 603 N.W.2d 326, 327 (Minn. 1999).  Courts consider "mootness a flexible discretionary doctrine not a mechanical rule that is invoked automatically."  Kahn v. Griffin, 701 N.W.2d 815, 821 (Minn. 2005) (quotation omitted).

            The city argues that "the only remedy sought by [Zorbalas] is reversal of the revocation of his rental license;" however, Zorbalas is also requesting that his record be cleared of the revocation.  Minneapolis, Minn., Code of Ordinances § 244.1910 (13) (2006) provides that anyone who has had an interest in two or more licenses that have been revoked, canceled, or a combination of revocations or cancellations "shall be ineligible to hold or have an interest in a rental dwelling license or provisional license for a period of five (5) years."  Failure to comply with the ordinance's standards and conditions, including section 244.1910 (13), "shall be adequate grounds for the denial, refusal to renew, revocation, or suspension of a rental dwelling license or provisional license."  Id. at § 244.1910.  Another revocation or a cancellation of a rental license would prevent Zorbalas from obtaining a rental license for five years and would affect Zorbalas's ability to rent other properties in Minneapolis.  We therefore conclude that collateral consequences attach to the current revocation and this appeal is not moot.

II.        Challenge to revocation

            "A city council's decision may be modified or reversed if the city . . . made its decision based on unlawful procedure, acted arbitrarily or capriciously, made an error of law, or lacked substantial evidence in view of the entire record submitted."  Montella v. City of Ottertail, 633 N.W.2d 86, 88 (Minn. App. 2001).  "Our review is confined to the record before the city council at the time it made its decision."  Id.  "Routine municipal decisions should be set aside only in those rare instances where the decision lacks any rational basis, and a reviewing court must exercise restraint and defer to the city's decision."  City of Mankato v. Mahoney, 542 N.W.2d 689, 692 (Minn. App. 1996).

a.         Adequacy of notice

            Zorbalas argues that the ordinance "does not contemplate certified mail," and the city committed an error of law "by ignoring its own ordinances' notice and service provisions," making the service on him ineffective.  The board found that certified mail is "a method in compliance with and in excess of what is required by the terms of the ordinance and a method that has been previously requested and favored by the [board]."

The city ordinance states:

            Whenever a notice is required to be sent to or served upon the licensee of a rental dwelling under this article, notice shall be deemed sufficient if sent by first class mail to the owner or owner's designated agent at the address specified in the last license application filed in the department of inspections under Section 244.1840.  If a notice sent to the address specified in the last license application is returned, and the owner or owner's agent cannot be found, then notice shall be sent to the person designated in the last license application, under subsection 244.1840(3), as responsible for the maintenance and management of the premises, or any other known caretaker or manager, and a notice shall also be posted on the building.

 

Minneapolis, Minn., Code of Ordinances § 244.2010 (2006).

            The city concedes that notices were sent to Zorbalas by certified mail, but argues that "even a cursory review of postal service policies via the official website located at www.usps.com clearly reveals that certified mail is simply an additional service that does not alter the class of mail [such that] the notices that were delivered via certified mail were still sent as first class."[4]  Zorbalas argues that the entire scheme of the ordinance presumes that the license holder receives actual notice of conduct violations as they occur, and that because the city failed to properly give notice, he was denied the opportunity to timely rectify the problems.

            We have not found any cases specifically addressing whether notice by certified mail is sufficient where a notice requirement provides, as in this case, that "notice shall be deemed sufficient if sent by first class mail. . . ."  But the ordinance does not require that notice be sent by first class mail and does not preclude other forms of service from being deemed sufficient.  The record reflects that the committee implemented a policy of serving the required notices by certified mail six to eight years ago as the most effective way to ensure receipt.  We find no merit in Zorbalas's claim that the city was precluded by the ordinance from effecting service by certified mail.

            There is more merit to Zorbalas's claim that notice was ineffective because he never received it.  But, as the city notes, this failure was due to Zorbalas's own business practices and not to any deficiency by the city.

            Zorbalas also asserts that under the ordinance, the city was required to post the notices at the building once the certified mail was returned to the city.  But Zorbalas ignores the provision in the ordinance that posting is only required when the owner or owner's agent cannot be found.  In this case, Zorbalas's agents were found at the address he provided to the city, but they refused to accept the notices even when the notices were personally delivered.

            Zorbalas knew that the terms of the rental license required that he or his "appointed agent/contact person for the property" reside in the 16-county metropolitan area, but Zorbalas admitted he lives in Florida.  His stated reason for having the rental staff refuse certified mail (so that he could deal with those letters personally) is questionable in light of his failure to provide evidence that he has any method of receiving certified mail sent to the address he provided.  It appears that Zorbalas's willful refusal to accept delivery could be construed as constructive delivery and proper notice.  Cf. McIntee v. State Dep't of Public Safety, 279 N.W.2d 817, 820 (Minn. 1979) (holding that mail was constructively delivered for purposes of driver's license revocation statute, which required notice by certified mail, when certified-mail notice was properly delivered to intended recipient who refused or neglected to receive mail), superseded in part on other grounds by Minn. Stat. § 171.19 (1982).  Under the circumstances of this case, we conclude that the city did not commit an error of law by concluding that service of notice was sufficient.

            We also note that Zorbalas's failure to take timely action concerning the criminal activities at the building was not the only basis of revocation of his rental license.  Revocation was also based on Zorbalas's failure to take appropriate action to remedy the conditions that led to the criminal activity.  The findings of the board, which were approved by the committee and the council, state:

The management plan submitted by [Zorbalas] is deficient in that it does not proactively address and detail plans and procedures to prevent further disorderly use of the premises. [Zorbalas's] sparse management plan and his admitted business practice of instructing his staff to refuse delivery of regulatory notices is indicative of a reactive management philosophy as opposed to the proactive managerial duty which is imposed upon rental license holders in [the city] under Chapter 244, Article XVI of the Minneapolis Code of Ordinances.

 

Nothing in the record indicates that, with additional notice, Zorbalas would have presented an acceptable management plan and thereby avoided revocation.

            b.         Uncharged allegations and opportunity to be heard

            Zorbalas argues that the city "committed an error of law by predicating its revocation decision on surprise charges that went beyond the record."  Despite the lengthy discussions at the hearings before the committee and the council regarding the deplorable conditions at the building and other rental properties in the city, the record demonstrates that the revocation decision was based on the board's recommendation, which focused exclusively on the disorderly incidents and Zorbalas's failure to adequately respond to those incidents.  The record contains a rational basis for the revocation, which is entitled to deference from this court.

            Zorbalas also argues that he did not get a chance to respond to the statements about the condition of the building.  Because the decision to revoke was not based on conditions other than those of which Zorbalas had notice, a response to the additional concerns was not required.  And the record demonstrates that following the committee hearing, Zorbalas's attorney responded to the committee's discussion of building conditions by sending a letter to all of the council members specifically addressing those comments.  This letter was made a part of the record.

            Affirmed.

[1] Zorbalas stated that he does not allow the agents to accept certified mail so that he can keep track of mechanics' liens and other important letters, but the record is silent as to any provisions Zorbalas made to obtain important letters mailed to the rental office by certified mail.

[2] The city's findings indicate that Zorbalas submitted the management plan on March 1, 2005, but the testimony and exhibits indicate that it was faxed to Skrivseth on March 8.

[3] The stay gave Zorbalas time to comply with all requirements for re-licensure so that the tenants would not have to vacate.  Re-licensure is dependent on full compliance with the rental ordinance, including provisions that were not the basis of the license revocation.

[4] The website indicates that certified mail is a service that can be used with first-class mail.  See http://www.usps.com/send/waystosendmail/extraservices/certifiedmailservice.htm (last visited Nov. 7, 2006).