Beach Break Equities, LLC v. Lowell – Defendant’s Right to Restitution Hearing Following Reversal

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“As a general rule, when a judgment is reversed on appeal, the appellant is entitled to restitution for all things lost by reason of the judgment. This principle is embodied in California statutory law and settled equitable principles . . . When a landlord who has secured a writ of possession evicts a tenant before the appellate rights of the tenant have been exhausted, the landlord assumes the risk it will be subject to a full accounting and restitution if the judgment granting the writ of possession is reversed on appeal.”

Beach Break Equities is a cautionary tale to unlawful detainer plaintiffs to be strategic in how and when they recover possession.

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Hjelm v. Prometheus Real Estate Group, Inc. – First District Court of Appeals Instructs on the Importance of Following the Rules

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The opinion of the First District Court of Appeals in Hjelm v. Prometheus Real Estate Group, Inc. reads like a lecture to Prometheus and its counsel. It reviewed the history of the dispute between the parties – from the execution of improperly drafted lease, through the vacating of a mismanaged property, through an over-litigated case (with two motions for summary adjudication on the single issue of entitlement to fees), which culminated in a partially untimely appeal. Hjelm teaches important lessons to property managers and attorneys on how to avoid being penalized for not following the rules.

The trial court found that the Hjelms signed a residential lease for a rental unit in San Mateo. They did not have an opportunity to negotiate their lease, which was mailed to them out of state for their signature. The family vacated a little over a year after moving in, following a persistent and unaddressed bedbug problem. At trial, management personnel testified that they had no real policy for dealing with bedbugs and that high turnover prevented new employees from effectively taking on existing problems.

The appeal sought to review the judgment itself, as well as a healthy award of $326,475.00 in attorneys’ fees (accrued in obtaining damages of only about $70,000.00). However, only the award of attorneys’ fees was properly before the Court because the appeal of the verdict was untimely.
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Amendment to Unlawful Detainer Statutes Affects “Public Records Mask”

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California AB 2819, which will take effect on January 1, 2017, now maintains the public records mask on limited unlawful detainer actions (under Cal. Code Civ. Proc., §1161.2) unless a plaintiff prevails in 60 days. (Currently, the statute automatically unmasks the record, unless a defendant prevails in 60 days).

It also adds a Section 1167.1 to the unlawful detainer statutes, which will allow a court to dismiss an unlawful detainer action unless a proof of service is filed within 60 days.

The new provisions are a result of efforts by Assembly Member David Chiu, who urged that “Tenants who prevail in eviction lawsuits should not be placed wrongfully on tenant blacklists”.

The changes shift the balance from the public policy promoting open access to public records in favor of protecting tenants from the stigma of having an eviction on their “record” (whether or not they ultimately prevailed). (The past few years has seen an increase in evictions, which is arguably tied more to increase in housing costs more than an increase in violative behavior.)

On the other hand, landlords have an interest in learning about the eviction history of their prospective tenants. The new law also creates an incentive for defendants to stall the unlawful detainer “summary proceeding” for at least 60 days, to trigger the maintaining of the mask.


Taylor v. Nu Digital Marketing, Inc.: When Is a Purchase Agreement Not a Purchase Agreement

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“The relationship created by the agreement must be characterized by reference to the rights and obligations of the parties and not by labels.”

The court in Taylor v. Nu Digital Marketing, Inc. affirmed the trial court, which waded through convoluted contract terms to find a landlord-tenant relationship in the midst of purchase-option contract.

When someone takes possession of a property under an option contract, as opposed to a standard lease or a purchase agreement, the usually bright line distinction becomes blurry: in either case, they are in possession. One significant difference is the remedy available upon default.

When a vendee on a purchase agreement defaults, the remedy of the seller to recover the property may be an action for ejectment. Ejectment, like most civil remedies, operates on a thirty-day summons, often taking a year or more to find a trial date. Unlawful detainers are considerably faster; the catch is that you must plead a cause of action for unlawful detainer, or you are not entitled to the summary remedy.

With about $15,000 in arrears, the plaintiff in Taylor was looking to recover the property quickly. Defendant resisted on the basis that it took possession pursuant to a purchase agreement, not a lease, and it could therefore not be dispossessed via an unlawful detainer.

The Third Appellate District looked through the labels to find that the “probationary installment payments” did not actually accrue to the down payment – the were just “rent”. Accordingly, it regarded the defendant as taking possession through a “lease” – default of which gave rise to a claim for unlawful detainer.


Second District Court of Appeal Champions Public Policy Above “Freedom To Contract” in Boston, LLC v. Juarez (2016)

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“Permitting landlords like Boston with superior bargaining power to forfeit leases based on minor or trivial breaches would allow them to strategically circumvent LARSO’s “good cause” eviction requirements and disguise pretext evictions under the cloak of contract provisions. Such provisions, which enable pretext evictions, are unenforceable on grounds of public policy if . . . the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.”

A 2015 case from the Appellate Division of the Superior Court of Los Angeles – Boston LLC v. Juarez (2015) 240 Cal. App. 4th Supp. 28 – awarded a landlord judgment for possession following the failure of a tenant to cure a “material” term of the lease. The term required the tenant to obtain insurance for the tenant’s benefit. This might otherwise seem like a trivial breach, but the lease agreement contained a forfeiture provision stating that any breach was a material breach.

In hazarding its interpretation of the materiality of the provision, the Appellate Division noted another Appellate Division case, NIVO 1 LLC v. Antunez (2013) 217 Cal. App. 4th Supp. 1, urging that some breaches of lease agreements are immaterial and will not result in forfeiture allowing a landlord to recover possession in an unlawful detainer action.

It nonetheless exalted the “forfeiture clause” in determining that the requirement of obtaining renters insurance could constitute a lawful covenant of the lease, the breach of which could be considered material.

Dissenting Judge Kumar was the first to jump on the rigidity of this thinking, in noting that the majority’s acceptance of the forfeiture clause at face value – that is, that any breach is a material breach – essentially takes away the question of materiality from the finder of fact, who is supposed to determine whether a particular breach is sufficient to support an eviction. (He also commented on the fact that Juarez cured the breach in seven days, which was pretty close to three days… although, this effort to mitigate the forfeiture is much less persuasive.)

Ultimately, the Second District Court of Appeal in Boston LLC v. Juarez (2016) 245 Cal. App. 4th 75 agreed with the reasoning in Judge Kumar’s dissent and the NIVO 1, LLC opinion, finding that the violation of lease provisions amounted to “breach” but that only “material breaches” can support an eviction, whereas trivial breaches would only justify nominal damages

The Court of Appeal acknowledged the importance of a parties’ freedom to contract, which justified the Appellate Division opinion, but it noted that freedom to contract is limited by public policy, like a rent ordinance, citing to the seminal Supreme Court case Green v. Superior Court (1974) 10 Cal.3d 616, 625 for the notion that disparate bargaining power in urban residential leases justifies the primacy of the public policy of the rent ordinance over inconsistent lease provisions. (Or, in other words, a lease term is not “material” merely because the lease says so.)


Division Four Disagrees with Delta Imports: Could Borsuk Lead to the Death of the Delta Motion?

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“The question is whether the tenant may challenge the landlord’s alleged failure to comply with this requirement by moving to quash service of summons under section 418.10. We conclude that the tenant may not, and in doing so we disagree with the leading case on the point, Delta [Imports v. Municipal Court].”

On November 23, 2015, Division Four of the Second Appellate District interpreted a long-standing doctrinal procedure for attacking an unlawful detainer complaint: Borsuk v. Appellate Division of the Superior Court of Los Angeles County (2015) 242 Cal.App.4th 607 has the potential to eliminate the “Delta Motion” and change how unlawful detainer actions are litigated.

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Anti-SLAPP Role Reversal in Olive Properties v. Coolwaters Enterprises, Inc.

The Second Appellate District’s decision, Olive Properties v. Coolwaters Enterprises, Inc., features an unusual role-reversal in the interplay of unlawful detainer actions and special motions to strike.

Special motions to strike under Cal. Code Civ. Proc., §425.16 (i.e., “anti-SLAPP motions”) are designed to defeat at the pleadings stage lawsuits that arise from “protected conduct”. The California Legislature views these lawsuits – Strategic Lawsuits Against Public Participation – as being more about chilling participation in public forums (e.g., petitioning a court for relief) than about litigating a claim.

Anti-SLAPP motions often come up in the context of evictions and derivative lawsuits following evictions. An unlawful detainer lawsuit proceeds on a unique, five-day summons (i.e., they move very fast through the courts, so a landlord can recover property and re-rent it in order to keep paying the bills).

The effect of this preference in the trial court is that only the causes of action based on unlawful detainer of property can be litigated in that initial lawsuit. Anything else (like a claim for breach of the lease where the remedy is something other than possession of the property, or a tenant’s claim for breach of the warranty of habitability or covenant of quiet enjoyment) must be litigated in a separate lawsuit instead of being joined in the unlawful detainer action.

Therefore, when tenants also have affirmative claims against their landlord, they will almost necessarily be litigated after the issue of possession is determined. And, where the landlord recovers possession, a tenant is wise to make sure their affirmative claims have absolutely nothing to do with the service of a termination notice or the lawsuit to recover possession, or else they are targeted at their former landlord’s privileged conduct in filing and prosecuting the eviction lawsuit.

Unusually in Olive Properties, the tenant filed their lawsuit first (alleging negligent interference with prospective economic relations and breach of the covenant of quiet enjoyment relating to their landlord leasing to another commercial tenant at a shopping center whose customers were using all of the available parking spaces). Meanwhile, the tenant failed to pay rent and CAM charges due under the lease – the basis for an unlawful detainer action based on non-payment of rent.

When the tenant moved to strike the unlawful detainer complaint, arguing that it was based on their filing of their general civil claims, the trial court denied their motion, citing the seminal anti-SLAPP case Navellier v. Sletten (2002) 29 Cal.4th 82, for the proposition that simply because a lawsuit is arguably triggered by another lawsuit does not necessarily mean that it “arises from” that lawsuit. The trial court awarded fees to the landlord, finding that the motion was intended merely to cause delay and adding that it “was a weak motion, at best, and an ordinary review of established legal authorities would have disclosed the inadequacies of the motion”.

The Court of Appeals affirmed, noting that “we publish our opinion in this matter to address the potential for abuse of the anti-SLAPP statute in unlawful detainer litigation”. Recent years have seen a trend against a mechanical application of the litigation privilege to all of landlord’s conduct surrounding a landlord-tenant relationship, simply because an eviction lawsuit was involved. (Moriarty v. Laramar Management Corporation (2014) 224 Cal.App.4th 125 comes to mind.) However, suing somebody for suing you will surely always be met with a successful anti-SLAPP motion.

Olive Properties is also noteworthy for its use of a motion for calendar preference at the appellate level. While the five-day summons and twenty-day trial setting move an unlawful detainer action through the trial courts quickly, these actions can slow down considerably on appeal. The California Legislature expressed its preference for unlawful detainers over most other civil matters in California Code of Civil Procedure, section 1179a. The landlord was able to successfully move the appellate court to accelerate the appeal in this action by invoking section 1179a.


Will the California Court of Appeals Reconsider Delta Imports and the Delta Motion

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This week, the Appellate Division for the Superior Court in the County of Los Angeles found that Delta Imports as interpreted by Parsons means that an unlawful detainer defendant can challenge personal jurisdiction on the basis that an unlawful detainer complaint fails to state a cause of action for unlawful detainer through the introduction of extrinsic evidence. (If you think that sounds wordy, you should read a Delta motion sometime.)

The ruling in Borsuk v. Superior Court (La Hillcreste Apartments, LLC) is not novel. But the politic concurrence, by Acting Presiding Judge Kumar, is rallying. Acknowledging the deference the Appellate Division must pay to the Courts of Appeal (particularly, decisions by its own Second District, like Delta Imports), he agreed with the majority that a trial court must consider extrinsic evidence about service of the requisite notice to an unlawful detainer action in evaluating the sufficiency of its ability to state a cause of action and its worthiness of the unique unlawful detainer five-day summons.

Even Judge Kumar thought this reasoning wasn’t absurd: “The apparent thought process behind cloaking the notice requirement with jurisdictional ramifications is this: if there is no valid three-day notice, the summons corresponding to the complaint is necessarily invalid because the truncated time for an answer provided therein is conditioned on a valid three-day notice.” He simply asserted that, in allowing a jurisdictional challenge to test the sufficiency of a cause of action, “Delta expanded the traditional scope of a motion to quash”.

Delta stressed that it would moot the point of a jurisdictional challenge if a tenant were required to challenge the cause of action for unlawful detainer on demurrer – a general appearance in the action. The tenant should be able to specially appear and challenge jurisdiction.

However, Judge Kumar reasoned that, “If the defendant was not properly served with the precedent three-day notice, the summons remains facially valid. As the three-day notice is an element of the unlawful detainer action, a challenge to it, like a challenge to any other element of the cause of action, should be directed to the legitimacy of the complaint, not the validity of the service of the summons.”

He closed by issuing an open invitation for “a court higher than the appellate division” to revisit the matter. The Delta motion is one of the more peculiar features of unlawful detainer law, and reform would straighten out what is supposed to be a simplified and summary proceeding for recovery of possession of real property. On the other hand, this doctrine is over three decades old, and higher courts have had no shortage of opportunities to spill ink on this issue.