Rosemary Court Properties, LLC v. Walker (Unpublished) – “Gatekeeper Duty” Justifies Reversal of Unlawful Detainer Judgment upon Failure To State Cause of Action

“Rosemary Court’s allegations that Parsi moved out of the premises and lived elsewhere for a time do not constitute termination under the lease or any law that we are aware of and, therefore, do not support Rosemary Court’s legal conclusion that Parsi terminated her leasehold interest. Rosemary Court relied on Walker’s purportedly unauthorized assignment of the lease to Parsi for its unlawful detainer cause of action, but regardless of any such assignment, by Rosemary Court’s own allegations, including the terms of the lease incorporated into the complaint by reference, Parsi was a colessee of a month-to-month tenancy who had moved out of the premises for a time, which remained occupied by Walker, and then moved back into the premises around the time that Walker moved out. These allegations establish only that Parsi was a colessee of the premises with an ongoing right to a month-to-month tenancy. Therefore, Rosemary Court did not state an unlawful detainer cause of action against Parsi.”

In Rosemary Court Properties, LLC v. Walker (unpublished), the First District Court of Appeal reversed the appellate division of the superior court decision upholding a default judgment in an unlawful detainer case against a co-lessee (Parsi) who, while temporarily out of occupancy, had resumed occupancy prior to the attempted termination of the tenancy. In so doing, the Court determined that the “gatekeeper duty” of the trial court required that it not enter a default judgment where the complaint is insufficient to state a cause of action.

Rosemary based its theory on the unsupported legal conclusion that Parsi, the co-lessee – had previously terminated her tenancy. The Court of Appeal noted that termination of a tenancy is a legal gesture with specific requirements found in statute. Merely being out of possession for an amount of time, while remaining on the contract, is not equivalent to termination of the interest. The landlord therefore needed to actually terminate her tenancy (a prerequisite to an unlawful detainer), or at least allege that it had.

Instead, Rosemary essentially pled facts indicating that the tenancy was not terminated. Whether or not it would be possible to amend the verified unlawful detainer complaint to allege a cause of action against the tenant, the insufficient allegations should have justified setting aside the default. Interestingly, Parsi only defaulted after her petition for a filing fee waiver was denied, and she promptly moved to set aside the default. She also appealed on the basis that the trial court abused its discretion denying her motion to vacate. However, while the Court of Appeal declined to rule on that issue (as unnecessary), Parsi’s having brought the motion nonetheless served as the basis for challenging the basis for default and triggering the gatekeeper duty.

The decision is unpublished (and therefore not binding), but it brings up several important issues of law. First, Rosemary appeared to have taken a default tactically, knowing that Parsi was trying to reinstate her answer after it was stricken for failure to pay fees. Counsel generally should warn a party (especially an appeared party) before doing this.

As for maintaining tenancies in general, knowing who is on your lease is essential. In this case, the unlawful detainer was based on breach of lease – namely, the prohibited “assignment” by the other co-lessee to Parsi, when Parsi moved back in. The allegations were therefore a bit ironic: the landlord attempted to evade Parsi’s interest while terminating her co-lessee’s interest on the basis that he assigned to Parsi. Obviously this had to be the case, or else there would be no breach (which also means that there should have been no lawsuit). But, the best practice for property managers is probably to invite all tenants to amend the lease to remove departing roommates.

Otherwise, unfortunately, San Francisco makes it essentially impossible to prohibit one-for-one roommate replacements (even allowing tenants to cure breaches of subletting provisions after the fact). Rental income property is most valuable when the rights and obligations are well known and clearly defined. Property managers should be vigilant to monitor these issues as they come up, because (as this case illustrates), attempting to deal with them on the eve of an unlawful detainer case is risky.