De Carlo v. Kosser
Filed 1/7/13 De
Carlo v. Kosser CA2/5
OFFICIAL REPORTS
California Rules of Court, rule
8.1115(a), prohibits courts and parties from citing or relying on opinions not
certified for publication or ordered published, except as specified by rule
8.1115(b). This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
JOSEPH DE
CARLO et al.,
Plaintiffs and Respondents,
v.
ROLAND KOSSER,
Defendant and Appellant.
B237278
(Los Angeles County
Super. Ct. No.
BC432876)
APPEAL
from a judgment of the Superior Court of
County.
Ernest M. Hiroshige, Judge. Affirmed in part and reversed in part.
The
Duringer Law Group, Stephen C. Duringer, Eric J. Bautista for Defendant and
Appellant.
Gordon
& Gordon, Anthony B. Gordon, Edward M. Bialack for Plaintiffs and
Respondents.
_______________
Roland Kosser appeals from the
judgment entered against him and in favor of respondents Joseph De Carlo and
Nancy Kanter, on respondents' complaint.
We affirm the judgment, except that we find appellant's contentions
concerning the award of attorney fees meritorious, and reverse that award.
Facts
This
case concerns a security deposit on a residential lease.
Appellant
rented a single family home to respondents. The lease began on July 15, 2005. Respondents put down a
security deposit of $16,990.
The
lease period was two years, but was extended by agreement of the parties until August 15, 2009. Respondents stopped paying
rent after July 15, believing that it would be "expedient" for
appellant to use the security deposit to cover the rent. When appellant did not receive the rent, he
served respondents with the applicable three-day notice, then filed an unlawful
detainer action. The notice claimed,
inter alia, that respondents had damaged the property.
On
August 20,
2009 the unlawful detainer action was
resolved by a stipulation. The parties
agreed that respondents owed appellant $10,500 for July rent, $6,566 for August
rent, and specified sums for appellant's attorney fees and costs, for a total
of $19,175. The parties also agreed to
extend the tenancy until August 31.
The
stipulation is on a printed form which includes the provision that "Any
security deposit shall be handled pursuant to the California Civil Code. [Tenants] shall return the premises clean and
undamaged, ordinary wear and tear excepted . . . ."
In
a handwritten addendum, the stipulation also provides that "[appellant]
agrees to account for the security deposit pursuant to the Civil Code. After making the permitted deductions,
[appellant] agrees to reduce the judgment amount . . . . If [respondents] pay
the remaining balance within 30 days of the security deposit accounting,
[appellant] will vacate the judgment + dismiss the case with prejudice.
Judgment is entered per CCP 415.46."
The
stipulation was entered as a judgment on August 20, 2009. Respondents moved out on August 31.
Civil
Code section 1950.5,
name="_ftnref1" title="">[1] which governs security
deposits, provides that before vacating the property, a tenant has the option
of attending an inspection.
name="_ftnref2" title="">[2] Because the three-day notice
to quit which appellant served on respondents described property damage,
respondents asked appellant for a final inspection, a request which was denied.
In
September, appellant gave respondents a security deposit accounting statement
which stated that respondents owed $8,659 for cleaning and repair. In October, appellant gave respondents a
revised accounting which increased the cleaning and repair charges to $8,963.
Respondents
moved to vacate the unlawful detainer judgment under the "mistake"
prong of Code of Civil Procedure section 473, claiming that they had mistakenly
believed that appellant would comply with section 1950.5. The unlawful detainer court denied the motion,
finding, however, that a genuine dispute existed between landlord and tenant,
that the dispute should be resolved on the merits, and that respondents could
file a new action seeking damages.
Respondents
did not pay the unlawful detainer judgment,
but in February 2010, filed this action.
In
April 2010, appellant garnished Nancy Kanter's wages.
Respondents'
complaint sought damages under section 1950.5, which provides, inter alia, that
a landlord may claim against the security deposit only for amounts
"reasonably necessary" for the repair of damages, and not for
ordinary wear and tear.
(§ 1950.5, subds. (b) & (e).) Respondents also sought damages under
subdivision (l) of that section, which provides that "The bad faith claim
or retention by a landlord . . . of the security or any portion thereof in
violation of this section . . . , may subject the
landlord . . . to statutory damages of up
to twice the amount of the security, in addition to actual damages." The complaint also included common counts, on
allegations that appellant collected too much when he garnished Kanter's wages,
but those causes of action were later abandoned.
The
case was tried to a jury, which heard evidence about the lease, the unlawful
detainer action and its settlement, the condition of the house when respondents
vacated, the accountings which appellant provided, and related matters. At the close of evidence, the court made
several findings, as a matter of law, based on undisputed evidence and section
1950.5.
The
court found that appellant failed to comply with
(§ 1950.5, subds. (f) & (g)) concerning
the accounting for the security deposit:
his first accounting was timely (within 21 days of the day the tenants
vacated) but did not include required documentation on the repairs. The second accounting was still deficient in
that it failed to properly itemize specified deductions. The jury was instructed on these findings,
and was instructed that "[a]s to the deductions that were improperly
itemized, the entire deduction should be disallowed."
The
court also found that as a matter of law,
respondents had had a right to an initial inspection prior to vacating the
premises. The court so instructed the
jury.
title="">[3]
On
special verdicts, the jury found that appellant had failed to comply with the
law in his accounting of respondents' security deposit, that his failure to
comply was in bad faith, and that $16,245 of the security deposit should have
been returned to respondents.
The
court awarded respondents actual damages of $12,140.84, calculated from the
jury's finding, the sum which respondents owed appellant under the unlawful
detainer judgment, and the sum which appellant realized through the
garnishment. The court also awarded
damages of $25,485 (one and one-half times the security deposit) for
appellant's bad faith retention of the security deposit.
Respondents
moved for attorney fees pursuant to a fees clause in the lease, seeking
$107,217 in fees. The court awarded
$73,125 in attorney fees.
Discussion
1. The effect of the stipulated judgment
Appellant
begins by arguing that the trial court erroneously found that the settlement in
the unlawful detainer action was not a judgment, and erroneously found that a
stipulated judgment can have no preclusive effect.
We
cannot see that the court found either that the settlement agreement was not a
judgment -- it clearly was -- or that the judgment could have no preclusive
effect. The court did find that
settlement agreement meant that the termination of the tenancy was not due to a
finding of unlawful detainer, but that is not the same as a finding that there
was no judgment in the unlawful detainer, or that the judgment could have no
preclusive effect.
Thus,
we must reject appellant's argument the unlawful detainer judgment had a
preclusive effect on the issue of respondents' right to a pre-vacancy
inspection, and that the court erred
when it found (and instructed the jury) that respondents had such a right. Appellant relies on Code of Civil Procedure
section 1174, which concerns unlawful detainer proceedings, and provides that
if, after trial, a tenant is found to have failed to perform under a lease,
"the judgment shall also declare the forfeiture of that lease or agreement
. . ." under specified circumstances.
(Code Civ. Proc., § 1174, subd. (a).)
Appellant reasons that, once the lease was forfeited, respondents had no
right to an inspection, a right which follows the lease.
Appellant
also relies on section 1950.5, subdivision (f)(1) which governs the
inspection. Appellant cites that portion
of the subdivision which reads, "The requirements of this subdivision do
not apply when the tenancy is terminated pursuant to subdivision (2), (3), or
(4) of Section 1161 of the Code of Civil Procedure," that is, through an
unlawful detainer.
However,
as the court found, the unlawful detainer judgment was not the result of a
finding by the court, and the tenancy was not terminated pursuant to an
unlawful detainer, but pursuant to a settlement
agreement. There was thus no
forfeiture of the lease. Moreover, the
settlement agreement specifies that the provisions of the Civil Code will apply
to the disposition of the security deposit.
Nothing in the agreement exempts the inspection provision.
Also
as to collateral estopped, appellant argues that the unlawful detainer judgment
established that respondents owed him a total of $17,066 in unpaid rent, an
amount greater than the security deposit, that the judgment has preclusive
effect, and that with the unlawful detainer settlement agreement, the parties
agreed that the security deposit would be applied to unpaid rent and to
damages.
We
agree, at least, that the stipulated judgment established that respondents owed
appellant $17,066 in unpaid rent, and that this action could not change
that. We do not, however, see that it
did. The court's calculation of damages
took into account amounts still owing under the unlawful detainer
judgment.
For
the same reason, we are not persuaded by appellant's
an argument about the effect of the stipulated judgment. The argument is that because the amount
respondents owed under the unlawful detainer agreement exceeded the amount of
the security deposit, respondents could not recover in this action. As we have seen, however, the amount
respondents recovered in this action was calculated from the amount which the
jury found could properly be deducted from the security deposit, the amount
collected from the garnishment, and the amount owed by respondents under the
unlawful detainer judgment.
2. Jury instructions
Appellant
contends that under the court's instructions, when the jury determined the
amount of the security deposit which "should have been returned to . .
." respondents, the jury did not take into account the money which
respondents owed to appellant pursuant to the unlawful detainer judgment.
That
is so, but it is not error. The jury was
not being asked to determine the amount appellant would pay respondents, or
respondents would pay appellant, but instead was asked to determine only one
part of that calculation, the amount of the security deposit which could be
withheld under the law. That was a
proper subject for a special verdict.
Appellant
also makes an argument concerning the jury's finding that he acted in bad
faith. The argument is based, first, on
the instruction concerning his failure to comply with the requirements of the
law with regard to the accounting. The
court found, and instructed the jury, that appellant failed to comply with
specified portions of that law. Then, in
instructing on bad faith, the court instructed the jury that "Every
contract imposes upon each party a duty of good faith and fair dealing in its
performance and its enforcement. This
means that each party will not do anything
to unfairly interfere with the right of any other party to receive the benefits
of the contract; however, the implied promise of good faith and fair dealing
cannot create obligations that are inconsistent with the terms of the contract." (Appellant's italics.) Appellant argues that "had the jury not
been misled to believe that the unpaid rent and damages set forth in the UD
Judgment did not have to be factored in, the jury would not have found
Appellant liable for bad faith retention of the Security Deposit."
Appellant
was free to introduce evidence that he withheld the security deposit because
respondents owed him money under the unlawful detainer judgment. The difficulty is that at the critical time,
he told respondents that he was withholding at least some of the money because
respondents had damaged the property.
Further,
this argument omits the fact that the jury received an additional instruction
on bad faith, that the law provides that "the bad faith claim or retention
by a landlord of the security or any portion thereof that are not reasonably
necessary for the purposes of repair of damages to the premises, exclusive of
ordinary wear and tear or the cleaning of the premises . . . necessary to
return the premises to the same level of cleanliness it was in at the beginning
of the tenancy may subject the landlord to statutory damages of up to twice the
amount of the security . . . ."
This instruction defined good faith, as "(1) honesty in belief or
purpose, (2) faithfulness to one's duty or obligation, (3) observance of
reasonable commercial standards of fair dealing in a given trade or business,
or (4) absence of intent to defraud or seek unconscionable advantage," and
also defined bad faith.
Appellant
also argues that the court erred by failing to instruct the jury under
v. Islay Investments (1995) 9 Cal.4th 738, which held that "a landlord
who in good faith fails to comply with the requirements of this statute may
nevertheless recover damages for unpaid rent, repairs, and cleaning in a
subsequent judicial proceeding." (
such an instruction was requested, or that it is applicable, because it
concerns a landlord who fails to comply with the statutory requirements in good
faith. Here, the jury found bad faith.
3. Separate Action/Equity
Here,
appellant argues that respondents were not entitled to file this action, which
appellant deems an action for setoff, or an action concerning partial
satisfaction of a judgment. He argues that
despite the ruling by the unlawful detainer court on respondents' motion to
vacate that judgment, "respondents should have filed a motion for
acknowledgement of partial satisfaction of judgment in the court of the UD
Action when such dispute arose." We
cannot see that appellant raised this argument in the trial court, and thus may
not further consider it. (
Planning Com. (1983) 34 Cal.3d 412, 417.)
Under
this heading, appellant also argues that the doctrine of unclean hands bars
this action, contending that in the settlement of the unlawful detainer,
respondents admitted they caused some damage, contending that $336 of the
amount respondents agreed to pay cannot be accounted for otherwise. We see no such concession. The settlement agreement obligated
respondents to pay $19,175, the sum of specified amounts for past rent,
appellant's attorney fees, and appellant's costs. There is no unaccounted for sum.
4. The fees award
Appellant
opposed respondents' motion for fees on the ground, inter alia, that the lease
did not allow an award of fees to a party which has commenced an action without
first attempting mediation.
In
paragraph 38, the lease provides that "In any action or proceeding arising
out of this Agreement, the prevailing party between Landlord and Tenant shall
be entitled to reasonable attorney fees and costs, except as provided in
paragraph 37A." Paragraph 37A
provides that ". . . Landlord and Tenant agree to mediate any dispute or
claim arising between them out of this Agreement, or any resulting transaction,
before resorting to court action. . . . If, for any dispute or claim to which
this paragraph applies, any party commences an action without first attempting
to resolve the matter through mediation, or refuses to mediate after a request
has been made, then that party shall not be entitled to recover attorney
fees."
It
is apparent from the record that respondents did not attempt to mediate before
commencing this action, and we thus agree that they were not entitled to fees.
On
this issue, the trial court noted that the lease also provides that an unlawful
detainer action is excluded from the mediation requirement, and found that the
unique history of the case meant that it fell into that exception, in that
"the whole genesis of this litigation was a dispute about the settlement
of the unlawful detainer action," and that "it became part of the
unlawful detainer action."
We
simply cannot agree. This lawsuit was
not part of the unlawful detainer case, but was a separate lawsuit on the
lease, and was subject to the mediation requirement. Indeed, even under the trial court's logic,
no fees should have been awarded. If this
was not a suit on the lease, it was a suit on the settlement agreement, and the
settlement agreement did not provide for an award of fees.
Disposition
The
judgment is affirmed, except that it is reversed insofar as it awards attorney
fees. Each party to bear its own
OFFICIAL REPORTS
ARMSTRONG,
Acting P. J.
We concur:
MOSK, J. KRIEGLER,
J.
references are to the Civil Code unless otherwise indicated.
(f)(1) provides that "Within a reasonable time after notification of
either party's intention to terminate the tenancy, or before the end of the
lease term, the landlord shall notify the tenant in writing of his or her
option to request an initial inspection and of his or her right to be present
at the inspection. The requirements of
this subdivision do not apply when the tenancy is terminated pursuant to
subdivision (2), (3), or (4) of Section 1161 of the Code of Civil Procedure. At a reasonable time, but no earlier than two
weeks before the termination or the end of lease date, the landlord, or an
agent of the landlord, shall, upon the request of the tenant, make an initial
inspection of the premises prior to any final inspection the landlord makes
after the tenant has vacated the premises.
The purpose of the initial inspection shall be to allow the tenant an
opportunity to remedy identified deficiencies, in a manner consistent with the
rights and obligations of the parties under the rental agreement, in order to
avoid deductions from the security."
