Erlach v. Sierra Asset Servicing, LLC , 226 Cal. App. 4th 1281 ( 2014 )

Filed 6/10/14
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
JOSEPH R. ERLACH, H038594
(Monterey County
Plaintiff and Appellant, Super. Ct. M115493)
v.
SIERRA ASSET SERVICING, LLC,
Defendant and Respondent.
John Erlach (appellant) appeals from a judgment of dismissal of his complaint
against Sierra Asset Servicing LLC (Sierra) entered after the trial court sustained Sierra's
demurrer without leave to amend. Appellant contends that it was error for the trial court
to determine that his residential lease was void and that he was a squatter with no legal
rights because a code enforcement notice (red tag) terminated his original tenancy, and to
determined that any subsequent lease with Sierra was an illegal contract and void.1 We
agree and reverse the judgment of dismissal.
Factual and Procedural Background
Our factual summary is derived from appellant's complaint.2
1
In support of appellant's position the Western Center on Law and Poverty has filed
an amicus curiae brief on behalf of the Homeowner Bill of Rights Collaborative.
2
On demurrer, "we must accept as true all properly pleaded material facts and facts
that may be inferred from these allegations . . . . " (Acuna v. San Diego Gas & Electric
Co. (2013) 217 Cal.App.4th 1402, 1411; see Klein v. Chevron U.S.A., Inc. (2012) 202
Cal.App.4th 1342, 1374.)
Starting in 2009, appellant was the tenant/lessee of one bedroom, one bathroom
and all the common areas of the residence at 7171 Oak Tree Place in Monterey. Mary
Schwann (Schwann) was the owner of the premises. On April 6, 2010, appellant and
Schwann entered into a written agreement whereby appellant paid $3,500 in advance to
rent the property for seven months ($500 a month) covering the period from April 1,
2010 to October 30, 2010. At some point, appellant had paid a $600 security deposit. On
October 9, 2010, appellant and Schwann entered into a modification of the agreement
whereby appellant paid an additional $500 to extend the agreement to November 30,
2010.
Late in October 2010, Schwann had the gas and electricity services to the property
turned off; she said it was because other tenants had failed to pay rent. Appellant
demanded that Schwann restore the utilities, but Schwann refused and told appellant that
she was going to " 'freeze [him] out.' " Thereafter, Schwann turned off the water service
despite the fact that appellant's name was on the account. On November 8, 2010, a code
enforcement inspector for the county "red tagged" the property for " 'no electric, no heat,
no hot water.' " Appellant was precluded from occupying the property except to gather
his belongings.
Four days later, on November 12, 2010, the property was sold in a foreclosure sale
to Sierra. After the foreclosure sale, appellant met with Sierra's representative and
explained that he had a lease with Schwann; the representative stated that appellant could
stay for the remainder of the lease, but work needed to be done on the property. Sierra
began work on the premises removing the carpets, flooring, and kitchen and bathroom
fixtures; appellant objected.
On November 15, 2010, appellant spoke with Brian Grocott, Sierra's agent.
Grocott told appellant that he could stay in the property until the end of December using
appellant's $600 security deposit as rent for that month; Grocott said the property would
be repaired and restored promptly. From November 15 to December 3, 2010, repeatedly,
2
appellant requested that Sierra restore the property as promised. On December 3, 2010,
Sierra told appellant that the property was ready for him. However, the property was not
restored. Some of appellant's belongings were missing and the kitchen and bathroom had
not been restored; piles of construction garbage were left throughout the property. The
flooring and wall coverings were missing. On December 27, 2010, the property had still
not been restored; the red-tag was still on the property and so appellant moved out.
Appellant filed a complaint for unspecified damages alleging eight causes of
action against Schwann and Sierra:3 1) "Violation of California Civil Code Section
1942.4"; 2) "Tortious Violation for Breach of the Warranty of Habitability"; 3)
"Intentional Infliction of Extreme Emotional Distress"; 4) "Negligent Infliction of
Extreme Emotional Distress"; 5) "Negligence: Violation of Duty to Maintain Habitable
Conditions"; 6) "Constructive Eviction"; 7) "Breach of the Covenant of Quiet
Enjoyment"; 8) "Retaliatory Eviction."
Sierra demurred to every cause of action in the complaint on the ground that Sierra
"had no lease with" appellant and that "there was no obligation at law that compelled
SIERRA to take any action regarding SCHWANN's former tenant . . . . Further, even if
the subject lease between SCHWANN and [appellant] were somehow valid, the
red-tagging by the County terminated the lease, immediately relieving the parties thereto,
and any party in purported privity therewith, of all obligations under that lease, as
performance of the contract terms were [sic] excused, because of impossibility due to an
action not taken by one of the parties (County of Monterey). Per Civil Code § 1933,
when the premises underwent construction for the County to lift the red tag, the property,
as it was originally contracted for, was 'destroyed,' which terminated the 'hiring' or
agreement. Lastly, any new agreement between [appellant] and SIERRA, whereby
SIERRA would assume any debt to [appellant] or default by SCHWANN described in
3
Schwann is not a party to this appeal.
3
the [complaint] would have to have been in writing, per the statute of frauds, and
[appellant] has not alleged that there ever was any such written agreement."4
After oral argument, the trial court sustained the demurrer without leave to amend
on the ground that no landlord-tenant relationship existed between appellant and Sierra
because the tenancy between appellant and defendant Mary Schwann "had already been
terminated by the county's red tag" before Sierra took possession of the premises.
Further, any lease between Sierra and appellant "while the premises were red tagged
would have been void as unlawful and in violation of public policy." Later the court
stated that when Sierra took over the property, appellant was "just a squatter at that time
with no legal rights."
The trial court indicated that it could not automatically dismiss the action against
Sierra without a noticed motion to dismiss. Accordingly, the court instructed counsel for
Sierra to file a noticed motion to dismiss, which the court heard and granted on April 27,
2012. The signed order entitled "ORDER GRANTING DEFENDANT SIERRA ASSET
SERVICES LLC'S MOTION TO DISMISS SAID DEFENDANT FROM PLAINTIFF'S
COMPLAINT, WITH PREJUDICE, AND GRANTING JUDGMENT OF DISMISSAL"
is dated April 27, 2012. According to the clerk of the court, no notice of entry of order
granting Sierra's motion to dismiss is in the court file. Appellant filed a notice of appeal
from the court's April 27, 2012, judgment dismissing Sierra from the case on June 28,
2012.
As an initial matter, although appellant's form notice of appeal refers to a
judgment of dismissal, the appellate record contains no judgment. Thus, this appeal
4
Under the statute of frauds, to be enforceable an agreement for the lease of real
property for more than one year must be in writing signed by the party to be charged.
(Civ. Code, § 1624, subd. (a)(3), italics added.) However, a party's partial or full
performance of an oral agreement to lease real property can take the contract out of the
statute of frauds. (Harrison v. Hanson (1958) 165 Cal.App.2d 370, 376.)
4
appears to have been taken from the order sustaining Sierra's demurrer to appellant's
complaint and granting Sierra's motion for dismissal. "Orders sustaining demurrers are
not appealable." (Hill v. City of Long Beach (1995) 33 Cal.App.4th 1684, 1695; Zipperer
v. County of Santa Clara (2005) 133 Cal.App.4th 1013, 1019.) Nevertheless, "an
appellate court may deem an order sustaining a demurrer to incorporate a judgment of
dismissal." (Molien v. Kaiser Foundation Hospitals (1980) 27 Cal.3d 916, 920.) It is
particularly appropriate to do so when the absence of a final judgment results from
inadvertence or mistake (id. at p. 92), and Sierra prepared the order and does not argue
for dismissal of the appeal.
Standard of Review
"In determining whether [a] plantiff[] has properly stated a claim for relief, our
standard of review is clear: ' "We treat the demurrer as admitting all material facts
properly pleaded, but not contentions, deductions or conclusions of fact or law.
[Citation.] We also consider matters which may be judicially noticed." [Citation.]
Further, we give the complaint a reasonable interpretation, reading it as a whole and its
parts in their context. [Citation.] When a demurrer is sustained, we determine whether
the complaint states facts sufficient to constitute a cause of action. [Citation.] And when
it is sustained without leave to amend, we decide whether there is a reasonable possibility
that the defect can be cured by amendment: if it can be, the trial court has abused its
discretion and we reverse; if not, there has been no abuse of discretion and we affirm.
[Citations.] The burden of proving such reasonable possibility is squarely on the
plaintiff.' [Citations.]" (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
Our review is de novo. (Ibid.) The purpose of a demurrer is to test the sufficiency of the
pleadings to state a cause of action as a matter of law. (Gomes v. Countrywide Home
Loans, Inc. (2011) 192 Cal.App.4th 1149, 1153.) We are not concerned with plaintiff's
ability to prove the allegations or with any possible difficulties in making such proof.
(Schmidt v. Foundation Health (1995) 35 Cal.App.4th 1702, 1706.)
5
Discussion
The determination whether the court erred in sustaining Sierra's demurrer without
leave to amend and dismissing the case rests squarely on whether the court was correct in
holding that the red-tagging of Schwann's property automatically terminated appellant's
lease with Schwann; and that any lease between Sierra and appellant was void as against
public policy.
In support of the argument that a red tag placed on a property terminates a lease,
Sierra cites Health and Safety Code section 17910 et seq. Sierra argues that despite
appellant's contention that the property was red-tagged due to the lack of utilities, the
provisions of the Health and Safety Code "make it clear that the property could only be
red-tagged due to extensive building code violations [that] endanger the health and safety
of residents." This argument does not advance Sierra's position.
We are not persuaded by Sierra's argument for the simple reason that Health and
Safety Code section 17920.3 provides, "Any building or portion thereof including any
dwelling unit, guestroom or suite of rooms, or the premises on which the same is located,
in which there exists any of the following listed conditions to an extent that endangers the
life, limb, health, property, safety, or welfare of the public or the occupants thereof shall
be deemed and hereby is declared to be a substandard building." (Italics added.)
Included in the listed conditions are the lack of, or improper water closet, lavatory, or
bathtub or shower in a dwelling unit, lack of hot and cold running water to plumbing
fixtures in a dwelling unit, lack of adequate heating, and lack of required electric lighting
(Health & Saf. Code, § 17920.3, subds. (a)(1), (5), (6) & (10)—all of which would have
been present after Schwann had the utilities turned off.5 Furthermore, we can find
5
Similarly, Civil Code section 1941.1 specifies the dilapidations that permit a
tenant to exercise the remedies provided by Civil Code section 1941 and 1942. A
6
nothing in Health and Safety Code section 17910 et seq. that supports Sierra's argument
that the red-tagging of a property terminates a lease. In fact, as we shall explain, there is
support for the contrary proposition; that is, that a tenancy survives the red-tagging of a
property.
Throughout much of its argument Sierra conflates the right to occupy with the
right to maintain a tenancy. A tenancy is not terminated when a building inspector orders
the tenants to vacate the property due to unsafe conditions. Rather, pursuant to Civil
Code section 1941, with exceptions not relevant here, and Health and Safety Code
section 17980.6, the landlord must put the property into a condition fit for occupation and
repair all subsequent dilapidations.
As our Supreme Court explained in City of Santa Monica v. Gonzalez (2008) 43
Cal.4th 905, "[s]ections 17980.6 and 17980.7 of the Health and Safety Code compose a
statutory scheme providing certain remedies to address substandard residential housing
that is unsafe to occupy." (Id. at p. 912.)
Pursuant to Health and Safety Code section 17980.6, if any building is maintained
in a manner that violates the State Housing Law, or applicable building standards, rules,
regulations, or local ordinances and the violations are so extensive and of such a nature
dwelling will be deemed untenantable for purposes of Civil Code section 1941 "if it
substantially lacks any of the following affirmative standard characteristics . . . . [¶]
(2) Plumbing or gas facilities that conformed to applicable law in effect at the time of
installation, maintained in good working order. ¶] (3) A water supply approved under
applicable law that is under the control of the tenant, capable of producing hot and cold
running water, or a system under the control of the landlord, that produces hot and cold
running water, furnished to appropriate fixtures, and connected to a sewage disposal
system approved under applicable law. [¶] (4) Heating facilities that conformed with
applicable law at the time of installation, maintained in good working order. [¶]
(5) Electrical lighting, with wiring and electrical equipment that conformed with
applicable law at the time of installation, maintained in good working order." (Italics
added.) Again, all these characteristics would have been present when Schwann had all
the utilities turned off.
7
that the health and safety of residents or the public is substantially endangered, the
enforcement agency may issue an order or notice to repair or abate. Any such order or
notice must be both posted in a conspicuous place on the property and sent by first-class
mail to each affected residential unit, or posted in a conspicuous place on the property
and in a prominent place on each affected residential unit. The order or notice must
include the name, address, and telephone number of the agency that issued the notice or
order; the date, time, and location of any public hearing or proceeding concerning the
order or notice; and information that the lessor cannot retaliate against a lessee.
Pursuant to Health and Safety Code section 17975, "Any tenant who is displaced
or subject to displacement from a residential rental unit as a result of an order to vacate or
an order requiring the vacation of a residential unit by a local enforcement agency as a
result of a violation so extensive and of such a nature that the immediate health and safety
of the residents is endangered, shall be entitled to receive relocation benefits from the
owner as specified in this article." (Italics added.)
If the owner fails to comply within a reasonable time with the terms of the order or
notice, the enforcement agency may seek and the court may order the imposition of
criminal penalties and that the owner not claim any deduction with respect to state taxes
for interest, taxes, expenses, depreciation, or amortization paid or incurred with respect to
the cited structure. The court may order the appointment of a receiver, and order the
owner to pay reasonable costs of the enforcement agency and to pay compensation to
tenants. (Health & Saf. Code, §§ 17980.7, subds. (a), (b), (c) & (d), italics added.)6
On a finding that a building violates the State Housing Law, the enforcement
agency or a tenant or tenant association or organization may seek an order appointing a
6
We fail to see how Sierra's contention that Health and Safety Code section
17980.7, subdivision (b) applies only where the county seeks a court order to make
repairs to the property advances its position that the red-tagging of a property
automatically terminates a lease.
8
receiver for a substandard building. The petition for appointment of a receiver must
include proof that notice of the petition was served not less than three days before filing
the petition to all persons with a recorded interest in the real property on which the
substandard building exists. (Health & Saf. Code, § 17980.7, subd. (c), italics added.)
If a receiver is appointed, the owner of the substandard building and his or her
agent will be enjoined from collecting rents from the tenants, from interfering with the
receiver in operating the substandard building, and from encumbering or transferring the
substandard building or real property on which the building is situated. (Health & Saf.
Code, § 17980.7, subd. (c)(3).) If the conditions of the premises or the repairs or
rehabilitation significantly affects the safe and sanitary use of the substandard building by
any tenant so that the tenant cannot safely reside in his or her unit, then the receiver must
provide relocation benefits as specified by statute or local ordinance. (Health & Saf.
Code, § 17980.7, subds. (c)(5) & (6), italics added.)
Throughout this statutory scheme there are references to tenants or lessees, not
former tenants or former lessees. When we examine the words of a statute, we "giv[e]
them their ordinary and usual meaning and view[] them in their statutory context, because
the statutory language is usually the most reliable indicator of legislative intent."
(Gattuso v. Harte–Hanks Shoppers, Inc. (2007) 42 Cal.4th 554, 567.) We may infer from
the Legislature's use of the word tenant in all of the aforementioned statutes that set out a
tenant's rights and remedies after a building has been red-tagged that the Legislature
contemplated that, although the tenant might not be able to occupy a building because of
a red-tag, the tenant still had rights and remedies. Giving the word tenant its ordinary
and usual meaning, the aforementioned statutes plainly contemplate that a tenancy
continues after a building is red-tagged. A tenant is, by definition, in possession of the
9
property of the landlord. (Board of Trustees of the Leland Stanford Junior University v.
Ham (2013) 216 Cal.App.4th 330, 339.)7
Significantly, 40 years ago, in Green v. Superior Court (1974) 10 Cal.3d 616(Green), our Supreme Court recognized that where occupancy itself is not illegal, but the
property does not conform to certain housing or building codes (as in this case) and the
defects are, by definition, correctable, the tenant may, at his or her option, remain in
possession and is relieved of the obligation to pay rent, but is liable for the reasonable
value of the use and occupancy of the property in its defective condition. (Id. at pp. 638-
639.)
In sum, we conclude that when Sierra bought the property at the foreclosure sale
on November 12, 2010, appellant's tenancy had not been terminated; appellant had paid
rent to extend his tenancy through to the end of November. The trial court erred in
determining that the red-tagging of the property had terminated appellant's tenancy.
We point out that new owners of rental property are required to address
outstanding code violations even if they were caused by the previous owner of the
property. (See Knight v. Hallsthammar (1981) 29 Cal.3d 46, 57, 59 (Knight); Hawthorne
Savings & Loan Assn. v. City of Signal Hill (1993) 19 Cal.App.4th 148, 162.)
7
There is one situation where the red-tagging of a building might lead ultimately to
the termination of a tenancy. Health and Safety Code section 17980.7 provides that, if
the owner fails to comply with the red-tag notice despite having been afforded a
reasonable opportunity to do so, the enforcement agency may seek judicial appointment
of a receiver to assume control over the property and remediate the violations or take
other appropriate action. Other appropriate action includes ordering the demolition of the
building. (City of Santa Monica v. Gonzalez, supra, 43 Cal.4th 905, 934.) However,
"[i]n deciding whether to require vacation of the building or to repair as necessary, the
enforcement agency shall give preference to the repair of the building whenever it is
economically feasible to do so without having to repair more than 75 percent of the
dwelling, as determined by the enforcement agency, and shall give full consideration to
the needs for housing as expressed in the local jurisdiction's housing element." (Health &
Saf. Code, § 17980, Stats. 2003, ch. 474, § 4.)
10
As to Sierra's argument that no landlord-tenant relationship was ever created
between appellant and Sierra because such an agreement would have constituted a
contract for an illegal purpose (since Sierra could not provide appellant with the right to
occupy the property) we conclude that this does not preclude appellant's right to recover
damages.
Rental agreements involving units that lack a certificate of occupancy are
ordinarily regarded as unlawful and void. (Carter v. Cohen (2010) 188 Cal.App.4th
1038, 1047.) "This is because '[t]he object of a contract must be lawful [citation]; i.e., it
must not be in conflict either with express statutes or public policy. . . . [Accordingly, i]f
the contract has a single object, and that object is unlawful (whether in whole or in part),
the entire contract is void.' [Citation.]" (Ibid.)
"Generally, 'the courts . . . will not enforce an illegal bargain or lend their
assistance to a party who seeks compensation for an illegal act.' [Citation.] Our Supreme
Court has explained: 'The reason for this refusal is not that the courts are unaware of
possible injustice between the parties, and that the defendant may be left in possession of
some benefit he should in good conscience turn over to the plaintiff, but that this
consideration is outweighed by the importance of deterring illegal conduct. Knowing
that they will receive no help from the courts and must trust completely to each other's
good faith, the parties are less likely to enter an illegal arrangement in the first place.
[Citations.]' [Citation.]" (Carter v. Cohen, supra, 188 Cal.App.4th at pp. 1047-1048.)
"Nonetheless, the rule barring the enforcement of unlawful contracts is not
absolute. Because the rationale for the rule is founded on deterrence, the Supreme Court
has made clear that courts ' "should not . . . blindly extend the rule to every case where
illegality appears somewhere in the transaction. The fundamental purpose of the rule
must always be kept in mind, and the realities of the situation must be considered.
Where, by applying the rule, the public cannot be protected because the transaction has
been completed, where no serious moral turpitude is involved, where the defendant is the
11
one guilty of the greatest moral fault, and where to apply the rule will be to permit the
defendant to be unjustly enriched at the expense of the plaintiff, the rule should not be
applied." ' [Citations.]" (Carter v. Cohen, supra, 188 Cal.App.4th at p. 1048.)
" '[W]hen the Legislature enacts a statute forbidding certain conduct for the
purpose of protecting one class of persons from the activities of another, a member of the
protected class may maintain an action notwithstanding the fact that he has shared in the
illegal transaction. The protective purpose of the legislation is realized by allowing the
plaintiff to maintain his action against a defendant within the class primarily to be
deterred. In this situation it is said that the plaintiff is not in pari delicto. [Citations.]'
[Citation.] Courts have thus permitted parties to obtain benefits under a law enacted for
their protection, despite their participation in transactions that contravened the law
[citations]. Similarly, courts have permitted parties to enforce contracts that contravene
statutes enacted for the parties' benefit [citation.]" (Carter v. Cohen, supra, 188
Cal.App.4th at p.1048.)
Although rental agreements regarding units lacking a certificate of occupancy are
unlawful, their enforcement by tenants is subject to the aforementioned principles.
(Carter v. Cohen, supra, 188 Cal.App.4th at at p.1048.)
Accordingly, we turn to appellant's complaint to determine whether he has stated
viable claims. We begin by discussing tort claims and statutory claims involving a
landlord-tenant relationship.
The California Supreme Court has held that because "under contemporary
conditions, public policy compels landlords to bear the primary responsibility for
maintaining safe, clean and habitable housing in our state," there is a warranty of
habitability implied in residential leases in California. (Green, supra, 10 Cal.3d at p.
627.) In Green, the court explained that "[t]his implied warranty of habitability does not
require that a landlord ensure that leased premises are in perfect, aesthetically pleasing
condition, but it does mean that 'bare living requirements' must be maintained. In most
12
cases substantial compliance with those applicable building and housing code standards
which materially affect health and safety will suffice to meet the landlord's obligations
under the common law implied warranty of habitability we now recognize." (Id. at pp.
637, fns. omitted.) The court held that a tenant may assert the landlord's breach of the
implied warranty of habitability as a defense to an unlawful detainer proceeding. (Id. at
pp. 631-637.) Moreover, a landlord's obligation to maintain premises in a habitable
condition is one that continues throughout the term of the lease. (Peterson v. Superior
Court (1995) 10 Cal.4th 1185, 1204.) In the event of a landlord's breach of the implied
warranty of habitability, the tenant is not absolved of the obligation to pay rent; rather the
tenant remains liable for the reasonable rental value as determined by the court for the
period that the defective condition of the premises existed. (Stoiber v. Honeychuck
(1980) 101 Cal.App.3d 903, 914; Hinson v. Delis (1972) 26 Cal.App.3d 62, 70,
disapproved on another ground in Knight, supra, 29 Cal.3d 46, 55, fn. 7; see also Code
Civ. Proc., § 1174.2, subd. (a) [in unlawful detainer action after nonpayment of rent,
where tenant proves substantial breach of habitability warranty, court determines
reasonable rental value of premises in its untenantable condition].)
In addition to asserting a breach of the habitability warranty as a defense to an
unlawful detainer action, a tenant may bring suit against the landlord for damages
resulting from such breach. (Landeros v. Pankey (1995) 39 Cal.App.4th 1167, 1169;
Miller & Starr, Cal. Real Estate (3d ed.2004) § 19:121, p. 362; Friedman et al., Cal.
Practice Guide: Landlord-Tenant, (The Rutter Group 2009) ¶ 3:97-3:100, pp. 3-40.4 to
3-40.5.) The elements of such an affirmative claim are the existence of a material
defective condition affecting the premises' habitability, notice to the landlord of the
condition within a reasonable time after the tenant's discovery of the condition, the
landlord was given a reasonable time to correct the deficiency, and resulting damages.
(Quevedo v. Braga (1977) 72 Cal.App.3d Supp. 1, 7-8 (Quevedo), disapproved on other
13
grounds in Knight, supra, 29 Cal.3d at p. 55, fn. 7;8 see also Friedman et al., supra, ¶
3:100, p. 3-40.5.)
According to the Quevedo court, the measure of damages is the amount of rent
that the landlord should refund, calculated by the difference between the rent paid while
the premises were uninhabitable and the rent that "would have been reasonable, taking
into account the extent to which the rental value of the property was reduced by virtue of
the existence of the defect." (Quevedo, supra, 72 Cal.App.3d Supp. at p. 8.) Other
methods of calculating a tenant's damages for breach of the habitability warranty include
(1) the difference between the fair rental value of the premises had they been in the
condition warranted and their fair rental value with the uninhabitable condition (Green,
supra, 10 Cal.3d at p. 638), and (2) the rent paid by the tenant multiplied by the
percentage of the premises rendered unusable due to the uninhabitable condition. (Id. at
p. 639, fn. 24; Cazares v. Ortiz (1980) 109 Cal.App.3d Supp. 23, 33.)
In addition, there is a statutory cause of action available to the residential tenant
where the premises are untenantable and other circumstances exist. Under Civil Code
section 1942.4, a residential landlord may not demand or collect rent, increase rent, or
serve a three-day notice to pay rent or quit if (1) the dwelling is untenantable as defined
under section 1941.1, is in violation of section 17920.10 of the Health and Safety Code,
or is deemed and declared substandard under section 17920.3 of the Health and Safety
Code; (2) a public officer inspects the premises and gives the landlord written notice that
it must abate the nuisance or repair the property; (3) the conditions have not been
remedied within 35 days of the notice; and (4) the substandard conditions were not
8
In Knight v. Hallsthammar, supra, 29 Cal.3d at page 55 and footnote 7, the
Supreme Court confirmed that breach of the implied warranty of habitability can support
an independent cause of action for damages, but overruled Quevedo to the extent it
required that a tenant be unaware of the defective condition upon occupancy and that a
landlord with preexisting notice of the defect be given additional time to repair it.
14
caused by the tenant's acts or omissions. (Civ. Code, § 1942.4, subd. (a).) In the event
that each of the circumstances under subdivision (a) of the statute is satisfied, a tenant
may bring an action for actual damages plus statutory damages of between $100 and
$5,000. (Civ. Code, § 1942.4, subd. (b)(1).)9
In Stoiber v. Honeychuck, supra, 101 Cal.App.3d 903 (Stoiber), the court held that
a tenant may maintain a tort action against his landlord for damages suffered by way of
annoyance or discomfort or for injury to his personal property caused by the landlord's
failure to keep the premises in a habitable condition under the expansive rationale of
Rowland v. Christian (1968) 69 Cal.2d 108. (Stoiber, supra, 101 Cal.App.3d at pp. 916-
917, 918-919.) The Stoiber court concluded "that the availability of a remedy for breach
of implied warranty of habitability does not preclude a tenant from suing his landlord for
intentional infliction of mental distress if the landlord's acts are extreme and outrageous
and result in severe mental distress." (Id. at p. 922.) Whether this is so under the present
allegations presents a factual question; however, it cannot be said as a matter of law that
appellant has not stated such a claim.
Furthermore, "the negligent infliction of emotional distress–anxiety, worry,
discomfort–is compensable without physical injury in cases involving the tortious
interference with property rights [citations]." (Stoiber, supra, 101 Cal.App.3d at p. 922.)
9
We recognize that the mere "existence of a prohibited (uninhabitable) condition or
other noncompliance with applicable code standards does not necessarily constitute a
breach of the warranty of habitability." (Friedman et al., Cal. Practice Guide: Landlord–
Tenant (The Rutter Group 2012) § 3:39, p. 3–13, citing Green, supra, 10 Cal.3d at pp.
637–638.) Whether a particular defect or violation of a housing code constitutes a breach
of the implied warranty of habitability depends on the severity and duration of the defect
or violation. (Friedman et al., supra, §§ 3:46 to 3:47, pp. 3–14 to 3–15.) In Green,
supra,10 Cal.3d at page 637, however, the court stated that "[i]n most cases substantial
compliance with those applicable building and housing code standards which materially
affect health and safety will suffice to meet the landlord's obligations under the common
law implied warranty of habitability . . . ." It follows that substantial noncompliance with
applicable code standards could lead to a breach of the warranty of habitability.
15
Thus, if Sierra's failure to repair the premises constitutes a tort grounded on negligence,
appellant is entitled to prove his damages for emotional distress because the failure to
repair must be deemed to constitute an injury to his tenancy interest (right to habitable
premises), which is a species of property. (Id. at p. 923.)
Moreover, we observe that Evidence Code section 669 "codifies the common law
doctrine of negligence per se, pursuant to which statutes and regulations may be used to
establish duties and standards of care in negligence actions." (Elsner v. Uveges (2004) 34
Cal.4th 915, 927, fn. omitted.) "Statutes may be borrowed in the negligence context for
one of two purposes: (1) to establish a duty of care, or (2) to establish a standard of care.
[Citations.]" (Id. at p. 928, fn. 8; see Toole v. Richardson–Merrell Inc. (1967) 251
Cal.App.2d 689, 702–704, [rebuttable presumption of negligence arose from violation of
Federal Food, Drug, and Cosmetic Act].)
Here, the complaint contains causes of action for breach of the warranty of
habitability in various forms—1) "Violation of California Civil Code Section 1942.4"; 2)
"Tortious Violation for Breach of the Warranty of Habitability"; 3) "Intentional Infliction
of Emotional Distress"; 4) "Negligent Infliction of Extreme Emotional Distress"; 5)
"Negligence: Violation of Duty to Maintain Habitable Conditions." Based on the
foregoing, we cannot say as a matter of law that these causes of action are not viable.
As to appellant's remaining causes of action for constructive eviction, breach of
the covenant of quiet enjoyment, and retaliatory eviction, we note that every lease
includes a covenant of quiet possession and enjoyment. (Civ.Code, § 1927.) This
covenant is breached upon actual or constructive eviction of the tenant. (McAlester v.
Landers (1886) 70 Cal. 79, 82.) Any interference by the landlord that deprives the tenant
of the beneficial enjoyment of the premises or renders the premises unfit for the purposes
for which they are let amounts to a constructive eviction if the tenant so elects and
vacates within a reasonable time. (Kulawitz v. Pacific Woodenware Paper Co. (1944) 25
Cal.2d 664, 670; Pierce v. Nash (1954) 126 Cal.App.2d 606, 612-613.)
16
As this court explained recently, " '[i]t has long been the rule that in the absence of
language to the contrary, every lease contains an implied covenant of quiet enjoyment.
[Citations.] Initially, the covenant related solely to the right of possession and only
protected the lessee against any act of molestation committed by the landlord or anyone
claiming under him, or by someone with paramount title, which directly affected the
tenant's use and possession of the leased premises; the covenant was construed to protect
the lessee against physical interference only. [Citation.] In recent years, the covenant of
quiet enjoyment has been expanded, and in this state, for example, it insulates the tenant
against any act or omission on the part of the landlord, or anyone claiming under him,
which interferes with a tenant's right to use and enjoy the premises for the purposes
contemplated by the tenancy. [Citation.]' [Citations.]" (Nativi v. Deutsche Bank
National Trust Company (2014) 223 Cal.App.4th 261, 291-292 (Nativi.)
Further, "[i]t is not necessary to show that the landlord acted with the subjective
intent to compel the tenant to leave the property or deprive the tenant of quiet enjoyment.
[Citation.] There is a 'presumption that a landlord intends the natural and probable
consequences of his acts; and where the acts of the landlord effectively deprive the tenant
of the use and enjoyment of the premises, the intent to evict is implied from the character
of the acts done. [Citations.]' [Citation.]" (Nativi, supra, 223 Cal.App.4th at p. 292.)
Simply put, " '[A]ny disturbance of the tenant's possession by the lessor or at his
procurement . . . which has the effect of depriving the tenant of the beneficial enjoyment
of the premises, amounts to a constructive eviction, provided the tenant vacates the
premises within a reasonable time. [Citations.]' [Citations]. The Supreme Court stated
in Standard Live Stock Co. v. Pentz (1928) 204 Cal. 618, 625 . . . that 'the covenant of
quiet possession in a lease is not breached until there has been an actual or constructive
eviction.' Nevertheless, some authorities recognize that a tenant may sue for breach of
the covenant while remaining in possession. [Citations.]" (Nativi, supra, at p. 292.)
17
In addition, Civil Code section 1940.2 makes it unlawful for a landlord to commit
certain specified acts "for the purpose of influencing a tenant to vacate a dwelling."10
(Civ. Code, § 1940.2, subd. (a).) The purpose of Civil Code section 1940.2 is to prohibit
a landlord's use of " 'constructive' self-help eviction" techniques (Friedman et al., Cal.
Practice Guide: Landlord-Tenant, supra, ¶ 7:42, p. 7-14), such as theft, extortion,
interference with a tenant's quiet enjoyment, or trespass "for the purpose of influencing a
tenant to vacate a dwelling." (Civ. Code, § 1940.2, subd. (a).)
In sum, at this stage of the proceedings, we conclude that appellant's causes of
action were adequately pleaded.11
Finally, in the event that on remand Sierra argues that the foreclosure sale
extinguished appellant's initial lease with Schwann, in Nativi, supra, 223 Cal.App.4th
261, this court explained that in "May 2009, the United States Congress enacted the
Protecting Tenants at Foreclosure Act of 2009 (PTFA or Act) (Pub.L. 111–22, Div. A,
Title VII, §§ 702–704, May 20, 2009, 123 Stat. 1660) and, in 2010, the Congress
amended it (Pub.L. 111–203, Title XIV, § 1484, July 21, 2010, 124 Stat. 2204). The Act
provides protections for bona fide tenants of residential real property at foreclosure
following the date of its enactment until its sunset at the end of 2014." (Nativi, supra,
223 Cal. App. 4th 268-269.)
10
"It is unlawful for a landlord to do any of the following for the purpose of
influencing a tenant to vacate a dwelling: [¶] (1) Engage in conduct that violates
subdivision (a) of Section 484 of the Penal Code [theft]. [¶] (2) Engage in conduct that
violates Section 518 of the Penal Code [extortion]. [¶] (3) Use, or threaten to use force,
willful threats, or menacing conduct constituting a course of conduct that interferes with
the tenant's quiet enjoyment of the premises in violation of Section 1927 that would
create an apprehension of harm in a reasonable person . . . . [¶] (4) Commit a significant
and intentional violation of Section 1954 [including abusing the right of access to harass
the tenant (Civ. Code, § 1954, subd. (c)]." (Civ. Code, § 1940.2, subd. (a).)
11
We express no opinion whatsoever as to whether this action can survive any
further demurrer or any summary judgment motion that might be brought, as these
matters are for the superior court to determine in the exercise of its sound discretion.
18
After "careful and extensive" examination of the PTFA, this court concluded
"solely as a matter of statutory interpretation, that the PTFA causes a bona fide lease for a
term to survive foreclosure through the end of the lease term subject to the limited
authority of the immediate successor in interest to terminate the lease, with proper notice,
upon sale to a purchaser who intends to occupy the unit as a primary residence. The Act
impliedly overrides state laws that provide less protection but expressly allows states to
retain the authority to enact greater protections. Bona fide tenancies for a term that
continue by operation of the PTFA remain protected by California law." (Nativi, supra,
at p. 270, italics added.)
Two final points: In Nativi, supra, at page 287, we concluded that permitting an
immediate successor in interest in a foreclosed property to invoke the general rule that
illegal contracts are unenforceable would allow it to circumvent the PTFA and frustrate
its fundamental public policy purpose. Moreover, "[u]nder Green v. Superior Court,
supra, a residential tenant may not be deemed to have exempted a landlord from the
implied warranty of habitability by continuing to live in uninhabitable premises . . . ."
(Knight, supra, 29 Cal.3d at p. 59.)
Conclusion
The trial court erred in sustaining Sierra's demurrer without leave to amend.
Accordingly, we will remand this matter to the superior court for further proceedings.
19
Disposition
The order of dismissal is reversed and the matter is remanded to the superior court.
The superior court is directed to vacate its order sustaining Sierra's demurrer without
leave to amend and to enter a new and different order overruling the demurrer. Appellant
is to recover his costs on appeal.
______________________________
ELIA, J.
WE CONCUR:
______________________________
RUSHING, P. J.
______________________________
PREMO, J.
20
Trial Court: Monterey County Superior Court
Trial Judge: Hon. Kay T. Kinsgley
Attorney for Appellant: Raymond N. Stella Erlach
Attorneys for Amicus Western Center on Law and Poverty
Curiae for Appellants: S. Lynn Martinez
Richard A. Rothschild
Madeline Howard
Attorneys for Respondent: Soltman, Levitt, Flaherty & Wattles
Garth M. Drozin
Steven S. Nimoy