Premises Liability Has Limits

In the recent case of Jones v. Awad, the California Court of Appeal affirmed the judgment of the trial court in finding a personal injury plaintiff was unable to prove a breach of duty by the defendant homeowners. 

The plaintiff sued defendant homeowners for premises liability after she tripped on a step in their garage. Defendants moved for summary judgment on the grounds that plaintiff was unable to establish one or more elements of her “Personal Injury-Premises Liability” claim, and the trial court granted the motion. 

On appeal, plaintiff contended triable issues of material fact existed with respect to each element of her cause of action. With regard to breach of duty, plaintiff argued 1) the trial court misapplied the standard for notice of a dangerous condition; and 2) the doctrine of negligence per se should have been applied. The Court of Appeal disagreed with plaintiff’s contentions. 

In December 2014, plaintiff visited the home of defendants, where plaintiff fell and suffered injuries to her right wrist and humerus. The incident took place on a step that leads from the house to the garage. When exiting the house to enter the garage, one must step down from the parquet floor landing inside the home onto a step with a rattan mat on top of a piece of carpet. From that step, one reaches the garage floor. 

The height from the parquet floor down to the step was approximately 10 1⁄2 inches. The height from the step to the garage floor was approximately 7 inches. 

The piece of carpet was present on the garage step when defendants moved into the home, and one of the defendants testified she was unsure when the floor mat was placed on top of the piece of carpet. 

As plaintiff was entering the garage, she took her first step down and believed her foot was going to land on the step with the rug. Plaintiff’s foot landed on the rug but, “it was like nothing was under the rug. [She] stepped on the rug and ... hit the floor.” Plaintiff did not observe what happened to the rug when she stepped on it, but later believed that the rug had moved.

Defendants’ adult son, was in the garage when plaintiff fell. Though he did not actually see plaintiff fall, the son testified the floor mat had not moved after plaintiff stepped down, and that the mat was not easily movable. 

At the time of the incident, the lighting was sufficient for plaintiff to see where she was stepping. In addition, there was no debris or obstacles covering or otherwise obscuring the steps. The step down into the garage would have been readily seen by an average adult person. 

The home of defendants was built in 1977 and was purchased by defendants in 1989. The step where plaintiff fell was in the same configuration at the time of the incident as it was when defendants moved into the home. During the 25 years defendants lived in the home, they never tripped or fell on the steps from the house into the garage, and they were not aware of anyone else ever tripping or falling down the stairs leading from the house to the garage during that time. 

The garage steps violated seven provisions of the Uniform Building Code (UBC) at the time plaintiff fell. These violations included:

            -  the exterior landing was more than seven and one-half inches below floor level (UBC § 3303(h)); 

            - the landing step was not equal to the length of the door (UBC § 3303(h)); 

            -  the door swung over the top step (UBC § 3303(h)); 

            - the step rise was more than eight inches (UBC § 3305(c)); 

            - the variation between the largest and smallest rise is in excess of one-fourth inch (UBC § 3305(c)); 

            - no handrail was on the open side (UBC § 3305(j)); and

            - the door opening was less than the required 30 inches and the top mat on the stair tread must be 30 inches wide (UBC§ 3305(b)). 

When plaintiff fell, defendants were not aware of any of these code violations. 

In September 2017, defendants moved for summary judgment on the grounds plaintiff was unable to establish one or more elements of her premises liability claim. 

Defendants argued that (1) the condition of the garage step was open and obvious; (2) defendants had no notice, either actual or constructive, that the garage step was unreasonably dangerous; and (3) plaintiff could not establish the element of causation. 

Plaintiff filed her opposition, arguing there are triable issues of material fact as to each matter raised in defendants’ motion. Specifically, plaintiff emphasized expert testimony that the accumulation of building code violations in relation to the garage steps created an unreasonably dangerous condition, and that plaintiff’s injuries were caused by these violations. 

The trial court issued a tentative ruling granting the motion for summary judgment, which stated that no reasonable jury could find defendants breached their duty of care under the circumstances. 

The tentative ruling stated:  “Plaintiff’s complaint alleges a single cause of action: ‘Personal Injury- Premises Liability.’ The undisputed evidence establishes that there was no breach as a matter of law, as no reasonable jury could find that Defendants failed to act with reasonable prudence under the circumstances. The statement of Plaintiff’s expert that the dangerous condition of the stairs was such that Defendants would have or should have recognized multiple dangerous defects is not a proper expert opinion. Therefore, his statement does not raise a triable issue of material fact with respect to breach. Accordingly, Defendants have negated an essential element of Plaintiff’s cause of action and are entitled to judgment as a matter of law.” 

Plaintiff then invoked the doctrine of negligence per se, based on the seven building code violations. The trial court then ordered post-hearing briefing on the topic of whether building code violations can be the basis for a negligence per se instruction. 

Defendants filed rebuttal points and authorities, arguing (1) that the doctrine of negligence per se cannot properly raise a triable issue of material fact because it was not presented in the pleadings, (2) that negligence per se does not apply to building code violations, and (3) that the harm suffered was not caused by any specific building code violation. 

In February 2018, the trial court issued its “Order on Motion for Summary Judgment,” granting defendants’ motion. The trial court concluded that the undisputed evidence showed there was no breach of duty as a matter of law, as no reasonable jury could find that defendants failed to act with reasonable care under the circumstances.

The trial court also determined plaintiff’s expert’s opinion that the dangerous condition of the stairs was such that defendants would have or should have recognized multiple dangerous defects to be inadmissible. 

With respect to the application of negligence per se, the trial court’s order rejected the argument because defendants did not do the construction work, and did not hire the person who did the work, and the doctrine of negligence per se did not apply. 

The elements of a cause of action for premises liability are the same as those for negligence. Accordingly, the plaintiff must prove a legal duty to use due care, a breach of such legal duty, and the breach as the proximate or legal cause of the resulting injury. 

California law requires landowners to maintain land in their possession and control in a reasonably safe condition. Consequently, landowners are liable for injuries caused by a lack of due care in the maintenance of their property.

However, a generally recognized exception is that landowners have no duty to warn of open and obvious dangers on their property because such dangers serve as warnings themselves. 

In the present case, defendants owed a duty of care to plaintiff because they were the owners and possessors of the home where plaintiff fell and was injured, and defendants had a duty to maintain the premises in a reasonably safe condition. 

The alleged defective condition of the stairs was not open and obvious. Plaintiff claims it was the unexpected two and one-half to three-inch difference in step height that caused her to fall, and not the step in general. While the existence of the step itself was open and obvious, the indistinct change in elevation between each step would not have been apparent to an individual stepping down. Additionally, the fact that the garage step area was free of debris, cracks, and obstacles would further reduce an individual’s expectation of danger. Therefore, that exception did not relieve defendants of their duty of care. 

While a landowner is not the insurer of a visitor’s safety, a landowner must exercise ordinary care by making reasonable inspections of the premises to ascertain whether any dangerous conditions exist on the property.  If a dangerous condition does exist, the landowner must use the care required of a reasonably prudent person acting under the same circumstances. Failure to do so constitutes a breach of duty of care. 

If the dangerous condition is brought about by third persons, then to impose liability the owner must have either actual or constructive knowledge of the dangerous condition or have been able by the exercise of ordinary care to discover the condition, which if known to him, he should realize as involving an unreasonable risk to invitees on his premises. 

Actual knowledge is defined as express information of a fact, while constructive knowledge is that which is imputed by law. 

A possessor of land is subject to liability for bodily harm caused to business visitors by a natural or artificial condition thereon if, but only if, he knows, or by the exercise of reasonable care should discover, the condition which, if known to him, he should realize as involving an unreasonable risk to them. 

Typically, to charge an individual with constructive notice, he must have actual notice of facts or circumstances which are sufficient to put a prudent person on inquiry as to the existence of the fact with respect to which he is charged with constructive notice. 

Therefore, a landowner cannot be charged with constructive notice without a showing of some overt feature surrounding the dangerous condition, which would notify the landowner of its existence. 

In Jones, the trial court properly concluded that plaintiff failed to raise a triable issue of material fact with respect to defendants’ actual or constructive knowledge of the dangerous condition of the garage steps. 

First, with respect to actual knowledge, plaintiff does not challenge the testimony that defendants were never informed of any UBC violations in the garage step area. Instead, plaintiff argues defendants had actual knowledge of the dangerous condition because defendants placed the rattan mat, which violated section 3305(b) of the UBC, on the first step. 

However, this fact alone was insufficient to raise a triable issue of material fact. While it is true that the rattan mat did not comply with the UBC, it does not necessarily follow that the mat constituted a dangerous condition.  Plaintiff does not explain how the failure of the rattan mat to meet the 30-inch width requirement created a dangerous condition. 

Plaintiff did not challenge the trial court’s ruling sustaining an objection to the statement by plaintiff’s expert that, the dangerous condition of the stairs was such that defendants would have or should have recognized multiple dangerous defects. Appellate courts do not consider evidence to which objections have been made and properly sustained.

Additionally, plaintiff did not dispute the testimony that during the entire 25-year span that defendants lived in the home prior to plaintiff’s fall, neither defendant, nor any other visitor, ever tripped or fell as a result of using the garage steps. Plaintiff’s only argument is that because of the accumulation of building code violations and the length of time defendants lived in the home, defendants should have recognized the existence of the dangerous condition. However, this is merely a legal conclusion. 

Plaintiff failed to point to any conspicuous element of the garage steps that would put a reasonably prudent person on notice of an unreasonable risk of harm. Rather, plaintiff did the opposite, by listing several relatively minor deviations from the standards set forth in the UBC. The number of violations is not significant unless it is shown the violations produced some noticeable feature of the garage steps. Without more, it could not be concluded that the variation of a few inches is sufficient to raise a triable issue of material fact with respect to constructive notice. 

Under the doctrine of negligence per se, compliance with the standard of conduct established by the relevant statute, ordinance, or regulation is adopted as the duty of care. This creates a rebuttable presumption of negligence where the statute, ordinance, or regulation is violated. 

Negligence is presumed if: (1) the individual violated a statute, ordinance, or regulation of a public entity; (2) The violation proximately caused death or injury to person or property; (3) The death or injury resulted from an occurrence of the nature which the statute, ordinance, or regulation was designed to prevent; and (4) The person suffering the death or the injury to his person or property was one of the class of persons for whose protection the statute, ordinance, or regulation was adopted. (Cal. Evid. Code, § 669 (a).)

Negligence per se is an evidentiary doctrine, rather than an independent cause of action. 

It can be applied generally to establish a breach of due care under any negligence-related cause of action. 

The Court of Appeal ruled that the facts of the Jones case did not give rise to an application of negligence per se. Defendants were simply homeowners and did not take part in any aspect of the design or construction of the garage step area. Defendants never had any knowledge of the building code violations, which existed when they purchased the home in 1989, and never experienced any incidents with the garage steps until plaintiff’s fall in 2014. 

In addition, the presence of a building code violation does not automatically render defendants at fault. The violations in this case are relatively minor, with several features of the garage step area listed by plaintiff deviating a few inches or less from the standards required by the UBC. Therefore, case precedent did not favor application of negligence per se to the facts of the Jones case. 

LESSONS:

1.         A landowner must exercise ordinary care by making reasonable inspections of the premises to ascertain whether any dangerous conditions exist on the property.  

2.         An important defense to a premises liability claim is that landowners have no duty to warn of open and obvious dangers on their property because such dangers serve as warning themselves. 

3.         Courts are hesitant to find liability for a condition that existed for a long time with no prior incidents.

Tort of Trespass To California Realty

The California Court of Appeal clarified a tort claim for trespass to realty in the recent decision in Veiseh v. Stapp.

Generally, the tort of trespass protects possessory interests and, therefore, a person in actual possession of the land may sue for trespass. Ownership or recorded title to land is not required. Some California decisions state the plaintiff’s possession must be “lawful.” 

The Appellate Court in Veiseh addressed an issue of first impression about what constitutes “lawful possession.” 

Plaintiff Reza Veiseh transferred the real property in question to a custodian for the benefit of his minor daughter pursuant to the California Uniform Transfers to Minors Act (Prob. Code, §§ 3900–3925). The act requires the property to be held for the use and benefit of the minor. Veiseh did not comply with this requirement. 

Instead, he maintained possession and control of the real property for his own use and benefit, rather than the use and benefit of his daughter. The defendants argued Veiseh’s failure to comply with the California Uniform Transfers to Minors Act meant his possession was unlawful. The trial court agreed. After a bench trial, the court found Veiseh’s actions were not consistent with the statute and he had no right of lawful possession in the real property. The court entered judgment for the defendants.

California case law establishes that “lawful possession” simply means actual, peaceful possession and a person with actual possession can sue for trespass even if he or she does not have any legal rights in the land. 

The Appellate Court concluded Veiseh’s failure to comply with California's Uniform Transfers to Minors Act did not render his possession of the real property unlawful for purposes of California's trespass law. 

The general definition of lawful possession applies in this case because, among other things, nothing in the text of the statute or the record supports the inference that the legislation was enacted to protect trespassers or otherwise define who could pursue a cause of action for trespass. The trial court’s explicit findings about Veiseh’s possession and control are sufficient to establish the lawful possession element of his trespass claim. 

The judgment was reversed, and the case was remanded for further proceedings. 

In 2004, Veiseh acquired ownership of 20 acres of land in Kern County ("Parcel").  In 2008, Veiseh recorded a grant deed transferring the Parcel from himself to “Zohreh Afshar, as custodian for Hedyeh Veiseh, under the California Uniform Transfers to minors act.” 

Zohreh Afshar is Veiseh’s former wife and Hedyeh Veiseh is his daughter, who was a minor when the deed was recorded. At trial, Veiseh testified he and his former wife maintained good relations and were living in the same house where he had a separate room. 

He also testified he transferred the Parcel to the custodian and his minor daughter for estate planning reasons because, at the time, he was not feeling well and a couple of his friends had passed away. 

Veiseh alleged that later in 2008, cattle from adjoining land entered the Parcel and damaged the trees, vegetables and flowers he had planted and maintained on the Parcel. The defendants owned either the cattle or owned or leased the land from which the cattle entered the Parcel. 

Sometime in 2015, when his daughter was 19 or 20 years old, there was an attempt using a quitclaim deed to transfer the property from her back to Veiseh. Veiseh testified he prepared the quitclaim deed and caused it to be recorded. 

Veiseh’s lawsuit against the defendants was commenced in October 2011, and he alleged that defendant grazed cattle on land adjacent to the Parcel. The three causes of action in the second amended complaint were labeled (1) injury to farmland, (2) trespass, and (3) negligence. 

The trial court bifurcated the issue of Veiseh’s standing to assert the causes of action. In September 2016, the court held a three-day bench trial on that issue. At the close of the evidence on the bifurcated issue of standing, the court found Veiseh “was maintaining possession and control of the premises solely for his benefit and interest. Absolutely no interest in the custodian, absolutely no interest [or] benefit for the minor. The court ultimately concluded Veiseh “did not have an enforceable right of possession” and lacked standing to bring the claims. 

The trial court's decision relied heavily on the California Uniform Transfers to Minors Act and concluded Veiseh “did not have lawful possession and control where the property was to be held, maintained, and used solely for the benefit of the minor. [Veiseh] was an interloper on the property.” Based on this determination, the decision concluded Veiseh lacked standing to assert the causes of action set forth in the second amended complaint. 

The question of who may sue for trespass to realty was addressed by the California Supreme Court over a century ago in the 1911 decision in Lightner Mining Co. v. Lane. It is a well-settled proposition that the proper party plaintiff in an action for trespass to real property is the person in actual possession. No averment of title in plaintiff is necessary. 

The Supreme Court further explained the role of title in a trespass action:  A defendant who is a mere stranger to the title will not be allowed to question the title of a plaintiff in possession of the land. It is only where the trespasser claims title himself, or claims under the real owner, that he is allowed to attack the title of the plaintiff whose peaceable possession he has disturbed. 

These statements from Lightner Mining remain an accurate description of California’s approach to the tort of trespass to realty. Prior peaceful possession is sufficient to maintain the action of ejectment against one who enters as a trespasser, and generally prior possession alone is sufficient as against a defendant who has no better right or title. 

Title to the land is significant to the outcome of a trespass action only when the alleged trespasser claims title himself or claims rights under the true owner. 

In Veiseh, defendants did not claim title to the Parcel and they did not claim the true owner of the property granted them to right to enter the Parcel. Therefore, the fact that Veiseh did not hold recorded title to the Parcel at the time of the alleged trespass does not bar his trespass claim. 

The cause of action for trespass affords protection for a possessory, not necessarily an ownership interest. For that reason, the plaintiff need not have legal rights in the land. Even one in peaceable though wrongful possession of real property may sue in tort for forcible interference with that possession even in the absence of injury to his person or goods. 

The term “lawful possession” includes peaceable possession, which can be established by proving actual possession—that is, subjecting the land to one’s will and control. It follows that “the plaintiff need not have legal rights in the land. 

During the trial, defendants argued that Veiseh’s possession of the Parcel was not lawful because he was in violation of the California Uniform Transfers to Minors Act. Under the act, property transferred to a custodian for the benefit of a minor is held and managed by the custodian for the use and benefit of the minor. 

The trial court addressed defendants’ argument by finding that, following the transfer of the Parcel pursuant to the grant deed, Veiseh “continued to maintain possession and control of the [Parcel] solely for his own benefit and interest, with absolutely no intent to benefit the minor, through her custodian.” 

The court determined Veiseh’s handling of the Parcel and the benefits derived from it was not consistent with the terms of the conveyance or the California Uniform Transfers to Minors Act. Based on the failure to comply with the legislation, the court concluded Veiseh had no right of lawful possession in the Parcel during the times relevant to the alleged trespass. 

Defendants’ argument and the trial court’s reliance on the California Uniform Transfers to Minors Act to conclude Veiseh did not have lawful possession of the property presents a narrow issue of first impression. Defendants did not cite, and the Appellate Court did not locate, any authority for the principle that possession of real property is rendered unlawful for purposes of the tort of trespass when, contrary to the California Uniform Transfers to Minors Act, the property is not held for the use and benefit of the minor.  Veiseh’s failure to prove the Parcel was held for the benefit and use of his minor daughter did not render his possession unlawful. 

First, defendants’ reliance on Veiseh’s failure to comply with the California Uniform Transfers to Minors Act is contrary to the general principle that a person with peaceable, actual possession of real property has standing to pursue a trespass action. Standing is not defeated by the fact the possessor has no legal rights to the property. 

Second, defendants did not refer to any statutory provision or legislative history supporting the inference that the Legislature adopted the California Uniform Transfers to Minors Act for the purpose of protecting trespassers such as defendants or, more specifically, modifying the legal standards for standing to bring an action for trespass to realty. 

Third, the policy considerations underlying the lawful possession element of a trespass claim do not weigh in favor of holding that a failure to comply with the California Uniform Transfers to Minors Act should bar a person in possession from seeking redress for a trespass. 

Having established the element of lawful possession, Veiseh had shown it is reasonably probable that the trial court would have reached a result more favorable to him absent the error. Consequently, the second phase of the bifurcated trial was necessary.

LESSONS:

1.         Title is important to determine who has standing to sue, but for the tort of trespass, "lawful possession" is sufficient.

2.         Even one in peaceable, though wrongful, possession of real property may sue in tort for forcible interference with that possession.

3.         Sometimes old decisions still state the rule: a defendant who is a mere stranger to the title will not be allowed to question the title of a plaintiff in possession of the land.  

Landlords - Be Careful About Refusing Rent Payment

In the recent case of Bawa v. Terhune, the appellate division of the Los Angeles Superior Court held that a landlord who returns a tenant’s rent check without cashing it based on a de minimisshortage in the agreed-upon rent, enables the tenant to assert the landlord’s bad faith in rejecting the payment as a defense to an unlawful detainer action.

The California appellate court rejected the Landlord's argument that when a check is returned because it is one cent short and an eviction notice is served days later, the Tenant must re-tender payment following service of the notice and has no defense to the action after failure to re-tender. 

The jury in the unlawful detainer action brought by the Landlord Bawa determined that Tenant Terhune did not fail to make at least one rental payment to Landlord as required by the rental agreement, and the court entered judgment for the Tenant.

However, because the tender of the check was rejected, Tenant failed to pay the rent, and thus the judgment was not supported by the evidence. 

Because the jury determined (improperly) that Tenant paid the rent, it did not address whether there was a legitimate defense to the unlawful detainer cause of action. The appellate court reversed and remanded the case for a new trial. 

The Landlord filed the unlawful detainer case against Tenant based on a failure to comply with a three-day notice to pay rent or quit. Landlord alleged the rental unit was subject to the City of Los Angeles Rent Stabilization Ordinance (LARSO) (L.A. Mun. Code, § 151.00 et seq.), and the action was warranted based of a failure to pay rent (see L.A. Mun. Code, § 151.09, subd. A. (evictions under LARSO must be supported by “good cause”)). 

The three-day notice stated there was “unpaid and delinquent rent” of $507.61 for June 2017, consisting of the base $504 rent and a $3.61 City of Los Angeles Systematic Code Enforcement Program (SCEP) fee. Landlord stated that, unless tenant complied with the notice, he “does hereby elect to declare a forfeiture of the subject lease . . . and will institute legal proceedings for the unlawful detainer to recover possession of the premises.” 

Tenant filed an answer, generally denying the allegations in the complaint, including that he was in default in paying the rent. Tenant also asserted affirmative defenses, including that plaintiff “[breached the] warranty of habitability,” “filed this lawsuit to retaliate against tenant for . . . asserting tenant’s legal rights,” and “violated the [i]mplied [c]ovenant of [g]ood [f]aith and [f]air [d]ealing.” Tenant additionally asserted his “[b]reach was not material and thus will not support a forfeiture.” 

At the ensuing jury trial, Tariq Saeed, Landlord’s resident manager, testified defendant was obligated to pay $507.61 at the beginning of each month. In early June 2017, Saeed received a check drawn on defendant’s Wells Fargo bank account in the amount of $507.60. 

On June 7, Saeed mailed back the check, uncashed, with a letter stating “we are returning your check . . . since the rent amount is incorrect. The correct amount of your rent portion including the SCEP fees is currently $507.61.” 

Saeed served the three-day notice to pay rent or quit on Tenant on June 12 by posting the notice on Tenant’s apartment door and mailing a copy to him on June 13. 

After expiration of the notice period, Tenant sent Landlord two checks, one dated June 20, 2017, in the amount of $507.61 and another for $519.86, dated June 25, 2017. The checks were not deposited into Landlord’s account, nor were they negotiated. Tenant's testimony confirmed none of his checks for June were paid by his bank. 

The jury was instructed that, for Landlord to prevail, it had to find Tenant failed to pay the rent, a three-day notice was served on Tenant, and Tenant failed to comply with the notice. The jury was further instructed on Tenant’s affirmative defenses, including habitability and retaliation, but not “good faith and fair dealing” and that Tenant’s breach was immaterial. 

The first question in the special verdict form asked, “Did [defendant] fail to make at least one rental payment to [plaintiff] as required by the rental agreement?” The jury answered “No.” 

Per the instructions on the form, the jury did not answer any further verdict questions, including whether Landlord provided Tenant with a valid three-day notice, whether the notice stated the correct amount owed, and “Did J.S. Bawa waive the right to reject David Terhune’s tender of the rent check of $507.60?”

The court entered judgment in Tenant’s favor in accord with the jury’s verdict. 

A landlord must serve a tenant with a valid three-day notice in order to prevail in an unlawful detainer action. (Code Civ. Proc., § 1161(2).) It has long been recognized that the unlawful detainer statutes are to be strictly construed and that relief not statutorily authorized may not be given due to the summary nature of the proceedings. The statutory requirements in such proceedings must be followed strictly.  The remedy of unlawful detainer is a summary proceeding to determine the right to possession of real property. Since it is purely statutory in nature, it is essential that a party seeking the remedy bring himself clearly within the statute.

A tenant is guilty of an unlawful detainer and may be properly evicted only when the landlord proves the tenant falls within at least one of the enumerated circumstances. In the case of failure to pay rent, the elements of the action are set forth in Code of Civil Procedure section 1161(2). 

The statute provides that the tenant may be evicted when he or she continues in possession, without the permission of his or her landlord, after default in the payment of rent, pursuant to the lease or agreement under which the property is held, and three days’ notice, in writing, requiring its payment, stating the amount which is due, shall have been served upon him or her.  

Under the clear words of the statute, a three-day notice may only be served, “after default in the payment of rent.” But, given the context in which it is used, it is apparent the common definition, “failure to do something required by duty or law,” was intended. To ascertain the common meaning of a word, ‘a court typically looks to dictionaries'. A tenant has a duty to timely pay rent, and when the tenant fails to do so, the tenant defaults in the duty. 

When, as here, the form of payment used is an uncertified check (personal check is an uncertified check), the California Uniform Commercial Code provides, that unless otherwise agreed, if an uncertified check is taken for an obligation, the obligation is suspendedto the same extent the obligation would be discharged if an amount of money equal to the amount of the instrument were taken, and the following rules apply. Suspension of the obligation continues until dishonor of the check or until it is paid or certified. Payment or certification of the check results in discharge of the obligation to the extent of the amount of the check.

While a debt or obligation is “suspended,” a debtor is not in default in the paying of the obligation. Suspended means to hold in an undetermined or undecided state awaiting further information. Once the tendered check is negotiated by the payee and honored by the bank, the obligation is discharged; if it is dishonored, the obligation is revived. 

In order for California's Uniform Commercial Code to apply to suspend an obligation, there must be both a delivery by the debtor and an acceptance by the creditor, which then results in a surrender of the right to sue on the obligation until the instrument is due, but if the instrument is not paid on due presentment the right to sue on the obligation is “revived. Under the above principles, if a landlord does not accept a check, the duty to pay rent is not suspended, and thus the tenant is in default in paying rent. 

Landlord argued “[a] refused tender prior to service of a notice to pay rent or quit is not a defense to an unlawful detainer based on a notice demanding the rent that had previously been refused.” The Appellate Court addressed this issue to provide guidance to the trial court and the parties upon remand. 

Because an unlawful detainer involves forfeiture of the right to remain in a home, not only must the eviction statutes be construed with exactitude, but the right to evict must also be governed by equitable principles. Forfeitures are disfavored by courts, and contractual provisions must be strictly interpreted against the party for whose benefit it is created. (Civ. Code, § 1442.) 

A ‘“trivial” or “de minimis” breach of a rental obligation is not sufficient ground for termination. Permitting landlords 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.

It is true that the payment of the rent in accordance with the terms of the lease is one of the essential obligations of the lessee, and the failure of the lessee to properly discharge this obligation is a legal cause for dissolving the lease. But this presupposes that the lessor is desirous and willing that the lessee should pay his rent promptly, and will facilitate and not hinder him in doing so; that the lessor is not endeavoring merely to entrap his lessee into a technical breach of the lease.

Thus, when a landlord refuses to accept rent that is one penny short of the required amount, without any legitimate intent other than to manufacture a default in order to evict a tenant, a tenant may assert the landlord’s bad faith as an unlawful detainer defense. Frustration of purpose of a lease is also a legitimate defense to an unlawful detainer action which, if established, results in the tenant’s retention of the premises.  

Even though a tenant defaults in the payment of rent, equity will not countenance forfeiture of a lease when the default is both de minimis and the product of the landlord’s unreasonable refusal to accept rent.

Because the jury failed to determine whether Landlord proved all the elements of the unlawful detainer action, Landlord is not entitled to have the court enter judgment in his favor on remand. Both Landlord and were given the opportunity to litigate the issues in a new trial. 

LESSONS:

1.         Sometimes you can lose an appeal with the case remanded for a second jury to consider a defense not decided in the first trial, and this is the type of case the landlord should settle, if possible.

2.         Landlords must act in good faith and consistent with the contract, and trivial or de minimus breach of a rental obligation is not sufficient ground for termination.

3.         Because an unlawful detainer involves forfeiture of the right to remain in a home, not only must the eviction statutes be construed with exactitude, but the right to evict must also be governed by equitable principles

Recovery of Attorney's Fees in California Contractual Disputes by the Prevailing Party

The standard Residential Purchase Agreement in California provides for the recovery of attorneys fees to the prevailing party, if an attempt to mediate is made, and this can be an important remedy in any litigation concerning contractual disputes.

In the recent case of De La Carriere v. Greene, the trial court's decision regarding which of the litigants would recover their attorneys fees was reversed by the Court of Appeal based upon certain principals that can be applied to many contractual disputes.

Appellant Greene obtained a judgment in his favor and against Respondent Carriere for breach of a written loan agreement. The trial court declared Greene the prevailing party and awarded him attorney fees pursuant to a contractual attorney fees provision. 

Greene nonetheless appealed, contending the trial court erred in calculating his damages. After the Appellate Court questioned whether Greene waived his right to appeal by accepting payment on the judgment and executing an acknowledgment of satisfaction of judgment, Greene voluntarily dismissed his appeal. 

Carriere then moved for an award of attorney fees incurred on appeal, as the prevailing party on the appeal, which the trial court granted. In his appeal, Greene contended the trial court erred in awarding Carriere her attorney fees given that Greene was the prevailing party in the trial. 

The Court of Appeal agreed with Green, and reversed the trial court’s order. 

Greene and Carriere were close friends for many years.  In 1997, Greene agreed to loan Carriere $175,000 to help her purchase a home. As part of the agreement, Carriere executed a promissory note (Note) and deed of trust (Trust Deed), which named Greene’s retirement trust as the beneficiary, and his consulting business as the trustee. The interest rate on the loan was 14.5 percent, and the loan came due in 2008. 

In 2012, the parties’ relationship soured, and Greene demanded payment on the loan. By that time, Carriere had made only a few payments, all of which went to interest. Greene threatened to foreclose Carriere’s property if she did not pay the full amount due. 

In a preemptive strike, Carriere filed a complaint against Greene, seeking to void the Note and Trust Deed. Greene, in turn, filed a cross-complaint against Carriere, asserting a claim for breach of the Note. 

The trial court conducted a four-day bench trial, after which it found Carriere’s claims meritless and entered judgment of dismissal against her. On Greene’s cross-complaint, the court found Carriere breached the Note, but agreed with Carriere that the interest rate was usurious. After subtracting the usurious interest payments from the outstanding principal, the court entered judgment against Carriere and in favor of Greene for $150,329.21. 

An important exception to the usury law is whether a broker "arranges" the loan, so any loan that exceeds the usury limit (typically 10% per annum) needs to be arranged by a licensed broker.

The trial court additionally awarded Greene $123,975 in attorney fees pursuant to a provision in the Note stating if any action is instituted on the note, the undersigned promised to pay such sum as the Court may fix as attorney’s fees. 

The court explained the basis for its decision as Carriere commenced this action with a complaint that asserted incendiary claims such as forgery, self-dealing and breach of professional responsibilities. The Defendants defeated those claims, and Greene's trust recovered affirmative relief on its cross-complaint. Under those circumstances, the trial court ruled that Greene, his trust, and the trustee were the prevailing parties within the meaning of Civil Code §1717(b)(1). 

Carriere and Greene filed cross notices of appeal. In his opening brief on appeal, Greene argued the trial court erred in subtracting interest payments from the principal owed under the Note. 

While the appeals were pending, Carriere paid Greene the full amount owed under the judgment and as attorney fees. Greene, in turn, executed an acknowledgement of full satisfaction of judgment (acknowledgment of satisfaction), which Carriere filed in the trial court. 

According to Carriere, Greene also agreed to reconvey the Trust Deed and return the Note and Trust Deed, but failed to do so. As a result, Carriere filed a motion to expunge the lis pendens and compel reconveyance of the encumbrance, which the court denied for lack of jurisdiction while the appeal was pending. 

Around the same time, Carriere filed a motion in the Appellate Court to dismiss Greene’s appeal as moot. In response, the Appellate Court issued an order to show cause (OSC) inviting Greene to address why the appeal should not be dismissed. The Appellate Court noted the general rule that a party cannot accept the benefits of a judgment while challenging it on appeal, but noted there are exceptions to that rule. 

Rather than respond to the OSC, Greene requested dismissal of his appeal, which was granted. The Appellate Court noted that Carriere would recover her costs on appeal. The next day, Carriere requested dismissal of her cross-appeal. 

Carriere then filed in the trial court a motion for attorney fees incurred in Greene’s appeal and her post-trial motion to expunge the lis pendens and compel reconveyance of encumbrances. She made the request pursuant to Civil Code § 1717 and the attorney fees provision in the Note. Carriere alternatively requested that the court sanction Greene pursuant to Code of Civil Procedure § 128.5, for pursuing a frivolous appeal. 

Greene opposed the motion, arguing the trial court had already determined he was the prevailing party in the lawsuit. He also argued that Carriere was not the prevailing party on appeal given he had voluntarily dismissed his appeal. 

The trial court awarded Carriere $67,238 in attorney fees, explaining that an appeal and post-judgment are separate phases of the proceedings. California Rules of Court, rule 8.278 designates the standards for determining the prevailing party for recovering costs on appeal, and the Court of Appeal’s remittitur specifically designated Carriere as the prevailing party entitled to costs on appeal. 

Based on this Appellate Court’s review of the post-trial proceedings related to the lis pendens, Carriere was the prevailing party for those procedures as well. As the prevailing party, the trial court found that Carriere was entitled to recover fees under Civ. Code § 1717.

Greene contended the trial court erred in awarding Carriere attorney fees given he was the prevailing party in the action, and the Appellate Court agreed. 

A prevailing party is entitled to recover costs in any action or proceeding, except as otherwise expressly provided by statute. These costs, however, do not include the attorney fees the prevailing party has incurred in the litigation unless (1) an agreement between the parties provides for the recovery of those fees (e.g., written contract), or (2) a statute creates a right of recovery.

Here, Carriere sought attorney fees pursuant to the terms of the Note and Civil Code § 1717, which provides generally that, in any action on a contract with an attorney fees provision, the party prevailing on the contract shall be entitled to reasonable attorney fees in addition to other costs. Civil Code § 1717(b)(1) clarifies that the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. Under Civil Code § 1717, there may only be one prevailing party entitled to attorney fees on a given contract in a given lawsuit. 

An action on a contract as used in Civil Code § 1717 refers to the whole of a lawsuit rather than to discrete proceedings within a lawsuit. The trial and appeal, therefore, are considered part of the same action for purposes of determining contractual attorney fees. 

The trial court determined that Greene was the prevailing party in the lawsuit after finding he defeated Carriere’s claims and obtained affirmative relief on the cross-complaint. Carriere’s subsequent success on appeal and her post-judgment motion did not affect that determination. 

Indeed, both before and after appeal, Greene received a net judgment of $150,329.21. Consequently, he recovered the greater amount on the action on the contract and remained the prevailing party for purposes of Civil Code § 1717. As such, he was the only party entitled to attorney fees under the Note. The trial court erred in finding otherwise. 

 LESSONS

1.         The best chance to recover attorney fees is by winning the trial and being found to be the prevailing party in the discretion of the trial court.

2.         There can only be one prevailing party, and even winning an appeal or compelling a voluntary dismissal may not change the prevailing party.

3.         If you anticipate the other party will breach a written contract or make a meritless claim, consider including an attorney fee provision