Opinion
E067805
10-10-2018
INDUSTRIAL CATERING, INC., Plaintiff and Respondent, v. HENRY AGUILA et al., Defendants and Appellants.
Henry Aguila, in pro. per.; Law Offices of George A. Saba and George A. Saba for Defendant and Appellant Henry Aguila. Rigo Gutierrez, in pro. per.; Law Offices of George A. Saba and George A. Saba for Defendant and Appellant Rigo Gutierrez. The Bailey Legal Group, John L. Bailey and Therese Bailey for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. MVC1603669) OPINION APPEAL from the Superior Court of Riverside County. John V. Stroud, Judge. (Retired judge of the Sacramento Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Reversed. Henry Aguila, in pro. per.; Law Offices of George A. Saba and George A. Saba for Defendant and Appellant Henry Aguila. Rigo Gutierrez, in pro. per.; Law Offices of George A. Saba and George A. Saba for Defendant and Appellant Rigo Gutierrez. The Bailey Legal Group, John L. Bailey and Therese Bailey for Plaintiff and Respondent.
I. INTRODUCTION
Plaintiff and respondent, Industrial Catering, Inc. (Industrial Catering), prevailed in this unlawful detainer case after a jury trial. The tenants, defendants and appellants, Henry Aguila and Rigo Gutierrez, charge the trial court with numerous errors, but we need reach only one of their arguments. We agree with them that the three-day notice to pay rent or quit vastly overstated the amount of delinquent rent. This was fatal to Industrial Catering's cause of action, and we must therefore reverse.
II. FACTS AND PROCEDURE
A. The Complaint, Aguila's Demurrer, and Gutierrez's Default
Industrial Catering filed the unlawful detainer complaint against Aguila and Gutierrez in October 2016. It alleges as follows: On August 19, 2016, defendants leased a kitchen and 5,700 square feet of storage (the leased premises) owned by Industrial Catering. They agreed to pay $12,600 in monthly rent, due on the 19th of the month, plus utilities. Industrial Catering served defendants with a three-day notice to pay rent or quit on September 27, 2016, and they failed to comply with that notice. The three-day notice demanded payment of $17,538.17. Industrial Catering attached the lease and three-day notice to the complaint.
Aguila filed a demurrer arguing in part that the three-day notice was defective because it overstated the amount of rent due. The court overruled the demurrer. Gutierrez did not join in the demurrer, and in November 2016, the clerk entered the default of Gutierrez. B. The Evidence at Trial Relating to Payment of Rent
The two-year lease identifies Industrial Catering as the landlord and Aguila and Gutierrez as the tenants. The leased premises consist of a commercial kitchen and a warehouse that are part of a larger 48,000-square-foot building. The "Commencement Date" of the lease is August 19, 2016. If Industrial Catering was unable to deliver possession of the leased premises on the commencement date, such date was extended to the date it made possession available to Aguila and Gutierrez. The "Base Rent" of $12,600 "is payable in advance on the 1st (or [ ] ___) day of each calendar month, and is delinquent on the next day." That is, the lease has an option for the parties to make the base rent due on some day other than the 1st, by checking the box and filling in the blank, but the parties here did not do that.
The parties used the California Association of Realtors Commercial Lease Agreement form (C.A.R. Form CL).
The lease further provides: "If the Commencement Date falls on any day other than the first day of the month, Base Rent for the first calendar month shall be prorated based on a 30-day period. If Tenant has paid one full month's Base Rent in advance of Commencement Date, Base Rent for the second calendar month shall be prorated based on a 30-day period." The lease stated that the first month's rent defendants provided covered the period of August 19 to September 18, 2016.
The lease defines other payment obligations above the base rent as simply "Rent." Such "Rent shall be paid within 30 days after Tenant is billed by Landlord." Similarly, under "Tenant Operating Expenses," the lease states: "Tenant agrees to pay for all utilities and services directly billed to Tenant." The lease then refers to "Attachment 'A,'" which sets forth fixed amounts for electricity, water, pest control, and linen services, but also provides that "[u]tilities will be adjusted according to usage, as needed."
On August 18, 2016, Aguila wrote Industrial Catering a $34,300 check for the first and last month's rent ($25,200) and the security deposit ($9,100). But according to Aguila, he did not get the keys to the premises or sign the lease on August 19, despite the "August 19, 2016" date next to his signature on the lease. Aguila testified he did not enter into the lease until August 29, 2016. The parties had to negotiate Attachment A to the lease, and until that was completed, Aguila refused to sign the lease. Attachment A bears a date of August 29, 2016, under the parties' signatures. Aguila said he took possession of the leased premises on September 1, 2016, and Gutierrez thought he took possession on August 29, 2016.
William Wade is the corporate secretary of Industrial Catering. According to Wade, he met with Gutierrez and gave him the lease on August 18, 2016. Gutierrez returned the lease to him the next day with Aguila's signature on it. Gutierrez also signed the lease that day and gave Wade a check from Aguila for the first and last month's rent and security deposit. Wade gave the keys to Gutierrez that same day—August 19, 2016. Gutierrez called Wade "a little bit after signing" and said Aguila wanted to add some terms to the lease, and so they added a paragraph to Attachment A. The parties signed the revised Attachment A on August 29, 2016.
Defense counsel asked Wade whether the rent should be prorated under the lease for a partial payment on August 19, 2016, but Wade did not think so. Instead, Wade's understanding was that the full rent and utilities were due every month on the 19th: "[T]he contract, from what I understand—and I'm not real good at this—but it says August 19th to September 18th, so that's a complete month. And so that's how I think it was set up, that it was due every 19th as far as my understanding is concerned."
Wade believed the second month's rent plus utilities became due on September 19, 2016. Defendants did not pay, and Industrial Catering served them with a three-day notice dated September 27, 2016, stating that their rent was delinquent in the amount of $17,538.17.
Aguila did not think defendants owed Industrial Catering any rent on September 27 because they had taken possession on September 1 and had already paid rent for September—the first month's rent. October rent was not yet due.
Wade testified that, for the period October 19 to November 18, 2016, defendants owed Industrial Catering $18,232.51 in rent and utilities, and for the period November 19 to December 18, 2016, they owed $17,101.66 in rent and utilities. As of the trial in early January 2017, defendants still possessed the leased premises.
Aguila moved for nonsuit after Industrial Catering rested its case. He argued, among other things, that Industrial Catering had not carried its burden of proof because the three-day notice overstated the amount of rent due. The court ruled there was "sufficient evidence at th[at] point for the jurors to make factual findings" and denied the motion. C. The Verdict and the Entry of Judgment Against Both Defendants
The jury returned a verdict against Aguila and awarded Industrial Catering $53,000 in damages. After the trial, the court held a default prove-up hearing against Gutierrez and entered a single judgment "on jury verdict and default prove-up" against both defendants. (Capitalization omitted.) The judgment made defendants jointly and severally liable for the $53,000 damages award and declared that Industrial Catering was entitled to immediate possession of the leased premises. D. Aguila's Motion for New Trial or Judgment Notwithstanding the Verdict
Aguila filed a motion for new trial or judgment notwithstanding the verdict. In part, he argued the evidence was insufficient to support the verdict because it showed the three-day notice overstated the rent due and was thus defective. The court denied the motion.
III. DISCUSSION
"An unlawful detainer action is a summary proceeding, the primary purpose of which is to obtain the possession of real property in the situations specified by statute." (Vasey v. California Dance Co. (1977) 70 Cal.App.3d 742, 746.) Because of the highly summary nature of the proceedings, the California courts have strictly construed the unlawful detainer statute (Code Civ. Proc., § 1161), and a landlord alleging unlawful detainer must strictly follow the statutory requirements (Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195 Cal.App.3d 1032, 1070-1071; Kwok v. Bergren (1982) 130 Cal.App.3d 596, 599). Otherwise, the landlord's "remedy is an ordinary suit for breach of contract with all the delays that remedy normally involves and without restitution of the demised property." (Cal-American Income Property Fund IV v. Ho (1984) 161 Cal.App.3d 583, 585.)
All further statutory references are to the Code of Civil Procedure.
The unlawful detainer statute requires a three-day notice to "stat[e] the amount which is due." (§ 1161, cl. (2).) The notice must not overstate the amount due. (North 7th Street Associates v. Constante (2016) 7 Cal.App.5th Supp. 1, 5.) "A notice to pay rent or quit which overstates the rent due is ineffective and will not support an action for unlawful detainer." (Ernst Enterprises, Inc. v. Sun Valley Gasoline, Inc. (1983) 139 Cal.App.3d 355, 359; North 7th Street Associates v. Constante, supra, at p. 5; Jayasinghe v. Lee (1993) 13 Cal.App.4th Supp. 33, 37.)
There is some leeway in the case of commercial leases. (§ 1161.1.) A commercial landlord may overstate the amount owing, so long as the three-day notice "clearly identifie[s]" the amount as an estimate, and the court or jury determines that the landlord "reasonably estimated" the amount. (§ 1161.1, subd. (a).) The amount claimed in the notice is a presumptively reasonable estimate if it is "no more than 20 percent more . . . than the amount determined to be due." (§ 1161.1, subd. (e).)
The trial court instructed the jury here on these principles. Specifically, it told the jury that, to establish the unlawful detainer claim, Industrial Catering had to prove "as of [the] date of [the] three-day notice, September 27, 2016, at least the amount stated in the three-day notice was due." (See CACI No. 4302.) It also told the jury that Industrial Catering had to prove "the notice stated no more than a reasonable estimate of the amount due." (See CACI No. 4303.) When the jury returned the general verdict in favor of Industrial Catering, it impliedly found the three-day notice did not overstate the amount due, and the notice reasonably estimated the amount. (Baxter v. Peterson (2007) 150 Cal.App.4th 673, 678 ["A general verdict implies a finding in favor of the prevailing party of every fact essential to support that verdict."].)
But the record lacks substantial evidence to support these findings. (WDT-Winchester v. Nilsson (1994) 27 Cal.App.4th 516, 527 [reviewing trier of fact's findings for substantial evidence after unlawful detainer trial].) To begin with, the statute that permits commercial landlords to overstate but reasonably estimate the amount of delinquent rent does not apply here. To trigger that right, the three-day notice must clearly identify the amount as an estimate. (§ 1161.1, subd. (a); WDT-Winchester v. Nilsson, supra, at p. 526.) Industrial Catering's three-day notice did not do that. Rather, it simply stated defendants were delinquent in the amount of $17,538.17. Industrial Catering was therefore bound by the more rigid rule that the notice must not overstate the amount due.
The evidence shows the three-day notice vastly overstated the delinquent rent and utilities. Wade and Aguila presented conflicting accounts of when defendants took possession of the leased premises and thus when the lease officially commenced. According to Wade, they took possession on August 19, 2016, not September 1, 2016, as Aguila asserted. Even assuming the jury credited Wade's version, defendants did not owe $17,538.17 on September 27.
The lease is clear—the rent of $12,600 is due on the 1st of the month, and it becomes delinquent the next day. The first month's rent that Aguila put down (along with the last month's rent and security deposit) covered August 19 to September 18, 2016. But nothing in the lease changed the due date for rent because of this first mid-month payment. The parties had the option to select another due date for the rent by checking a box and inserting another date, but they did not. When the commencement date falls on any day other than the 1st, the lease provides that the rent for the month is simply prorated based on a 30-day period. The prorated rate is $420 per day, based on a monthly rent of $12,600.
Accordingly, the September 2016 rent became due on September 1, but given that Aguila had paid through September 18, defendants owed rent only for September 19 through September 30. At $420 per day, that amounted to $5,040. Defendants also agreed to pay utilities "directly billed to" them, and the lease made anything above the base rent due within 30 days after Industrial Catering had billed defendants. However, there is no evidence whatsoever that Industrial Catering billed them for utilities before its payment demand in the three-day notice. At most, defendants were delinquent in the amount of $5,040, and the three-day notice demanding $17,538.17 exceeded the amount owed by $12,498.17.
This overstatement is nowhere near the 20 percent margin of flexibility given to commercial landlords who want to invoke the presumption of reasonability for their estimates of delinquent rent. Thus, even if Industrial Catering had properly invoked the "reasonable estimate" right, we would conclude the record lacks substantial evidence that $17,538.17 was a reasonable estimate. (WDT-Winchester v. Nilsson, supra, 27 Cal.App.4th at p. 531.)
Wade's belief that a full month's rent was due on the 19th of every month does not control. "'The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties.' [Citations.] 'Such intent is to be inferred, if possible, solely from the written provisions of the contract.' [Citations.] 'If contractual language is clear and explicit, it governs.'" (State of California v. Continental Ins. Co. (2012) 55 Cal.4th 186, 195.) That is the case here, where the payment terms of the lease are plain and not susceptible to the interpretation Wade would impose. Moreover, even if the terms were ambiguous and required extrinsic evidence to interpret them, "[t]he parties' undisclosed intent or understanding is irrelevant to contract interpretation." (Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 956.) Industrial Catering proffered no evidence that Wade disclosed his subjective understanding of the lease, which contradicted the clear and explicit terms of the document, to defendants.
In sum, the three-day notice was defective for vastly overstating the amount of rent due, and it could not support this action. This conclusion applies with equal force to Aguila and Gutierrez, who appeals from a default judgment. "On appeal from the default judgment, '[a]n objection that the complaint failed to state facts sufficient to constitute a cause of action may be considered.'" (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 282.) If the allegations of the complaint do not state any proper cause of action, the default judgment cannot stand. (Ibid.) Although this matter went to trial, the defect in the three-day notice was apparent on the face of the complaint because it attached the lease and the notice. The lease contradicts the complaint's allegation that the rent was due on the 19th of the month, and the lease controls. (Ibid. ["'If facts appearing in the exhibits [to the complaint] contradict those alleged, the facts in the exhibits take precedence.'"]) The notice's strict compliance with the law is an essential element of Industrial Catering's case (Davidson v. Quinn (1982) 138 Cal.App.3d Supp. 9, 11), and without it, Industrial Catering cannot state a cause of action for unlawful detainer. We must reverse the judgment based on the defective notice and direct the trial court to enter judgment for both defendants. (WDT-Winchester v. Nilsson, supra, 27 Cal.App.4th at pp. 534-535.)
At oral argument, Industrial Catering asserted, for the first time, that we should not direct the trial court to enter judgment for defendants, and we should instead direct the court to consider restitution for the time defendants occupied the leased premises without paying rent. Industrial Catering also expressed a concern over the res judicata or collateral estoppel effect a judgment for defendants could have in a pending civil action between these same parties. (See fn. 5, post.) It cited Beach Break Equities, LLC v. Lowell (2016) 6 Cal.App.5th 847 (Beach Break) to support these arguments. The issues of restitution and res judicata or collateral estoppel are not properly before us. We are concerned only with Industrial Catering's defective three-day notice and resulting failure to prove an essential element of the unlawful detainer cause of action, the only cause of action stated in the complaint. It is well settled that such a failure of proof requires a judgment for defendants, and Beach Break does not change that result. Beach Break did not deal with the issue of a defective three-day notice.
Although we need not reach defendants' remaining contentions of error, we are compelled to address one. Defendants repeatedly charge the trial court with bias and misconduct for its evidentiary rulings on Industrial Catering's exhibits. They cite Aguila's filed objections to the exhibits, the admitted exhibits, and pages of the reporter's transcript showing the court admitted exhibits to which Aguila did not object. None of these citations support accusations of bias and misconduct. In fact, we have reviewed the entire record and see no evidence to support this charge. The fact that the court declined to sustain Aguila's evidentiary objections does not establish bias or misconduct. Our justice system requires courts to routinely rule in favor of one party or the other. That is part of the courts' core function—to settle disputed issues. We urge circumspection in making allegations of bias and misconduct in the future.
IV. DISPOSITION
The judgment is reversed. On remand, the trial court shall enter judgment for defendants. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
Industrial Catering filed a request for judicial notice and motion to augment the record with two documents: (1) a minute order in a civil action between these parties (case No. RIC1613262), which denied Aguila's motion to consolidate the civil action and this unlawful detainer action; and (2) the notice of ruling on that same motion to consolidate. We deny the request for judicial notice and motion to augment, as the documents are "not relevant to dispositive issues on appeal." (Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 482.)
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
FIELDS
J. We concur: MILLER
Acting P. J. CODRINGTON
J.