Case Number: BC577100 Hearing Date: July 13, 2017 Dept: 37

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES—CENTRAL JUDICIAL DISTRICT

BLANCA CAROLINA MENJIVAR

MERINO, ET AL.

Plaintiffs,

vs.

Metro apts, LLC, et al.

Defendants.

 

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Case No.: BC577100

Tentative Memorandum of Decision

 

STATEMENT OF THE CASE

This is an action brought by tenants against the owner and managers of real property located at 3838 Gibraltar Avenue, Los Angeles, California 90008 based on the alleged lack of habitable living conditions in the subject rental units. As set forth in the complaint, the factual background is as follows. Plaintiffs allege that the subject property has been inspected and cited on multiple occasions by the Los Angeles Housing and Community Investment Department (“Housing Department”) and the Los Angeles Department of Public Health (“Health Department”). The habitability violations concern both the interior and exterior of the premises and include deteriorated flooring, walls, ceilings and cabinets; inadequate fire protection; faulty electrical wires and outlets; inadequate heating and ventilation; improper sewage disposal; deteriorated walls and ceiling; inoperable doors and windows; excessive odors; dysfunctional plumbing systems; dampness; and infestations of cockroaches, bedbugs, and other vermin.

Plaintiffs allege certain injuries and health problems caused or exacerbated by exposure to these living conditions. Specifically, Plaintiffs allege physical injuries, severe mental suffering, frustration, and anxiety arising out of the conditions of the premises. Consequently, Plaintiffs filed this action, asserting causes of action for violation of (1) Civil Code, section 1942.4, (2) breach of warranty of habitability, (3) private nuisance, (4) violation of Business and Professions Code section 17200 (“UCL”), and (5) negligence.

The prior owner, Patrick De La Torre, was criminally prosecuted for neglecting dozens of properties in the Los Angeles area, and was forced to sell all of his buildings including 3838 Gibraltar Avenue. Defendant Metro Apts, LLC purchased the subject property in December 2013.

On January 3, 2017, Plaintiffs proceeded to trial on all of their claims except the fourth cause of action for violations of the UCL, and on January 17, 2017, the jury returned a verdict in Plaintiffs’ favor. Defendant moved the court to dismiss the UCL claim on February 2, 2017, and the court denied the motion to dismiss. The court heard additional evidence on the UCL claim on June 2, 2017. The following is the court’s analysis and decision on the UCL claim.

DISCUSSION

  1. Fourth Cause of Action: Violations of the Unfair Competition Law

 

  1. Legal Standard

 

To assert standing under the UCL, a party must “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that the economic injury was the result of, i.e.,caused by, the unfair business practice or false advertising that is the gravamen of the claim.” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322.) California law previously authorized “any person acting for the interests of … the general public” to sue for relief for unfair competition notwithstanding lack of injury or damages”; however, Proposition 64, approved by the voters at the November 2, 2004 General Election, changed the standing requirements for a UCL claim. (Hall v. Time Inc. (2008) 158 Cal.App.4th 847, 852.) A private person now has standing to assert a UCL claim only if he or she (1) “has suffered injury in fact,” and (2) “has lost money or property as a result of the unfair competition.” (Hall, supra, at 852, citing Bus. & Prof. Code, § 17204.)

 

  1. Unlawful Action under the UCL

 

As an initial matter, Defendant contends that California Courts have never held habitability violations to construe an unlawful act within the meaning of the UCL. Defendant specifically contends that the UCL only applies to intentional acts and further argues that it has not engaged in a “business practice” of committing negligent habitability violations.

The UCL proscribes “unfair competition,” which it defines as, among other things, “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code, § 17200.) By proscribing any “unlawful” business practice, the UCL “ ‘ “borrows” violations of other laws and treats them as unlawful practices’ that the unfair competition law makes independently actionable.” (Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 (Cel-Tech).) In 1992, the Legislature amended section 17200 to expand the definition of unfair competition to include “any unlawful, unfair, or fraudulent business act or practice,” overruling former case law that had limited the statute’s application to practices involving more than a single transaction. (Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 570, emphasis in original, superseded by Proposition 64 as described above.) As can be seen, the UCL has very broad coverage.

On January 17, 2017, the jury found that Defendant liable for violations of Civil Code section 1942.4, breach of the warranty of habitability, nuisance, and negligence. Defendant’s violation of section 1942.4 is sufficient to support a UCL claim under the “unlawful” prong.[1] (See Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 681 [“Virtually any law or regulation—federal or state, statutory or common law, can serve as a predicate for a Business and Professions Code section 17200 ‘unlawful’ violation. [Citation.],” internal quotations omitted].) [2]

Defendant, however, challenges the jury’s finding and contends that Plaintiffs have not proven a violation of Civil Code, section 1942.4, as a matter of law. In order to prove a violation of Civil Code, section 1942.4, Plaintiffs must have presented evidence:

(1) The dwelling substantially lacks any of the affirmative standard characteristics listed in Section 1941.1 or violates Section 17920.10 of the Health and Safety Code, or is deemed and declared substandard as set forth in Section 17920.3 of the Health and Safety Code because conditions listed in that section exist to an extent that endangers the life, limb, health, property, safety, or welfare of the public or the occupants of the dwelling.

(2) A public officer or employee who is responsible for the enforcement of any housing law, after inspecting the premises, has notified the landlord or the landlord’s agent in writing of his or her obligations to abate the nuisance or repair the substandard conditions.

(3) The conditions have existed and have not been abated 35 days beyond the date of service of the notice specified in paragraph (2) and the delay is without good cause. . . .

(4) The conditions were not caused by an act or omission of the tenant or lessee in violation of Section 1929 or 1941.2.

 

(Civ. Code, § 1942.4, subd. (a).)

Plaintiffs submitted evidence of official inspection reports by Los Angeles County Environmental Health Department Inspector Vachon Barkhordarian demonstrating the property was cited for the presence of cockroaches in January 2014, March 2014, April 2014, and June 2014, as well as the report of Los Angeles Housing Department Inspector Linn Melvin demonstrating that the property was again cited on February 2015. (Trial Ex. 39-42, 44.) This evidence establishes that the building was cited for habitability violations that were unabated within 35 days beyond the date of notice.

Defendant contends that section 1942.4 requires the public officer to have found a substandard condition in Plaintiff’s “apartment units” and further contends that Inspector Vachon Barkhordarian and Inspector Linn Melvin testified that neither Unit 22 nor Unit 23 were specifically examined or referenced in these reports. (1/9/17 Trial Transcript (“Trial Tr.”) at 26:13-24; 28:17-23; 32:4-11; 34:7-17; 37:28-38:7; 62:23-63:1.) According to Defendant, the only actionable citation was that by Los Angeles County Environmental Health Department Inspector Tam Nguyen who testified that she observed cockroaches and rodent droppings in Unit 23 on February 9, 2015 and found that the issues had been abated when she re-inspected Unit 23 on March 31, 2015. (Trial Tr. 1/6/2017, at 7:25-9:14.)

The court disagrees. The statutory language of section 1942.4 concerns the liability of “[a] landlord of a dwelling” after inspection of “the premises” by a public officer and notification of the nuisance or substandard condition, in writing. (See Civ. Code, § 1942.4, subd. (a).) Defendant identifies no legal authority to support its proposition that a public officer must examine and cite every affected individual unit in a building for the occupants of the corresponding units to recover under section 1942.4. (Cf. McNairy v. C.K. Realty (2007) 150 Cal.App.4th 1500, 1506 [“While appellants worry about ‘[w]indfall judgments based on emotional distress,’ section 1942.4 applies only if a building is found to be untenantable under section 1941.1. That means that the condition of the premises ‘are not fit for occupancy or rental.’ [Citation.]”], emphasis added.) Thus, Plaintiffs did not need to present evidence of the inspection and citation of units 22 and 23 to prove their section 1942.4 claim—Plaintiffs only needed to prove that the public officers inspected the “premises.”

At trial, Julia Eickhoff, a supervisor for Defendant, testified that pest control reported large infestations of cockroaches in units in the building. (1/11/17 Trial Tr. at 179:5-182:28; see Tr. Ex. 64.) Plaintiff’s entomological expert, Herb Field, testified that he reviewed the records of the building and that the fact that ten distinctive units “all over the structure” had problems with German cockroaches over the 24-month period from 2014 to 2016 indicates a high likelihood that other units in the building were also infected. (1/4/17 Trial Tr. at 44:6-26.)

Based on the evidence presented, the jury found that Defendant violated Civil Code, section 1942.4 with respect to all Plaintiffs; that the defective condition or conditions materially affected habitability such as to endanger the life, limb, health, property, safety, or welfare of the public or Plaintiffs; that Defendant was notified of the violation or violations by a public officer; that the defective condition or conditions existed unabated for 35 days beyond the date of service of the notice, without good cause for delay; that Plaintiffs did not cause, by act or omission, the defective conditions; and that the defective conditions caused injury to Plaintiffs. (Special Verdict Forms ¶¶ 1-7.) Plaintiffs presented evidence to support each element of a cause of action for a section 1942.4 violation, and Defendant’s argument fails. Thus, Plaintiffs have shown a violation of the unlawful prong of the UCL.

 

  1. Restitution under the UCL

 

Business and Professions Code, section 17203 authorizes the court to fashion remedies to prevent, deter, and compensate for unfair business practices in addition to injunctions. (Cortez v. Purolator Air Filtration Prods., Co.(2000) 23 Cal.4th 163, 173.) Restitution requires a plaintiff to prove that the defendant obtained something to which it was not entitled and that the plaintiff gave up something which he or she was entitled to keep. (Day v. AT&T Corp.(1998) 63 Cal.App.4th 325, 340.) “[T]he trial court’s discretion to award restitution under the UCL is very broad. [Citation.]” (People ex rel. Kennedy v. Beaumont Inv., Ltd. (2003) 111 Cal.App.4th 102, 135.)

Defendant contends that courts typically apply the “market approach” in calculating restitution and that restitution should be “measured by the diminution in value of [the tenants’] leasehold interests resulting from the unlawful business practices.” (Def. Bench Memo 8-9, citing Beaumont, supra, 111 Cal.App.4th at p. 135.) According to Defendant, Plaintiff’s request for restitution should be denied because Plaintiffs failed to produce evidence of the market value of their apartment units. The court disagrees. Defendant’s restitution argument fails to differentiate between contractual and statutory remedies. (See Beaumont, at p. 134 [“[R]estitution may be awarded in contract actions. But it is also available as a remedy to redress statutory violations.”].) “Where restitution is ordered as a means of redressing a statutory violation, the courts are not concerned with restoring the violator to the status quo ante.” (Ibid.) “The focus instead is on the victim.” (Ibid.) “The object of [statutory] restitution is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest. [Citation.]” (Ibid.)

In Beaumont, the trial court found that defendant mobile home park owners unlawfully forced tenants to accept long-term leases in order to avoid the City of San Jose rent control ordinance. (Id. at p 108.) The Court of Appeal affirmed the trial court’s decision requiring the defendants “to disgorge unauthorized rents and to restore that money to the affected tenants,” based on the Defendants’ collection of above-Ordinance rents. (Id. at p. 135.) The Beaumont Court additionally ordered the defendants “to pay restitution to certain tenants for the diminution in value of their leasehold interests resulting from defendants’ unlawful business practices.” (Ibid.) This additional restitution, however, was separate and in addition to the ordered disgorgement of unauthorized rents. (Id. at p. 132.) Here, as in Beaumont, the underlying unlawful business practice was a statutory violation, and Plaintiffs need only prove violation, standing, and their entitlement to restitution pursuant to the underlying statute.

On January 17, 2017, the jury found that Defendant violated Civil Code, section 1942.4. (Special Verdict Forms ¶¶ 1-6.) Section 1942.4, subdivision (a) provides that a landlord may not demand rent or collect rent if the established conditions exist prior to a landlord’s demand or notice. (Civ. Code, § 1942.4, subd. (a).) Accordingly, Plaintiffs need to demonstrate that they paid rent and the amount paid in order to be entitled to restitution under section 1942.4.

Defendant contends that Plaintiff Maria Garcia is not entitled to restitution of rent, arguing that Garcia, herself, did not pay rent, and Defendant points to testimony from Garcia’s August 26 deposition as evidence. (Declaration of James Lumsden (“Lumsden Decl.”) [3] Ex. A (August 26, 2016 Deposition of Maria Valdivia Garcia) at 49:9-12.) This testimony, however, does not appear to have been submitted at trial and is not in evidence. It is accordingly excluded from the court’s consideration. (See Evid. Code, § 770.) At trial, Plaintiff Garcia testified that she and her family paid rent every month, but her testimony is at best ambiguous as to whether Garcia, herself, paid any rent or shared finances with someone who did—as compared to another member of her family who is not a plaintiff in this case or a third party. (Trial Tr.1/10/2017 at 54:9-10.) Further, Plaintiff Garcia did not testify to the amount of the monthly rent collected for the unit, or the amount of the rent that she paid, if any. (See ibid.) The only evidence Plaintiffs offered regarding the rent paid for unit 22 were two money orders in an amount totaling $1,118.00, signed by “Ramon Gallozo,” who is not a plaintiff in this action. (Trial Ex. 4.) At best, this evidence could give rise to the inference that Gallozo, who is not a plaintiff in this case, paid that amount in rent on the date marked on the money order. That evidence is insufficient to meet Plaintiff Garcia’s burden to establish that she paid monthly rent in the amount of $1,118.00, or any amount, or to establish the specific portion of rent that a plaintiff in this action actually paid. To the contrary, this evidence suggests that another individual or individuals, including Gallozo, paid all or at least a portion of the rent charged for the unit. Thus, Garcia has not met her burden of proof to show she, or any other Plaintiff, suffered losses with respect to unit 22, such that she is entitled to restitution a monetary award as restitution.

In contrast, Plaintiff Merino testified that she paid $875.00 in monthly rent for unit 23, and Plaintiffs offer, as evidence, a copy of a money order in the amount of $875.50 in Plaintiff Hernandez’s name. (Trial Tr. 1/517 at 200:14-15; Trial Ex. 23.) This evidence is sufficient to establish that Plaintiffs Merino and Hernandez are entitled to a specific amount in restitution for wrongfully collected rent.[4] There is no evidence, however, that Plaintiff Orellana paid any amount of rent for this unit.

Plaintiffs request restitution of 75% of rent monies paid. Defendant does not challenge the amount sought for unit 23. Accordingly, the court finds that Plaintiffs Merino and Hernandez are jointly entitled to restitution in the sum of $13,789.13 for wrongfully collected rent with respect to unit 23. [5]

 

  1. Offsets Based on the January 17, 2017 Prior Award

 

Defendant contends that any restitution granted to Plaintiffs must be offset by the prior award to prevent a double recovery and a violation of Defendant’s due process rights. (Def. Bench Memo 10, citing People v. National Association of Realtors (1981) 120 Cal.App.3d 459, 475, fn. 7 [declining to address the double recovery question but recognizing that this concern “may be overcome through the use of offset or limiting the complaint when the problem arises”].) “UCL remedies are cumulative to remedies available under other laws (§ 17205) and, as section 17203 indicates, have an independent purpose—deterrence of and restitution for unfair business practices. [Citation.]” (Cortez v. Purolator Air Filtration Prods. Co., supra, 23 Cal.4th at p. 179.) A damages award for noneconomic damages is separate from an economic award for restitution. (See Id. at p. 174 [“[A] damages award in a negligence action in tort may include monetary compensation for lost wages, pain and suffering, physical injury, and property damage. [Citation.] That damage award would not include an element of restitution.”].)

Although Defendant contends that an off-set is necessary to prevent a double recovery by Plaintiffs, Plaintiffs’ award under the UCL is restitution for Plaintiff’s economic losses from wrongfully collected rent, whereas the damages awarded by the jury were to compensate Plaintiffs for their non-economic losses including physical pain and mental suffering. (See Special Verdict Forms ¶¶ 19.) Defendant acknowledges that the jury awards were entirely non-economic. (Def. Closing Br. ¶ 11.) Thus, the court finds that an offset is not warranted as the monetary award on the UCL claim is for Plaintiffs’ separate and distinct losses. The court thus declines to offset Plaintiff’s UCL award with the award granted by the jury.

 

CONCLUSION

 

Based on the foregoing, the following is ordered:

 

  1. The court finds that Defendant Metro Apts LLC violated section 17200 based on its unlawful acts in violation of Civil Code, section 1942.4.
  2. The court GRANTS restitution in the amount of $13,789.13 to Plaintiffs Merino and Hernandez jointly.[6]
  3. The court DENIES restitution to Plaintiff Garcia on the grounds that Garcia has not met her burden to prove the amount of her monthly rent and the portion of her rent, if any, that she or someone with whom she shared finances paid.
  4. The court DENIES Defendant’s request to off-set Plaintiffs’ UCL recovery by the January 17, 2017 jury awards.

 

 

DATED: JULY 14, 2017 ___________

Marc Marmaro, Judge

of the Superior Court

[1] See also People ex rel. Sepulveda v. Highland Fed. Savings & Loan (1993) 14 Cal.App.4th 1692, 1701, fn. 4 [reversing a trial court’s ruling sustaining demurrer against causes of action including a UCL claim based on habitability law violations]; id. at p. 1700 [“The thrust of the complaint charges Highland with engaging in unfair business practices and fraud for the purpose of maximizing its profits. Such goal was achieved by creating a situation where rents, which were collectable only if the units complied with the habitability laws, were generated without the expenditure of sums necessary to ensure such compliance. Thus, the slum nature of the buildings was perpetuated and the tenant plaintiffs were defrauded of their right to a habitable dwelling.”]

 

[2] Defendant further contends that application of the UCL would violate Supreme Court precedent that strict liability cannot be applied in habitability cases. (Def. Bench Memo 5, citing Peterson v. Superior Court (1995) 10 Cal.4th 1185, 1206.) The court disagrees. The UCL does not apply strict liability for habitability violations; the UCL may, however, apply strict liability for violations of other laws that require proof of habitability violations. (See Paulus v. Bob Lynch Ford, Inc., supra, 139 Cal.App.4th at p. 678.) A plaintiff must still prove all of the elements of the causes of action for the underlying violation in order to also be liable under the illegal prong of the UCL. Here, a jury found that Plaintiffs had proven the notice and failure to timely abate elements of their section 1942.4 claim; thus, the UCL does not hold Defendant strictly liable for alleged habitability violations, it holds Defendant strictly liable for proven habitability violations. (Cf. Peterson, supra, 10 Cal.4th at p. 1206 [holding that strict products liability cannot be applied to a landlord because “a tenant cannot reasonably expect that the landlord will have eliminated defects in a rented dwelling of which the landlord was unaware and which would not have been disclosed by a reasonable inspection”].)

[3] The court notes that the Lumsden Declaration is unclear as to the identity of the declarant. The declaration is titled the Declaration of James C. Lumsden and is signed by Lumsden, but the declaration itself purports to be that of “Thomas H. Citron.”

 

[4] Defendant contends that claims under the UCL are equitable in nature such that a court is not required to award restitution. Defendant further contends that an award of restitution is “barred” when a case involves an “adequate legal remedy.” (Def. Bench Memo 10-11, citing Prudential Home Mortg. Co. v. Sup. Ct. (1998) 66 Cal.App.4th 1236, 1249 and Prata v. Sup. Ct. (2001) 91 Cal.App.4th 1128, 1145.) Neither of Defendant’s cited cases support the proposition that a monetary award of restitution under the UCL is barred by a monetary award of non-economic damages. Prudential Home considered the issue of reconveyance under Civil Code, section 2941, whereas Prata did not address issues related to an adequate legal remedy; thus, both cases are inapposite, and Defendant’s argument fails.

 

[5] Defendant additionally contends that Plaintiffs are not entitled to restitution because the Los Angeles Housing and Community Investment Department (“LAHCID”) did not refer the subject building to its Rent Escrow Account Program (“REAP”). (Def. Closing Br. 9-10.) According to Defendant, LAHCID’s alleged determination demonstrates that Plaintiff’s request for 75% rent reduction in the form of a reimbursement, is unwarranted. The court disagrees; Plaintiffs do not seek a rent reduction, they seek restitution for proven violations of Civil Code, section 1942.4 and the UCL. LAHCID’s determinations and the REAP are both irrelevant to the question of restitution and outside the record.

 

[6] To be clear, the court is awarding a single monetary sum, i.e., $13,789.13.