Judge Elaine Lu, Case 20STCV20074 2022-08-05 Tentative Ruling

On May 27, 2020, Plaintiffs Hector Olvera, et al.,[1] (collectively “Plaintiffs”) filed the instant habitability action against Defendants Sylmar Foothill LLC, Eden Garden Apartments, LLC, and Apartment Investments Inc. On June 2, 2021, Plaintiffs filed two Doe amendments naming Winstar Properties, LLC and Winstar Properties, Inc.^{^[2]} as Does 1 and 2 respectfully. On January 12, 2022, Plaintiffs filed the operative Second Amended Complaint (“SAC”) against Defendants asserting seven causes of action for (1) Breach of Implied Warranty of Habitability, (2) Breach of Statutory Warranty of Habitability, (3) Breach of the Covenant of Quiet Enjoyment, (4) Negligence, (5) Violation of Civil Code section 1942.4, (6) Private Nuisance, and (7) Declaratory Relief. Trial is currently set for February 6, 2023.

On March 4, 2022, Defendants Sylmar Foothill LLC, Eden Garden Apartments, LLC, and Winstar Properties, LLC (jointly “Moving Defendants”) filed the instant demurrer to the SAC. On July 21, 2022, Plaintiffs filed an opposition. On July 27, 2022, Moving Defendants filed a reply.

Defendants are managers and/or owners of the apartment building at 10237-10261 Western Ave, Downey CA 90241-2451 (“Apartments”). (SAC ¶ 1.) Plaintiffs are those who have been or are now tenants of the Apartments over the last four years. (SAC ¶ 2.) Defendants failed to correct numerous substandard conditions of which Defendants were or should have been aware during Plaintiffs’ respective tenancies. (SAC ¶ 8.)

“Specifically, the deficiencies in the apartment building include, but are not limited to the failure to:

a. Maintain the building from cockroaches, flea, mite, bedbug, or other vermin infestation. Seal all cracks and crevices to eliminate cockroach and other vermin harborages as required by Health and Safety Code § 17920.3(J) and other applicable laws.

b. Provide and maintain approved screening (16 mesh or smaller) set in tight-fitting frames to all operable windows, and to all other openings in the exterior walls of buildings as required by California Civil Code § 1941.1 and other applicable laws.

c. Maintain all bathrooms, toilet rooms and their fixtures in good repair and free from corrosion as required by the California Building Standards Codes §§407.1 and 407.2.

d. Maintain the counters/drain boards for kitchen sinks, bathroom lavatories, and adjacent wall and/or floor surfaces in a manner to prevent water damages, and/or in a clean and sanitary condition and free from dirty or foreign materials. Health and Safety Code § l 7920.3(a)(13).

e. Maintain all exits, hallways, corridors, and stairways with required lighting.

f. Provide and maintain required Smoke Detectors as required by the California Building Standards Code §§907.2.3.6.l and 907.2.3.9.2 and all other applicable laws.

g. Replace broken smoke detectors as required by the California Building Standards Code §907.2.3.92 and all other applicable laws.

h. Maintain all doors, door frames and cabinet doors in good repair as required by the Health and Safety Code § l 7920.3(a)(l3).

i. Maintain all windows and window sashes in good repair as required by California Civil Code § 1941.1 and all other applicable laws.

j. Maintain all electrical equipment, including the service panel, subpanels, conduits, wiring, switches, outlets, fixtures in good repair Health and Safety Code§ 17920.33( d) .

k. Maintain or install approved hard-wired Smoke Detectors at the required locations California Building Standards Code §907.2.3. c.i.

l. Maintain all electrical switches, receptacles and other outlets with protective plates as required by the National Electrical Code 370-15 and other applicable laws.

m. Maintain all electrical outlets in bathrooms, and all electrical outlets in kitchens located within 6 feet of sinks, with ground fault interruption protection as required by the National Electrical Code 210-8 and other applicable laws.

n. Maintain all plumbing lines and plumbing fixtures free from defects. Correct any loose, leaky, clogged or otherwise faulty toilets, faucets, sinks, showers, bathtubs and plumbing lines as required by the Uniform Plumbing Code, §§302; 801; 907, the California Building Standards Codes §§407.2 and 407.3 and other applicable laws.

o. Maintain enamel surfaces on sinks and bathtubs in good repair as required by the Uniform Plumbing Code §901 and other applicable laws.

p. Maintain the wall areas adjacent to sinks, showers, and bathtubs in good repair as required by the Health and Safety Code § 17920.3.c and all other applicable laws.

q. Always provide and maintain the required central or individual room heating appliance in good repair and operable as required by the Health & Safety Code Section l 7920.3a.6 and other applicable laws.

r. Maintain the required mechanical or natural bathroom ventilation as required by Health & Safety Code Section 17920.3c and other applicable laws.

s. Maintain the required appliance venting system in a good and safe condition, and in conformance with applicable laws at the time of insulation as required by Health & Safety Code Section 17920.3.c.” (SAC ¶ 9.)

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal 3d 311, 318.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.)

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dep’t of Water & Power (2006) 144 Cal. App. 4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Ct. (1984) 153 Cal. App. 3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, 147 Cal.App.4th at 747.)

Code of Civil Procedure § 430.41, subdivision (a) requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer¿in person or by telephone¿with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” The parties are to meet and confer at least five days before the date the responsive pleading is due and if they are unable to meet the demurring party shall be granted an automatic 30-day extension. (CCP § 430.41(a)(2).) The demurring party must also file and serve a declaration detailing the meet and confer efforts. (Id.¿at (a)(3).)¿ If an amended pleading is filed, the parties must meet and confer again before a demurrer may be filed to the amended pleading. (Id.¿at (a).)

Moving Defendants have fulfilled the meet and confer requirement. (Nashalian Decl. ¶¶ 10-11.)

Moving Defendants demurrer to the seventh cause of action for declaratory relief.

As a preliminary matter, Plaintiffs contends that the instant demurrer is untimely and should not be considered.

Pursuant to Code of Civil Procedure section 430.40, “[a] person against whom a complaint or cross-complaint has been filed may, within 30 days after service of the complaint or cross-complaint, demur to the complaint or cross-complaint.” (CCP § 430.40(a), [italic added].) The statute does not require that a demurrer must be filed with 30 days. Further, “ ‘[t]here is no absolute right to have a pleading stricken for lack of timeliness in filing where no question of jurisdiction is involved, and where, as here, the late filing was a mere irregularity [citation]; the granting or denial of the motion is a matter which lies within the discretion of the court.’ [Citation].” (McAllister v. County of Monterey (2007) 147 Cal.App.4th 253, 281–282.) Moreover, “[t]he court may, in furtherance of justice, and on any terms as may be proper, … , enlarge the time for answer or demurrer.” (CCP § 473(a)(1).) “The trial court may exercise this discretion so long as its action does ‘not affect the substantial rights of the parties.’ [Citation.]” (McAllister, supra, 147 Cal.App.4th at 282.)

Here, Plaintiffs filed the operative SAC on January 12, 2022 with proof of service indicating electronic service on January 12, 2022. However, Defendants did not file the instant motion until March 4, 2022.

As indicated in the moving and reply papers, Moving Defendants did not receive service of the SAC. (Nashalian Decl. ¶ 7; Torsney Decl. ¶ 3; Bates Decl. ¶ 3.) In addition, Defense Counsel emailed Plaintiffs’ Counsel stating that they did not have any record of the SAC being served on them to which Plaintiffs’ Counsel did not respond. (Bates Decl. ¶¶ 4-5, Exh. A.) In light of the dispute between the parties regarding service of the SAC, the Court will in its discretion consider the demurrer on the merits.

Moving Defendants contend that Plaintiffs’ allegations do not support the seventh cause of action for declaratory relief.

The elements of declaratory relief are “‘(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to [Plaintiff’s] rights or obligations.... [Citation.]’” (Wilson & Wilson v. City Council of Redwood City (2011) 191 Cal.App.4th 1559, 1582.) Declaratory relief is proper “in cases of actual controversy relating to the legal rights and duties of the respective parties[.]” (CCP § 1060.) However, “[t]he court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.” (CCP § 1061.) “The broad discretionary power of the trial court to deny declaratory relief may be invoked by general demurrer.” (General of America Ins. Co. v. Lilly (1968) 258 Cal.App.2d 465, 471.)

“ ‘ “The purpose of a declaratory judgment is to ‘serve some practical end in quieting or stabilizing an uncertain or disputed jural relation.’ ” [Citation.] “Another purpose is to liquidate doubts with respect to uncertainties or controversies which might otherwise result in subsequent litigation [citation].” [Citation.]' [Citation.] ‘ “One test of the right to institute proceedings for declaratory judgment is the necessity of present adjudication as a guide for plaintiff’s future conduct in order to preserve his legal rights.” ’ ” (Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 647.) “Code of Civil Procedure section 1060 does not require a breach of contract in order to obtain declaratory relief, only an ‘actual controversy.’ Declaratory relief pursuant to this section has frequently been used as a means of settling controversies between parties to a contract regarding the nature of their contractual rights and obligations.” (Ibid.)

“ ‘Declaratory relief operates prospectively, serving to set controversies at rest. If there is a controversy that calls for a declaration of rights, it is no objection that past wrongs are also to be redressed; but there is no basis for declaratory relief where only past wrongs are involved. Hence, where there is an accrued cause of action for an actual breach of contract or other wrongful act, declaratory relief may be denied.’ [Citation.]” (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 366.)

Here, paragraph 24 of each of the leases provides that “ATTORNEY'S FEES: If any legal action or proceeding be brought by either party to this agreement, the prevailing party shall be reimbursed for all reasonable attorneys' fees up to but not more than $500 in addition to other damages awarded.” (SAC ¶ 45, Exhs. A-F.) The leases also contain a severability clause. (SAC ¶ 46, Exhs. A-F.) Plaintiffs allege that “[t]he $500 cap on attorney's fees and the waiver of jury trial are both procedurally and substantively unconscionable.” (SAC ¶ 48.) “Under Civil Code §1670.5, Plaintiffs request that the Court determine the $500 cap on attorney's fees is unconscionable, refuse to enforce and/or limit the application the $500 cap on attorney's fees, and enforce the remainder of the attorney's fees provision without the cap.” (SAC ¶ 56.)

As a preliminary matter, the SAC alleges that there is a jury waiver in the leases. (SAC ¶ 48.) The attached leases do not contain a jury waiver, (SAC, Exhs. A-F). In fact, Defendants note that there is no jury waiver in the leases. (Demurrer at p.7, Fn 2.) “[F]acts appearing in exhibits attached to the complaint will also be accepted as true and, if contrary to the allegations in the pleading, will be given precedence.” (Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627.) The Court finds that the exhibited leases do not contain a jury waiver, and there is no basis for finding that nonexistent jury waiver is unconscionable.

“California courts analyze unconscionability as having a procedural and a substantive element.” (Kinney v. United Healthcare Services, Inc. (1999) 70 Cal.App.4th 1329.) “[B]oth elements must be present before a contract or contract provision is rendered unenforceable on grounds of unconscionability.” (Id.) The doctrine of unconscionability refers to “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133.) It consists of procedural and substantive components, “the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.” (Ibid.) Although both components of unconscionability must be present to invalidate a contract or clause, they need not be present in the same degree. (Armendariz v. Found Health Psychcare Servs., Inc. (2000) 24 Cal.4th 83, 114.) “Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves. [Citations.] In other words, the more substantively unconscionable the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Ibid.)

“Procedural unconscionability concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. It focuses on factors of oppression and surprise.” (Id.) “Surprise differs from oppression. Surprise is when a prolix printed form conceals the arbitration provision. [Citation.] Oppression, on the other hand, occurs when there is a lack of negotiation and meaningful choice. [Citation.] The presence of surprise or oppression requires higher scrutiny of the contract.” (Torrecillas v. Fitness International, LLC (2020) 52 Cal.App.5th 485, 493.)

Here, the SAC alleges in relevant part that “[w]hen Plaintiffs signed the Lease agreements, an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice. The Lease agreements were provided in English, but Plaintiffs do not speak, read or write English. The Lease agreements were not translated orally or in writing into Spanish, which the Plaintiffs do speak. Plaintiffs were not given time to consider the proposed Leases and were pressured to sign them. Plaintiffs have no experience or education in negotiating Lease agreements. The length and complexity of the Leases was a challenge to Plaintiffs. The disputed Lease provision was not explained to Plaintiffs. Plaintiffs were not advised they could negotiate any of the Lease provisions. Plaintiffs were not advised to seek legal counsel and none of the Plaintiffs were represented by legal counsel in the drafting, negotiation of execution of the subject Lease agreements.” (SAC ¶ 49.) Further, the SAC alleges that “Plaintiffs lacked reasonable alternatives to the subject apartments.” (SAC ¶ 50.)

As the landlords drafting the agreement, Defendants were in a superior bargaining position. As alleged, Plaintiffs were unable to speak or read English and were not given an opportunity to have the lease translated. This is sufficient to allege procedural unconscionability. However, “the mere fact that a contract term is not read or understood by the non-drafting party or that the drafting party occupies a superior bargaining position will not authorize a court to refuse to enforce the contract.” (A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 486.) However, “a finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided.” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915.)

“Substantive unconscionability” focuses on the terms of the agreement and whether those terms are “so one-sided as to ‘shock the conscience.’” (Kinney, 70 Cal.App.4th at p.1330.)

Here, the terms of the attorney’s fees clause are not so one-sided as to “shock the conscience.” As noted above the clause at issue provides that:

ATTORNEY'S FEES: If any legal action or proceeding be brought by either party to this agreement, the prevailing party shall be reimbursed for all reasonable attorneys' fees up to but not more than $500 in addition to other damages awarded.

Despite the bilateral nature of the cap on fees, Plaintiffs allege that “[t]he $500 cap is an overly harsh allocation or risks or costs that is not justified by the circumstances under which the Leases were made.” (SAC ¶ 51.) The SAC alleges that the cap unreasonably favors landlords because landlords generally have more economic advantage to be able to hire legal counsel. (SAC ¶¶ 52-53, 55; see also Beverly Hills Properties v. Marcolino (1990) 221 Cal.App.3d Supp. 7, 12 [“We know from our own experience reviewing landlord/tenant disputes on appeal that the person who is most likely to need and receive free legal services is the tenant, not the landlord.”].) Plaintiffs argue that the “[a]rtificial caps on attorney's fees in leases will discourage the representation by private counsel of those tenants who cannot afford to pay attorney fees or costs and result in tenants being unable to enforce existing rights because of their inability to obtain legal counsel. Actual attorney's fees incurred by any party to a civil action arising out of uninhabitable conditions will almost always be far in excess of $500.” (SAC ¶ 54.) Plaintiffs further allege that due to the economic advantage as between landlords and tenants, “the various dollar caps on recovery are reasonably viewed as an intimidation tactic by landlords to deny a tenant's access to the Courts.” (SAC ¶ 55.)
However, there is no general right for a prevailing party to be entitled to attorney’s fees absent statute or through agreement. “‘With regard to an award of attorney fees in litigation, California generally follows what is commonly referred to as the “American Rule,” which provides that each party to a lawsuit must ordinarily pay his or her own attorney fees.’” (Retzloff v. Moulton Parkway Residents' Assn., No. One (2017) 14 Cal.App.5th 742, 749.) This rule has been codified by statute: “[e]xcept as attorney's fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties[.]” (CCP § 1021.)

Because there is no entitlement to attorney’s fees absent a statute, it is well settled that “parties to a contract may limit entitlement to fees.” (511 S. Park View, Inc. v. Tsantis (2015) 240 Cal.App.4th Supp. 44, 49; see e.g., Cullen v. Corwin (2012) 206 Cal.App.4th 1074, 1079, [prevailing party who refused prelitigation mediation as a condition precedent to attorney’s fees under the parties' purchase agreement barred from recovering fees].) Thus, despite Defendants’ economic advantage of being able to hire private counsel, the lease here could have provided for no attorney’s fees at all and would not, by virtue of that term, have been unconscionable. Because there is no right to attorney’s fees absent the agreement, a limitation having the practical effect of nearly eliminating attorneys’ fees is not “shocking to the conscience.”

Further, the legal authority cited in the SAC is inapposite. Civil Code section 1942.4 provides its own separate basis for attorney’s fees if a violation of that section is shown. (Civ. Code, § 1942.4(b)(2), [“The prevailing party shall be entitled to recovery of reasonable attorney's fees and costs of the suit in an amount fixed by the court.”].) Thus, the attorneys’ fees clause in the leases – including the cap on fees – would be inapplicable to attorney’s fees if Plaintiffs prevail on their claim for violation of Civil Code section 1942.4.

Similarly, Plaintiffs’ reliance on Beverly Hills Properties v. Marcolino (1990) 221 Cal.App.3d Supp. 7 is misplaced. Though the Court in Marcolino noted the economic disparity in obtaining legal representation between landlords and tenants, the case only “addressed whether attorney fees are ‘incurred’ for purposes of Civil Code section 1717 when pro bono counsel does not charge the prevailing party fees.” (511 S. Park View, Inc., supra, 240 Cal.App.4th Supp. at p.49 [discussing Beverly Hills Properties v. Marcolino (1990) 221 Cal.App.3d Supp. 7].)

In sum, the $500 cap on attorneys’ fees for suit based on the lease is not substantively unconscionable. Accordingly, Moving Defendants’ demurrer to the seventh cause of action is SUSTAINED.[3]

The challenged attorneys’ fee clause is not substantively unconscionable, and thus, Plaintiffs’ claim for declaratory relief fails as a matter of law. Accordingly, there is no reasonable possibility that Plaintiffs will be able to successfully amend the claim for declaratory relief.

Based on the forgoing, Defendants Sylmar Foothill LLC, Eden Garden Apartments, LLC, and Winstar Properties, LLC’s demurrer is SUSTAINED WITHOUT LEAVE as to the seventh cause of action for declaratory relief.

Defendants Sylmar Foothill LLC, Eden Garden Apartments, LLC, and Winstar Properties, LLC are to file answers to the remaining claims of the SAC within ten (10) days of notice of this order.

The Court hereby sets an OSC re dismissal of all unnamed defendants and cross-defendants (including all unnamed Does and Roes) for August 26, 2022 at 8:30 am. Any party who opposes the dismissal of all unnamed defendants and cross-defendants shall file and serve a written opposition no later than 3 days before the OSC and shall appear at the OSC and show cause why all unnamed defendants and cross-defendants (including all unnamed Does and Roes) should not be dismissed. Failure to appear at the OSC shall result in dismissal of all unnamed Defendants and Cross-Defendants (including all unnamed Does and Roes).

Moving Parties to give notice to all parties and file proof of service of such within three court days.

[1] There are 136 named Plaintiffs. For the purposes of efficiency, the Court declines to list each Plaintiff individually.

[2] On March 7, 2022, the Court granted Plaintiffs’ oral request to dismiss Winstar Properties, Inc. without prejudice.

[3] In Brookshire v. HPG Management Inc., the Court of Appeal rejected arguments similar to those that Plaintiff raises here, i.e., that an attorney’s fees cap in a lease agreement was oppressive and one-sided, especially because defendants were “multi-million dollar corporations.” (Brookshire v. HPG Management Inc. (Cal. Ct. App., Oct. 25, 2018, No. B269544) 2018 WL 5291444, at *3.) Though Brookshire is an unpublished case, the Court finds the reasoning in Brookshire to be persuasive.

Superior Court of California

County of Los Angeles

Department 26