2710 Sutter Ventures, LLC v. Millis

• Decision Date: 31 August 2022
• Docket Number: A162439
• Citation: 82 Cal.App.5th 842,298 Cal.Rptr.3d 842
• Parties: 2710 SUTTER VENTURES, LLC, et al., Plaintiffs and Appellants, v. Sean MILLIS et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

82 Cal.App.5th 842

298 Cal.Rptr.3d 842

2710 SUTTER VENTURES, LLC, et al., Plaintiffs and Appellants,

v.Sean MILLIS et al., Defendants and Respondents.

A162439

Court of Appeal, First District, Division 4, California.

Filed August 31, 2022

Dowling & Marquez LLP, Curtis F. Dowling, Jak. S. Marquez for Plaintiffs and Appellants.

Fried & Williams LLP, Clifford E. Fried, Oakland, as Amicus Curiae on behalf of Plaintiffs and Appellants.

Stephen L. Collier, San Francisco, for Defendants and Respondents.

BROWN, J.

Plaintiffs brought this unlawful detainer action to evict defendants after invoking the Ellis Act ( Gov. Code, § 7060 et seq. ) (the Act). The trial court sustained defendants’ demurrer, finding that plaintiffs’ notice terminating defendants’ tenancy was defective and plaintiffs failed to provide "proper required information regarding relocation payments" under section 37.9A, subdivision (e)(4) (section 37.9A(e)(4)) of the San Francisco Administrative Code (Rent Ordinance).¹ Plaintiffs argue the judgment must be reversed because: (1) the Act preempts section 37.9A(e)(4); (2) defendants cannot assert a defense under Government Code section 7060.6 for plaintiffs’ purported failure to comply with section 37.9A(e)(4); (3) the trial court improperly found that plaintiffs’ notice of termination had to strictly comply with section 37.9A(e)(4); and (4) plaintiffs should be allowed to amend their complaint to state a cause of action for ejectment. We find plaintiffs’ arguments unavailing and affirm.

BACKGROUND

Plaintiffs own a three-unit residential rental property in San Francisco and invoked the Act.² Defendants Sean Millis and Michelle Mattera are long-term tenants of one unit owned by plaintiffs at 2710 Sutter Street (the premises). Plaintiffs pled, based on information and belief, that Millis entered into a tenancy agreement for the premises with plaintiffs’ predecessor in 1995. In 1999, Millis entered into a written tenancy agreement with plaintiffs’ predecessor; plaintiffs further alleged, based on information and belief, that Mattera moved into the premises as a co-tenant in 2005. Plaintiffs alleged that defendants are the only occupants of the premises and the only persons entitled to relocation assistance payments under the Rent Ordinance.

On November 13, 2019, plaintiffs served defendants with a 120-Day Notice of Termination of Tenancy (the termination notice) and half of the relocation assistance payments due to defendants under the Rent Ordinance. In response to the termination notice, defendants both claimed disability status, and plaintiffs provided to each defendant one half of the additional relocation assistance payment due for disabled tenants.³

On November 15, 2019, plaintiffs filed a Notice of Intent to Withdraw Residential Units from the Rental Market (NOI) with the San Francisco Residential Rent Stabilization and Arbitration Board. On the same day, plaintiffs served defendants with a Notice to Tenant of Filing of Notice of Intent to Withdraw Residential Units from the Rental Market. Defendants exercised their right under the Act to a one-year extension of the withdrawal date of the premises based on their claims of disability status. Defendants did not vacate the premises by November 15, 2020, and plaintiffs filed an unlawful detainer suit.

With respect to the ground under which plaintiffs sought to recover possession, the termination notice stated, "Possession of the aforesaid premises is sought pursuant to San Francisco Administrative Code § 37.9(a)(13) and California Government Code §§ 7060 et. seq. The owners of the premises, 2710 Sutter Ventures, LLC and Sutter Partner Holdings, LLC (‘owners’ or ‘landlords’) intend to withdraw from rent or lease all rental units within any detached physical structure and, in addition, in the case of any detached physical structure containing three or fewer rental units, any other rental units on the same lot, and complies [sic] in full with [Rent Ordinance] § 37.9A and California Government Code §§ 7060 et. seq. with respect to each such unit; provided, however, that a unit classified as a residential unit under chapter 41 of the [San Francisco Administrative Code] which is vacated under this subsection may not be put to any use other than that of a residential hotel unit without compliance with the provisions of [San Francisco Administrative Code] § 41.9."

The relevant portions of the termination notice addressing relocation assistance payments were as follows. On page 1, the termination notice provided, "You have rights and obligations under [Rent Ordinance] § 37.9A, including, but not limited to, the right to renew the tenancy if proper notification is given within 30 days after vacating the unit, and entitlement to certain relocation payments as described in more detail below. A true and correct copy of [Rent Ordinance] § 37.9A is attached hereto as Exhibit A and incorporated herein by reference. You are hereby notified of your rights as set forth in Exhibit A." At page 5, the termination notice stated, "You have rights to relocation assistance payments as follows: [¶] Each tenant of the premises shall be entitled to receive $6,985.23, one-half of which shall be paid at the time of the service of the notice of termination of tenancy, and one-half of which shall be paid when the tenant vacates the unit. In the event there are more than three tenants in a unit, the total relocation payment shall be $20,955.68, which shall be divided equally by the number of tenants in the unit. If any tenant is 62 years of age or older, or if any tenant is disabled within the meaning of Section 12955.3 of the California Government Code, such tenant shall be entitled to receive an additional supplemental payment of $4,656.81, one-half of which shall be paid within fifteen (15) calendar days of the landlord's receipt of written notice from the tenant of entitlement to the supplemental relocation payment, and one-half of which shall be paid when the tenant vacates the unit." Plaintiffs attached as an exhibit the applicable version of Rent Ordinance section 37.9A and a copy of the San Francisco Rent Stabilization and Arbitration Board's form entitled, "Relocation Payments for Tenants Evicted Under the Ellis Act."

Defendants demurred to the plaintiffs’ operative first amended complaint. As is relevant here, defendants argued their demurrer should be sustained because the termination notice was defective in two respects: (1) it quoted a superseded version of section 37.9, subdivision (a)(13) (section 37.9(a)(13)) as the ground for eviction, thus providing an inaccurate ground for eviction⁴ ; and (2) the termination notice did not properly advise defendants of the right to relocation assistance payments because it incorrectly referenced a superseded section of the Rent Ordinance regarding relocation payments.

After argument at the hearing on the demurrer, the trial court announced that it would sustain the demurrer and explained the basis for its ruling. The trial court accepted the defendants’ argument that strict compliance with notice provisions was required in the unlawful detainer suit, and found for defendants due to the following faults in the plaintiffs’ termination notice: (1) the termination notice quoted an outdated 2004 version of section 37.9(a)(13) as the ground for eviction; and 2) the termination notice did not provide the required information regarding the right to receive relocation payments. The court instructed defendants’ counsel to prepare an order that complied with the court's oral pronouncement and to send the order to plaintiffs’ counsel for approval. The final written order of the court contained the following language: "IT IS HEREBY ORDERED that Defendants’ Demurrer to the First Amended Complaint is SUSTAINED WITHOUT LEAVE TO AMEND. The Notice of Termination is fatally defective. Plaintiffs failed to provide proper required information regarding relocation payments under San Francisco Rent Ordinance § 37.9A(e)(3)-(4)." Plaintiffs timely appealed after entry of judgment.

DISCUSSION

I. Standard of Review

We review an order sustaining a demurrer de novo. ( Boshernitsan v. Bach (2021) 61 Cal.App.5th 883, 889, 276 Cal.Rptr.3d 109.) We accept the truth of material facts properly pled in the operative complaint, but not contentions, deductions, or conclusions of fact or law. ( Ibid. ) The proper interpretation of a statute is a question of law reviewed review de novo. ( Id. at p. 890, 276 Cal.Rptr.3d 109.) Whether state law preempts a local ordinance is also question of law subject to de novo review. ( Johnson v. City and County of San Francisco (2006) 137 Cal.App.4th 7, 12, 40 Cal.Rptr.3d 8 ( Johnson ).)

II. The Act

The Act provides that "[n]o public entity ... shall, by statute, ordinance, or regulation, or by administrative action implementing any statute, ordinance or regulation, compel the owner of any residential real property to offer, or to continue to offer, accommodations in the property for rent or lease ...." ( Gov. Code, § 7060, subd. (a).)⁵ "A landlord who complies with the Ellis Act may therefore go out of the residential rental business by withdrawing the rental property from the market." ( Drouet v. Superior Court (2003) 31 Cal.4th 583, 587, 3 Cal.Rptr.3d 205, 73 P.3d 1185 ( Drouet ).) The Legislature enacted the Act following the California Supreme Court's opinion in Nash v. City of Santa Monica (1984) 37 Cal.3d 97, 207 Cal.Rptr. 285, 688 P.2d 894, which upheld city charter provisions that required owners of residential rental property to obtain a permit, available only in certain situations, before they could remove property from the rental market. ( Gov. Code, § 7060.7.) "[T]he Act was intended to overrule the Nash decision so as to permit landlords the unfettered right to remove all residential rental units from the market, consistent, of course, with guidelines as set forth in the Act and adopted by local governments in accordance thereto."...