Coyne v. De Leo

• Decision Date: 30 July 2018
• Docket Number: A149660
• Citation: 237 Cal.Rptr.3d 359,26 Cal.App.5th 801
• Court: California Court of Appeals Court of Appeals
• Parties: Martin J. COYNE, Plaintiff and Respondent, v. Diego DE LEO, Defendant and Appellant.

26 Cal.App.5th 801

237 Cal.Rptr.3d 359

Martin J. COYNE, Plaintiff and Respondent,

v.Diego DE LEO, Defendant and Appellant.

A149660

Court of Appeal, First District, Division 5, California.

Filed July 30, 2018

As Modified on Denial of Rehearing August 28, 2018

Tenderloin Housing Clinic and Stephen L. Collier, San Francisco, for Defendant and Appellant.

Zacks, Freedman & Patterson, Andrew M. Zacks and Emily L. Brough, San Francisco, for Plaintiff and Respondent.

BRUINIERS, J.

In this unlawful detainer action filed under the Ellis Act ( Gov. Code, § 7060 et seq. ), defendant Diego De Leo appeals from a judgment of possession entered in favor of his landlord, Martin J. Coyne. De Leo argues, inter alia, the trial court committed prejudicial error in its exclusion of evidence. We agree the trial court abused its discretion in excluding the evidence and reverse.

I. Legal Background

The Ellis Act sets forth the procedure by which a landlord may go out of business by removing all of his or her rental units in a building from the market. ( Drouet v. Superior Court (2003) 31 Cal.4th 583, 589–590, 3 Cal.Rptr.3d 205, 73 P.3d 1185 ( Drouet ).) "The Ellis Act ... provides that no statute, ordinance, regulation, or administrative action ‘shall ... 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).) ... If necessary, the landlord may institute an action for unlawful detainer to evict the tenants and recover possession of the property. ( Gov. Code, § 7060.6.)" ( Drouet , at p. 587, 3 Cal.Rptr.3d 205, 73 P.3d 1185.) "The right articulated in the [Ellis] Act, however, is expressly made subject to certain other laws.

For example, the Act is not intended to interfere with local authority over land use .... Nor does the Act permit a landlord to withdraw from rent or lease less than all of the accommodations in a building. ( [ Gov. Code, § 7060.7 ], subd. (d).)" ( Drouet , at p. 590, 3 Cal.Rptr.3d 205, 73 P.3d 1185.)

Unlawful detainer actions are authorized and governed by Code of Civil Procedure section 1161 et seq. "The statutory scheme is intended and designed to provide an expeditious remedy for the recovery of possession of real property. [Citation.] Unlawful detainer actions are, accordingly, of limited scope, generally dealing only with the issue of right to possession and not other claims between the parties, even if related to the property." ( Larson v. City and County of San Francisco (2011) 192 Cal.App.4th 1263, 1297, 123 Cal.Rptr.3d 40.) "Affirmative defenses may be asserted only to the extent they might defeat the landlord's right to possession." ( Lincoln Place Tenants Assn. v. City of Los Angeles (2007) 155 Cal.App.4th 425, 452, 66 Cal.Rptr.3d 120 ; accord, Green v. Superior Court (1974) 10 Cal.3d 616, 633, 111 Cal.Rptr. 704, 517 P.2d 1168.)

Retaliatory eviction, codified at Civil Code section 1942.5, is one such defense. ( Drouet, supra , 31 Cal.4th at p. 587, 3 Cal.Rptr.3d 205, 73 P.3d 1185.) Civil Code section 1942.5 makes it unlawful for a landlord to engage in specified conduct against a tenant who is not in default on rent, including "bring[ing] an action to recover possession," because of a tenant's lawful and peaceable exercise of any rights under the law (id ., subd. (d) ) or because of a tenant's complaints regarding habitability (id. , subd. (a) ). However, a landlord retains the right to bring an action to recover possession "for any lawful cause." (Id. , subd. (f).) To recover possession for a good faith, nonretaliatory reason, the landlord must give the tenant notice of such grounds and, if controverted, the landlord must prove the truth of the reason stated. (Id. , subd. (g).)¹

In Drouet , our Supreme Court harmonized the Ellis Act and the retaliatory eviction statute. The landlord and tenants in that case had a long history of conflict. Several months after the tenants requested various repairs, the landlord served notice he was withdrawing his property from the rental market pursuant to the Ellis Act. ( Drouet, supra, 31 Cal.4th at p. 588, 3 Cal.Rptr.3d 205, 73 P.3d 1185.) When the tenants failed to vacate, the landlord filed an unlawful detainer action, to which the tenants raised a retaliatory eviction defense. ( Id. at pp. 588–589, 3 Cal.Rptr.3d 205, 73 P.3d 1185.) The landlord unsuccessfully moved for summary adjudication of that defense. ( Id . at p. 589, 3 Cal.Rptr.3d 205, 73 P.3d 1185.) On writ review, Division One of this appellate district held that, in unlawful detainer proceedings commenced under the Ellis Act, a tenant may not raise an affirmative defense of retaliatory eviction. ( Ibid . )

The Drouet court reversed and remanded, concluding the Ellis Act did not supersede the retaliatory eviction statute. ( Drouet, supra , 31 Cal.4th at pp. 593, 600, 3 Cal.Rptr.3d 205, 73 P.3d 1185.) Giving effect to both statutory sections, the Supreme Court held: "[W]here a landlord has complied with the Ellis Act and has instituted an action for unlawful detainer, and the tenant has asserted the statutory defense of retaliatory eviction, the landlord may overcome the defense by demonstrating a bona fide intent to withdraw the property from the market. If the tenant controverts the landlord's bona fide intent to withdraw the property, the landlord has the burden to establish its truth at the hearing by a preponderance of the evidence. ( [Civ. Code, former] § 1942.5, subd. (e).)" ( Drouet , at pp. 599–600, 3 Cal.Rptr.3d 205, 73 P.3d 1185.)

The Drouet majority also rejected the tenants’ argument that the landlord "should be compelled to prove not merely that he has a bona fide intent to go out of business but also that this bona fide intent was not motivated by the tenant's exercise of rights under subdivisions (a) and (c) of [Civil Code former] section 1942.5." ( Drouet, supra, 31 Cal.4th at p. 596, 3 Cal.Rptr.3d 205, 73 P.3d 1185, italics omitted.) Thus, the fact finder should "consider first whether the landlord's intent to withdraw the property is bona fide. If it is, the statutory defense of retaliatory eviction has been overcome. If the landlord's intent is contested, the landlord has the burden to establish its truth. ( [Civ. Code, former] § 1942.5, subd. (e).) Only when the landlord has been unable to establish a bona fide intent need the fact finder proceed to determine whether the eviction is for the purpose of retaliating against the tenant under subdivision (a) or (c) of [Civil Code former] section 1942.5." ( Drouet , at p. 600, 3 Cal.Rptr.3d 205, 73 P.3d 1185.)

Drouet ’s interpretation "give[s] effect to the plain language of [ Civil Code section 1942.5 ], including [former] subdivisions (d) and (e), which permit a landlord to go out of business and evict the tenants—even if the landlord has a retaliatory motive—so long as the landlord also has the bona fide intent to go out of business. ... If, on the other hand, the landlord cannot establish a bona fide intent to go out of business, the tenants may rely on [former] subdivisions (a) and (c) to resist the eviction." ( Drouet, supra , 31 Cal.4th at p. 597, 3 Cal.Rptr.3d 205, 73 P.3d 1185, fn. omitted.)

Bearing these principles in mind, we turn to the facts of this case.

II. Factual and Procedural BackgroundThe Parties and Lease

Martin Coyne has owned the real property located at 566–568A Chestnut Street, San Francisco (the Property) since 1996.² The Property includes a building with three apartments (upper, middle, and lower units) and a freestanding, three-bedroom cottage.

De Leo, who was 81 years old at the time of trial, had resided in the cottage since August 1989. Pursuant to an oral lease with the Property's previous owners, De Leo paid $770 per month in rent. After Martin purchased the Property, De Leo paid $800 per month in rent.

2012 Efforts To Move De Leo from the Cottage

The Property was completely occupied by tenants for most of 2012. Maria Esclamado, who was also a Coyne Development employee, rented the upper unit for $2,250 per month. De Leo rented the cottage for $800 per month. Karl and Kate Beale rented the middle unit for $2,250 per month. Dan Guenther and his girlfriend rented the lower unit for $1,600 per month.

Martin testified that, sometime in 2012, he decided to move into the cottage. Martin asked De Leo to move to the lower unit in exchange for a reduced rent of $600 per month. Martin could not recall if he communicated, at the time, the reason he wanted De Leo to move.³ De Leo initially agreed to move. Martin entered into an oral agreement with Guenther and his girlfriend to vacate the lower unit in exchange for $10,000. At the end of October 2012, Guenther and his girlfriend moved out and Martin painted the lower unit.

De Leo then spoke with his son, who expressed concerns about De Leo moving. Neither De Leo's son, nor any other caregiver, would have a place to stay if De Leo moved to the lower unit. Thus, three to four weeks after he initially agreed to move, De Leo called Martin to say he changed his mind. Martin was frustrated and explained to De Leo that he was committed to moving himself and his children into the Property, and the only viable option left would be to invoke the Ellis Act, which would mean evicting De Leo and the other tenants. De Leo refused to vacate the cottage, and Martin hired counsel.

In December 2012, Martin transferred ownership of a portion of the Property to three trusts established for the benefit of his children, with Martin's sister, Margaret, acting as trustee. Martin, Michael, Deirdre, and Margaret acting as trustee of the three trusts, also executed a tenancy in common agreement. The amended and restated agreement, effective May 2016, assigned exclusive use of each of the four units as follows: the upper unit to Martin and the trust benefiting Cecilia, the cottage to Martin alone, the middle unit to Martin, Michael, and the trust benefiting Michael, and the lower unit to...