Erlach v. Sierra Asset Servicing, LLC

• Citation: 173 Cal.Rptr.3d 159,226 Cal.App.4th 1281
• Decision Date: 10 June 2014
• Docket Number: H038594
• Court: California Court of Appeals
• Parties: Joseph R. ERLACH, Plaintiff and Appellant, v. SIERRA ASSET SERVICING, LLC, Defendant and Respondent.

226 Cal.App.4th 1281

173 Cal.Rptr.3d 159

Joseph R. ERLACH, Plaintiff and Appellant,

v.SIERRA ASSET SERVICING, LLC, Defendant and Respondent.

H038594

Court of Appeal, Sixth District, California.

Filed June 10, 2014

See 12 Witkin, Summary of Cal. Law (10th ed. 2005) Real Property, § 621.

Monterey County Superior Court, Hon. Kay T. Kinsgley. (Monterey County Super. Ct. M115493)

Raymond N. Stella Erlach, San Francisco, for Appellant.

Western Center on Law and Poverty, S. Lynn Martinez, Richard A. Rothschild, Los Angeles, Madeline Howard, San Jose, for Amicus Curiae for Appellants.

Soltman, Levitt, Flaherty & Wattles, Garth M. Drozin, Westlake Village, Steven S. Nimoy, for Respondent.

ELIA, J.

Joseph R. Erlach (appellant) appeals from a judgment of dismissal of his complaint against Sierra Asset Servicing LLC (Sierra) entered after the trial court sustained Sierra's demurrer without leave to amend. Appellant contends that it was error for the trial court to determine that his residential lease was void and that he was a squatter with no legal rights because a code enforcement notice (red tag) terminated his original tenancy, and to determined that any subsequent lease with Sierra was an illegal contract and void.¹ We agree and reverse the judgment of dismissal.

Factual and Procedural Background

Our factual summary is derived from appellant's complaint.²

Starting in 2009, appellant was the tenant/lessee of one bedroom, one bathroom and all the common areas of the residence at 7171 Oak Tree Place in Monterey. Mary Schwann (Schwann) was the owner of the premises. On April 6, 2010, appellant and Schwann entered into a written agreement whereby appellant paid $3,500 in advance to rent the property for seven months ($500 a month) covering the period from April 1, 2010 to October 30, 2010. At some point, appellant had paid a $600 security deposit. On October 9, 2010, appellant and Schwann entered into a modification of the agreement whereby appellant paid an additional $500 to extend the agreement to November 30, 2010.

Late in October 2010, Schwann had the gas and electricity services to the property turned off; she said it was because other tenants had failed to pay rent. Appellant demanded that Schwann restore the utilities, but Schwann refused and told appellant that she was going to “ ‘freeze [him] out.’ ” Thereafter, Schwann turned off the water service despite the fact that appellant's name was on the account. On November 8, 2010, a code enforcement inspector for the county “red tagged” the property for “ ‘no electric, no heat, no hot water.’ ” Appellant was precluded from occupying the property except to gather his belongings.

Four days later, on November 12, 2010, the property was sold in a foreclosure sale to Sierra. After the foreclosure sale, appellant met with Sierra's representative and explained that he had a lease with Schwann; the representative stated that appellant could stay for the remainder of the lease, but work needed to be done on the property. Sierra began work on the premises removing the carpets, flooring, and kitchen and bathroom fixtures; appellant objected.

On November 15, 2010, appellant spoke with Brian Grocott, Sierra's agent. Grocott told appellant that he could stay in the property until the end of December using appellant's $600 security deposit as rent for that month; Grocott said the property would be repaired and restored promptly. From November 15 to December 3, 2010, repeatedly, appellant requested that Sierra restore the property as promised. On December 3, 2010, Sierra told appellant that the property was ready for him. However, the property was not restored. Some of appellant's belongings were missing and the kitchen and bathroom had not been restored; piles of construction garbage were left throughout the property. The flooring and wall coverings were missing. On December 27, 2010, the property had still not been restored; the red-tag was still on the property and so appellant moved out.

Appellant filed a complaint for unspecified damages alleging eight causes of action against Schwann and Sierra: ³ 1) “Violation of California Civil Code Section 1942.4”; 2) “Tortious Violation for Breach of the Warranty of Habitability”; 3) “Intentional Infliction of Extreme Emotional Distress”; 4) “Negligent Infliction of Extreme Emotional Distress”; 5) “Negligence: Violation of Duty to Maintain Habitable Conditions”; 6) “Constructive Eviction”; 7) “Breach of the Covenant of Quiet Enjoyment”; 8) “Retaliatory Eviction.”

Sierra demurred to every cause of action in the complaint on the ground that Sierra “had no lease with” appellant and that “there was no obligation at law that compelled SIERRA to take any action regarding SCHWANN's former tenant.... Further, even if the subject lease between SCHWANN and [appellant] were somehow valid, the red-tagging by the County terminated the lease, immediately relieving the parties thereto, and any party in purported privity therewith, of all obligations under that lease, as performance of the contract terms were [sic] excused, because of impossibility due to an action not taken by one of the parties (County of Monterey). Per Civil Code § 1933, when the premises underwent construction for the County to lift the red tag, the property, as it was originally contracted for, was ‘destroyed,’ which terminated the ‘hiring’ or agreement. Lastly, any new agreement between [appellant] and SIERRA, whereby SIERRA would assume any debt to [appellant] or default by SCHWANN described in the [complaint] would have to have been in writing, per the statute of frauds, and [appellant] has not alleged that there ever was any such written agreement.” ⁴

After oral argument, the trial court sustained the demurrer without leave to amend on the ground that no landlord-tenant relationship existed between appellant and Sierra because the tenancy between appellant and defendant Mary Schwann “had already been terminated by the county's red tag” before Sierra took possession of the premises. Further, any lease between Sierra and appellant “while the premises were red tagged would have been void as unlawful and in violation of public policy.” Later the court stated that when Sierra took over the property, appellant was “just a squatter at that time with no legal rights.”

The trial court indicated that it could not automatically dismiss the action against Sierra without a noticed motion to dismiss. Accordingly, the court instructed counsel for Sierra to file a noticed motion to dismiss, which the court heard and granted on April 27, 2012. The signed order entitled “ORDER GRANTING DEFENDANT SIERRA ASSET SERVICES LLC'S MOTION TO DISMISS SAID DEFENDANT FROM PLAINTIFF'S COMPLAINT, WITH PREJUDICE, AND GRANTING JUDGMENT OF DISMISSAL” is dated April 27, 2012. According to the clerk of the court, no notice of entry of order granting Sierra's motion to dismiss is in the court file. Appellant filed a notice of appeal from the court's April 27, 2012, judgment dismissing Sierra from the case on June 28, 2012.

As an initial matter, although appellant's form notice of appeal refers to a judgment of dismissal, the appellate record contains no judgment. Thus, this appeal appears to have been taken from the order sustaining Sierra's demurrer to appellant's complaint and granting Sierra's motion for dismissal. “Orders sustaining demurrers are not appealable.” (Hill v. City of Long Beach (1995) 33 Cal.App.4th 1684, 1695, 40 Cal.Rptr.2d 125; Zipperer v. County of Santa Clara (2005) 133 Cal.App.4th 1013, 1019, 35 Cal.Rptr.3d 487.) Nevertheless, “an appellate court may deem an order sustaining a demurrer to incorporate a judgment of dismissal.” (Molien v. Kaiser Foundation Hospitals (1980) 27 Cal.3d 916, 920, 167 Cal.Rptr. 831, 616 P.2d 813.) It is particularly appropriate to do so when the absence of a final judgment results from inadvertence or mistake (id. at p. 921, 167 Cal.Rptr. 831, 167 Cal.Rptr. 831), and Sierra prepared the order and does not argue for dismissal of the appeal.

Standard of Review

“In determining whether [a] plaintiff[ ] has properly stated a claim for relief, our standard of review is clear: ‘ “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.” [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff.’ [Citations.]” (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, 119 Cal.Rptr.2d 709, 45 P.3d 1171.) Our review is de novo. (Ibid.) The purpose of a demurrer is to test the sufficiency of the pleadings to state a cause of action as a matter of law. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1153, 121 Cal.Rptr.3d 819.) We are not concerned with plaintiff's ability to prove the allegations or with any possible difficulties in making such proof. (Schmidt v. Foundation Health (1995) 35 Cal.App.4th 1702, 1706, 42 Cal.Rptr.2d 172.)

Discussion

The determination whether the court erred in sustaining Sierra's demurrer without leave to amend and dismissing the case rests squarely on whether the court was correct in holding that the red-tagging of Schwann's property automatically terminated appellant's lease with Schwann; and that any lease between Sierra and appellant was void as against public policy.

In support of the...