Reynolds v. Lau

• Decision Date: 19 August 2019
• Docket Number: A151825
• Citation: 39 Cal.App.5th 953,252 Cal.Rptr.3d 548
• Parties: Robyn REYNOLDS et al., Plaintiffs and Appellants, v. Cory LAU, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

39 Cal.App.5th 953

252 Cal.Rptr.3d 548

Robyn REYNOLDS et al., Plaintiffs and Appellants,

v.Cory LAU, Defendant and Respondent.

A151825

Court of Appeal, First District, Division 1, California.

Filed August 19, 2019

As Modified on Denial of Rehearing September 13, 2019

Hooshmand Law Group, Mark Hooshmand and Jenny Jin, San Francisco, for Plaintiffs and Appellants.

de la Peña & Holiday LLP, Gregory R. de la Peña and K. Anderson Franco, San Francisco, for Defendant and Respondent.

Sanchez, J. Appellants Robyn and Ian Reynolds¹ prevailed in a jury trial on a claim that their former landlord, respondent Cory Lau, violated the owner move-in provisions of the San Francisco Residential Rent Stabilization and Arbitration Ordinance (rent ordinance) when he instigated eviction procedures against them. Appellants were awarded over $600,000 in damages. Following the verdict, the trial court, in a series of postverdict orders, called for briefing on whether the verdict was subject to being set aside on a motion for judgment notwithstanding the verdict (JNOV). In a detailed 68-page statement of decision, the court granted Lau's motion for JNOV and, alternatively, ordered a new trial, after finding there was no substantial evidence to support the jury's verdict.

The Reynoldses have appealed the resulting judgment. We affirm.

I.

FACTUAL AND PROCEDURAL BACKGROUND

A. Owner purchase and notice of owner move-in

The subject of this litigation is a mixed-use building in San Francisco consisting of three units, a commercial space on the ground floor that houses a liquor store, a residential unit on the second floor (456 Broadway), and a residential unit on the third floor (458 Broadway). Four Fifty-six Broadway has three bedrooms and is 917 square feet. Four Fifty-eight Broadway has two bedrooms and is 842 square feet and has a small outdoor deck.

Respondent Cory Lau purchased the property in August 2007. From 2007 to 2012, Lau and his fiancée, Sofia Bayawa, operated the ground floor liquor store on their own. They lived in an apartment in San Bruno and commuted seven days a week to the liquor store until January 2016, when they moved into 456 Broadway. At the time of Lau's purchase of the property, Robyn Reynolds had been a tenant of 456 Broadway since 1995. Her husband Ian joined her in 2004.

On April 20, 2015, Lau informed appellants that he had decided to move into their unit and served them with a 60-day notice to terminate tenancy for owner.² At the time of the notice, appellants' rent was $1,462.12 per month and they were on a month-to-month lease. On June 1, 2015, Lau gave notice of his intent to vacate his apartment in San Bruno. That same day, Robyn sent Lau a letter offering to pay $86,551 for two years of advance rent at a rate of $3,000 per month, plus a refund of the initial relocation payment of $5,551 and three months' deposit of $9,000, in exchange for a new lease in either of the property's two apartments. Lau declined Robyn's offer, responding that he had already given notice to vacate his own apartment and that appellants would be required to move out by June 20.

Robyn wrote Lau on July 2, 2015 to "to please ask that you stop the unlawful eviction of Ian and I from our home at 456 Broadway." Her letter discussed that the upstairs lessee at 458 Broadway, Peter Herrmann, had been renting his unit using short-term rental websites for the past five years and Lau was acting in bad faith by evicting them instead of Herrmann.³ The letter stated: "Why haven't you terminated Peter's tenancy? Why haven't you evicted Peter? Why would you try to evict us instead, unless it's because you want to remove 20 year tenants who are paying less in rent? That is bad faith, Cory." Robyn also claimed that because Herrmann's unit was "unoccupied" Lau was required by law to move into 458 Broadway instead of their unit.

B. Unlawful detainer and wrongful eviction actions

Lau determined that his April 2015 notice to vacate was defective and had an attorney prepare and serve appellants with a second 60-day notice to vacate on June 9, 2015. When appellants did not vacate 456 Broadway after 60 days, Lau initiated an unlawful detainer action against them.

Lau separately emailed Herrmann directing him to stop offering his apartment for short-term rentals. A June 19, 2015 e-mail stated: "Robyn is building a case around you and the way you are renting out your apartment. She has placed a camera in her window monitoring the people going up and down the stairs. All Airbnb activity must stop until you follow the correct procedures required by the laws of San Francisco.... I cannot allow any further renting of your apartment until you are properly licensed by the city." Over a period of 75 days from May through July, appellants observed 458 Broadway being used for short-term rentals on 69 of those days. Herrmann responded to Lau that he would remove the apartment from Internet listings, but Robyn continued to observe 458 Broadway listed on rental websites. Lau sent several follow-up e-mails in July and August 2015. On August 14, 2015, Lau's attorney sent Herrmann a 30-day notice to cure or quit. Herrmann agreed to modify his lease to remove the provision allowing him to have paying guests of no longer than 15 days at a time.⁴

In August 2015, appellants filed a complaint for wrongful eviction against Lau and various other defendants who are not parties to this appeal. The complaint alleged causes of action for declaratory relief, negligence, breach of covenant of quiet enjoyment, violation of the rent ordinance, intentional infliction of emotional distress, negligent misrepresentation, and intentional misrepresentation. In the meantime, the trial court granted Lau's motion for summary adjudication in the unlawful detainer action, concluding that 458 Broadway was not "vacant" or "available" for owner move-in purposes because Peter Herrmann was an existing tenant who lives overseas and has sublet the premises, with the landlord's consent, to subtenants. On the day of trial, the parties reached a settlement. Appellants agreed to vacate their unit by November 30, 2015, while retaining the option "to remain in possession of the Premises" as late as December 31, 2015. The agreement further provided that "if the non-comparable premises at 458 Broadway, San Francisco become vacant and available before [appellants] vacate the Premises ..., then [Lau] will offer the premises at 458 Broadway, San Francisco, as set forth in § 37.9 (a)(8)(iv) of the San Francisco Administrative Code." (Italics added.) Lau agreed to provide $41,352 toward relocation expenses and to dismiss his unlawful detainer action.

On December 19, 2015, Herrmann surrendered possession of 458 Broadway and terminated his lease. Lau offered 458 Broadway to appellants at a rent of $4,000 per month. Appellants refused the offer. On December 29, 2015, appellants surrendered possession of 456 Broadway. Lau and Bayawa moved into 456 Broadway in January 2016.

C. Appellants' wrongful eviction trial

Trial in appellant's wrongful eviction action commenced February 24, 2017, and lasted seven days. The jury returned a verdict on March 7, 2017. Testimony from the following key witnesses was adduced at trial.

Robyn Reynolds

Robyn testified she moved into 456 Broadway in 1995. Shortly after Lau purchased the building in 2007, he told her he did not plan on moving into the building. The relationship with Lau was cordial for many years. He described her and Ian as perfect tenants. Robyn planned on remaining in the apartment for the next 25 to 30 years.

In 2012, she met Peter Herrmann, who had just rented the upstairs apartment at 458 Broadway. Herrmann told her that he traveled frequently for work and would be renting out the apartment through Airbnb most of the time. Robyn met Amy Kee, who was Herrmann's Airbnb property manager. Robyn last saw Herrmann in November 2012. Prior to 2015, Robyn never observed anyone staying upstairs for more than 30 days at a time. She believed Lau was aware of Herrmann's Airbnb activities, though she had not advised Lau of any legal concerns until after receiving the notice of owner move-in. Robyn acknowledged that all short-term rentals at 458 Broadway ceased in June or July 2015, with one renter occupying the unit for 45 days and another renter occupying the unit from August through December.

Robyn was surprised by Lau's decision to move into 456 Broadway. Lau told her his rent in San Bruno was increasing to $5,000 a month. Robyn offered to pay more rent or to move upstairs into Herrmann's unit, since nobody was living there and it was only being used as a hotel room. Lau declined her offer. Robyn told Lau that Herrmann's Airbnb was illegal, and Lau responded that if this were true then he would evict Herrmann as well. Robyn came to believe Herrmann's apartment qualified as a vacant unit that Lau was required to offer to her and Ian. If Lau had initially offered 458 Broadway to her, she would have accepted it. Robyn and Ian settled the unlawful detainer action but did not waive their right to sue Lau. In exchange for agreeing to move out, they received money for relocation expenses and moved out in December 2015. When Lau offered them the upstairs unit, they declined because they had already disposed of much of their furniture and signed a lease for a new apartment.

Cory Lau

Lau began operating the ground floor liquor store soon after acquiring the property in 2007. When he and Bayawa were living in San Bruno, they worked at the store seven days a week, anywhere from 11 to 12 hours a day. Before opening for business, they would spend an hour or two shopping. They were unable to get products delivered to the store because they arrived too late to accept daytime deliveries. The store was open from 3:00 p.m. to 2:00 a.m. They decided to move into the building so that they could accept deliveries, eliminate their commute, and have more time to spend together and raise a family.

Lau and Bayawa decided...