Boston LLC v. Juarez

245 Cal. App. 4th 75, 199 Cal. Rptr. 3d 452, 2016 Cal. App. LEXIS 146
CourtCalifornia Court of Appeal
DecidedFebruary 25, 2016
DocketB267267
StatusPublished
Cited by23 cases

This text of 245 Cal. App. 4th 75 (Boston LLC v. Juarez) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Boston LLC v. Juarez, 245 Cal. App. 4th 75, 199 Cal. Rptr. 3d 452, 2016 Cal. App. LEXIS 146 (Cal. Ct. App. 2016).

Opinion

Opinion

LUI, J.

— Plaintiff and respondent Boston LLC (Boston) rented defendant and appellant Juan Juarez an apartment under the Rent Stabilization Ordinance of the City of Los Angeles (LARSO) (L.A. Mun. Code, § 151.00 et seq.). Their rental agreement contained a forfeiture clause stating that “any failure of compliance or performance by Renter shall allow Owner to forfeit this agreement and terminate Renter’s right to possession.” (Italics added.) The agreement also contained an insurance clause stating that Juarez “shall obtain and pay for any insurance coverage necessary to protect Renter” “for any personal injury or property damage.” (Italics added.) After 15 years of Juarez failing to obtain this insurance, Boston gave Juarez a three-day notice to perform or quit. Juarez obtained insurance shortly after the three-day period expired.

Boston then sued Juarez for unlawful detainer. (Super. Ct. L.A. County, No. 14U02675.) The trial court ruled for Boston. Juarez appealed to the *79 appellate division of the superior court. (Super. Ct. L.A. County, App. Div., No. BV030948.) The appellate division affirmed, holding that because of the forfeiture clause, Juarez was properly precluded at trial from defending himself on a materiality ground or raising certain affirmative defenses. (Boston LLC v. Juarez (2015) 240 Cal.App.4th Supp. 28 [193 Cal.Rptr.3d 521] (.Boston I).)

We asserted jurisdiction over the matter pursuant to California Rules of Court, rule 8.1002, 1 to settle an important question of law; Whether a tenant’s breach of an LARSO rental contract, regardless of the breach’s materiality or impact on the landlord, justifies the landlord forfeiting the agreement and terminating tenancy. We hold a tenant’s breach must be material to justify forfeiture. Here, the tenant’s obligation to obtain and pay for insurance protected the tenant’s interest, not the landlord’s; accordingly, the tenant’s failure to obtain a policy could not have harmed the landlord and therefore was not a material breach of the agreement constituting grounds for forfeiture.

BACKGROUND

Juarez rented an apartment in Los Angeles from Boston for more than 15 years under LARSO. Juarez and Boston’s rental agreement called for Juarez to obtain renter’s insurance. Juarez did not obtain renter’s insurance, however. On February 14, 2014, Boston gave Juarez a three-day notice to perform by obtaining renter’s insurance or quit. 2 February 14th was a Friday and began a three-day weekend for Presidents’ Day, a legal holiday, which was on Monday, February 17th. Likely due to the holiday weekend, Juarez failed to obtain renter’s insurance within the three-day period; he did, however, obtain it by February 21st.

Boston then sued Juarez for unlawful detainer. Boston argued the rental contract contained a forfeiture clause which allowed it to terminate Juarez’s tenancy for any breach, regardless of the breach’s materiality. Juarez countered that the law requires a material breach to justify forfeiture. Juarez argued he should therefore be allowed to present evidence that his breach was immaterial and, in any event, he was in substantial compliance with the insurance clause. He also asserted a number of affirmative defenses, including retaliation and waiver. The trial court, however, agreed with Boston that the forfeiture clause made any breach by Juarez, regardless of materiality, grounds for Boston to terminate Juarez’s tenancy. Juarez agreed to a bench *80 trial upon the parties stipulating to undisputed facts. The court ruled Juarez had breached the rental agreement by failing to obtain renter’s insurance within the three-day notice period and Boston could thereby forfeit the lease. The trial court did not make a determination about the breach’s materiality. Juarez appealed to the appellate division, but it affirmed, two to one. We review this matter under rule 8.1002.

DISCUSSION

On appeal, Juarez argues the law demands that a tenant’s breach must be material to justify a landlord’s forfeiture of a rental contract. We agree. Because we agree, we do not reach his argument that the forfeiture clause constituted an unlawful penalty or whether he should have been allowed to present certain affirmative defenses.

Whether the law requires a material breach to enforce a forfeiture clause in a residential lease is a question of law which we review de novo in the absence of disputed facts. (Cohn v. Corinthian Colleges, Inc. (2008) 169 Cal.App.4th 523, 527 [86 Cal.Rptr.3d 401] [appellate courts exercise “independent judgment” on “pure question[s] of law” where “the facts are not disputed”].)

1. Code of Civil Procedure section 1161, subdivision 3 governs forfeiture procedure and does not create substantive rights

Boston brought its unlawful detainer action under Code of Civil Procedure section 1161, subdivision 3. 3 Section 1161, subdivision 3 establishes that a “tenant of real property ... is guilty of unlawful detainer: [¶] . . . [¶] 3. When he or she continues in possession . . . after a neglect or failure to perform other conditions or covenants of the lease or agreement under which the property is held . . . than the one for the payment of rent, and three days’ notice, in writing, requiring the performance of such conditions or covenants, or the possession of the property shall have been served upon him or her . . . .” On appeal, Boston argues that section 1161, subdivision 3 provides for statutory forfeiture, as opposed to contractual forfeiture, and, therefore, Boston was permitted to forfeit the contract as a matter of law after Juarez failed to obtain insurance within the notice period.

Boston is incorrect. Section 1161, subdivision 3 does not create a substantive forfeiture right. Rather, “ ‘[t]he purpose of the unlawful detainer statutes is procedural. The statutes implement the landlord’s property rights by permitting him to recover possession once the consensual basis for the *81 tenant’s occupancy is at an end.’ ” (Foster v. Britton (2015) 242 Cal.App.4th 920, 930 [195 Cal.Rptr.3d 800], quoting Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129, 149 [130 Cal.Rptr. 465, 550 P.2d 1001].) This procedural statute does not speak to what kinds of substantive “neglect or failure to perform . . . conditions or covenants of the lease” allow the statute to take effect. In the absence of such a statutory directive, we look to case law for the substance of what kinds of breaches allow the procedural statute to take effect.

2. Case law dictates a breach must be material to justify forfeiture

Case law is clear as to what kinds of “failure to perform” justify forfeiture. Courts have consistently concluded that “a lease may be terminated only for a substantial breach thereof, and not for a mere technical or trivial violation.” (Keating v. Preston

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Cite This Page — Counsel Stack

Bluebook (online)
245 Cal. App. 4th 75, 199 Cal. Rptr. 3d 452, 2016 Cal. App. LEXIS 146, Counsel Stack Legal Research, https://law.counselstack.com/opinion/boston-llc-v-juarez-calctapp-2016.