Espinoza v. Calva, ____ Cal. App.4th ____

(December 16, 2008, Case No. G040006, Fourth Appellate District, Division Three)

In an unlawful detainer action, the Court of Appeal reversed the trial court's award of past due rent under a lease where the landlord had failed to secure a required certificate of occupancy for the leased premises and the tenants were unaware of the requirement at the time they leased the premises.

The landlord brought the action against the tenants seeking eviction and an award of past due rent. The tenants claimed the premises were uninhabitable. They introduced records that no occupancy permit had been issued for the premises and a copy of applicable city ordinances, all which were admitted by the trial court. The trial court awarded possession of premises to the landlord, and also awarded the landlord $2,350 for rent.

Because no certificate of occupancy existed for the leased premises and Section 109.1(1) of the Santa Ana Municipal Code prohibited the use or occupation of a building "until the building official has issued a certificate of occupancy," the court found that the "occupancy was unlawful and the lease constitutes an illegal contract." However, the court noted that before it could rule for the tenants, it had the additional duty to "ascertain the true facts … to prevent the guilty party from reaping the benefit of his wrongful conduct, or to protect the public from the future consequences of an illegal contract. They do not necessarily apply to both parties to the agreement unless both are truly in pari delicto." Tri-Q, Inc. v. Sta-Hi Corp. (1965) 63 Cal.2d 199, 218. Therefore, the court had to look at the record to be sure there was no evidence that the tenants were in pari delicto with the landlord, i.e., that they knew about the requirement for a certificate of occupancy and the landlord's failure to have one for the premises. Based on the record, the court concluded it could not assume the tenants were aware of the legal requirements for occupancy and the landlord's failure to meet those requirements.

In reaching its conclusion, the court also discussed Gruzen v. Henry (1978) 84 Cal.App.3d 515, wherein a landlord without a certificate of occupancy for the leased premises brought an unlawful detainer action. In Gruzen, the issue was whether an ordinance requiring a certificate of occupancy which was silent as to the effect on leases of a violation of its requirements but expressly imposed a criminal sanction on violation, could be construed as permitting enforcement by way of a partial defense to an action for unlawful detainer. The Gruzen court held that it could, and the plaintiff landlord’s relief was limited to an order of eviction, not an award of rent. Since the tenants in this case had already vacated the premises, the court limited its ruling to reversing the trial court's award of past due rent to the landlord, which it found to be in error because of the landlord's lack of a certificate of occupancy for the premises.

While the crux of the court's decision is above, the court discussed several deficiencies in the proceedings which impacted both sides. First, after the landlord rested, the trial court announced that the tenants had 20 minutes to present their case because it had a jury trial the next day. The tenants were permitted to make an "'offer of proof'" that defendant Soqui "would testify to all the facts set forth in" the tenants' answer. The answer had six affirmative defenses relevant to the appeal: (1) the unit was substandard, did not comply with building codes, and was hazardous; (2) the unit was not certified for occupancy; (3) the landlord refused oral and written requests to make repairs; (4) rent was withheld to compel repairs; (5) the landlord had turned off electric and water services; and (6) tenants were locked out of the premises for four weeks. The court stated that "the mere offer of proof by one party does not convert … statements as to what a witness would testify to into evidence." Thus, without a stipulation from all parties, including the plaintiff landlord, an offer of proof was not evidence the court could consider. After reviewing the record, the court found nothing in the record indicating the landlord had stipulated to the tenants’ "'offer of proof,'" rendering it a nullity as evidence. Thus, the trial court had effectively precluded the tenants from presenting evidence in their defense.

Second, the tenants requested specific findings in a statement of decision as to each of the affirmative defenses. The trial court refused to issue a statement of decision because: (1) it did not have a secretary, and (2) as matter of law the tenants were not entitled to them. The court found that the trial court had a mandatory duty to provide a statement of decision but remand was moot due to the reversal of the trial court's judgment. Because of the trial court's actions as to the statement of decision and the "'offer of proof,'" the court found that "an appearance of unfairness … pervades the record."

Finally, Civil Code section 1941 requires that a landlord of any building must put it into a condition fit for human occupation and repair any conditions that render it untenantable. Code of Civil Procedure section 1174.2 imposes numerous duties on the court if a tenant raises the affirmative defense that landlord has breached his or her obligations under section 1941 and the court finds that such breach has occurred. The court in this case inferred that since the trial court reduced the rental value by $1000, the premises failed to meet the requirements of section 1941, which triggered the trial court's duties under section 1174.2. The court found that the trial court's judgment failed to satisfy "any of" the requirements of section 1174.2.