The CBM Group v. Llamas
JAD17-06
| Cal. Ct. App. | Jun 23, 2017Background
- Llamas rented a subsidized apartment (monthly rent $766; tenant paid $25) under a USDA Rural Development program requiring annual recertification by 12/31/2015 (with an effective grace period to Jan. 10).
- Respondent (CBM) sent 120-, 90-, and 60-day recertification notices; the 60-day notice specifically cited failure to recertify as the reason for termination and referenced several lease covenants but did not expressly cite the covenant addressing drug/criminal activity (Covenant 15(D)).
- Appellant was in a 90-day rehabilitation program and could not meet the manager during an initial “blackout” period; she returned Nov. 22 and went to the manager on Nov. 23–24 to recertify but alleges the manager refused to process her recertification.
- After certification lapsed, CBM charged full market rent ($1,050); on Jan. 19, 2016 it served a 3-day notice to quit or pay based on nonpayment of the higher rent and then filed unlawful detainer relying on the 3-day notice (the complaint did not allege criminal/drug grounds).
- At trial the court sua sponte reopened evidence to consider alleged criminal activity/drug use as an alternative basis; it admitted a misdemeanor plea form of the appellant’s ex‑boyfriend and found alternative grounds (criminal activity and inferred drug use), and found appellant failed to timely recertify—entering judgment for CBM.
- The appellate division reversed: it held the 60‑day notice did not give adequate notice of termination for criminal/drug reasons and the record did not support the court’s finding that appellant failed to timely recertify.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 60‑day notice adequately notified tenant termination was for criminal activity/drug use | 60‑day notice cited lease covenants; court may rely on covenants to support termination for criminal/drug activity | 60‑day notice only specified failure to recertify; tenant lacked notice of criminal/drug grounds and no opportunity to cure | Held: 60‑day notice insufficient—it did not state criminal/drug conduct as basis; tenant entitled to clear notice and chance to cure under federal regs |
| Whether federal regulations permit termination for criminal activity without prior notice/cure opportunity | CBM argued criminal activity need not be preceded by cure opportunity (citing authority) | Tenant relied on 7 C.F.R. § 3560.159(a): borrower must give written notice and opportunity to correct; lease‑based terminations still require notice | Held: Termination for criminal/drug activity under §3560.159(d) must be consistent with lease and §3560.159(a) procedures; notice/opportunity to cure required |
| Whether the trial court’s finding that tenant failed to timely recertify (supporting 3‑day notice) is supported by substantial evidence | CBM: Tenant made no timely effort to recertify; thus full rent owed and 3‑day notice valid | Llamas: She attempted to recertify in late Nov.; manager refused to process it, making further attempts futile | Held: No substantial evidence to support finding she made no attempt; court ignored evidence that manager refused recertification—trial finding reversed |
| Whether reopening trial and amending complaint to add criminal grounds was proper | CBM relied on recertification/3‑day notice as sole basis; any amendment was harmless or permissible | Llamas: No notice she’d have to defend criminal/drug allegations; amendment prejudicial after close of evidence | Held: Because 60‑day notice did not give such notice and respondent never pled or proved criminal/drug grounds before reopening, reliance on those grounds was improper (court reversed on those bases) |
Key Cases Cited
- Parsons v. Bristol Development Co., 62 Cal.2d 861 (1965) (court reviews contract interpretation de novo)
- Crocker Nat. Bank v. City & County of San Francisco, 49 Cal.3d 881 (1989) (application of federal regulations to undisputed notice content reviewed de novo)
- Winograd v. American Broadcasting Co., 68 Cal.App.4th 624 (1998) (appellate review of trial court factual findings governed by substantial evidence standard)
- Primm v. Primm, 46 Cal.2d 690 (1956) (scope of appellate review on factual insufficiency challenges)
- Tesseyman v. Fisher, 113 Cal.App.2d 404 (1952) (presumption that record contains evidence to sustain findings)
- Kemp Bros. Constr., Inc. v. Titan Elec. Corp., 146 Cal.App.4th 1474 (2007) (trial court must weigh evidence; appellate court will not apply substantial‑evidence rule if court failed to weigh)
- Estate of Larson, 106 Cal.App.3d 560 (1980) (substantial evidence rule inapplicable where record shows court did not weigh evidence)
- Zucco v. Farullo, 37 Cal.App. 562 (1918) (older authority cited by respondent but distinguished on facts and regulations)