In the other appeal, Peng challenges an order awarding attorney fees and costs to
In the published portion of this opinion, we conclude the unlawful detainer judgment did not preclude Hong Sang from pursuing a separate civil action for back-due rent that accrued in months other than the one month for which damages were awarded in the unlawful detainer action. In the unpublished portion of the opinion, we conclude the trial court erred in awarding Hong Sang attorney fees incurred in defending against Peng's cross-complaint, and we also make an adjustment to the fee award to ensure that Peng receives the benefit of an agreed-upon reduction in the award associated with fees incurred before the effective date of the attorney fee clause. Accordingly, we shall modify the attorney fee award but otherwise affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Peng's Tenancy
Hong Sang owned a two-unit commercial building in San Francisco. In 2002, Ming Kee Game Birds, Inc. (Ming Kee) leased the entire premises and sublet one of the two units to Peng for a period of ten years.
Ming Kee sued Peng for breach of the sublease in 2004. Peng cross-complained against Ming Kee and ended up securing a judgment against Ming Kee in the sum of $46,545. In 2009, Peng was granted an additional award of attorney fees payable by Ming Kee in the sum of $47,800. She managed to collect $46,500 in partial satisfaction of the outstanding judgment.
In August 2009, while Peng was still attempting to collect her judgment against Ming Kee, she was informed that Hong Sang and Ming Kee had
As of September 2009, Peng remained in possession of the premises with Hong Sang's knowledge and consent. By operation of law, she became Hong Sang's tenant at the rental rate of $4,725 per month. Hong Sang filed an unlawful detainer action against Peng in 2009 but ultimately dismissed the case voluntarily in early January 2011, when it acknowledged that the three-day notice to pay rent or quit that was served on Peng in 2009 was arguably defective. Peng did not pay any rent for the premises during the period from September 2009 through February 2011.
Hong Sang's Unlawful Detainer Lawsuit
Following the effective date of the section 827 notice, Peng paid Hong Sang rent of $4,725 per month in March and April 2011. In May 2011, Peng became delinquent in her rent payments. On May 13, 2011, Hong Sang served Peng with a three-day notice to pay rent or quit as well as a thirty-day notice to quit. The three-day notice to pay rent or quit stated that Peng's rent was delinquent in the amount of $4,725 for the month of May 2011 but also expressly reserved Hong Sang's rights to recover rent for the period before March 1, 2011, in a separate legal action. Peng did not comply with either of the May 2011 notices.
Hong Sang filed an unlawful detainer action against Peng in June 2011. It sought to recover possession of the premises and requested back-due rent in the amount of $4,725, which was the amount demanded for the month of May 2011 in the three-day notice to pay rent or quit. In September 2011, the trial court granted summary judgment in favor of Hong Sang in the unlawful
Hong Sang's Breach of Contract Lawsuit and Peng's Cross-complaint
In March 2011, Hong Sang filed an action for breach of contract against Peng in which it sought back-due rent for the period from September 2009 through February 2011.
Peng filed a cross-complaint against Hong Sang, Ming Kee, and Ming's Poultry, LLC. Peng alleged four causes of action against Hong Sang: interference with contractual relations, breach of the covenant of quiet enjoyment, declaratory relief, and conspiracy. Peng alleged that Hong Sang had falsely advised her that Ming Kee was in default under the master lease and that her sublease was terminated as a result. She claimed that she was forced to hire an attorney as a consequence and incur attorney fees and costs to defend herself against the unlawful detainer action filed by Hong Sang in 2009. In the conspiracy cause of action, Peng alleged that the cross-defendants had conspired to render Ming Kee insolvent and prevent her from collecting her judgment against Ming Kee by offsetting the amount
Anti-SLAPP Motion and Disposition of Peng's Cross-complaint
Hong Sang filed a special motion under Code of Civil Procedure section 425.16 (anti-SLAPP motion) to strike three of the causes of action in Peng's cross-complaint on the ground they were based on an act in furtherance of its right to free speech-i.e., the filing of an unlawful detainer action. The anti-SLAPP motion did not seek to strike the declaratory relief cause of action. The trial court granted Hong Sang's special motion to strike the challenged causes of action, reasoning that they arose at least in part from
On appeal, we reversed the trial court's order granting Hong Sang's anti-SLAPP motion. We concluded that the challenged causes of action did not arise from protected activity. We did not reach the question of whether Peng had demonstrated a probability of prevailing on the merits of her causes of action. The reversal required that we also vacate the award of attorney fees and costs because there was no longer a statutory basis for the award.
While the court's anti-SLAPP order was on appeal, Peng filed an amended cross-complaint containing a single cause of action for declaratory relief against Hong Sang. In 2012, the court granted a demurrer without leave to amend as to the declaratory relief cause of action. The court noted that the controversy alleged in the declaratory relief cause of action no longer existed. Peng did not challenge the court's order dismissing the declaratory relief cause of action.
After this court issued the remittitur in the appeals challenging the court's anti-SLAPP orders, Peng filed a second amended cross-complaint that re-alleged the causes of action against Hong Sang for interference with contractual relations, breach of the covenant of quiet enjoyment, and conspiracy. Peng subsequently requested that the court dismiss her cross-complaint. The court entered judgment in favor of Hong Sang on the cross-complaint in October 2013.
Court Trial on Breach of Contract Cause of Action
The single cause of action in Hong Sang's operative complaint for breach of contract proceeded to trial in June 2012. As noted, Hong Sang sought a total of $85,050 from Peng for back-due rent covering the period from September 2009 through February 2011.
Before trial, Peng filed a motion for judgment seeking to dismiss the breach of contract cause of action on the ground that it was barred by the doctrines of res judicata and collateral estoppel. She argued that the September 2011 unlawful detainer judgment awarding $4,725 as back-due rent for the month of May 2011 has a res judicata effect that precludes a separate
The matter was tried before the court on stipulated facts. In essence, Peng agreed that she owed Hong Sang rent of $4,725 per month for the period from September 2009 through February 2011 if the court rejected her res judicata defense. The court trial therefore turned solely upon the legal question of whether the unlawful detainer judgment has a res judicata or collateral estoppel effect that precludes Hong Sang from recovering additional amounts of back-due rent beyond the monthly rent for May 2011 that was awarded in the unlawful detainer action.
The trial court ruled in favor of Hong Sang and awarded damages of $85,050 plus prejudgment interest of $18,075.39. The court rejected Peng's res judicata claim, reasoning that claim preclusion does not apply to matters that could not have been tried in the first action. As the court explained in its statement of decision, because Hong Sang was limited by statute in the amount of rent it could recover in an unlawful detainer action, it had no choice but to file two separate actions to achieve both the eviction of Peng and the payment in full of back-due rent.
Following entry of judgment in favor of Hong Sang, Peng timely appealed the judgment in appeal number A140653.
Award of Attorney Fees and Costs
Hong Sang moved for an award of attorney fees and costs. It sought $118,096.33 as contractual attorney fees on the ground that the express terms of the parties' rental agreement, as modified by the section 827 notice, permitted the prevailing party in an action arising out of the tenancy to recover reasonable attorney fees and costs. Hong Sang also sought costs totaling $2,271.95.
Of the amount sought as attorney fees, $56,956.33 was requested for work performed by the law firm of Steven Adair MacDonald & Associates, P.C. (the Steven Adair firm), and $61,140 was requested for work performed by the law firm of Bradley Curley Asiano Barrabee Abel & Kowalski (the
Peng opposed the motion for attorney fees and costs. With respect to fees claimed by the Bradley Curley firm, which defended against the cross-complaint, Peng argued that the acts giving rise to the cross-complaint occurred well before the effective date of the attorney fee clause contained in the section 827 notice. Peng also pointed out that a significant part of the work done by the Bradley Curley firm related to the anti-SLAPP motion and subsequent appeal. According to Peng, because the anti-SLAPP order and associated statutory fee award were overturned by this court, Hong Sang should not recover the fees it incurred for that work on the basis of a contractual attorney fee provision. Accordingly, she asked that the court deny the request for fees billed by the Bradley Curley firm in its entirety.
At the hearing on the attorney fees motion, the court agreed to reduce the fee award by the amount attributable to work performed before the effective date of the attorney fee clause. The parties agreed that approximately $5,000 of the fees fell into that category. At the request of Hong Sang's counsel, the court divided the $5,000 reduction evenly between the Steven Adair firm and the Bradley Curley firm, with the fees for each being reduced by $2,500. Aside from the $5,000 reduction in the fee award for work performed before the effective date of the attorney fee clause, the court otherwise rejected Peng's arguments seeking to reduce or deny the claimed fees. Accordingly, the court awarded Hong Sang its requested costs of $2,271.95 plus contractual attorney fees totaling $113,096.33, composed of $58,640 in fees for work performed by the Bradley Curley firm and $54,456.33 in fees for work performed by the Steven Adair firm.
DISCUSSION
I. Res Judicata Effect of Unlawful Detainer Judgment
Peng contends that the September 2011 unlawful detainer judgment in which Hong Sang was awarded one month's back-due rent has a res judicata or collateral estoppel effect that bars any further actions for back-due rent. Although she acknowledges that Civil Code section 1952, subdivision (b) (hereafter section 1952(b) ), expressly permits a landlord to bring a separate action for back-due rent after bringing an unlawful detainer action to recover possession of the premises, she nonetheless argues that a landlord may not split a claim for rent between an unlawful detainer action and a subsequent civil action. Because the relevant facts are undisputed and the application of res judicata principles presents a question of law, we apply de novo review in assessing Peng's claim of error. ( Noble v. Draper (2008)
A. Waiver as a Result of Delay in Asserting Affirmative Defense
Before addressing the merits of Peng's claim, we first consider Hong Sang's contention that Peng waived any affirmative defenses premised upon res judicata principles by failing to raise them in her original answer and by not being diligent in seeking to amend her answer. For her part, Peng argues that Hong Sang's challenge to the order authorizing the amendment is not properly before this court because Hong Sang did not file a cross-appeal, and even if it had, Hong Sang has failed to establish that the court abused its discretion in permitting the amendment.
Leave to amend a pleading, including an answer, is entrusted to the sound discretion of the trial court. (See Garcia v. Roberts (2009)
As support for its claim that the court abused its discretion in allowing Peng to amend her answer, Hong Sang contends she presented no evidence to excuse her extreme lack of diligence in seeking to amend the answer. It also argues that it suffered prejudice because it was required to address a new and complex defense "without the benefit of either research or pretrial discovery."
We are not persuaded that the court exceeded the scope of its discretion in allowing the amendment. As a practical matter, Peng could not have asserted a res judicata defense when she first filed her answer because there was no judgment at the time in the unlawful detainer action. (See Solari v. Atlas-Universal Service, Inc. (1963)
"As generally understood, '[t]he doctrine of res judicata gives certain con
Although the res judicata doctrine encompasses both claim and issue preclusion, the term "res judicata" has sometimes been used by California courts to denote claim preclusion whereas the term "collateral estoppel" has denoted issue preclusion. (See Mycogen Corp. v. Monsanto Co., supra,
" 'The prerequisite elements for applying the doctrine to either an entire cause of action or one or more issues are the same: (1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding.' " ( People v. Barragan, supra,
C. Splitting a Cause of Action for Back-Due Rent Between an Unlawful Detainer Action and an Ordinary Civil Action
It is undisputed that two of the three requisites for the application of claim preclusion are present here. The unlawful detainer proceeding resulted in a final judgment on the merits and the parties in this action are identical to the parties in the unlawful detainer action. The parties' dispute turns on whether the claim raised in this breach of contract action for back-due rent is identical to the claim raised in the unlawful detainer action, in which Hong Sang sought and was awarded one month's rent. Peng asserts that the claims are identical and amount to Hong Sang splitting a single cause of action for accrued but unpaid rent into two different lawsuits.
At first blush, Peng's argument appears meritorious. After all, Hong Sang sought accrued and unpaid rent in two different actions, albeit for different time periods. But the argument proves to be meritless when one takes into account that the back-due rent cause of action was "split" between two very different legal proceedings-a summary unlawful detainer action and an ordinary civil lawsuit. An unlawful detainer action is a summary proceeding designed to adjudicate the right of immediate possession; the only claims that are cognizable in such a proceeding are those bearing directly on the immediate right of possession. (
An unlawful detainer judgment has a limited res judicata effect because the claim preclusion aspect of the res judicata doctrine applies only to matters that were raised or could have been raised in the earlier action on matters that were litigated or litigable.
A cause of action for back-due rent falls into the category of claims that a court has limited power to decide in an unlawful detainer proceeding. (See Friedman et al., Cal. Practice Guide: Landlord-Tenant (2017) § 9:416.1, p. 9-144 (hereafter Friedman).) If a landlord proceeds by way of a three-day notice to "pay or quit" when the tenant is in default in rent payments, the landlord is limited to recovering rent that accrued within one year of the notice. ( Code Civ. Proc., § 1161, subd. (2) ; see Friedman, supra , § 9:416.1, p. 9-144.) The amount of back-due rent is generally limited to that demanded in the three-day notice. (Friedman, supra, § 9:312, p. 9-90.) A landlord proceeding by way of a three-day notice for nonpayment of rent
By contrast, the right to recover back-due rent is not so limited in an ordinary civil action premised upon section 1951.2 of the Civil Code. A landlord can generally recover up to four years of back-due rent if the claim is based upon a written lease agreement. ( Code Civ. Proc., § 337.2 [four-year statute of limitations for breach of written lease].) Because a court has no jurisdiction to award more than one year's back-due rent in an unlawful detainer action, res judicata principles suggest that an unlawful detainer judgment should not preclude a separate, civil action for back-due rent that is not recoverable in an unlawful detainer proceeding.
The Legislature has gone further in limiting the res judicata effect of an unlawful detainer judgment in section 1952(b). The statute provides, with an exception not relevant here,
This principle is demonstrated in Northrop Corp. v. Chaparral Energy, Inc. (1985)
Northrop confirms that a lessor may choose to pursue rent damages in a separate civil suit even though it is authorized to seek rent damages in a prior unlawful detainer action, but its ruling does
We are guided by familiar principles in construing statutory language. Our primary goal is to "ascertain legislative intent so as to effectuate the purpose of the law. [Citation.] To do so, we first examine the language of the statute, giving the words their ordinary, commonsense meaning and according significance to all words used, if possible. [Citations.] 'The statute's words generally provide the most reliable indicator of legislative intent; if they are clear and unambiguous, "[t]here is no need for judicial construction and a court may not indulge in it." [Citations.] However, where 'the statutory language is ambiguous on its face or is shown to have a latent ambiguity such that it does not provide a definitive answer, we may resort to extrinsic sources to determine legislative intent.' " ( Guillen v. Schwarzenegger (2007)
It is reasonable to conclude the Legislature did not intend the term "any detriment" to refer to the entire category of claims for back-due rent. Such an interpretation would preclude a lessor from pursuing any further back-due rent claims in a separate civil action if any back-due rent claims were finally determined on the merits in an unlawful detainer action. But that interpretation is directly at odds with the California Law Revision Commission's expressly stated view at the time subdivision (b) was added to Civil Code section 1952 that damages may be recovered in both an unlawful detainer action and a civil action, as long as they are not duplicative: " 'The lessor's right to recover damages for loss of the benefits of the lease should be independent of his right to bring an action for unlawful detainer to recover the possession of the property. The damages should be recoverable in a separate action in addition to any damages recovered as part of the unlawful detainer action.' " ( Walt v. Superior Court (1992)
Peng nonetheless urges that case law supports her contention that res judicata principles preclude a landlord from splitting a cause of action for back-due rent between and unlawful detainer action and an ordinary civil action. The cases she relies upon are inapposite. She claims that McCaffrey v. Wiley (1951)
Likewise, Peng's reliance on Lekse v. Municipal Court (1982)
Peng also purports to rely on Northrop for the principle that a landlord may not split a claim for back-due rent between an unlawful detainer action and an ordinary civil action. She claims that if Hong Sang had wanted to preserve its claim for back-due rent, it should have "followed the procedure" in Northrop and sought possession only in the unlawful detainer action and pursued all claims for back-due rent in a separate civil lawsuit. But Northrop merely stands for the proposition that nothing requires a landlord to pursue damages for rent claims in an unlawful detainer action. ( Northrop,
Accordingly, we hold that an unlawful detainer judgment awarding back-due rent does not preclude a lessor from seeking additional back-due rent in an ordinary civil action. However, the lessor is precluded from recovering back-due rent associated with a particular time period in the subsequent civil action if such a claim was actually determined on the merits in the unlawful detainer action. Thus, the lessor is not only precluded from recovering twice for the same items of damages but also may not renew a claim for back-due rent associated with a particular time period if that periodic claim was denied on the merits in the unlawful detainer action.
Because the damages for back-due rent in the unlawful detainer judgment here were limited to the month of May 2011, Hong Sang was not precluded from seeking additional back-due rent covering the period from September 2009 through February 2011 in its breach of contract action. Therefore, the trial court did not err in rejecting Peng's claim that Hong Sang was precluded from seeking additional back-due rent in its civil action after recovering one month's back-due rent in the unlawful detainer action.
DISPOSITION
The amended judgment is reversed to the extent it awards a total of $113,096.33 in attorney fees to Hong Sang. The case is remanded to the trial court with directions to enter a new amended judgment awarding Hong Sang
Hong Sang shall be entitled to recover its costs on appeal.
We concur:
Pollak, J.
Siggins, J.
Notes
Retired Presiding Justice of the Court of Appeal, First Appellate District, Division Three, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
On the court's own motion, we consolidate the appeals in case numbers A140653 and A141640 for purposes of decision.
Code Civ. Proc., § 425.16.
Although Hong Sang's breach of contract action was filed before the unlawful detainer action, the judgment in the unlawful detainer action was entered before the judgment in the breach of contract action.
Issue preclusion, or collateral estoppel, does not apply unless the issue was actually litigated and necessarily decided in the former proceeding. (Hernandez v. City of Pomona (2009)
The exception applies when, during the course of an unlawful detainer proceeding, possession no longer becomes an issue and the action is converted to an ordinary civil action in which the lessor may seek relief not otherwise recoverable in an unlawful detainer proceeding. (See Civ. Code, §§ 1952(b), 1952.3, subd. (a).)
Section 1952(b) provides as follows: "Unless the lessor amends the complaint as provided in paragraph (1) of subdivision (a) of Section 1952.3 to state a claim for damages not recoverable in the unlawful detainer proceeding, the bringing of an action under the provisions of Chapter 4 (commencing with Section 1159 ) of Title 3 of Part 3 of the Code of Civil Procedure does not affect the lessor's right to bring a separate action for relief under Sections 1951.2, 1951.5, and 1951.8, but no damages shall be recovered in the subsequent action for any detriment for which a claim for damages was made and determined on the merits in the previous action."
Peng contends that, even if claim preclusion principles do not bar Hong Sang's back-due rent cause of action, it is barred by the application of issue preclusion principles. The claim is meritless. In the unlawful detainer action, the parties did not litigate the issues bearing upon whether Hong Sang was entitled to back-due rent for the period from September 2009 through February 2011. Indeed, the court's order granting summary judgment in the unlawful detainer action fails to even mention that Peng did not pay rent during that period. There was consequently no determination that Peng owed back-due rent for any period other than the month of May 2011. Because issue preclusion does not apply unless the issue was actually litigated and necessarily decided in the former proceeding, that principle does not foreclose Hong Sang's cause of action for additional back-due rent. (See Hernandez v. City of Pomona, supra,
See footnote *, ante .