Del Monte Props. & Invs., Inc. v. Dolan

Counsel

Gregory M. Holtz, S. Lynn Martinez, Legal Services of Northern California, for Defendant and Appellant., Defendant and Appellant Margarett Dolan's ("Appellant") appeal came on for hearing with the Appellate Division in Department 3 of this Court on April 6, 2018, *925Hon. Dale A. Reinholtsen, Hon. Gregory Elvine-Kreis, and Hon. Kelly L. Neel presiding. Gregory M. Holtz appeared on behalf of Appellant. Andrew Del Monte and Denise Del Monte appeared for Plaintiff and Respondent Del Monte Properties and Investments ("Respondent")., Having read and considered the briefs filed by the parties, and having heard argument of counsel and the parties, the Court reverses the judgment of the trial court for the reasons stated below., On May 10, 2017, Respondent filed a complaint for unlawful detainer against Appellant. Respondent alleged that it leased the premises to Appellant at a monthly rent of $600 and that it served Appellant with a 3-day notice to pay rent or quit on May 5, 2017. The 3-day notice, attached as an exhibit to the complaint, demanded rent in the amount of $600, as well as a late fee in the amount of $50, for a total of $650. The lease, also attached as an exhibit to the complaint, contains the following term:, Appellant filed an amended answer as well as a motion for summary judgment. The summary judgment motion was denied and the case proceeded to trial on June 6, 2017 and June 7, 2017. Andrew Del Monte testified for Respondent. Both Respondent and Appellant's counsel asked questions about the late fee. After Appellant's motion for nonsuit was overruled, Appellant testified. Appellant requested a statement of decision. The trial court found for Respondent. It ordered the lease forfeited and awarded Respondent possession of the premises, as well as "past-due rent" of $650 and holdover damages of $140, for a total judgment of $790. Judgment was entered on June 7, 2017. Appellant filed a notice of appeal on September 8, 2017. The trial court entered a statement of decision on September 29, 2017., Courts look beyond the language of the contract to determine the actual circumstances of a liquidated damages clause. Garrett v. Coast & Southern Fed. Sav. & Loan Assn., 9 Cal.3d at 737, 108 Cal.Rptr. 845, 511 P.2d 1197. Agreement to an invalid liquidated damages clause does not insulate it from attack under Civil Code § 1671. The losses caused by late payment of residential rent are limited to interest and administrative costs of collecting and accounting for the late rent. Orozco v. Casimiro (2004) 121 Cal.App.4th Supp. 7, 11, 17 Cal.Rptr.3d 175., As a separate and independent basis for this decision, Respondent failed to meet its burden to show that the late fee was the result of a reasonable endeavor to approximate actual losses caused by late payment of rent. To be valid under Civil Code § 1671, a liquidated damages clause must be the result of a reasonable endeavor to approximate actual losses caused by the breach being compensated. In re Cellphone Termination Fee Cases (2011) 193 Cal.App.4th 298, 322, 122 Cal.Rptr.3d 726. Setting the liquidated damages to a percentage of the contract price demonstrates a purpose other than compensating losses. Garrett v. Coast & Southern Fed. Sav. & Loan Assn., 9 Cal.3d at 740, 108 Cal.Rptr. 845, 511 P.2d 1197. Some analysis of actual losses is required prior to setting the amount. Util. Consumers' Action Network, Inc. v. AT&T Broadband of Southern California, Inc. (2006) 135 Cal.App.4th 1023, 1031, 37 Cal.Rptr.3d 827. Post-hoc rationalization will be rejected. In re Cellphone Termination Fee Cases, 193 Cal.App.4th at 328, 122 Cal.Rptr.3d 726., It is settled law that a defective notice is fatal to an unlawful detainer complaint. Wasatch Prop. Mgmt. v. Degrate (2005) 35 Cal.4th 1111, 1117, 29 Cal.Rptr.3d 262, 112 P.3d 647. The notice upon which the complaint in this case is based is defective because it may include an invalid late fee and it may not support a judgment for unlawful detainer.