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Granberry v. Islay Investments

September 09, 1993

LISA GRANBERRY ET AL., PLAINTIFFS AND APPELLANTS,
v.
ISLAY INVESTMENTS ET AL., DEFENDANTS AND APPELLANTS.



Superior Court County of Santa Barbara. Super. Ct. No. 136428. Hon. Ronald C. Stevens, Judge.

Willard, J.;*fn* Gilbert, Acting P.J., and Yegan, J., Concurring.

Willard

WILLARD, J.:

These appeals concern security posted by approximately 10,000 tenants (plaintiffs) who rented apartments from defendants during a three-year period commencing April 27, 1978. The basic issues relate to the meaning of Civil Code*fn1 section 1950.5 as it read during that interval of time.

Section 1950.5 was originally enacted in 1970 as section 1951. It was amended in 1972 and again in 1977 to read as it existed during the period involved in these appeals. The relevant portions during the three-year period are set forth in footnote 2.*fn2 For several decades, defendants have managed a number of apartment complexes in Santa Barbara County. They have modified their rental agreement forms over the years. At one time they required tenants to post security deposits. Later, they required tenants to provide non-refundable cleaning fees. During the period here involved, they established a rental rate for the first 31 days of occupancy. Thereafter, if the tenant continued on a month-to-month basis, a lesser rent was charged. The amount by which the first rental payment exceeded subsequent payments was not refunded in whole or in part; it was simply treated as part of the rent for the period involved.*fn3 The aggregate amount of such security is approximately $1 million.

On April 27, 1981, plaintiffs brought a class action against defendants seeking a refund of the amounts by which the rate for rent during the first 31 days exceeded the subsequent rate.*fn4 A jury found that the "excess" was in fact a security within the meaning of section 1950.5, subdivision (b). There has been no appeal from that determination. By summary adjudication, the trial Judge ruled that such security deposits must be refunded to members of the plaintiff class who individually made claim therefor under a procedure to be established.

The court found that defendants were not entitled to offsets for unpaid rent, repairs or cleaning, for which a security might be required by section 1950.5, because the defendants had not complied with a requirement of subdivision (e): "No later than two weeks after the tenant has vacated the premises, the landlord shall furnish the tenant with an itemized written statement of the basis for, and the amount of, any security received and the Disposition of such security and shall return any remaining portion of such security to the tenant." The judgment did not provide for requested prejudgment interest. It stated that plaintiffs' attorneys fees and costs should be determined later, should be paid out of the aggregate amount paid by defendants as refund, and should not exceed 25 percent of such aggregate amount.

Defendants have appealed from the ruling that they may not offset costs of cleaning, damages, unpaid rent, et cetera, from the security to be refunded. We reverse.

Plaintiffs have appealed from the judgment claiming error with regard to four matters: (1) the jury instruction defining "bad faith," (2) the limitation of refunds to those members of the class who come forward individually to claim them, (3) failure to award prejudgment interest, and (4) limitation of attorneys fees to be awarded plaintiffs' attorneys to 25 percent of the aggregate amount defendant is ultimately required to pay. There is no error with regard to the first, second and fourth claims, but we reverse the judgment with respect to the third.

DEFENDANTS' APPEAL

During the three-year period which the litigation involves, plaintiffs vacated apartments rented from defendants. During that period, and for more than nine years thereafter, no plaintiff received a written statement of the basis for, or the amount of, security posted or of the Disposition of that security. Likewise, none received a return of any portion of that security. The trial court found that defendants' default barred claims for offsets attributable to obligations for which the security was posted. Defendants contend that to deny them the right to offset, even after many years, is not mandated by the statute and would constitute an impermissible forfeiture.

In construing the meaning of the statute, two separate questions are presented. One is whether within two weeks of tenancy termination the landlord is obligated to account for and return unapplied security. We answer this in the affirmative. Where there is a failure to account, the entire deposit must be refunded, and because the amount is liquidated, prejudgment interest accrues. The second question is whether failure of the landlord to make the required refund cancels his causes of action, if any, for which the deposit was security. In other words, does loss of the security automatically result in loss of the landlords' right to setoff for property damage, unpaid rent or other obligation secured by the deposit? We answer this in the negative.

Obligation to Refund Security

"The fundamental rule is that a court should ascertain the intent of the Legislature so as to effectuate the law's purpose, and in determining intent the court first turns to the words used. [Citation.] [P] When statutory language is clear and unambiguous, there is no need for construction and courts should not indulge in it. [Citations.]" (People v. Overstreet (1986) 42 Cal. 3d 891, 895, 231 Cal. Rptr. 213, 726 P.2d 1288.) This rule of statutory construction has been stated and followed many times by the Supreme Court. (People v. Woodhead (1987) 43 Cal. 3d 1002, 1007-1008; Morse v. Municipal Court (1974) 13 Cal. 3d 149, 156, 118 Cal. Rptr. 14, 529 P.2d 46; Caminetti v. Pac. Mutual L. Ins. Co. (1943) 22 Cal. 2d 344, 353-354139 P.2d 908; Solberg v. Superior Court (1977) 19 Cal. 3d 182, 198, 137 Cal. Rptr. 460, 561 P.2d 1148.)

Pursuant to that mandate, we first turn to the words of the statute in order to ascertain whether there is ambiguity or whether the statute has an unambiguous plain meaning. The statute provides: "No later than two weeks after the tenant has vacated the premises, the landlord shall furnish the tenant with an itemized written statement of the basis for, and the amount of, any security received and the Disposition of such security and shall return any remaining portion of such security to the tenant." The amount of the tenant's security deposit to be refunded is the portion "remaining" as shown by the required statement after subtracting the amount retained from the original deposit. There is no other "remainder" to which the statute could be interpreted to apply.*fn5

Assuming, arguendo, that there were some ambiguity in the wording of the statute, we consider rules developed by court decision as an aid to determination of legislative intent. One is "that in attempting to ascertain the legislative intention effect should be given, whenever possible, to the statute as a whole and to every word and clause thereof, leaving no part or provision useless or deprived of meaning." (Weber v. County of Santa Barbara (1940) 15 Cal. 2d 82, 86, 98 P.2d 492, quoted and approved in Gay Law Students Assn. v. Pacific Tel. & Tel. Co. (1979) 24 Cal. 3d 458, 478, 156 Cal. Rptr. 14, 595 P.2d 592.) If any meaning is to be given to the statutory provision in question, it must be that it obligates the landlord to account for and refund the unused portion of the deposit within the two-week period specified. Otherwise, the requirement that the landlord "shall return any remaining portion of such security" is meaningless. (Emphasis added.) It might as well be written in "invisible ink."*fn6

Another construction aid, assuming ambiguity in wording, is to look at the objectives to be achieved by the statute. This involves consideration of the evils to be remedied. (People v. Woodhead, supra, 43 Cal. 3d at p. 1008.) The situation prior to the adoption in 1970 of section 1951, the predecessor of section 1950.5, in the form governing this litigation has been described as follows: "Theoretically, the security deposits are created to insure against the contingencies of unpaid rents, tenant-inflicted damages, and unclean premises at the termination of the lease. [Fn. omitted.] Any claim as to the retention of these funds by the landlord arises only at such time as there has been a breach of the tenant's obligation and an assessment of damage. [Fn. omitted.] However, the security deposit in actuality has evolved into a bonus to be kept by the landlord upon termination of the lease agreement regardless of the damages actually sustained by the landlord. Landlords will retain security deposits after the departure of a tenant secure in the knowledge that a former tenant is severely inhibited from initiating legal action. This restraint is a product of a combination of factors including problems of proof, [fn. omitted] the relatively small sum of money at issue, the time factor, and the distance now separating the tenant from his former landlord. [Fn. omitted.] Where the reimbursement is forthcoming, usually the payments are delayed, the application of the retained amounts unitemized, and the interim retention and use of the funds having been without cost to the landlord." (Jory, The Residential Lease: Some Innovations for Improving The Landlord-Tenant Relationship (1971) 3 U.C. Davis L.Rev. 31, 38-39.)

Regardless of the accuracy of the law review description quoted, supra, it is clear that the 1970 legislation and section 1950.5 as it read during the period here involved was remedial legislation designed to furnish tenants rights they had not previously had. It did away with non-refundable security deposits (which defendants' leases had called for prior to 1970); it set upper limits on the amount of security deposits; it required an accounting for security deposits within two weeks of tenancy termination; it exempted ordinary "wear and tear" as a basis for the retention of security deposits; and it provided for a statutory penalty in cases of bad faith retention of security deposits. This tends to show a legislative purpose of ameliorating hardships previously suffered by tenants--of leveling the playing field. We cannot ...


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