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Bisno v. Douglas Emmett Realty Fund 1988

June 19, 2009


APPEAL from a judgment of the Superior Court of Los Angeles County. Phrasel L. Shelton, Judge. Affirmed in part, reversed in part, and remanded. (Los Angeles County Super. Ct. No. BC 319842).

The opinion of the court was delivered by: Rubin, J.*fn15


Douglas Emmett Realty Fund 1998 and Douglas, Emmett & Company appeal from the judgment entered after a jury found them liable for violating provisions of two Santa Monica rent control ordinances: (1) prohibiting notices to quit and eviction actions except on certain enumerated grounds; and (2) making unlawful demands for excessive rent. The plaintiff in that action, Robert Bisno, cross-appeals from a pretrial order summarily adjudicating that the affirmative defense of reliance on advice of counsel barred his malicious prosecution cause of action, and from the denial of his JNOV motion on his breach of contract claim. We hold that there were no triable issues of fact to defeat reliance on the advice-of-counsel defense and, therefore, affirm the summary adjudication order. Finding the litigation privilege (Civ. Code, § 47, subd. (b)) applies, we reverse the judgment outright as to the rent control claims based on the eviction notice and unlawful detainer action. We also reverse the judgment as to the rent control claim for excessive rent demands but permit retrial because whether the litigation privilege applies in the present setting is a question of fact and the jury was not instructed to consider that defense. We affirm the order denying Bisno‟s motion for partial judgment notwithstanding the verdict on his breach of contract cause of action. We also reverse the order awarding Bisno attorney‟s fees, allowing the parties to renew their respective motions upon resolution of the remaining claim.


Robert Bisno rented an apartment at The Shores, a Santa Monica high-rise, in 1996. Although Bisno had been married for several years to Jeanette Bisno, she was not mentioned in the lease at all, and he was the only person to sign the lease and be designated as a tenant. In 1998, The Shores was bought by Douglas Emmett Realty Fund 1998, a California limited partnership, which designated Douglas, Emmett & Company to serve as the property‟s manager.*fn1 Under the lease, Bisno had a month-to-month tenancy at a monthly rate of $933. The lease said no one but Bisno could occupy the unit without first obtaining the owner‟s consent, and that Bisno could not assign or sublet the unit. Paragraph 12 of the lease provided that the monthly rent would increase to $2,000 if Bisno assigned or sublet the unit, whether with or without the owner‟s consent.

When Bisno rented the unit in 1996, he and Jeanette lived in Berkeley, where they owned a home and where Bisno worked as the CEO of a real estate development company.*fn2 Bisno would sometimes stay at the unit when he was in Los Angeles on business, and Jeanette would sometimes stay there too. The Bisnos moved to Southern California in 2000 and bought a parcel of land in Beverly Hills in an area known as Beverly Park, where they began to build a house. While construction was underway, they lived in a rented house also in Beverly Hills. Jeanette filed for divorce in December 2001, and Bisno moved into The Shores in early 2002. He stayed there until the fall of 2002, when he moved into the newly-built home in Beverly Park. In April 2003, Jeanette moved into The Shores, intending to make Bisno‟s unit her primary residence. In or about that time, Bisno asked Emmett to make Jeanette a tenant on the lease.

We digress to describe some unpleasantries between Bisno and Emmett leading up to Jeanette‟s move to The Shores. Back in mid-May 2000, Bisno and Emmett had a dispute over the number of parking spaces Bisno was allowed. Although the lease allotted him only one space, Bisno was using two. When Emmett tried to enforce the lease and take back one of the spaces, Bisno contended the prior owner of The Shores had agreed to give him two spots. The prior owner eventually confirmed this, and Emmett let Bisno keep both spaces. In June 2001, Jeanette and the Bisnos‟ son were initially denied entrance to Bisno‟s unit when they asked to move in some items. The Shores‟s personnel did not know who Jeanette was and asked her for identification. She produced a driver‟s license, but, because she was not listed in The Shores‟s directory as either a tenant, occupant, or permitted visitor, they insisted on confirming her identity with Bisno. Although Bisno‟s secretary confirmed Jeanette‟s identity, Bisno was not available, and The Shores‟s personnel insisted on seeing a marriage certificate before they would open the unit for Jeanette. She was eventually allowed in, and was soon after added to Bisno‟s guest list for entry.*fn3

On February 18, 2003, Bisno wrote Emmett to give notice that his rent on the unit would be paid monthly by automatic electronic transfer to Emmett‟s bank. Bisno also wrote that "[a]lthough the unit is my wife‟s residence, my payment of the rent is pursuant to an agreement between us. (This is a private matter and I am not interested in publicity.)" By separate letter that same day, Bisno wrote to Jay Hotch, The Shores‟s property manager, about a meeting they had planned. Bisno said, "As you probably surmised, based upon my request to do certain improvements to the unit, my wife is looking to make the unit her residence."

On March 28, 2003, Emmett, represented by Attorney Don Sherwood, served the Bisnos with a notice of intent to file a petition seeking to raise the monthly rent from the then-current rent controlled rate of around $1,000 to the market rate of more than $4,000. Under section 3304 of the Santa Monica Rent Control Charter Amendment (C.A. section 3304), such a one-time increase was allowed if the tenant did not occupy the rental unit, based on a determination that the unit was not his "usual residence of return." The petition was filed on April 8, 2003, and a hearing officer of the Santa Monica Rent Control Board (Board) conducted a hearing on the petition on May 28, 2003.*fn4 The hearing officer issued her decision on August 1, 2003. Because Bisno had not resided in the unit since late-2002 and was now living in his newly-built home in Beverly Hills, the hearing officer found that Bisno‟s unit at The Shores was not his residence of return. Because Jeanette was not a named tenant and had never made The Shores her home, she had a limited right of occupancy but was not a tenant or a subtenant. Finally, because Jeanette had seldom lived in the unit by the time of the hearing, it was not her usual residence of return. Based on those findings, the hearing officer found that The Shores was entitled to increase the monthly rent on Bisno‟s unit to the market rate.

Bisno appealed that decision. The Board‟s staff recommended that it be affirmed in a report prepared for the Board‟s October 2003 meeting. The appeal was denied and, at a post-appeal hearing, the hearing officer set the fair market monthly rent of Bisno‟s unit at $4,045. Bisno sued the Board, contending that C.A. section 3304 was invalid because the Board exceeded its authority when it enacted that measure. Bisno was granted a preliminary injunction enjoining any attempt to implement the rent increase. Bisno ultimately lost at trial, and the judgment for the Board was affirmed by this court in Bisno v. Santa Monica Rent Control Bd. (2005) 130 Cal.App.4th 816 (Bisno I).

During argument at the Board hearing, Bisno‟s lawyer contended that a rent increase under C.A. section 3304 was not proper, but acknowledged that one might be authorized by the Costa-Hawkins Rental Housing Act. (Civ. Code, § 1954.50, et seq.)*fn5

After the trial court in Bisno I preliminarily enjoined enforcement of the rent increase approved by the Board, Trial Attorney Sherwood spoke with Emmett‟s general counsel, William Kamer, to discuss the point made by Bisno‟s lawyer concerning the applicability of the Costa-Hawkins Act, section 1954.53, subdivision (d)(1). After discussing the issue with Kamer and researching the Costa-Hawkins Act, Sherwood concluded that the act provided Emmett another means of raising the rent on Bisno‟s unit. He had Emmett‟s portfolio manager, Michael Boge, prepare a 60-day notice of rent increase. After certain changes recommended by Sherwood were made to that draft, Emmett served the notice on Bisno. Citing to section 1954.53, subdivision (d), the notice said that the rent increase was authorized under the Costa-Hawkins Act because Jeanette was a lawful sublessee, and demanded a new monthly rent of $4,295.

Sherwood recommended that a lawyer with true Costa-Hawkins expertise be hired to review the 60-day notice that had been served, confirm there was a valid legal basis for the rent increase under Costa-Hawkins, and then take care of an unlawful detainer action against Bisno should one become necessary. Acting on this recommendation, Emmett hired lawyer Craig Mordoh, an unlawful detainer specialist with Costa-Hawkins experience. Although there is a dispute as to which documents Mordoh reviewed, it is undisputed that he reviewed the lease and the Board hearing officer‟s report, and advised Emmett that it had a valid claim under the Costa-Hawkins Act. When Bisno refused to pay the increased rent, Mordoh prepared and served a three-day notice to pay rent or quit in February 2004. When that was ignored, Mordoh prepared, filed, and served an unlawful detainer action against the Bisnos.

In June 2004, counsel for Bisno wrote Mordoh to point out several perceived flaws in the unlawful detainer action.*fn6 According to the lawyer, Costa-Hawkins did not apply because Jeanette was an "original occupant" of the unit, had lived there for some time with Emmett‟s knowledge and consent, and was not a subtenant. The letter threatened a malicious prosecution action and a claim for attorney‟s fees for defending the unlawful detainer action. Mordoh read Bisno‟s lease again and realized he had missed paragraph 12, which set the rent in case of a sublease or assignment at $2,000 per month, an amount that would control under the Costa-Hawkins Act. Although Mordoh believed a Costa-Hawkins rent increase in the reduced amount would be valid, he recommended that Emmett dismiss the unlawful detainer action for several reasons: the costs of proceeding with that action; the likelihood of an appeal by Bisno if he lost; the cost of attorney‟s fees if Bisno prevailed; and the termination of the preliminary injunction in Bisno I, which reinstated the rent increase approved by the Board. Based on this advice, Emmett dismissed the unlawful detainer action.

Bisno then sued Emmett for malicious prosecution for having brought the unlawful detainer action. Bisno alleged that the unlawful detainer action was just the last step in a campaign of harassment by Emmett designed to drive him from his rent-controlled apartment. His complaint also included causes of action under two provisions of Santa Monica‟s rent control laws: charter amendment section 1806 (C.A. section 1806), which establishes a cause of action for wrongful eviction, including actual and punitive damages, against landlords who serve notices to quit or bring unlawful detainer actions unless the tenant has failed to pay the rent or otherwise committed some material breach of the lease; and charter amendment section 1809 (C.A. section 1809), which establishes a cause of action based on improper demands for unwarranted and excessive rent, including actual damages, attorney‟s fees, and a civil penalty of treble damages if the landlord acted willfully and maliciously. Bisno also stated a cause of action for breach of contract, based on allegations that Emmett: demanded an unauthorized rent increase and refused to accept the lawful rent of $1,100; brought the unwarranted unlawful detainer action; and breached his covenant of quiet enjoyment.

Before Bisno‟s action against Emmett went to trial, the court made two critical rulings. First, it denied Emmett‟s motion for leave to amend its answer to assert the litigation privilege as an affirmative defense. Second, it denied Emmett‟s motion for summary judgment, but granted its motion for summary adjudication of the malicious prosecution claim because it found that Emmett established as a matter of law the affirmative defense of good faith reliance on the advice of counsel. The remaining causes of action went to the jury, which found that Emmett had violated C.A. sections 1806 and 1809, and did so maliciously and in bad faith, and awarded Bisno more than $900,000 in punitive damages. The jury also found that Emmett had not breached its contract with Bisno. After various posttrial motions, the judgment awarded Bisno damages of $77,856 under C.A. section 1806, and $47,760 under C.A. 1809. Following additional posttrial motions, the trial court reduced the punitive damage award to $311,420. Bisno was awarded costs of more than $19,000 and attorney‟s fees of more than $700,000.

On appeal, Emmett contends: (1) the trial court erred by denying its motion to amend its answer and assert the litigation privilege as a defense; (2) the litigation privilege bars both causes of action under the rent control laws; and (3) as the prevailing party on the contract cause of action, it was Emmett who was entitled to attorney‟s fees, not Bisno.*fn7

Bisno has cross-appealed, contending the trial court erred by granting summary adjudication of his malicious prosecution claim, and the jury‟s determination that Emmett did not breach the lease was in error.


A. Summary Adjudication Was Properly Granted on the Malicious Prosecution Claim

1. Standard of Review

Summary judgment (or adjudication of a single cause of action) is granted when a moving party establishes the right to the entry of judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) In reviewing an order granting summary adjudication, we must assume the role of the trial court and redetermine the merits of the motion. In doing so, we must strictly scrutinize the moving party‟s papers. The declarations of the party opposing summary adjudication, however, are liberally construed to determine the existence of triable issues of fact. All doubts as to whether any material, triable issues of fact exist are to be resolved in favor of the opposing party. While the appellate court must review a summary adjudication motion by the same standards as the trial court, it must independently determine as a matter of law the construction and effect of the facts presented. (Barber v. Marina Sailing, Inc. (1995) 36 Cal.App.4th 558, 562.)

A defendant moving for summary adjudication meets its burden of showing that there is no merit to a cause of action if that party has shown that one or more elements of the cause of action cannot be established or that there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subds. (o)(2), (p)(2).) If the defendant does so, the burden shifts back to the plaintiff to show that a triable issue of fact exists as to that cause of action or defense. In doing so, the plaintiff cannot rely on the mere allegations or denial of her pleadings, "but, instead, shall set forth the specific facts showing that a triable issue of material fact exists . . . ." (Code Civ. Proc., § 437c, subd. (p)(2).) A triable issue of material fact exists "if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof. [Fn. omitted.]" (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.)

Our first task is to identify the issues framed by the pleadings. (Lennar Northeast Partners v. Buice (1996) 49 Cal.App.4th 1576, 1582.) The moving party need address only those theories actually pled, and an opposition which raises new issues is no substitute for an amended pleading. ...

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