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Kruger v. Reyes

Superior Court of California, Appellate Division, Santa Clara

December 17, 2014

KIM KRUGER, Plaintiff and Respondent,
v.
CORINA REYES et al., Defendants and Appellants.

APPEAL from the Santa Clara Superior Court Trial Ct. No. 1-13-CV-253086, Derek Woodhouse, Judge.

Todd Rothbard Law Office and Todd B. Rothbard for Plaintiff and Respondent.

Dennis W. Smith Law Office and Dennis W. Smith for Defendants and Appellants.

OPINION

Honorable Griffin M.J. Bonini, Presiding Judge

THE COURT.[*]

Defendants and appellants Corina Reyes and Golden Gate Care Collective, Inc. (collectively “Appellants”) appeal from the October 18, 2013 unlawful detainer judgment against them. The judgment, entered after a court trial, restored possession of the subject property to plaintiff and respondent Kim Kruger, and awarded her damages plus attorney fees and costs in the total amount of $10, 298.81. Because Appellants had timely paid all rent due through the period covered by the three-day notice by deposit directly into Kruger’s bank account as provided by Civil Code section 1500, they had actually performed and were not in default when Kruger served them with a three-day notice to pay rent or quit, even though Kruger had returned at least some of the timely deposited funds. Kruger’s service of the three-day notice to pay rent or quit was therefore premature and void as a matter of law. We accordingly reverse the judgment.

STATEMENT OF THE CASE[1]

Kruger is the owner of commercial real property located at 623 North First Street, in San Jose. On May 20, 2012, she entered into a written lease agreement with Appellants, who used the premises to operate a medical-marijuana cooperative. The lease initially required Appellants to pay as rent $2, 800 per month due in advance on the first day of each calendar month during the lease term. Among other things, the lease provided that “Landlord may issue a Three-Day Notice to Pay Rent or Quit after the rent continues to be unpaid after four days after the date it is due.” Beginning June 1, 2013, the monthly rental rate was increased to $2, 968 per the lease terms. By separate agreement or practice of the parties, the manner in which Appellants paid rent was by direct deposit into Kruger’s bank account.

At some point, a dispute arose between the parties about the way in which Appellants were conducting business on the premises. Kruger generally contended that illegal activities were taking place in violation of the lease. On March 27, 2013, she filed an unlawful detainer action seeking to remove Appellants from the premises for these alleged violations (“the prior action”). Despite the pendency of that action, and as more particularly described below, Appellants continued to pay rent in advance for the months of April through September 2013 by deposit directly into Kruger’s bank account. Kruger maintains that she periodically returned those funds to Appellants either in cash or by check. As of June 21, 2013, Kruger considered the lease terminated, acknowledged that rent was no longer due, and confirmed she would no longer accept it.

On September 9, 2013, on Kruger’s request, the court dismissed the prior action. That same day, Kruger served Appellants with a three-day notice to pay rent or quit under Code of Civil Procedure section 1161, subdivision (2). The notice appears to have demanded back rent for a six-month period from April 2013 through September 2013—the period for which Appellants had timely made advance direct deposits for payment of rent. The estimated amount of rent claimed to be due on the notice was originally $17, 472 but, because of a calculation error, it was later reduced to $14, 672. Before the three-day notice period expired, Appellants made a partial payment of $8, 400 that Kruger accepted. On September 13, 2013, the fourth day after service of the notice, Appellants made an additional payment of $9, 400, which Kruger rejected.

On September 16, 2013, Kruger filed this unlawful detainer complaint against Appellants, by which she sought possession of the premises, restitution, and damages. Appellants filed a verified answer denying allegations and alleging various affirmative defenses.

A court trial was held on October 17, 2013, at the conclusion of which the court found in favor of Kruger. Judgment in her favor for possession and damages, plus attorney fees and costs, in the total amount of $10, 298.81 was entered the next day.

On October 30, 2013, Appellants filed a motion to vacate the judgment. The court heard and denied the motion on November 13, 2013.

On November 8, 2013, Appellants filed a petition for relief from judgment as it declared a forfeiture of the lease agreement. The court heard and denied the petition on November 20, 2013. Appellants appealed from the judgment, which is appealable under ...


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