Opinion
E042905
4-25-2008
MICHAEL FREEMAN, Plaintiff and Appellant, v. UNITED DOMINION REALTY TRUST, INC. et al., Defendants and Respondents.
Geller, Stewart & Foley, Michael S. Geller and Richard A. Stewart for Plaintiff and Appellant. Pahl & McCay, Karen K. McCay and Ginger L. Sotelo for Defendants and Respondents.
NOT TO BE PUBLISHED
Plaintiff Michael Freeman leased an apartment in Riverside from defendant Windemere at Sycamore Highlands, LLC (Windemere). In his first cause of action, he alleges that Windemere engaged in seven specified business practices that violated the unfair competition law (UCL) (Bus. & Prof. Code, § 17200). In his second cause of action, he alleges that Windemere violated the Consumer Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.).
Freeman further alleges that defendants United Dominion Realty Trust, Inc. (UDR), UDR California Properties, LLC (UDRC), and UDR Western Residential, Inc. (UDRW) are agents and alter egos of Windemere, and vice versa, so that if Windemere is liable under the UCL or the CLRA, they are equally liable.
The trial court granted summary judgment for defendants, ruling that Freeman had failed to show: (1) that any of the alleged business practices violated the UCL; (2) that an apartment lease results in the lease of "goods" or "services" to a "consumer" so as to come within the scope of the CLRA; or (3) that UDR and UDRC were liable for any acts of Windemere. It awarded defendants attorney fees against Freeman under the CLRA.
We will conclude that there was at least a triable issue of fact with respect to whether one out of the seven alleged business practices violated the UCL. We will also conclude that defendants were not entitled to attorney fees against Freeman because his CLRA claim was in good faith, even though ultimately it lacked merit. Otherwise, however, we will affirm.
I
FACTUAL BACKGROUND
We accept all facts listed in defendants separate statement that Freeman did not dispute. We also accept all facts listed in defendants separate statement that Freeman did dispute, to the extent that (1) there is evidence to support them (Code Civ. Proc., § 437c, subd. (b)(1)), and (2) there is no evidence to support the dispute (id., subd. (b)(3)). Finally, we accept all facts listed in Freemans separate statement, to the extent that there is evidence to support them. (Ibid.) We disregard any evidence not called to the trial courts attention in the separate statement of one side or the other, except as necessary to provide nondispositive background, color, or continuity. (See San Diego Watercrafts, Inc. v. Wells Fargo Bank (2002) 102 Cal.App.4th 308, 314-316.)
On June 27, 2003, Windemere leased an apartment to Freeman. The lease, as relevant here, provided:
"LATE CHARGE AND NSF [(nonsufficient funds)] CHARGE: Landlord and Resident(s) agree that the actual cost to landlord when Resident(s) fail to pay rent on time, or when Resident(s) pay rent by a check which is subsequently dishonored by the bank, is difficult or impossible to ascertain, but the parties agree that Landlord does, in the event of late payment or in the event of a dishonored check, incur certain costs, such as additional bookkeeping and administrative charges, bank charges, lost opportunity costs of the late payment, etc. The parties accordingly agree that, any time the rent for any given month is paid after the fifth day of such month, Resident(s) will in that month pay to Landlord, as additional rent due with the late payment, a late charge in the sum of $ 75.00 and further agree that, in the event of a dishonored check, Resident(s) will pay to Landlord, as additional rent due with the payment required to replace the dishonored check, a NSF fee in the sum of $50.00."
"UTILITIES: Payment of all utilities charges shall be the responsibility or Resident(s) . . . . In the event Resident(s) fail to pay any utility charges which are to be paid by Resident(s), Landlord may, at its option, pay such charges to retain continuing utilities service. In the event that Landlord does so, any such charges may be billed to Resident(s) by Landlord and said billing shall become due and payable, in full, as additional rent together with the regular monthly rental payment on the first day of the month next following the date of such billing."
The lease included a "Discount Agreement" (capitalization altered), which provided: " . . . $1225.00 additional free rent is offered and accepted as a one time concession for entering into this lease. . . . [¶] If the lessee(s) should default under any provision of this lease, lessor will recover the rent and discount set forth above."
Windemere used Viterra Energy Services, a third party billing provider, to bill tenants for water service and trash collection. Viterra added an administrative fee of $2.90 per month to each tenants bill.
Each apartment had its own water meter, so that tenants were charged only for their own water use, at the rate set by the water company. Tenants were not charged for common-area water use. The water bills that Freeman received listed his own meter readings and water usage.
Tenants were charged a flat fee for trash collection of $11.96 per month. Windemere charged a flat fee, rather than a pro rata share of the total, because it could not be certain what its occupancy rates would be and because it did not want tenants to have to pay "exorbitant trash fees when occupancy levels are low . . . ." During Freemans tenancy, Windemere consistently paid more per year for trash than it recovered from its tenants.
According to Amy Smith, a representative of Windemere, Windemeres actual administrative expenses in the event of either a late payment or an NSF check are not readily calculable: "Sometimes, the tenant will promptly pay the late rent, but other times, . . . the rent is not paid for weeks or at all. During this undeterminable length of time, Windemere is losing the time-value of the funds which simply cannot be determined. Other times, . . . we have to go further and issue a Three Day Notice to Pay Rent or Quit. Further, in any of these circumstances, there is typically time expended in making notations and entries in the rent roll and accounting documents, discussing the issue with the tenant and trying to fashion an acceptable resolution." (Capitalization altered.) She added that the administrative expenses "depend[] on who is performing the tasks and can vary greatly. In some cases, my assistant will perform the tasks while in other instances, I will." ShShe indicated that she and her assistant were paid at different hourly rates.
Smith also testified that Windemere set the $75 late fee after considering "the following factors . . . in order to derive a reasonable estimate of the costs incurred . . . : tracking delinquencies, contacting tenants whether by phone or letter, drafting 3-Day Notices, delivering and/or posting 3-Day Notices, tracking the correspondence and related paperwork, sending certified mail if [the] resident is unavailable in person, making required accounting entries . . . and lost opportunity costs of the funds."
Similarly, Smith testified that Windemere set the $50 NSF fee after considering "the following factors . . . in order to derive a reasonable estimate of the costs incurred . . . : bank charges associated with NSF reporting, per item charges from the bank, verification of accuracy of account information, posting NSF information in various internal stems, maintenance of custom computer programs, processing of information received from the bank, communicating with the bank re verification of payments, account information and correcting mistakes, contacting tenants whether by phone or letter . . . , engaging in collection efforts, making required accounting entries . . . , and lost opportunity costs of the funds."
In April 2004, Freemans monthly rent check bounced. As a result, Windemere sent him a bill for the rent, for a $75 late fee, and for a $50 NSF fee. Toward the end of April, he paid this bill.
In June 2004, Freeman gave Windemere a monthly rent check, but he stopped payment on it before it cleared. As a result, on June 16, 2004, Windemere sent him a three-day notice to pay rent or quit. On or about July 9, 2004, Freeman vacated the apartment, without having paid the June or partial July rent. He also owed Viterra a total of $193.27.
Initially, Freeman had paid Viterras water and trash bills. In November 2003, however, he asked Windemere to produce backup documentation to prove that the water and trash fees were "being fairly apportioned." In February 2004, Windemere responded that actual water costs were passed through, while trash was charged as a flat fee; however, it refused to produce the requested documentation. That was when Freeman stopped paying.
II
PROCEDURAL BACKGROUND
On July 7, 2004, Freeman filed the complaint in this action. As subsequently amended, it asserted two causes of action. The first cause of action was for violation of the UCL, Business and Professions Code section 17200. It alleged that defendants charged Freeman and other tenants:
1. A $75 late fee.
2. A $50 fee for returned checks.
3. Fees for water that were more than defendants themselves actually paid.
4. Fees for trash collection that were not authorized by the leases.
5. Fees for billing services that were not authorized by the leases.
6. Late fees for water service, trash collection, and billing services that were not authorized by the leases.
7. A charge-back of the free-rent incentive when tenants who had received free rent breached the leases.
The second cause of action was for violation of the CLRA, Civil Code section 1750 et seq. It incorporated the allegations of the first cause of action.
On December 23, 2005, defendants filed a motion for summary judgment. In it, they argued that: (1) Freeman could not prevail on his UCL cause of action because he could not establish that defendants alleged practices were unfair, deceptive, or fraudulent; (2) Freeman could not prevail on his CLRA cause of action because he could not establish that he was a "consumer"; and (3) UDR and UDRC were not liable, as agents, alter egos, or otherwise, for Windemeres alleged conduct.
In support of their motion, defendants filed declarations by Amy Smith and Cheri MacArthur. In opposition to the motion, Freeman filed his own declaration, as well as a declaration by his attorney, Michael S. Geller. Freeman also filed objections to specified portions of the Smith and MacArthur declarations. Defendants then filed objections to specified portions of the Freeman and Geller declarations.
The trial court overruled Freemans objections to the Smith and MacArthur declarations; it sustained all but one of defendants objections to the Freeman and Geller declarations.
On March 14, 2006, after hearing argument, the trial court granted the motion for summary judgment.
Accordingly, on January 17, 2007, the trial court entered judgment in favor of defendants and against Freeman. Freeman filed a timely notice of appeal from the judgment.
On May 7, 2007, defendants filed a motion for attorney fees under the CLRA.
On September 5, 2007, after hearing argument, the trial court granted the motion and awarded defendants $118,714.50 in attorney fees against Freeman. Freeman filed a timely notice of appeal from the fee award.
III
DISCUSSION
A. Evidentiary Issues.
Preliminarily, Freeman contends that the trial court erred by overruling his objections to the Smith declaration, as well as by sustaining defendants objections to the Freeman and Geller declarations. He does not tell us what the declarations said or what the objections were; he does not explain why the objections were (or were not) well taken; and he does not cite any authority in support of this contention.
"An appellant must provide an argument and legal authority to support his contentions. This burden requires more than a mere assertion that the judgment is wrong. . . . It is not our place to construct theories or arguments to undermine the judgment and defeat the presumption of correctness. When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived. [Citation.]" (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852, fn. omitted.)
In their respondents brief, defendants pointed out this deficiency. Even so, in his reply brief, Freeman did not bother to remedy it. He merely cited to the objections that he had filed in the trial court, then asserted: "These objections made to the trial court contain the legal reasoning that supports their validity . . . . No further argument should be required . . . ."
Alas, further argument is required. "`[I]t is entirely inappropriate for an appellate brief to incorporate by reference documents and arguments from the proceedings below . . . . [Citations.] `An appellant cannot rely on incorporation of trial court papers, but must tender arguments in the appellate briefs. [Citation.]" (In re Groundwater Cases (2007) 154 Cal.App.4th 659, 690, fn. 18, quoting 2 Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2006) ¶ 9:30.1, pp. 9-10 and Paterno v. State of California (1999) 74 Cal.App.4th 68, 109.)
We conclude that Freeman has forfeited the asserted evidentiary errors.
B. First Cause of Action: The UCL.
"The UCL is codified in Business and Professions Code section 17200 et seq. The UCL prohibits any `unlawful, unfair or fraudulent business act or practice. [Citation.] `Because Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition — acts or practices which are unlawful, or unfair, or fraudulent. [Citation.]" (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1554, quoting Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632, 647.)
"A business practice is unfair within the meaning of the UCL if it violates established public policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury to consumers which outweighs its benefits. [Citations.] The determination whether a business practice is unfair `"`involves an examination of [that practices] impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer. In brief, the court must weigh the utility of the defendants conduct against the gravity of the harm to the alleged victim . . . . [Citations.] [Citation.]" [Citation.]" (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1473, quoting Wilner v. Sunset Life Ins. Co. (2000) 78 Cal.App.4th 952, 965.)
1. Water fees.
Freeman alleged that defendants charged more for water then they themselves actually paid. Defendants, however, established that all they did was pass along the actual cost of the water that each tenant actually consumed. Thus, there was no triable issue of fact with respect to this alleged practice.
Freeman purported to dispute this, citing paragraph 10 of the Geller declaration and paragraph 18 of his own declaration. The Geller declaration, however, had no paragraph 10, and the trial court sustained defendants objection to paragraph 18 of Freemans declaration. (See part III.A, ante.)
Freeman also cited utility bills showing that the City of Riverside had billed defendants a lump sum for water. However, this did not conflict with defendants claim that individual apartments were also submetered.
2. Trash fees.
Freeman alleged that defendants charged unauthorized fees for trash collection. Defendants responded that trash collection was a "utility" within the meaning of the lease. The trial court ruled that "the provision in the lease that the tenant is to pay utilities is sufficiently broad to include trash service, and so . . . there is . . . no violation of law." Freeman argues that the lease was ambiguous on this point, and therefore it should be construed against the drafter.
The rule of construction against the drafter, however, applies only "[i]n cases of uncertainty not removed by the preceding rules . . . ." (Civ. Code, § 1654.) "`[T]his canon applies only as a tie breaker, when other canons fail to dispel uncertainty. [Citation.]" (Powers v. Dickson, Carlson & Campillo (1997) 54 Cal.App.4th 1102, 1112, quoting Pacific Gas & Electric Co. v. Superior Court (1993) 15 Cal.App.4th 576, 596.)
"[T]he conduct of the parties after the execution of the contract, and before any controversy arose, may be considered in order to attempt to ascertain the parties intention. [Citation.] `It is well settled that although an agreement may be indefinite or uncertain in its inception, the subsequent performance of the parties will be considered in determining its meaning for they are least likely to be mistaken as to the intent. [Citations.] [Citations.]" (Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441, 1449, quoting Crawford v. Continental Cas. Co. (1968) 261 Cal.App.2d 98, 102.)
Here, Freeman lived in the apartment for a year. The City of Riverside collected his trash; Windemere paid the City of Riverside; and — at least until a controversy arose — Freeman paid Windemere. Admittedly, five months after he moved in, Freeman sent a letter to Windemere questioning whether the trash charges were being fairly apportioned; however, even then, he did not question the necessity of paying them, in some amount. This was sufficient evidence that both parties considered trash collection to be a "utility" within the meaning of the lease. Freeman introduced no contrary evidence.
Freeman also argues that it was unfair to charge him a flat fee instead of his actual trash charges. The evidence showed, however, that the flat fee was consistently less than the actual charges. We conclude that the flat fee for trash collection was not an unfair business practice.
3. The $2.90 administrative fee.
Freeman alleged that defendants charged unauthorized fees for billing services. The trial court ruled that this was not an unfair business practice (although it did not really explain why).
Even assuming these fees were not authorized by the lease, under Berryman v. Merit Property Management, Inc., supra, 152 Cal.App.4th 1544, this practice did not violate the UCL. In Berryman, the plaintiffs alleged that when they sold their homes, the defendant, the manager of several homeowners associations, violated the UCL by charging transfer fees that were not authorized by statute or by contract. (Id. at pp. 1548-1549.) The appellate court held that a demurrer to this claim was properly sustained, explaining: "[W]e are unaware of any statutory or case law that requires a for-profit business to point to a statute or contract that allows it to charge a fee for a service. The burden is on the plaintiffs to show why Merit was not permitted to do so." (Id. at p. 1555.)
Here, similarly, defendants provided billing services (through Viterra) that they were not required to provide, either statutorily or under the lease. Much as in Berryman, Freeman claims that the fees were unfair only because they were not authorized by statute or by contract. He does not claim that they were fraudulent; the bills themselves disclosed that the services were being provided and that Viterra was charging $ 2.90 a month for them. Thus, Berryman is controlling here.
The same analysis also applies to Freemans claim that defendants charged unauthorized late fees on the bills for water, trash, and billing services.
4. The $75 late fee and $50 NSF fee.
Freeman alleged that the $75 late fee and $50 NSF fee were "unlawful liquidated damages provisions . . . ." The trial court ruled that an unlawful liquidated damages provision cannot constitute an unlawful or unfair business practice under the UCL, citing Californians for Population Stabilization v. Hewlett-Packard Co. (1997) 58 Cal.App.4th 273 (CAPS), disapproved on other grounds in Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 175-178.
In CAPS, the plaintiff asserted that a liquidated damages provision in an employment agreement (see CAPS, supra, 58 Cal.App.4th at pp. 281-282) violated the UCL because it was unlawful under several statutes, including Business and Professions Code section 16600, concerning covenants not to compete, and Civil Code section 1671, concerning liquidated damages. (CAPS, at pp. 286-287.) Preliminarily, the court observed: "It is questionable whether the . . . statutes cited by CAPS actually constitute violations of law as contemplated by section 17200. Rather, they appear to address certain unenforceable contract provisions which may be severed from a contract. There is merit to [the] claim that section 17200 `does not give the courts a general license to review the fairness of contracts but rather has been used to enjoin deceptive or sharp practices. [Citation.] Nevertheless, we address each statute in turn." (CAPS, at p. 287, quoting Samura v. Kaiser Foundation Health Plan, Inc. (1993) 17 Cal.App.4th 1284, 1299, fn. 6.) Thus, the court went on to conclude that the plaintiff had failed to rebut the presumption, under Civil Code section 1671, subdivision (b), that a liquidated damages provision is reasonable. (CAPS, at pp. 288-290.)
Civil Code section 1671, as relevant here, provides:
"(b) Except as provided in subdivision (c), a provision in a contract liquidating the damages for the breach of the contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.
"(c) The validity of a liquidated damages provision shall be determined under subdivision (d) and not under subdivision (b) where the liquidated damages are sought to be recovered from . . . : [¶] . . . [¶]
"(2) A party to a lease of real property for use as a dwelling by the party or those dependent upon the party for support.
"(d) In the cases described in subdivision (c), a provision in a contract liquidating damages for the breach of the contract is void except that the parties to such a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage."
Later, however, in Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, the court held that a covenant not to compete that is unlawful under Business and Professions Code section 16600 does violate the UCL. (Application Group, Inc., at pp. 906-908.) It dismissed the statement to the contrary in CAPS as "dictum," adding, "As with most dicta, this statement is deserving of little or no weight in our analysis." (Application Group, Inc., at p. 908, fn. 21.)
We fail to follow the CAPS courts reasoning. We readily concede that the courts have no roving commission to review the fairness of contracts. However, we have a specific remit from the Legislature to review liquidated damages provisions under Civil Code section 1671. And once we find that a provision does violate Civil Code section 1671, it is not "unenforceable" and "sever[able]" rather than unlawful; it is unenforceable and severable because it is unlawful. (See Civ. Code, § 1599 [permitting severance of unlawful contract term].)
In Hitz v. First Interstate Bank (1995) 38 Cal.App.4th 274, the appellate court upheld the trial courts ruling that certain fees charged by the defendant bank were unlawful under Civil Code section 1671 (Hitz, at pp. 288-292), and therefore that they did violate the UCL. (Id. at pp. 292-293, fn. 14.) Unlike CAPS, Hitz is a square holding on point. We find it persuasive.
Thus, the trial court erred by granting summary adjudication on the ground that an unlawful liquidated damages provision does not violate the UCL. Defendants, however, also argued below that the $75 late fee and $50 NSF fee were not unlawful under Civil Code section 1671. The parties have raised and briefed this issue in this appeal. Thus, if defendants are correct, we may sustain the summary adjudication on this ground.
"In 1977, . . . Civil Code section 1671 was amended to favor liquidated damages except in contracts for the sale or lease of consumer goods and services, or in residential leases. [Citation.] In non-consumer contracts, the new law stated that a liquidated damages provision was valid unless the party seeking to invalidate that provision `establishes that the provision was unreasonable under the circumstances existing at the time the contract was made. (Civ. Code, § 1671, subd. (b); [citation].) When a liquidated damages provision is contained in a consumer contract or a residential lease, `the prior law . . . still applies. ([Citation]; see [Civ. Code,] § 1671, subds. (c), (d).)" (Utility Consumers Action Network, Inc. v. AT&T Broadband of Southern Cal., Inc. (2006) 135 Cal.App.4th 1023, 1028, fn. omitted.)
"Because the current law governing liquidated damages in consumer contracts is a continuation of prior law on the subject, decisions interpreting former section 1671 apply with equal force here. Those cases developed a two-part test for determining whether a liquidated damages provision was valid. The first tracks the statutory language: fixing the amount of actual damages had to be impracticable or extremely difficult. The second is a judicially crafted requirement: the amount selected must `represent a reasonable endeavor by the parties to estimate fair compensation for the loss sustained. [Citation.] Determining whether a reasonable endeavor was made depends upon both (1) the motivation and purpose in imposing the charges, and (2) their effect. If the amount selected is designed to substantially exceed the damages suffered, and its primary purpose is to serve as a threat to compel compliance through the imposition of charges bearing little or no relationship to the amount of actual loss, then the purported liquidated damages provision is an invalid attempt to impose a penalty. [Citation.]" (Utility Consumers Action Network, Inc. v. AT&T Broadband of Southern California, Inc., supra, 135 Cal.App.4th at p. 1029, quoting Rice v. Schmid (1941) 18 Cal.2d 382, 386.)
Here, defendants introduced sworn testimony that it would be impracticable to calculate the expenses incurred as a result of a late payment or an NSF check. Admittedly, some of that testimony was puffery, at best. There is a well-known and highly practical method of measuring the lost time value of funds — its called "interest." Moreover, some of the categories of expenses that defendants claimed seem trivial and/or duplicative. How much can it really cost to "process[] . . . information received from the bank"? Is there any difference between "posting NSF information in various internal systems" and "making required accounting entries"? Still, defendants merely claimed that they considered each of these categories, not that each category was substantial. And it seems reasonable that defendants would incur at least some costs in each of the listed categories.
Freeman purported to dispute this evidence, but once again, he cited the nonexistent paragraph 10 of the Geller declaration.
Freeman did not present any contradictory evidence to the trial court. We also note that, in the lease itself, Freeman agreed that the actual costs arising out of a late payment or NSF check were "difficult or impossible to ascertain . . . ." Freeman has not asserted a cause of action to rescind or reform the lease in this respect. Accordingly, he is conclusively bound by this recital. (Evid. Code, § 622.)
The only even arguably contradictory evidence was Windemeres statement, in response to a request for documents "evidenc[ing] any calculations or considerations utilized" in setting the $75 late fee and $50 NSF fee, that "such documents . . . never existed." Freeman, however, did not cite this evidence in his separate statement. The trial court therefore was not required to consider it. (San Diego Watercrafts, Inc. v. Wells Fargo Bank, supra, 102 Cal.App.4th at pp. 314-316.)
We therefore conclude — albeit on different grounds than the trial court — that the $75 late fee and the $50 NSF fee did not constitute unlawful business practices.
5. The Free Rent Charge-Back.
Freeman also alleged that the "Discount Agreement," which provided that the $1,225 free rent concession would become due in the event of any breach of the lease, was an unlawful liquidated damages provision.
It appears that the trial court rejected this claim, too, on the authority of CAPS. In doing so, it erred. However, defendants had also argued that the free rent concession did not constitute liquidated damages at all. The parties have raised and briefed this issue in this appeal. Hence, we may consider it.
"`We have consistently ignored form and sought out the substance of arrangements which purport to legitimate penalties and forfeitures. [Citation.]" (Ridgley v. Topa Thrift & Loan Assn. (1998) 17 Cal.4th 970, 979, quoting Garrett v. Coast & Southern Fed. Sav. & Loan Assn. (1973) 9 Cal.3d 731, 737.)
In general, a liquidated damages provision takes effect upon a breach of contract. (Ridgley v. Topa Thrift & Loan Assn., supra, 17 Cal.4th at p. 982.) By contrast, a provision that takes effect without regard to a breach of contract is not a liquidated damages provision. (Id. at pp. 978-979.) For example, in Ridgley itself, a lender charged a prepayment charge when a borrower repaid a loan early, if — and only if — the borrower had made any interest payment more than 15 days late or had defaulted on any other contractual obligation. (Ridgley v. Topa Thrift & Loan Assn., supra, 17 Cal.4th at pp. 973, 974.) The lender argued that all it had done was agree to waive a prepayment charge that would otherwise have been due, on the condition that the borrower had never been in default. (Id. at pp. 981-982.) The Supreme Court found this to be a distinction without a difference: "That the prepayment fee might have been imposed without condition does not imply it may validly be imposed on the condition of . . . late payment of interest. A forfeiture or unreasonable penalty, imposed only upon the other partys default, is unenforceable even though the same money, property or other consideration might have validly been bargained for as a form of contractual performance. A contrary conclusion would allow unreasonable late charges and other penalties to escape legal scrutiny through simple rephrasing as a conditional waiver." (Id. at p. 982.)
The terminology in this area can be somewhat confusing. Some cases distinguish between a "liquidated damages provision," which is valid, and a "penalty provision," which is invalid. Our task, however, is to distinguish both liquidated damages provisions and penalty provisions — i.e., all provisions that are subject to the rules stated in Civil Code section 1671 — from all other contract provisions. Accordingly, we will call both of these, collectively, liquidated damages provisions.
The free rent charge-back in this case is strikingly similar to the "conditional waiver" in Ridgley. It takes effect if — and only if — the lessee is in default. Defendants argue that "[i]f the lease agreement is not fulfilled, the concession was not earned . . . and, therefore, [Freeman] is not entitled to the discount taken at the inception of the [l]ease." Ridgley, however, rejected essentially the identical argument.
We conclude that there was at least a triable issue of fact with respect to whether the free rent charge-back was an unlawful liquidated damages provision under Civil Code section 1671 and hence with respect to whether it was an unlawful business practice under the UCL.
C. Second Cause of Action: The CLRA.
Freeman also contends that the trial court erred by sustaining the motion for summary judgment with respect to his cause of action under the CLRA. The trial court ruled that the CLRA did not apply to an apartment lease.
To have standing to sue under the CLRA, a plaintiff must be a "consumer." (Civ. Code, § 1780, subd. (a); Schauer v. Mandarin Gems of California, Inc. (2005) 125 Cal.App.4th 949, 960; California Grocers Assn. v. Bank of America (1994) 22 Cal.App.4th 205, 217.) "Consumer" is defined as "an individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes." (Civ. Code, § 1761, subd. (d).)
"Goods," as relevant here, are defined as "tangible chattels bought or leased for use primarily for personal, family, or household purposes, . . . including goods that, at the time of the sale or subsequently, are to be so affixed to real property as to become a part of real property, whether or not they are severable from the real property." (Civ. Code, § 1761, subd. (a).)
"Services," as relevant here, are defined as "work, labor, and services for other than a commercial or business use . . . ." (Civ. Code, § 1761, subd. (b).)
In this case, Freeman leased an apartment. An apartment is real property, not a tangible chattel. Accordingly, an apartment is not a good or a service within the meaning of the CLRA. If the Legislature had intended the CLRA to apply to residential leases, it would not have limited its scope to a lease of "goods or services"; it would have defined a consumer as an individual who leases "property or services."
Freeman relies on Guy v. Brennen (1923) 60 Cal.App. 452, which held that for purposes of the statute of frauds, a leasehold for a term of years is not real property, but a "chattel real." (Id. at pp. 454-457; see also Civ. Code, § 765.) A chattel real is "not real property," though it is "an estate in real property." (Atlantic Oil Co. v. County of Los Angeles (1968) 69 Cal.2d 585, 594.) But even if so, a leasehold is not a tangible chattel. All the tangible aspects of the apartment — the walls, floors, and ceilings — are real property. The tenants interest in the real property is intangible.
Freeman also argues that, while the CLRA expressly excludes the sale of a residence, it does not expressly exclude the lease of a residence. He cites Civil Code section 1754, which states: "The provisions of this title shall not apply to any transaction which provides for the construction, sale, or construction and sale of an entire residence or all or part of a structure designed for commercial or industrial occupancy, with or without a parcel of real property or an interest therein, or for the sale of a lot or parcel of real property, including any site preparation incidental to such sale." It appears that the Legislature was simply trying to make the application of the statute clear in certain doubtful cases, such as when it could be argued that the construction of a structure or the site preparation of a lot was a service, not a good. The failure of Civil Code section 1754 to exclude the lease of a residence does not change the fact that Civil Code section 1761 does not include the lease of a residence in the first place.
Finally, Freeman argues that the lease included "an entire array of services," including "maintenance of the residence; the provision and maintenance of a refrigerator; a maintained swimming pool; a maintained club house meeting room; a maintained spa; maintained gym equipment in a gym facility; gardening; package receipt services; various community events; and a monthly community newspaper."
The record fails to show that the landlord was, in fact, required to provide these services. Freeman did not mention any of them in his separate statement. The lease did not include any contractual duty to maintain the apartment. Although the landlord did have statutory duties of maintenance, as well as a duty of maintenance arising out of the warranty of habitability (7 Miller & Starr, Cal. Real Estate (3d ed. 2004) § 19:116), these were merely incidents of the landlord-tenant relationship; they did not change the fundamental nature of the lease. The same is true of the provision of appliances or common areas, such as a swimming pool or a clubhouse, as well as any duty to maintain them.
While the lease did establish certain prerequisites to the tenants use of a fitness center and a package receipt service, it did not obligate the landlord to provide these services. Finally, it did not obligate the landlord to provide community events or a community newspaper. If the landlord chose to stop providing these amenities, it could not be credibly asserted that this was a breach of the lease.
Accordingly, we concur with the trial court that Freeman was not a "consumer" with standing to sue under the CLRA.
D. Liability of UDR and UDRT.
UDR and UDRT also sought summary judgment on the ground that, even if Windemere was liable, they were not. The trial court agreed. It ruled: "[E]ven if you had established the liability of some of the defendants, namely Windemere, . . . you have not . . . raise[d] a triable issue of fact open [sc. "upon"?] the alter ego status of UDR and UDRT." Freeman does not argue that this was error. Hence, we will affirm the judgment with respect to UDR and UDRT.
E. Attorney Fees Under the CLRA.
Freeman contends that the trial court erred by awarding attorney fees against him under the CLRA.
A prevailing plaintiff can recover attorney fees under the CLRA as a matter of right. By contrast, a prevailing defendant can recover attorney fees under the CLRA if, and only if, "the plaintiffs prosecution of the action was not in good faith." (Civ. Code, § 1780, subd. (d).) "Courts have uniformly constructed this language as requiring a subjective test." (Corbett v. Hayward Dodge, Inc. (2004) 119 Cal.App.4th 915, 924.) Hence, when any reasonable attorney would agree that the action was totally devoid of merit, the trial court may infer that the action is in bad faith (id. at p. 926); however, it is not required to do so (id. at pp. 922-924). Moreover, "`there is a distinction between weak cases that assert new theories and frivolous cases that are barred by established law." (Id. at p. 920 [quoting lower court]; see also id. at p. 924 [holding that lower court applied correct standard].) "[T]he defendant moving for attorney fees under Civil Code section 1780, subdivision (d) has the burden of proof." (Id. at p. 926.)
"A trial courts exercise of discretion concerning an award of attorney fees will not be reversed unless there is a manifest abuse of discretion. [Citation.] . . . Accordingly, there is no question our review must be highly deferential to the views of the trial court. [Citation.]
"At the same time, discretion must not be exercised whimsically, and reversal is appropriate where there is no reasonable basis for the ruling or the trial court has applied `the wrong test or standard in reaching its result. [Citation.] `"The scope of discretion always resides in the particular law being applied, i.e., in the `legal principles governing the subject of [the] action . . . . Action that transgresses the confines of the applicable principles of law is outside the scope of discretion and we call such action an `abuse of discretion." [Citation.]" (Nichols v. City of Taft (2007) 155 Cal.App.4th 1233, 1239, quoting Flannery v. California Highway Patrol (1998) 61 Cal.App.4th 629, 634; also quoting Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, 393, quoting City of Sacramento v. Drew (1989) 207 Cal.App.3d 1287, 1297.)
There are no published cases discussing whether the CLRA applies to an apartment lease. The trial court granted defendants motion for attorney fees because it felt that an apartment lease "plainly" does not involve goods or services within the meaning of the CLRA. Freemans arguments on this point, however (see part III.C, ante), while ultimately unavailing, are far from frivolous. We cannot say that any reasonable attorney would have known that they were totally devoid of merit. Thus, there is insufficient evidence to support a finding of bad faith. Moreover, while defendants assert that Freeman acted for the purpose of delay, they do not cite any supporting evidence in the record.
The trial courts written order stated that it was also granting the motion for attorney fees "because some of plaintiffs factual allegations were clearly not true . . . ." Defendants motion for attorney fees, however, had not asserted this as a ground. (See Code Civ. Proc., § 1010 ["notice of a motion . . . must state . . . the grounds upon which it will be made"].) Hence, Freeman had neither notice that he was charged with making false factual allegations nor an opportunity to try to disprove this charge. Partly as a result of this lack of notice, we cannot tell which factual allegations the trial court considered to be "clearly not true." The only one that would go to the merits of the CLRA cause of action in its entirety would be Freemans claim that he was a "consumer" within the meaning of the CLRA; however, for the reasons we have already stated, that finding was an abuse of discretion.
Defendants motion did not assert that UDR and UDRC were entitled to attorney fees, even if Windemere and UDRW were not, because Freemans alter ego allegations against them were in bad faith. We deem any such contention waived.
We therefore conclude that the trial court erred by granting defendants motion for attorney fees.
IV
DISPOSITION
The first cause of action alleged that seven specified business practices violated the UCL. In part III.B, ante, we held that Freeman failed to raise a triable issue of fact with respect to six of those seven practices. However, he did raise a triable issue of fact with respect to the seventh practice — the free rent charge-back. We must therefore decide whether the trial court could grant summary adjudication with respect to the other six practices, or whether, on the other hand, it had to deny summary adjudication on the first cause of action entirely.
"A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty." (Code Civ. Proc., § 437c, subd. (f)(1).) However, "[f]or summary adjudication purposes, separate wrongful acts give rise to separate causes of action. Whether they are pleaded in the same or single counts is not determinative. [Citations.]" (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2007) § 10-39.2; accord, Edward Fineman Co. v. Superior Court (1998) 66 Cal.App.4th 1110, 1118; Lilienthal & Fowler v. Superior Court (1993) 12 Cal.App.4th 1848, 1853-1854.)
Here, each of the seven allegedly unlawful business practices constituted a separate and alternative wrongful act. Freeman could have pleaded each of them as the basis for a separate cause of action under the UCL. We therefore conclude that each of them can be summarily adjudicated separately.
Alternatively, even assuming that each business practice did not present a separate cause of action, it did present a separate issue of duty. (See Linden Partners v. Wilshire Linden Associates (1998) 62 Cal.App.4th 508, 516-519.)
Accordingly, the judgment in favor of Windemere and UDRW is reversed, and the trial court is directed to enter a new order: (1) denying summary adjudication on the claim in the first cause of action that the free rent charge-back violated the UCL; (2) granting summary adjudication on all other claims in the first cause of action; and (3) granting summary adjudication on the second cause of action. The judgment in favor of UDR and UDRT is affirmed.
In the interest of justice, each side shall bear its own costs on appeal. (Cal. Rules of Court, rule 8.276(a)(4).)
We concur:
McKINSTER, Acting P.J.
MILLER, J.