GRANBERRY v. ISLAY INVESTMENTS (1993)

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 1 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Section 1950.5 was originally enacted in 1970 as section 1951.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 2.²

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 nonrefundable 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.³  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.⁴  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.]  [¶ ]  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, 239 Cal.Rptr. 656, 741 P.2d 154;  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, 353–354, 139 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.⁵

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.” ⁶

 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, 239 Cal.Rptr. 656, 741 P.2d 154.)   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 nonrefundable 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 reconcile this basic purpose with defendants' argument that the two-week period for accounting and refunding was a simple request to landlords, unsupported by remedies or sanctions except in cases of bad faith.

Defendants argue that to require an accounting and refund of unapplied security within two weeks of the time tenants have vacated premises would be unfair in particular circumstances.   As an example, they assume a situation in which the tenant surreptitiously moves out and the landlord has no actual notice within two weeks that the premises have been vacated.   That situation is not shown to have existed here, and we state no dictum with respect to it.   It is possible that in the future the statute may be interpreted to contain exceptions.

Defendants also contend that an exception to the two-week requirement should be recognized in this case because they acted in good faith, as determined by the jury.   Their good faith foreclosed the assessment of a penalty not exceeding $200 per tenancy pursuant to subdivision (h) of section 1950.5.   They submit that it also excuses them from making the accountings and refunds until adjudication that the money was “security.”   Unlike the hypothetical example of the surreptitious vacation of premises, the tenants here are not shown to have caused or contributed to the delay.   They did nothing wrong.   No basis exists for denying them the benefits of the statute.

When this lawsuit was filed in 1981, defendants had notice that their former tenants were seeking return of deposits without offset.   Regardless of their original evaluation of the merits of that claim, in 1984 they were required to take it seriously.   Our decision involving this lawsuit, issued October 30, 1984 (161 Cal.App.3d 382, 207 Cal.Rptr. 652), held that the trial court should consider and determine the close question as to whether the higher amount of the first month's rent was a security under section 1950.5 or whether it was legitimate rent.   Defendants, however, did not change their position.   They continued to treat it as rent until the jury found it to be “security.”   In this they assumed a risk.   They lost and raise no appellate issue with respect to that finding.

Tenant's Obligations

 Security deposits posted by tenants may be claimed by landlords only in “such amounts as are reasonably necessary to remedy tenant defaults in the payment of rent, to repair damages to the premises caused by the tenant, exclusive of ordinary wear and tear, or to clean such premises, if necessary, upon termination of the tenancy.”  (Civ.Code, § 1950.5, subd. (e).)  If the security is lost by the landlord, does it follow that he also loses the substantive rights or causes of action for which the security was posted?   For example, would the landlord's loss of a $150 security deposit deprive him of the right to collect $750 in unpaid rent or damages for negligent destruction of the premises?   The statute contains no express provision for such a loss of formerly secured rights.   Nor does section 1950.5 specifically relate to rights and duties of landlords and tenants except with respect to security deposits.

Nothing has been called to our attention that indicates a legislative intent to abolish the landlords' right to setoff for property damage, unpaid rent or other obligation secured by the deposit.   Furthermore, “[t]he law traditionally disfavors forfeitures and statutes imposing them are to be strictly construed.”  (People v. United Bonding Ins. Co. (1971) 5 Cal.3d 898, 906, 98 Cal.Rptr. 57, 489 P.2d 1385.)

Each side relies in part upon legislative history to support its contention.   Plaintiffs argue that defendants in 1990 and 1991 “pushed for a bill” to amend the section to make it conform to defendants' contention as to how it should be interpreted, and that neither bill was passed.   But, as said in Dyna–Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1396, 241 Cal.Rptr. 67, 743 P.2d 1323:  “Unpassed bills, as evidences of legislative intent, have little value.  [Citations.]”

Defendants, likewise, rely on legislative history.   In 1985, the Legislature failed to enact a bill that expressly would have denied the right of offset to landlords who failed to furnish the required statement and refund within the two-week time limit.   This has no appreciable significance.   The bill could have failed passage either because the Legislature did not like the result, or because it thought that was what the existing law provided and that the amendment was unnecessary.

At that time, the Legislature did amend the section to authorize a penalty of 2 percent per month to be charged the landlord for “bad faith” retention of security, or any portion thereof, in addition to the penalty of not to exceed $200.   This is in a distinct subdivision, subdivision (k), of section 1950.5.   It serves a different purpose.   The penalties may be applied even though a timely accounting is rendered.   The interest and damage sanctions may be applied only to that portion of the security retained in bad faith.   Because the 1985 amendment is applicable to an entirely different situation than that here presented, it is not of much help in determining what the 1977 Legislature meant by the provisions it enacted.   The legislative history has little significance and, in view of the explicit language of the statute, is not controlling.

 We conclude that although defendants are obligated to former tenants to refund security deposits, they are not deprived of causes of action against such tenants based either on contract or tort.   Problems remain, however, with regard to statutes of limitation, prejudgment interest and offsets.

Section 431.70 of the Code of Civil Procedure furnishes a partial answer.   It provides in part:  “Where cross-demands for money have existed between persons at any point in time when neither demand was barred by the statute of limitations, and an action is thereafter commenced by one such person, the other person may assert in the answer the defense of payment in that the two demands are compensated so far as they equal each other, notwithstanding that an independent action asserting the person's claim would at the time of filing the answer be barred by the statute of limitations.”  Civil Code section 1950.5 does not conflict with nor bar the application of section 431.70 of the Code of Civil Procedure.   Neither expressly nor impliedly does it prohibit offsets which otherwise are appropriate.   The trial court shall determine what offsets should be allowed.

 As discussed, infra, prejudgment interest accrues on the tenants' liquidated claims for security deposit refunds.   While the issue had not been raised on appeal, it would appear that such interest would also accrue on liquidated claims of landlords (e.g., for unpaid rent), but not for unliquidated claims (e.g., for negligent damage to property).

PLAINTIFFS' CROSS–APPEAL

I. Bad Faith

 Subdivision (h) of section 1950.5 provided:  “The bad faith claim or retention by a landlord ․ of a security or any portion thereof, in violation of this section, may subject the landlord ․ to damages not to exceed two hundred dollars ($200), in addition to any actual damages.”   Plaintiffs alleged in their pleadings and at the jury trial that defendants acted in bad faith.   In instructing the jury, the trial court defined “bad faith” as follows:

“ ‘Bad faith’ is defined as the opposite of ‘good faith’ generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake, but by some interested or sinister motive, not simply bad judgment or negligence, but rather the conscious doing of a wrong because of dishonest purpose or moral obliquity;  it contemplates a state of mind affirmatively operating with furtive design or ill will.”   The jury returned a finding that defendants did not act in bad faith.

Retentions of security deposits would seem to fall within one of four categories:  (1) Those authorized by the statute;  (2) Those not authorized by the statute, but kept with the subjective, although erroneous, belief that keeping these deposits was permitted by the statute;  (3) Those not authorized by the statute, but kept through negligence;  and (4) Those not authorized by the statute and kept under the belief that they were not so authorized.

Throughout the trial, defendants had claimed that the securities in question were rent;  that the higher first month's rent was designed to motivate longer tenancies, and that it had nothing to do with covering the repair of damage or excessive cleaning requirements.   The trial court recognized that the jury might or might not adopt this contention, and instructed the jury that bad faith involved a state of mind as indicated in the fourth alternative, supra.   That was a correct instruction.

 Faith is a mental concept involving belief, “often used with the qualifiers good or bad to specify a state of mind of one trying to be honest and faithful ․ or of one trying to deceive, mislead, or defraud․”  (Webster's Third New Internat. Dict. (1981) p. 816.)   As used in section 1950.5, subdivision (h), “bad faith,” which authorized a penalty, required a finding that what was done was done with the belief that it was not authorized by statute.   The statute should not be construed to penalize a person whose actions were accomplished with the subjective belief that they were permissible under the statute.

The organization of section 1950.5 supports this meaning.   If every failure to furnish the required statements and to refund the unapplied portions of the security amount to bad faith, there would have been no reason to complicate the statute by introducing the bad faith concept.   It would be inappropriate not to attribute some meaning to the language.  (Cf. Dyna–Med, Inc. v. Fair Employment & Housing Com., supra, 43 Cal.3d at p. 1387, 241 Cal.Rptr. 67, 743 P.2d 1323.)

Reasoning by analogy may have its pitfalls, but in this case of first impression it is helpful (if not controlling).  Code of Civil Procedure section 128.5, subdivision (a), provides sanctions for bad faith actions or tactics in the course of litigation or arbitration.  “To interpret section 128.5 as authorizing the imposition of sanctions solely upon a consideration of whether the action was objectively frivolous would be to render the Legislature's use of ‘bad-faith’ meaningless surplusage.   That term is given meaning only if we assume that the Legislature intended that the court determine that an action or tactic was being pursued in subjective bad faith before imposing sanctions under this section.”  (Summers v. City of Cathedral City (1990) 225 Cal.App.3d 1047, 1071, 275 Cal.Rptr. 594, fn. omitted;  see also Llamas v. Diaz (1990) 218 Cal.App.3d 1043, 1046–1049, 267 Cal.Rptr. 427;  Javor v. Dellinger (1992) 2 Cal.App.4th 1258, 3 Cal.Rptr.2d 662.)

The trial court's instruction defining bad faith was not in error.

 Plaintiffs also appear to contend that there was no substantial evidence of good faith to support the jury finding.   On the contrary, the record is replete with testimony that representatives of defendants believed their rental plan was designed merely to motivate longer tenancies and was not to cover costs for which security was authorized.   There was substantial evidence to support the jury's finding.

II. The Relief

 The trial court's judgment, in ordering defendants to refund security, was in favor of only those remaining members of plaintiffs' class (excluding named plaintiffs whose claims were dealt with specifically in the judgment) who came forward and filed individual claims under a procedure to be established at a later date.   Plaintiffs had requested that judgment be for the total of security improperly retained and had suggested the possibility of escheat of unclaimed funds to the State of California.   In denying this request, the trial judge issued a memorandum of intended decision stating in part:  “In certain consumer class actions Fluid Recovery may be the best method of compensating the class.   The propriety of Fluid Recovery in a particular case depends upon its usefulness in fulfilling the purposes of the underlying cause of action.  (See State v. Levi Strauss and Company [1986] 41 Cal.3d 460 [224 Cal.Rptr. 605, 715 P.2d 564].)   We do not find that the Fluid Recovery method is necessary to fulfill the purpose of this case.”

In that respect, this case differs from People ex rel. Smith v. Parkmerced Co. (1988) 198 Cal.App.3d 683, 244 Cal.Rptr. 22, where the district attorney sued the landlord for the return of fees charged tenants, the retention of which constituted an unlawful business practice (Bus. & Prof.Code, § 17206), and the unclaimed “refunds” were required to be paid to a tenants' organization.   Unlawful business practice was defined as “unlawful, unfair or fraudulent” action.  (Bus. & Prof.Code, § 17200.)   The landlord was found to have acted in bad faith.

 In framing a remedy the trial court limited recovery to those plaintiffs who personally made claims for the return of their deposits.   It elected not to require all deposits to be placed in a fund.   Had it done so, unclaimed deposits would have escheated to the State of California at the end of the year (Unclaimed Property Law, Code Civ.Proc., § 1500 et seq.), and the basis upon which plaintiffs' attorneys' fees will be calculated would be larger than under the order made by the trial court.   The trial court understood that in designing a remedy discretion was involved.   The trial judge who framed the remedy had lived with this case for many years.   He was well acquainted with its history, the parties, their attorneys, and the issues involved.   Our standard of review is whether he abused his discretion.   We hold that he did not.

 Fluid recovery is appropriate where useful in fulfilling the purpose of the underlying cause of action, as in those cases where proof of individual damages is not feasible.  (State of California v. Levi Strauss & Co. (1986) 41 Cal.3d 460, 224 Cal.Rptr. 605, 715 P.2d 564;  see also Bruno v. Superior Court (1981) 127 Cal.App.3d 120, 123–124, 179 Cal.Rptr. 342.)   That is not the case here.

We conclude that the trial court did not abuse its discretion in fashioning the remedy it adopted.

III. Prejudgment Interest

 The judgment herein expressly rejected prejudgment interest.   Plaintiffs contend that they were entitled to such interest under the provisions of section 3287, subdivision (a), which provides:  “Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt.   This section is applicable to recovery of damages and interest from any such debtor, including the state or any county, city, city and county, municipal corporation, public district, public agency, or any political subdivision of the state.”   Section 3281 defines damages broadly to include any monetary recovery:  “Every person who suffers detriment from the unlawful act or omission of another, may recover from the person in fault a compensation therefor in money, which is called damages.”

 Although section 3287, subdivision (a) uses the term “damages,” it has been consistently applied to require the award of prejudgment interest where the judgment is for money owed or to be refunded pursuant to a statutory obligation.  (Tripp v. Swoap (1976) 17 Cal.3d 671, 681, 131 Cal.Rptr. 789, 552 P.2d 749.)

Here the amount of security to be returned to each class member was a fixed amount readily ascertainable by defendants.   It was the amount by which the rent for the first 31 days exceeded the rent for subsequent months of the tenancy.   The “damages” were certain and they were due two weeks after each class member vacated the rented premises.

In support of the trial court's order denying prejudgment interest, defendants rely upon Korens v. R.W. Zukin Corp. (1989) 212 Cal.App.3d 1054, 261 Cal.Rptr. 137.   That decision dealt with the question of whether interest accrued on security deposits during the term of the tenancy.   There was no obligation that the deposits be returned during the tenancy.   Prejudgment interest was held not to apply during a period prior to the time an obligation to return the deposit came into being.   The decision was based on facts not comparable with those here presented and is neither controlling nor persuasive.

 It has been suggested that section 3287, subdivision (a) is inapplicable because section 1950.5, subdivision (k) was amended in 1986 to provide that a bad faith retention of security may subject the landlord to interest at a rate of 2 percent per month in addition to the penalty of not to exceed $200.   Assuming, arguendo, that this provision applies to retentions that began long before the amendment became effective, does this provide the exclusive entitlement to interest?   In bad faith situations, it might.   But where there was no bad faith, as here, the provisions for penalty and interest at a penalizing rate are inapplicable and do not override the prejudgment interest obligation established by section 3287, subdivision (a).

IV. Costs and Attorneys' Fees

 The remaining issue in these appeals relates to the allowance of costs and the award of attorneys' fees.   The judgment provided:  “Plaintiffs shall recover legal costs in the amount of $_ [to be hereafter determined by the Court].   Plaintiffs' counsel shall recover reasonable attorneys' fees in an amount to be hereafter determined by the Court.   Such court costs and attorneys' fees shall be paid out of and deducted from any aggregate amount of money paid by Islay under this judgment as the refund of rent for the first 31 days of a tenancy (when compared with the rent for the second and subsequent months of the tenancy).   Pursuant to the notice given potential class members, such court costs together with such attorneys' fees shall not exceed 25% of said aggregate amount.”⁷

At the time the judgment was under consideration, neither side contended that an exact amount could properly be ascertained.   Several issues remained open for determination on appeal.   The trial court merely declared there should be a maximum consisting of 25 percent of the aggregate amount of the judgment.   That aggregate amount will be different in the revised judgment.   Upon remand, the trial court will be in a position to determine costs and attorneys' fees based upon the net amount to be paid by Islay.   The actual figure awarded will be subject to review on appeal.

 Plaintiffs also ask us to consider whether they are entitled to private attorney general fees pursuant to section 1021.5 of the Code of Civil Procedure.   In the trial court, plaintiffs contended that such fees could not properly be determined until final judgment following appeal.   We agree, but add that such determination should be made by the trial court.   Fees may not be awarded on any basis until there has been an evidentiary hearing with respect to the basis for and the amount of the fees.   The trial court should determine, among other things, which services were expended for successful claims (which are compensable) and for unsuccessful claims (which are not compensable).  (Hensley v. Eckerhart (1983) 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40.)   It should also determine the reasonable hourly rate (Merola v. Atlantic Richfield Company (3d Cir.1975) 515 F.2d 165, 169;  In re Capital Underwriters, Inc. Securities Lit. (N.D.Cal.1981) 519 F.Supp. 92, 102–103), and the reasonable amount of hours (Bernardi v. Yeutter (N.D.Cal.1990) 754 F.Supp. 743, 744).  “The ‘experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong.’   (Harrison v. Bloomfield Building Industries, Inc. (6th Cir.1970) 435 F.2d 1192, 1196․)”  (Serrano v. Priest (1977) 20 Cal.3d 25, 49, 141 Cal.Rptr. 315, 569 P.2d 1303.)

The judgment is reversed and remanded to the trial court for further proceedings.   Each side shall bear its own costs on appeal.

FOOTNOTES

FOOTNOTE.  

FN1. All further statutory references are to the Civil Code unless otherwise specified..  FN1. All further statutory references are to the Civil Code unless otherwise specified.

2.   “(a) The provisions of this section shall apply to security for a rental agreement for residential property, that is, property used as the dwelling of the tenant.“(b) As used in this section, ‘security’ means any payment, fee, deposit or charge, including, but not limited to, an advance payment of rent, used or to be used for any purpose, including, but not limited to, any of the following:“(1) The compensation of a landlord for a tenant's default in the payment of rent.“(2) The repair of damages to the premises caused by the tenant.“(3) The cleaning of the premises upon termination of the tenancy.“․“(d) Any security shall be held by the landlord for the tenant who is party to such lease or agreement.   The claim of a tenant to such security shall be prior to the claim of any creditor of the landlord.“(e) The landlord may claim of the security only such amounts as are reasonably necessary to remedy tenant defaults in the payment of rent, to repair damages to the premises caused by the tenant, exclusive of ordinary wear and tear, or to clean such premises, if necessary, upon termination of the tenancy.   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.“․“(h) The bad faith claim or retention by a landlord or transferee of a security or any portion thereof, in violation of this section, may subject the landlord or his transferee to damages not to exceed two hundred dollars ($200), in addition to any actual damages.   In any action under this section, the landlord shall have the burden of proof as to the reasonableness of the amounts claimed.“(i) No lease or rental agreement shall contain any provision characterizing any security as ‘nonrefundable.’“․“Subdivision (e) of this section shall be applicable to all tenancies, leases, or rental agreements for residential property terminated on or after January 1, 1978.”

3.   Further factual background is set forth in a prior appeal in this case, Granberry v. Islay Investments (1984) 161 Cal.App.3d 382, 207 Cal.Rptr. 652, and in Bauman v. Islay Investments (1973) 30 Cal.App.3d 752, 106 Cal.Rptr. 889.

4.   Approximately 260 members of the original class eventually “opted out” and are no longer members of the plaintiff class.   Reference in this opinion, infra, does not refer to them.

5.   “Any remaining portion of the payment or deposit must be returned to the lessee no later than two weeks after termination of his tenancy.”  (See Comment, California Liquidated Damages (1979) 16 San Diego L.Rev. 967, 974, fn. omitted.)

6.   (Cf. Huijers v. DeMarrais (1992) 11 Cal.App.4th 676, 678–679, 14 Cal.Rptr.2d 232.)

7.   The class notice stated in part:  “Plaintiffs' attorneys estimate that the reasonable attorneys fees and costs will total 25 percent or less of the total aggregate recovery, which fees and costs will be deducted from any recovery.”

WILLARD, Associate Justice (Assigned).* FN* Retired judge of the Superior Court sitting under assignment by the Chairperson of the Judicial Council.

GILBERT, Acting P.J., and YEGAN, J., concur.