The PEOPLE of the State of California, Plaintiff and Respondent, v. Angelo SANGIACOMO, et al., Defendants and Appellants.
This is an appeal from an order granting a preliminary injunction enjoining defendants from assessing their tenants non-refundable security in violation of Civil Code section 1950.5 1 subdivision (i), and from failing within the statutory two-week period to return to their tenants in full or appropriate part any security in violation of section 1950.5 subdivision (e).
Defendants are engaged in the business of investing in real property. Their business includes investment in residential rental property located in San Francisco and the leasing of that property to individuals.
For several years, defendants have charged their residential tenants a $75 “non-refundable rental fee.” Defendants claim that this rental fee is charged solely for their “entering into” the rental agreement. The $75 non-refundable fee is charged in addition to other securities, rental payments and deposits demanded by defendants from each tenant. If a tenant refuses to pay the $75 fee, defendants will not lease a unit to that person.
The $75 “non-refundable rental fee” is not mentioned on defendants' application to rent a unit nor is it mentioned on defendants' rental agreement form. Defendants consider the fee to be a separate charge which is placed in a separate fund and for which the tenant receives a separate receipt. In the past, the receipts for this fee were stamped “non-refundable” or “non-refundable rental fee.”
In July of 1979, the People filed a complaint for injunctive relief, restitution and penalties against defendants. In their first cause of action plaintiff alleged that “[b]eginning at an exact date unknown to Plaintiff, but at least since June 1, 1976, Defendants have required of their tenants non-refundable securities and have characterized as ‘non-refundable’, in their leases and rental agreements, these securities demanded of their tenants, in violation of California Civil Code section 1950.5․” In their second cause of action plaintiff alleged that defendants had “violated California Civil Code section 1950.5 by failing within the statutory maximum two-week period after the tenant has vacated the Defendants' premises to return either in full or in appropriate part securities paid by tenants of Defendants.” Both violations were alleged to constitute unlawful business practices in violation of California Business and Professions Code section 17200 et seq.
In its prayer for relief, plaintiff requested that defendants be “preliminarily and permanently enjoined from engaging in or performing ․ any of the following acts: [¶] a) assessing tenants a non-refundable security in violation of 1950.5 of the Civil Code; and [¶] b) failing, within the statutory maximum two-week period, to return either in full or in appropriate part any security assessed to tenants of Defendants in violation of 1950.5 of the Civil Code.”
On October 2, 1979 plaintiff filed a notice of motion for preliminary injunction together with points and authorities in support of that motion in the Law and Motion Department of the San Francisco Superior Court. The notice of motion stated that the “[p]laintiff will move the Court for a preliminary injunction, as prayed for in the Complaint on file in this action, enjoining Defendants ․ from engaging in or performing directly or indirectly the following act: [¶] Charging tenants non-refundable securities including any non-refundable rental fee or non-refundable deposit of any kind.”
The notice of motion did not explicitly state that a preliminary injunction was also being sought to enjoin defendants from failing to return security within the statutory two-week period as was alleged in plaintiffs' second cause of action. Furthermore, the points and authorities filed in support of the motion was limited to a discussion of the demand that the defendants be enjoined from continuing “their ongoing policy of charging tenants non-refundable securities.”
Pursuant to an agreement of counsel, plaintiff's motion for preliminary injunction was heard together with defendants' demurrer and motion to strike which had been filed prior to the motion for preliminary injunction. This consolidated hearing took place on October 18, 1979.
After the hearing, the trial judge overruled defendants' demurrer, partially granted their motion to strike, and granted plaintiff's motion for a preliminary injunction. On November 29, 1979 the following order was filed granting the preliminary injunction: “IT IS ORDERED THAT Defendants ․ are preliminarily enjoined from engaging in or performing, directly or indirectly, the following acts: [¶] 1. Assessing tenants any non-refundable security (payment, fee, deposit or charge) in violation of Civil Code section 1950.5. [¶] 2. Failing within the statutory maximum two-week period to return either in full or in appropriate part any security (payment, fee, deposit, or charge) assessed to tenants of Defendants, in violation of Civil Code section 1950.5.” Defendants seek review from this order.
Although it is difficult to characterize the precise gravamen of all of defendants' arguments, they can be broadly summarized as follows: First, defendants contend that they were denied due process since the scope of the injunctive relief actually granted exceeded the scope of the relief prayed for in the notice of motion for preliminary injunction and the accompanying points and authorities. Secondly, defendants contend that the law and motion judge committed an abuse of discretion by issuing the order.
Denial of Due Process
We deal first with defendants' argument that they have been denied procedural due process. Defendants argue that they have been denied due process because the scope of relief actually granted by the trial court's order exceeded that prayed for in the notice of motion for preliminary injunction. The record before us indicate that the relief granted exceeded that prayed for in the moving papers. However, it does not follow that defendants have thereby established that they have been denied due process of law.
In Hammond Lumber Co. v. Bloodgood (1929) 101 Cal.App. 561, 281 P. 1101, the court stated: “It is the well-settled law of this state that where both parties appear and contest a motion, without objection in the trial court, such appearance is a waiver of a written notice, if none were given, or of the defect in the notice to specify all of the relief asked and given, if the motion and order went beyond the terms of the notice. [Citations.]” (Pp. 563–564, 281 P. 1101, emphasis added.) This same rule has been restated in at least two subsequent cases. (Brainard v. Brainard (1946) 76 Cal.App.2d 850, 853, 174 P.2d 702; Overton v. White (1937) 18 Cal.App.2d 567, 576, 64 P.2d 758.)
The record before us does not include a reporter's transcript of the consolidated hearing before the trial court. The record indicates two things: first, the moving papers requested that the defendants be enjoined from “Charging tenants non-refundable securities including any non-refundable rental fee or non-refundable deposit of any kind” and second, the order granting the preliminary injunction went beyond the terms of the notice. We are therefore left completely in the dark as to whether oral arguments were presented at the hearing regarding that part of the injunction enjoining defendants from failing to return securities to tenants within the statutory two-week period. Furthermore, if such arguments were presented, we have no way of discerning from the record whether defendants objected to those arguments as exceeding the scope of the notice. Finally, we have no way of discovering whether the trial judge announced his intended ruling at the hearing and whether defendants then objected to this ruling as exceeding the scope of the relief prayed for in the notice of motion.
It is now established that a defendant has the burden of producing a record which overcomes the presumption of validity favoring a judgment or order. (Weiss v. Brentwood Sav. & Loan Assn. (1970) 4 Cal.App.3d 738, 746, 84 Cal.Rptr. 736; Lerno v. Obergfell (1956) 144 Cal.App.2d 221, 223–224, 300 P.2d 846; Riley v. Dunbar (1942) 55 Cal.App.2d 452, 455, 130 P.2d 771.) As was stated long ago in Riley v. Dunbar, “There is no question as to the law that an appellant has the burden of producing a record affirmatively showing error [citation] and if any matters could have been presented to the court below which would have authorized the order complained of, it will be presumed that such matters were presented. [Citations.]” (55 Cal.App.2d at p. 455, 130 P.2d 771.)
Here, defendants have failed to carry their burden to affirmatively show that error was committed. Since matters could have been presented to the court below which would have authorized its order, in the absence of a contrary record we must presume that such matters were presented. Therefore, defendants have not shown that they were denied due process of law.
Abuse of Discretion
Defendants next contend that the order issued by the court below was the result of an abuse of discretion.
Preliminarily, we note the limited scope of review exercised by an appellate court in passing on the propriety of the trial court's order for preliminary injunction. The decision to grant or deny a request for such an order rests in the sound discretion of the trial court. If the proceedings are otherwise regular, the order may not be reversed on appeal except for an abuse of discretion. (Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 527, 67 Cal.Rptr. 761, 439 P.2d 889; People v. Black's Food Store (1940) 16 Cal.2d 59, 61, 105 P.2d 361.) “Discretion is abused in the legal sense ‘whenever it may be fairly said that in its exercise the court in a given case exceeded the bounds of reason or contravened the uncontradicted evidence.’ [Citations.]” (Continental Baking Co. v. Katz, supra, 68 Cal.2d 512, 527, 67 Cal.Rptr. 761, 439 P.2d 889.)
To secure a preliminary injunction in a consumer protection suit brought by the People, it must be shown that “pending a trial on the merits, defendants should be restrained from exercising the right claimed by them. The purpose of the injunction is to preserve the status quo until a final determination is made upon the merits, and the issue before the court [is] whether defendants would suffer greater harm from its issuance than the People would suffer from its refusal. In making this assessment, the court [is] required to determine whether there [is] a reasonable probability that the People would prevail on the merits. [Citation.]” (People v. Pacific Land Research Co. (1977) 20 Cal.3d 10, 21, 141 Cal.Rptr. 20, 569 P.2d 125.)
In the present case, the trial court necessarily had to construe the provisions of 1950.5 in order to determine whether the payments “for execution of the lease” demanded by defendants fell within the prohibition of that statute.
If the trial court's decision was the exclusive product of an erroneous concept of the law, then the order granting a preliminary injunction must be reversed. (City of San Diego v. American Federation of State etc. Employees (1970) 8 Cal.App.3d 308, 317–318, 87 Cal.Rptr. 258.)
The first issue of law which the trial court was forced to resolve in reaching its decision was whether the fee charged by defendants for entering a lease or rental agreement was a “security” as that term is used in section 1950.5, subdivision (i). This section states: “No lease or rental agreement shall contain any provision characterizing any security as ‘nonrefundable.’ ” (§ 1950.5, subd. (i).)
Section 1950.5, subdivision (b) defines security in the following manner: “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.”
Defendants argue that the term “security” as defined in section 1950.5, subdivision (b) is limited to payments used or to be used to secure the performance of the conditions or covenants of the rental agreement. They argue that the fee for entering into the lease is not such a payment and is therefore not a “security” within the meaning of section 1950.5.
We reject this strained interpretation of the statute. The statute plainly states that a “security” means “any payment” to be used for “any purpose.” Clearly, a fee for the execution of a lease falls within this broad definition.
Furthermore, the People presents an even stronger argument in favor of constructing the term “security” as including a payment for entering a rental agreement. Section 1950.5 has been recently amended.2 A comparison of the former statute and the present statute clearly indicates that the Legislature intended the scope of “security” to be given a broad interpretation under present section 1950.5. Former section 1950.5, subdivision (a) stated: “Any payment or deposit of money the primary function of which is to secure the performance of a rental agreement or any part of such an agreement, other than a payment or deposit, including an advance payment of rent, made to secure the execution of a rental agreement, shall be governed by the provisions of this section.” (Emphasis added.)
When the statute was amended in 1977, the language restricting the operation of the section to payments “the primary function of which is to secure performance of a rental agreement” was deleted. Furthermore, the statutory exception for “a payment or deposit ․ made to secure the execution of the rental agreement” included in former section 1950.5 was also deleted by the 1977 amendment.
As the noted commentator, Sutherland, has said: “[T]he mere fact that the legislature enacts an amendment indicates that it thereby intended to change the original act by creating a new right or withdrawing an existing one. Therefore, any material change in the language of the original act is presumed to indicate a change in legal rights.” (1A Sutherland, Statutory Construction (4th ed. 1973) § 22.30, p. 178.)
Finally, a law review article cited by both defendants and plaintiff argues that a fee for execution of a lease should be included within the meaning of “security.” In discussing the amendments to section 1950.5, the author of the article says: “In effect, the statute is saying that regardless of what you call it, the payment is to be refunded to the extent it exceeds certain amounts due and certain damages. Thus, the statute should be considered to cover a security deposit, an advance payment of rent, and a bonus or consideration for execution of the lease.” (Coskran, Tenant Front End Payments (1978) 12 Loyola L.A.L.Rev. 62 (Emphasis added).)
Therefore, we conclude that the Legislature intended payments for the execution of a lease or rental agreement to be “securities” for purposes of current section 1950.5.
Defendants argue that the court's construction of “security” as including payments for the execution of a lease makes section 1950.5 unconstitutional for two reasons: first, such a construction renders the statute void as a law impairing the rights of contract in violation of article I, section 10 of the United States Constitution and article I, section 9 of the California Constitution; and secondly, this construction of the statute would make it “void for vagueness” under the Due Process clauses of the United States and California Constitutions. We reject both arguments for reasons stated below.
Defendants assert that if this court construes the term “security” as used in section 1950.5 to include a payment to secure the execution of a lease or rental agreement, this construction would constitute an “ex post facto law impairing the rights of contract” in violation of the United States Constitution, article I, section 10, and California Constitution, article I, section 9.
Defendants argue that former section 1950.5 explicitly excepted from its coverage payments “made to secure the execution of a rental agreement.” (Former § 1950.5, subd. (a).) The current version of the statute does not preserve this exception.
The current statute (with the exception of subdivision (e)) applies to leases and rental agreements for residential property created or renewed on or after January 1, 1978. (1950.5, subd. (k).) However, the statute provides that subdivision (e) shall be applicable to all leases and rental agreements for residential property terminated on or after January 1, 1978.
Subdivision (e) requires that the landlord return any unused portion of a security within two weeks of the tenant vacating the premises. Defendants maintain that under our broad interpretation of “security” any advance payment to secure execution of a rental agreement would have to be returned in all cases where that rental agreement terminated after January 1, 1978. “Thus,” defendants conclude, “under a broad interpretation of the statute, a properly non-refundable deposit or a fee made or paid at the beginning of a tenancy created before January 1, 1978, magically becomes refundable, with the concomitant duty to account, when a tenant vacates the premises in 1978 or thereafter.”
We do not reach the question of whether such a construction of 1950.5 would constitute an unconstitutional impairment of contract rights, since we conclude that defendants' suggested construction is incorrect.
As was stated earlier, with the sole exception of subdivision (e), the present version of 1950.5 applies only to rental agreements and leases created or renewed on or after January 1, 1978. (§ 1950.5, subd. (k).) This includes the definition of security contained in present section 1950.5, subdivision (b). Therefore, the definition of security for the purposes of a lease created before January 1, 1978 but terminated after that date would be governed by former section 1950.5. Even though subdivision (e) would be applicable to such a lease or rental agreement, it would not require the refund of a payment “made to secure the execution of a rental agreement” since the former exception for such payments would still be applicable to leases created or renewed before January 1, 1978.
Thus, under the illumination of rigid analysis, the true nature of the conflict imagined by defendants becomes clear: It is chimerical. In short, a payment to secure execution of a rental agreement which is created or renewed before January 1, 1978 is not a security which must be returned pursuant to 1950.5, subdivision (e). It is only when such a payment has been made to secure execution of a rental agreement created or renewed on or after January 1, 1978 that it becomes a “security” for the purposes of 1950.5, subdivision (e).
Defendants also attack our construction of 1950.5 on the ground that it would render the statute unconstitutionally vague in violation of due process.
Civil statutes must be sufficiently clear and definite to provide adequate notice of the prohibited conduct, as well as to establish a standard of conduct which can be uniformly interpreted by administrative agencies and the judiciary. (United Business Com. v. City of San Diego (1979) 91 Cal.App.3d 156, 176, 154 Cal.Rptr. 263; McMurtry v. State Board of Medical Examiners (1960) 180 Cal.App.2d 760, 766, 4 Cal.Rptr. 910.)
Defendants claim that our literal interpretation of security as meaning “any payment ․ used or to be used for any purpose” would cause the statute to violate this standard. As an example, defendants argue that even ordinary rent would be considered a security under this broad definition, and would therefore have to be returned or accounted for under 1950.5, subdivision (e).
However, when read as a whole the statute clearly indicates that the Legislature did not intend that ordinary rent be treated as a security. For example, section 1950.5, subdivision (b) states that security includes “an advance payment of rent.” Since the Legislature has seen fit to specify that a particular class of rent (advance rent) is to be considered a security, it can be inferred that under the statutory scheme ordinary rent is not to be considered a security.
Furthermore, if the words used in a statute may be made reasonably certain by reference to the purpose of that statute, the words are not unconstitutionally vague or ambiguous. (McMurtry v. State Board of Medical Examiners, supra, 180 Cal.App.2d 760, 767, 4 Cal.Rptr. 910.) Section 1950.5 is not intended to be a rent control law. Its clear purpose is to regulate the use of payments which are made in addition to the payment of ordinary rent.
For the foregoing reasons we conclude that even given our broad interpretation of “security”, section 1950.5 is not so vague as to violate due process. The statute is sufficiently clear and definite to provide adequate notice of the prohibited conduct, and is also sufficiently definite to be uniformly interpreted by the judiciary.
Defendants next contend that the trial court abused its discretion by enjoining them from entering into contracts which are “valid on their face.” As indicated earlier, the injunction was predicated on section 1950.5, subdivision (i) which provides: “No lease or rental agreement shall contain any provision characterizing any security as ‘nonrefundable.’ ”
As previously mentioned, the non-refundable fee for entering the agreement was not mentioned in defendants' rental agreements. Rather, defendants treated the fee as a separate charge which was placed in a separate fund and for which the tenant received a separate receipt. In the past, the receipts for this fee were stamped “non-refundable” or “non-refundable rental fee.”
Defendants claim that the court abused its discretion by issuing the injunction since no evidence was presented to the court to establish that defendants' printed rental agreements contained provisions characterizing any security as “non-refundable.” The court refuses to place its stamp of approval on this subterfuge.
A lease or rental agreement is considered to be largely contractual in nature under California law. (Green v. Superior Court (1974) 10 Cal.3d 616, 624, 111 Cal.Rptr. 704, 517 P.2d 1168.) Our Supreme Court has stated that the “application of contract principles ․ is particularly appropriate in dealing with residential leases of urban dwelling units.” (P. 624, 111 Cal.Rptr. 704, 517 P.2d 1168.) Therefore, it is appropriate to apply contract principles to determine whether the “separate” fee charged by defendants for entering the agreement is a part of the rental agreement.
Section 1642 states: “Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together.” Several cases have interpreted this section to mean that contracts relating to the same matters, between the same parties, and made as part of substantially one transaction are to be construed as one contract (Freeland v. Greco (1955) 45 Cal.2d 462, 468, 289 P.2d 463; Symonds v. Sherman (1933) 219 Cal. 249, 253, 26 P.2d 293; Meier v. Paul X. Smith Corp. (1962) 205 Cal.App.2d 207, 217, 22 Cal.Rptr. 758); and the District Court for the Southern District of California, relying on common law, has stated that two separate documents which are executed at the same time, between the same parties must be considered as one agreement. (Paramount Pictures Theatres Corp. v. Partmar Corp. (S.D.Cal.1951) 97 F.Supp. 552, 554–555.)
In California, a contract is defined as “an agreement to do or not to do a certain thing.” (Civ.Code, § 1549.) Thus, the terms “contract” and “agreement” are treated as being roughly synonymous. It follows then, that the California cases cited above can be read as holding that contracts relating to the same matters, between the same parties, and made as part of substantially one transaction are to be construed as one agreement.
The payment of the non-refundable fee for the execution of the lease and the lease itself are “contracts” relating to the same matters, between the same parties, and made as part of substantially one transaction. Thus, they are to be construed together as one contract and one agreement.
In short, the non-refundable rental fee charged by defendants is part and parcel of their rental agreements. Since this fee is characterized as non-refundable, defendants have violated section 1950.5, subdivision (i).3
Defendants next contend that the lower court abused its discretion by issuing the preliminary injunction since the People did not prove that they would suffer “irreparable injury” if the injunction were denied. Defendants cite no authority for the proposition that to obtain a preliminary injunction the moving party must show that it will suffer irreparable injury if the injunction is denied. Defendants cite no authority because there is no authority to support this proposition.
To obtain a preliminary injunction there is no requirement that the moving party show that it will suffer “irreparable injury” if the injunction is refused.4 Rather, the issue to be determined by a court in deciding whether to grant a preliminary injunction in a consumer protection suit is whether the defendants would suffer greater harm if the injunction is issued, than the people would suffer if it were refused. (People v. Pacific Land Research Co. (1977) supra, 20 Cal.3d 10, 21, 141 Cal.Rptr. 20, 569 P.2d 125; Continental Baking Co. v. Katz (1968) supra, 68 Cal.2d 512, 526–529, 67 Cal.Rptr. 761, 439 P.2d 889.) In determining the degree of harm likely to be suffered by each party, the court must decide whether the People have a “reasonable probability” of prevailing on the merits. (People v. Pacific Land Research Co. (1977) supra, 20 Cal.3d 10, 21, 141 Cal.Rptr. 20, 569 P.2d 125; Continental Baking Co. v. Katz (1968) supra, 68 Cal.2d 512, 526–529, 67 Cal.Rptr. 761, 439 P.2d 889.)
We observe primarily that the court could easily have determined that there was a “reasonable probability” that the People would prevail on the merits in this case. Our analysis of the law indicates that non-refundable payments charged for the execution of a lease or rental agreement violate section 1950.5, subdivision (i). This is true even though the lessor has attempted to avoid the realm of conduct prohibited by the statute by treating this non-refundable fee as somehow separate from the rental agreement. We find, then, that the lower court's interpretation of the law is correct.
The only issue remaining for the court to have determined in deciding whether the People had a “reasonable probability” of prevailing was one of fact: namely, was there a “reasonable probability” that the People could prove that defendants have charged and continue to charge a non-refundable fee for executing their rental agreements?
The evidence before us on this point is uncontradicted. It includes the declarations of two of defendants' former employees; the declarations of three of defendants' former tenants; defendant Angelo Sangiacomo's own deposition; a letter from defendants' employee to one of its tenants; and photocopies of several receipts for “non-refundable” rental fees.
All of this evidence indicates that defendants have and continue to charge a non-refundable rental fee for “entering into” their rental agreements.
Therefore, we conclude that the court did not abuse its discretion by finding that the People had a “reasonable probability” of prevailing on the merits.
The final factual question which the court had to consider in ruling on the request for preliminary injunction was whether the defendants would suffer greater harm from the issuance of the injunction than the People would suffer from its denial.
Our review of the lower court's decision on this point is again hampered by the fact that in the record before us there is no reporter's transcript of the hearing. Thus, we do not know what arguments were considered by the judge at the hearing concerning the harm suffered by each party.
Defendants have the burden of producing a record which overcomes the presumption in favor of upholding a judgment or order. (Weiss v. Brentwood Sav. & Loan Assn. (1970) supra, 4 Cal.App.3d 738, 746, 84 Cal.Rptr. 736; Lerno v. Obergfell (1956) supra, 144 Cal.App.2d 221, 223–224, 300 P.2d 846; Riley v. Dunbar (1942) supra, 55 Cal.App.2d 452, 455, 130 P.2d 771.) They have failed to meet this burden. Thus, we cannot find that the trial court abused its discretion by deciding that the defendants would suffer less harm from the issuance of the injunction than the plaintiff would suffer from its denial, since we do not know what evidence regarding relative harm was presented to the court.
In sum, the lower court's issuance of the preliminary injunction was not the result of an error in the law or an abuse of discretion.
The judgment is affirmed.
1. All references to statutes are to the Civil Code unless otherwise noted.
2. Original Civil Code section 1951 became operative on January 1, 1971, by Stats.1970, c. 1317, p. 2453, § 1. It was later renumbered section 1950.5 in 1972, c. 618, p. 1095, § 4, and was amended in 1977, operative January 1, 1978, by Stats.1977, c. 971, p. 2939.
3. Defendants argue that it is “equally” a principle of contract interpretation that a contract must receive an interpretation as will make it lawful if this can be done without violating the intention of the parties. (Civ.Code, § 1643.)We agree that the rule mentioned by defendants is on an “equal” footing with the rule that contracts, relating to the same matters, between the same parties, and made as part of substantially one transaction, are to be taken together. Thus, when we apply both rules of construction, we conclude that the non-refundable fee for entering the contract is a part of the rental agreement, and that we cannot therefore interpret the contract in such a way as to make it lawful, since the agreement clearly violates section 1950.5, subdivision (i).
4. However, a moving party may have to show great or irreparable injury in order to secure a temporary restraining order. (Code Civ.Proc., § 527(a).)
MILLER, Acting Presiding Justice.
SMITH and TAYLOR,* JJ., concur.