In re: Wendy Tejeda ( 2019 )

FILED
MAR 12 2019
NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. CC-18-1227-SFL
WENDY TEJEDA, Bk. No. 2:17-bk-10155
Debtor. Adv. No. 2:17-ap-01308
WENDY TEJEDA,
Appellant,
v. MEMORANDUM*
SORAYDA VELASQUEZ,
Appellee.
Argued and Submitted on February 21, 2019
at Pasadena, California
Filed – March 12, 2019
Appeal from the United States Bankruptcy Court
for the Central District of California
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value. See 9th Cir. BAP Rule 8024-1.
Honorable Ernest M. Robles, Bankruptcy Judge, Presiding
Appearances: Metu C. Ogike argued for appellant; Paul J Estuar of
Legal Aid Foundation of Los Angeles argued for appellee.
Before: SPRAKER, FARIS, and LAFFERTY, Bankruptcy Judges.
INTRODUCTION
Prior to her chapter 71 bankruptcy filing, debtor Wendy Tejeda was
Sorayda Velasquez’s landlord. The landlord-tenant relationship ended
badly. Velasquez and her three minor children lived in the apartment for
roughly three years; however, during the last nine months they lived there,
the apartment had no running water. Eventually, Velasquez and her
children vacated the premises. After Tejeda commenced her bankruptcy
case, Velasquez filed a nondischargeability complaint under § 523(a)(6)
alleging that, in order to induce Velasquez to move, Tejeda had refused to
reconnect water service to the apartment after the water company had shut
it off.
After a one-day bench trial, the bankruptcy court determined that the
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.
2
harm Velasquez and her children suffered while living in the apartment
without water constituted willful and malicious injury within the meaning
of § 523(a)(6).
Tejeda appeals from the nondischargeability judgment. She makes
several different arguments on appeal, but her arguments were not raised
in the bankruptcy court, lack merit, or both. Accordingly, we AFFIRM.
FACTS
Tejeda owned a five-unit apartment complex in Los Angeles,
California. In September 2012, Tejeda leased to Velasquez a two-bedroom
apartment in the complex on a month-to-month basis.2 As part of the lease,
Tejeda agreed to provide Velasquez’s utilities, including water, gas and
electricity. This made sense because multiple units, including Velasquez’s,
were connected to a single water meter and a single electric meter.3
According to Tejeda, Velasquez was supposed to pay monthly rent of
$1,100, and that amount never changed. Tejeda further insists that
Velasquez stopped paying rent in August 2012 (actually before Velasquez
2
The parties disagree as to whether the lease was oral or written. Regardless,
there appears to be no dispute that Tejeda leased the apartment to Velasquez on a
month-to-month basis and that utilities were included in the lease. The bankruptcy
court found the lease to be oral. This finding is not challenged on appeal. Nor are the
basic lease terms referenced above.
3
Velasquez did not testify regarding whether there were multiple gas meters or a
single gas meter for the complex. When Tejeda was asked that question, she stated that
she did not know.
3
says she moved in) and that she never paid any rent afterwards. She claims
that all of the tenants in the complex, acting “in cahoots,” stopped paying
rent at the same time. She posits that they all felt free to ignore their rent
payment obligations at that point because her husband had left her and
was no longer collecting the rent for her.
Velasquez tells a much different story regarding rent. She maintains
that things went well with her apartment for roughly a year. She duly paid
$975 rent in cash, in person, to Tejeda or her husband. Then, after about a
year, she came home one night, and there was no electricity in her
apartment. She contacted Tejeda, who told her that she had disconnected
the electrical service because one of the other tenants was not paying rent.
Tejeda declined to take any steps to reconnect the electrical service. Instead,
she told Velasquez that, if she was unhappy, she should move. Velasquez
was forced to open an electrical service account in her own name. This was
particularly problematic because of the shared electric meter. As a result,
Velasquez was forced to pay for electric consumption for herself and for
several other tenants in the complex. According to Velasquez, Tejeda
granted her a $100 per month rent reduction – from $975 to $875.
Unfortunately, this reduction did not cover the increased cost of paying the
electric bill covering several tenants, and she was too afraid to ask the other
tenants to share the cost.
A few months after the electrical service interruption, the gas to
4
Velasquez’s apartment was turned off. Once again, Velasquez called Tejeda
seeking to have the gas service resumed. Again, Tejeda declined to take
any steps to resume the gas service. Instead, Tejeda advised Velasquez that
she should put the gas service account in her own name, like she had done
with the electrical service account. Tejeda again told Velasquez to move if
she did not like this. Unlike with the electrical service adjustment, there
was no agreed-upon reduction in the amount of Velasquez’s monthly rent
after she took over the gas service account.4
According to Velasquez, she continued to pay rent to Tejeda until the
water service to her apartment was turned off in December 2014. As
Velasquez tells it, she learned from one of the public assistance
organizations she contacted at the time that she was not obliged to pay any
rent so long as no running water was available in her apartment. On the
other hand, Velasquez insists that she was ready, willing and able to
resume making her rent payments as soon as the water service to her
apartment resumed. She said she told Tejeda this. In response, however,
Velasquez says that Tejeda indicated she had no intention of restoring the
4
Neither party produced any documentary evidence to support their respective
claims regarding rent. The written lease presented into evidence did not help pin down
the amount of rent Velasquez was supposed to pay. Both parties acknowledged that the
amount of rent specified in the written lease – $653 – did not reflect the amount of
monthly rent Velasquez actually owed. Instead, the $653 was the maximum amount of
rent Velasquez could agree to pay and still qualify for a one-time public assistance
benefit payment of $653. Apparently, Velasquez and Tejeda initially worked together to
fabricate a false lease agreement to help Velasquez qualify for the benefit payment.
5
water service. Instead, Tejeda told Velasquez that she did not want the
apartment complex anymore and that she wanted all of the tenants to
leave. When Velasquez told Tejeda she needed to restore the water service,
Tejeda supposedly refused and told Velasquez: “No, Sorayda [Velasquez],
I have been telling you for a time to go find some other place to live. I don’t
know why you keep insisting on staying if you know what’s going on there
. . . .” Tejeda also supposedly told Velasquez: “If you don’t feel good there,
I’ve been telling you for a while that it’s better that you leave.” Tejeda
denies ever having told Velasquez that she should move and denies having
shut off the water to force tenants to move.5
One of the public assistance agencies Velasquez contacted, Strategic
Actions for a Just Economy (aka SAJE), notified the Los Angeles County
5
It is worth mentioning that Tejeda ceased paying for water to the complex in
February 2013, long before water service was disconnected in December 2014. Between
those two dates, other tenants assumed responsibility for the water service account.
Something changed around December 2014 that caused the water utility, Golden State
Water Company, to disconnect the water supply. Two reasons were posited at trial:
(1) the water service account in the name of one of the other tenants had a $6,000
balance due; and (2) someone allegedly had tampered with the water meter. Whatever
the reason, Velasquez testified that Golden State refused to permit her to transfer the
water service account into her name, apparently telling her that only the owner could
do so. Tejeda testified that she spoke with Golden State and that she also tried to
reconnect the water service but that Golden State refused unless she paid the
outstanding $6,000 water bill. Tejeda testified that she could not afford to do so. The
bankruptcy court did not believe that Tejeda ever contacted Golden State or that she
ever tried to restore the water service. Nor did the court believe that Golden State
insisted on Tejeda paying the $6,000 owed on someone else’s water bill before it would
restore water service to the complex.
6
Department of Public Health about the lack of running water in the
complex. The health department arranged for a meeting in early January
2015 and informed Tejeda by phone that she needed to appear and explain
why her apartment complex had no running water. The parties’ accounts of
what transpired at the meeting differ. Velasquez testified that the health
department employee presiding at the meeting told Tejeda she could be
fined if she did not provide water service to the building. In response,
Tejeda supposedly said “I prefer to pay the fine, but I want everybody to
leave.”
After the meeting, Tejeda and Velasquez met by chance in the
parking garage. Velasquez claims Tejeda told her she had called the social
workers and that she should move because they otherwise would take her
kids away. Tejeda denies telling Velasquez this. She further maintains that
she only called the Department of Child and Family Services because the
health department told her to.
In March 2015, Velasquez and her children sued Tejeda, her husband
and the water utility company in the Los Angeles County Superior Court.
Among other things, the lawsuit sought damages and restoration of water
service to Velasquez’s apartment. Velasquez vacated the apartment in fall
of 2015. The lawsuit was still pending when Tejeda commenced her
chapter 7 bankruptcy case in January 2017.
Velasquez filed her nondischargeability complaint in June 2017. She
7
sought to have excepted from discharge the damages she and her family
suffered as a result of having to live without water from December 2014
until she vacated the apartment. In May 2018, the bankruptcy court held a
trial, at which Velasquez and Tejeda testified. Velasquez offered
compelling testimony regarding the hardships her family endured having
to live without running water. She testified that the lack of running water
interfered with her autistic son’s home therapy and with his daily routine.
She also testified that the absence of running water was a frustration and
an emotional strain on the entire family. She recounted her struggles to
provide her family with water by hauling up to her second-floor apartment
five gallon containers full of water and how she no longer could make
home-cooked meals for her children. She further recounted how they
would pay to bathe at the house of a friend. After the close of evidence, the
bankruptcy court took the matter under submission.
In August 2018, the bankruptcy court issued a memorandum
decision ruling in favor of Velasquez on her § 523(a)(6) claim. The
bankruptcy court credited Velasquez’s version of events and found Tejeda
not credible. More specifically, the court did not believe Tejeda’s claims
that she tried to restore water to the complex. Tejeda had explained that
Golden State had told her it would cost $6,000 to restore the water service
and that she was unable to pay that much due to her poor financial
condition. However, the court found Tejeda failed to restore water service
8
as part of an effort to coerce all of the tenants, including Velasquez and her
chidren, to move out of their apartments. Based on Velasquez’s willingness
to stay and pay rent, the court also found that Tejeda could afford to
restore water service and pay the monthly water bill.
As for damages, the bankruptcy court awarded Velasquez statutory
damages under Cal. Civ. Code 789.3(c) of $100 per day for 280 days
($28,000). The bankruptcy court explained that the $100 per day maximum
daily amount of statutory damages fit the harm Velasquez and her children
suffered as a result of being forced to live without running water. The court
awarded Velasquez no other damages or attorney’s fees.
The bankruptcy court entered its nondischargeability judgment on
August 7, 2018. Tejeda timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334
and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
1. Did the bankruptcy court commit reversible error when it found that
Tejeda sought to force Velasquez to move by refusing to provide
water service to her apartment?
2. Did the bankruptcy court abuse its discretion by admitting into
evidence Tejeda’s entire deposition transcript?
3. Did the bankruptcy court abuse its discretion by admitting into
9
evidence testimony regarding utilities other than water?
4. Did the bankruptcy court commit reversible error by not offsetting
against the damages the rent Velasquez allegedly owed to Tejeda?
5. Did the bankruptcy court unconstitutionally apply Cal. Civ. Code
§ 789.3 in awarding statutory damages of $100 per day?
STANDARD OF REVIEW
In nondischargeability actions, the ultimate question of whether a
claim is dischargeable is a mixed question of fact and law reviewed de
novo. Carrillo v. Su (In re Su), 290 F.3d 1140, 1142 (9th Cir. 2002). However,
when the appellant challenges the bankruptcy court’s factual findings in
the action, those are reviewed under the clearly erroneous standard. Id.
Legal rulings in the action are reviewed de novo. Id.
The bankruptcy court’s evidentiary rulings are reviewed for an abuse
of discretion and will not be disturbed in the absence of prejudice and
timely objection. Price v. Kramer, 200 F.3d 1237, 1252 & n.17 (9th Cir. 2000);
Van Zandt v. Mbunda (In re Mbunda), 484 B.R. 344, 351–52 (9th Cir. BAP
2012), aff'd, 604 F. App’x 552 (9th Cir. 2015). The bankruptcy court abuses
its discretion if it applies an incorrect legal rule or its factual findings are
illogical, implausible or without support in the record. See TrafficSchool.com,
Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011) (citing United States v.
Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)).
10
DISCUSSION
Tejeda has not challenged the legal standard the bankruptcy court
applied to except her debt from discharge under § 523(a)(6). Nonetheless,
we briefly restate the law governing § 523(a)(6) claims.
Section 523(a)(6) excepts from discharge those debts arising from a
debtor’s willful and malicious injury of another. An injury is considered
willful when the debtor had a subjective intent to injure the plaintiff or a
subjective belief that injury was substantially certain to occur. Ormsby v.
First Am. Title Co. of Nevada (In re Ormsby), 591 F.3d 1199, 1206 (9th Cir.
2010) (citing In re Su, 290 F.3d at 1142). An injury is considered malicious
when it “involves (1) a wrongful act, (2) done intentionally, (3) which
necessarily causes injury, and (4) is done without just cause or excuse.”
Ormsby, 591 F.3d at 1206 (quoting Petralia v. Jercich (In re Jercich), 238 F.3d
1202, 1209 (9th Cir. 2001)). In addition to these elements, § 523(a)(6) does
not apply unless the debtor’s conduct is tortious under applicable
nonbankruptcy law. Lockerby v. Sierra, 535 F.3d 1038, 1041 (9th Cir. 2008).
Tejeda has not disputed that the bankruptcy court found her liable for
tortious conduct under state law. As the bankruptcy court held, California
landlords can be held liable in tort for not furnishing their tenants with
habitable dwellings. Stoiber v. Honeychuck, 101 Cal. App. 3d 903, 918–19
(1980). Premises without running water are considered uninhabitable. Cal.
Civ. Code § 1941.1(a)(3).
11
Tejeda has raised five issues on appeal. One concerns the sufficiency
of the evidence relating to Tejeda’s intent, two concern evidentiary issues,
and the final two concern the court’s monetary award. We address each in
turn.
A. Tejeda’s Intent.
On the one hand, Tejeda asserts in her appeal brief that there are no
disputed factual issues. On the other hand, she claims there was no
evidence in the record supporting the bankruptcy court’s findings: (1) that
she intentionally injured Velasquez; and (2) that she purposefully refused
to take the steps necessary to resume water service to Velasquez’s
apartment in order to harm her and coerce her to move. This argument is
quintessentially a factual argument. We may reverse the bankruptcy
court’s intent findings only if they were illogical, implausible or without
support in the record. Retz v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th
Cir. 2010).
Tejeda’s intent argument lacks merit. It relies exclusively on her own
version of events. She ignores the fact that the bankruptcy court credited
Velasquez’s version of events and found Tejeda not credible. We must
“give great deference” to factual findings based on witness credibility
because the bankruptcy court had the opportunity to assess “‘variations in
demeanor and tone of voice that bear so heavily on the listener’s
understanding of and belief in what is said.’” Id. (citing Anderson v. City of
12
Bessemer City, 470 U.S. 564, 575 (1985)). Furthermore, Tejeda fails to explain
how the bankruptcy court’s reliance on Velasquez’s testimony in making
its intent finding was illogical, implausible, or factually unsupported in the
record.
Velasquez’s trial testimony provided ample evidence to support the
bankruptcy court’s inference that Tejeda refused to restore water service to
Velasquez’s apartment for the purpose of inducing her to move. According
to Velasquez, as each one of her utilities was disconnected, Tejeda told her
to move if she did not like it. Velasquez also recounted Tejeda’s comments
at the department of health meeting, which are telling. When threatened at
the meeting with a fine unless she provided running water to her tenants,
Tejeda said: “I prefer to pay the fine, but I want everybody to leave.”
Immediately after the meeting, Tejeda told Velasquez: “You should leave,
Sorayda, because I already called the social workers and they’re going to
take your kids away.” It was not illogical or implausible for the bankruptcy
court to infer from these statements that Tejeda refused to arrange for the
water to be turned back on in the apartment complex as a means of
coercing her tenants to move.
One of the main themes of Tejeda’s testimony was that she was too
poor to reconnect the water service. She claimed that none of the tenants
had been paying rent, including Velasquez, since August 2012. She further
claimed that she contacted Golden State about resuming water service but
13
they refused to do so unless she paid $6,000 in past due water bills incurred
while the water service for the complex was in one or more of the tenants’
names. The bankruptcy court found this testimony not credible for a
number of reasons. Among other things, the court noted that Tejeda’s
testimony about her efforts to restore water service was cursory. The court
concluded that the testimony was not believable because, had Tejeda
actually contacted Golden State, it would have expected her testimony
regarding that contact to be much more detailed. The court further noted
that Tejeda’s trial testimony on this point was at odds with her deposition
testimony. During her deposition, Tejeda claimed she could not recall ever
contacting Golden State.
As for Tejeda’s testimony that Velasquez didn’t pay any rent from
and after August 2012, the bankruptcy court instead chose to believe
Velasquez’s testimony that she paid rent until her water was disconnected
in December 2014. The bankruptcy court also credited Velasquez’s
statement that she was ready, willing and able to resume her rent
payments as soon as water service resumed. The bankruptcy court further
found that, had Tejeda restored the water service, the monthly water bill
would have been substantially less than Velasquez’s monthly rent
payments, so there was no legitimate reason why Tejeda could not afford
to restore water service to the complex.
“Where there are two permissible views of the evidence, the fact
14
finder’s choice between them cannot be clearly erroneous.” Anderson, 470
U.S. at 574. In short, Tejeda has not persuaded us that any of the
bankruptcy court’s intent-related findings were clearly erroneous.
B. Admission Of Tejeda’s Deposition Transcript.
Tejeda also argues that the bankruptcy court committed reversible
error when it sua sponte admitted into evidence the entire transcript from
Tejeda’s November 23, 2016 deposition. Tejeda contends on appeal that the
court had no authority sua sponte to admit the deposition transcript into
evidence. Tejeda construes Civil Rule 32(a) (made applicable in adversary
proceedings by Rule 7032) as only permitting the parties to move into
evidence deposition transcripts. But Tejeda cites no authority to support
her strict construction of Civil Rule 32(a).
Generally speaking, trial courts enjoy significant discretion in
deciding whether to admit party deposition transcripts used by the adverse
party. See Nationwide Life Ins. Co. v. Richards, 541 F.3d 903, 914 (9th Cir.
2008); Mark IV Props., Inc. v. Club Dev. & Mgmt. Corp., 12 B.R. 854, 859
(Bankr. S.D. Cal. 1981); see also Hub v. Sun Valley Co., 682 F.2d 776, 778 (9th
Cir. 1982) (“Because the underlying objective is efficiency at trial without
jeopardizing accurate fact finding, the district court is usually in the best
position to decide whether a prior deposition should be admitted.”).
More importantly, Tejeda failed to object when the bankruptcy court
announced that it was going to admit the deposition transcript into
15
evidence. If Tejeda had objected, the bankruptcy court easily could have
addressed Tejeda’s concern by asking Velasquez if she wanted to move for
admission of the transcript into evidence. Regardless, by failing to object
during the trial, Tejeda forfeited this objection and cannot raise it for the
first time on appeal. See Price, 200 F.3d at 1251-52; Ocwen Loan Servicing,
LLC v. Marino (In re Marino), 577 B.R. 772, 786 (9th Cir. BAP 2017).
C. Admission Of Testimony Regarding Utilities Other Than Water.
During Velasquez’s cross-examination of Tejeda, Velasquez asked
Tejeda questions about electric and gas utility service. After several such
questions, Tejeda’s counsel objected to this line of questioning, as follows:
“Objection, Your Honor. This is beyond the scope. Talking just about
water. Providing – provision of water, Your Honor. This is beyond the
scope of the water service.” Counsel did not state whether this line of
questioning was beyond the scope of direct examination, the pretrial order,
or both.
The bankruptcy court overruled the objection. The bankruptcy court
did not specify the basis for its evidentiary ruling. It merely stated that it
was going to give Velasquez “some leeway” to ask questions about utilities
other than water. After several more questions about electricity and gas,
Velasquez moved on to other lines of inquiry.
As a threshold matter, its is quite doubtful that the bankruptcy
court’s admission of this testimony caused any prejudice to Tejeda.
16
Without prejudice, we will not disturb a bankruptcy court’s evidentiary
ruling. See Price, 200 F.3d at 1252 n.17; In re Mbunda, 484 B.R. at 351–52.
Tejeda answered almost all of these questions about other utilities with
answers like: “I don’t know” or “I don’t remember.” Thus, it is
questionable whether this testimony materially impacted the bankruptcy
court’s findings. We acknowledge that the bankruptcy court generally
relied on Tejeda’s overall lack of knowledge and recollection in finding
Tejeda not credible. But there were many other questions about many other
topics where Tejeda expressed a similar lack of knowledge or recollection.
Accordingly, Tejeda’s testimony regarding the electric and gas utility
services was cumulative in this respect.
Even if we were to conclude that this evidentiary ruling was
prejudicial, Tejeda’s challenge of it lacks merit. On appeal, Tejeda has
clarified or refined her objection to the admission of this testimony.
According to Tejeda, the bankruptcy court should not have admitted her
testimony because it was beyond the scope of the issues identified in the
pretrial order. As Tejeda puts it, the pretrial order only specifically
referenced factual issues concerning Velasquez’s water service, so any
testimony regarding other utility services went beyond the scope of the
pretrial order. She further points to the order granting her motion in limine
generally limiting the admissibility of evidence to those matters identified
in the pretrial order.
17
At bottom, the bankruptcy court’s evidentiary ruling on the scope of
the pretrial order and the effect of the order in limine is a question of
construction of the court’s orders. We typically defer to the bankruptcy
court’s interpretation of its own orders, because it is in the best position to
know what it meant when it ruled. Rosales v. Wallace (In re Wallace), 490 B.R.
898, 906 (9th Cir. BAP 2013); see also Hallett v. Morgan, 296 F.3d 732, 739–40
(9th Cir. 2002); Damages for Justice v. Civil Serv. Comm'n of City & Cty. of S.F.,
934 F.2d 1092, 1094 (9th Cir. 1991). Tejeda has offered no explanation why
we should second-guess the bankruptcy court’s construction of its own
orders or why that construction was wrong.
In any event, we agree with the bankruptcy court’s interpretation.
Tejeda’s urged construction is too narrow. The pretrial order unequivocally
raised the issue of Tejeda’s intent with respect to her failure to reconnect
water service to the apartment complex. The questions that Velasquez
asked about other utilities were relevant to that issue. This relevance is
made apparent by Velasquez’s testimony regarding other utilities.6 In her
testimony, Velasquez recalled Tejeda told her that she was not going to
reconnect gas or electricity and that Velasquez should move if she was
unhappy about this. This testimony tends to show that, with respect to
other utilities, Tejeda harbored the same intent she was found to have with
6
When Velasquez was asked questions by her own counsel regarding other
utilities, Tejeda did not object to any of these questions.
18
respect to the water service: an intent to induce her tenants to move by
refusing to provide them with basic utility services. Under these
circumstances, the bankruptcy court did not abuse its discretion by
admitting Tejeda’s testimony regarding utilities other than water.
D. Damages Issues.
Tejeda’s damages argument is twofold. First, Tejeda argues that the
bankruptcy court erred by not offsetting the amount of rent Velasquez
allegedly owed her. And second, Tejeda argues that the statutory damages
the bankruptcy court imposed under Cal. Civ. Code § 789.3 were
unreasonable and hence unconstitutional.
We can easily dispose of Tejeda’s offset argument. Tejeda concedes
that no rent was owing once the water service was disconnected in
December 2014 until Velasquez moved out during the fall of 2015. See Cal.
Civ. Code §§ 1941.1(a)(3), 1942.4(a)(1) (rent not collectible once premises is
rendered uninhabitable because of the absence of running water). Instead,
Tejeda contends that Velasquez owed but did not pay any rent from
August 2012 to December 2014. But we already discussed, above, how the
bankruptcy court credited Velasquez’s version of events and how it found
Tejeda not credible. In the process, the bankruptcy court specifically found
that Velasquez paid her rent until the water service to her apartment was
disconnected in December 2014. We also held above that the bankruptcy
court’s findings in this regard were not clearly erroneous. Because
19
Velasquez already paid her rent for the period in question, there is no
unpaid rent to offset against Velasquez’s damages. Accordingly, we reject
Tejeda’s offset argument.
Tejeda’s argument challenging the constitutionality of the
bankruptcy court’s application of Cal Civ. Code § 789.3 requires a bit more
discussion.
Cal. Civ. Code § 789.3(a) provides in relevant part that a landlord
shall not, directly or indirectly, willfully interrupt basic utility services
furnished to a tenant with an intent to terminate the tenant’s occupancy of
a residence under a lease. Cal. Civ. Code § 789.3(c)(2) directs the court to
award the following against any landlord violating the statute:
(1) Actual damages of the tenant.
(2) An amount not to exceed one hundred dollars ($100) for
each day or part thereof the landlord remains in violation of
this section. In determining the amount of such award, the
court shall consider proof of such matters as justice may
require; however, in no event shall less than two hundred fifty
dollars ($250) be awarded for each separate cause of action.
Subsequent or repeated violations, which are not committed
contemporaneously with the initial violation, shall be treated as
separate causes of action and shall be subject to a separate
award of damages.
The bankruptcy court did not award any actual damages to
Velasquez. Instead, after considering the nature and extent of the harm
Tejeda inflicted on Velasquez and her children, the court imposed the
20
maximum statutory damages of $100 per day for 280 days. On appeal,
Tejeda has not challenged the amount of days the damages were imposed.
But she does challenge the rate imposed of $100 per day. Tejeda claims this
rate was unconstitutional as applied to her. To support this argument,
Tejeda relies on Hale v. Morgan, 22 Cal. 3d 388 (1978). In Hale, the California
Supreme Court held that, under the circumstances presented, the trial court
had applied Cal. Civ. Code § 789.3 in an unreasonable and unconstitutional
manner by imposing a $17,300 award. Id. at 392.
However, Hale is distinguishable. First of all, at the time Hale was
decided, the $100 per day provision under Cal. Civ. Code § 789.3 was
mandatory rather than discretionary. As a result, the Hale court expressed
the concern that the statutory damages provision could be used as a sword
rather than a shield. As the Hale court reasoned,
section 789.3 permits the occasional experienced and designing
tenant to ambush an unknowing landlord converting the single
wrongful act of the latter into a veritable financial bonanza.
Such a tenant may readily choose to endure the undoubted
hardship of no utility service in return for a sure and certain
reward accumulating at $3,000 per month; the size of the
instant award demonstrates the potential for abuse.
Id. at 403–04. After Hale was decided, the California legislature amended
the statute to provide courts with discretion over the size of the award by
directing the trial court to impose an amount “not to exceed” $100 per day
and directing the court to consider “proof of such matters as justice may
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require” for purposes of determining the amount of the award. See Kinney
v. Vaccari, 27 Cal. 3d 348, 356 n.6 (1980) (explaining 1979 amendments to
statute).
Second, the facts of Hale are markedly different. There, a landlord
owned and operated a mobile home park in South Lake Tahoe even though
he resided in San Francisco. Hale, 22 Cal. 3d at 393. The plaintiff tenant
moved his 35-foot mobile home into the park without the landlord’s
knowledge and consent. Id. Afterwards, the parties agreed to a rent of $65
per month, but for the next three months, the tenant failed to pay rent. Id.
The landlord in May 1975 disconnected the water and electrical lines to the
tenant’s mobile home. Id. Thereafter, the tenant alternately lived in his
mobile home or at his sister’s residence until November 1975, when he
removed his mobile home from the park. Id. Under these circumstances,
the Hale court held that the mandatory imposition of $100 per day was
arbitrary and unreasonable and, hence, unconstitutional. Id. at 404-05.
The dispute between Velasquez and Tejeda is more like Kinney, 27
Cal. 3d at 354-55. In Kinney, the California Supreme Court upheld an award
of $36,000 under Cal. Civ. Code § 789.3 ($100 per day, times 6 residential
units affected, times 60 days). Id. at 354-57. In holding constitutional the
application of the statute in that case, the Kinney court considered all of the
surrounding circumstances but particularly focused on the following three
factors: (1) the landlord’s motivations for his violative conduct; (2) the
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tenants’ efforts to mitigate damages; and (3) the egregious nature of the
impact on the tenants arising from the violation of the statute. Id. at 353-55.
In Kinney, the defendant landlord told the tenants he intended to
“throw the bums out” and that he would turn off the gas service to their
rental units beginning February 1 unless they moved. Id. at 351. The rental
units were without gas throughout February and March, even though it
was the middle of winter and the lack of gas left the tenants and their
minor children exposed to extreme cold. Id. at 355. Nor could the landlord
in Kinney blame the disconnection of the gas on insufficient funds. The
California Supreme Court noted that the amount of rent the tenants paid in
January was more than enough to pay the gas bill. Id. at 354.
As for their mitigation efforts, the tenants in Kinney continued to
tender their rent even though the gas already had been shut off. The
landlord refused to accept it or to turn back on the gas. The tenants also did
everything in their power independently to restore gas to their units. Id. at
354-55. When their efforts to work directly with the gas company failed,
within a week of gas service being terminated, the tenants sued the
landlord and sought an injunction to restore gas service to the units. Id.
Velasquez’s and Tejeda’s conduct is reminiscent of Kinney. The
bankruptcy court found that, before the water was disconnected, Velasquez
had been regularly paying more than enough rent to pay for the cost of the
water service. After water service was disconnected, Velasquez first tried to
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work directly with Tejeda to persuade her to resume water service. When
those efforts failed, she worked with various public assistance
organizations and the Los Angeles County Department of Public Health as
part of her further efforts to persuade Tejeda to restore water service. When
those efforts failed, Velasquez sued Tejeda and sought an injunction to
restore water service.
Nor can there be any legitimate doubt as to Tejeda’s motivations,
particularly in light of the bankruptcy court’s findings. Tejeda repeatedly
told Velasquez she should move if she did not like the existing
circumstances at the apartment complex. She further told a health
department employee that she would rather be fined than restore water to
the complex and that she wanted all the tenants to leave. Finally, Tejeda
told Velasquez that, if she didn’t move, the social workers were going to
take her children away from her.
As for the egregiousness of the harm caused by Tejeda’s conduct, we
already have recounted Velasquez’s testimony demonstrating the physical
and emotional toll being in an apartment without running water had on
her and her children. Velasquez also made it clear through her testimony
that if she had possessed any means and ability to move elsewhere, she
would have done so, as her adolescent daughter had urged her.
In sum, the circumstances of this case distinguish it from Hale and
justify following Kinney. The bankruptcy court did not apply the statutory
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damages provision in an unreasonable or unconstitutional manner.
CONCLUSION
For the reasons set forth above, we AFFIRM the bankruptcy court’s
judgment pursuant to § 523(a)(6).
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