Filed 4/5/17




                         CERTIFIED FOR PUBLICATION

                  IN THE APPELLATE DIVISION SUPERIOR COURT

                   STATE OF CALIFORNIA, COUNTY OF FRESNO




THE CBM GROUP, INC.,            )       Sup. Ct. Appeal No. 2599
                                )
          Plaintiff/Respondent, )       Superior Ct. No. 16CECL00668
                                )
v.                              )
                                )
GABRIELA LLAMAS,                )
                                )
          Defendant/Appellant. )
                                )
                                )
                                )

        APPEAL from a judgment of the Superior Court of Fresno

County, Dale Ikeda, Judge.      Reversed.1

        Attorneys and Law Firms
        Marcos Segura, Central California Legal Services, Inc.,

attorney for defendant/appellant Gabriela Llamas.

        Michael J. Lampe, the Law Offices of Michael J. Lampe,

attorney for plaintiff/respondent The CMB Group, Inc.

        Opinion

        Donald S. Black, J.
1
  This opinion was originally issued by the court on April 5, 2017.     It was
certified for publication on May 3, 2017, which is within the time that the
appellate division retained jurisdiction. This opinion has been certified for
publication in the Official Reports. It is being sent to the Fifth District
Court of Appeal to assist the Court of Appeal in deciding whether to order the
case transferred to the court on the court‟s own motion under Rules 8-1000 –
8.1018.
                                           I.


                                      INTRODUCTION


      In    this       appeal,        defendant/appellant           Gabriela        Llamas

(hereinafter “appellant”) challenges an unlawful detainer judgment

in favor of plaintiff/respondent The CBM Group, Inc. (hereinafter

“respondent”).      The judgment was based on appellant‟s failure to

pay full market rate rent after she failed to complete paperwork

to    recertify    her    application          for     federal    subsidized       housing

through the Rural Development Program, and also on her alleged

drug use and involvement in criminal activities on the property.

Appellant   contends      that    the     60-day       notice     served    on    her    was

insufficient to support the judgment because it did not mention

any   alleged     drug   use     or    criminal        activity    and     gave    her   no

opportunity to cure the alleged violations.                        She also contends

that there was no substantial evidence to support the judgment to

the   extent    that     it    relied     on     the    three-day     notice       because

respondent refused to allow her to complete the recertification

process to qualify for the federal subsidy program.                        We agree that

the judgment was not supported by either the 60-day notice or the

three-day notice, and therefore we will reverse the judgment.

                                          II.

                                       BACKGROUND

      Appellant entered into a lease agreement with respondent in

November of 2012 to rent an apartment in Kerman.                           The rent was
$766 per month, but appellant was only required to pay $25 per

month because she qualified for subsidies under the United States

Department of Agriculture‟s Rural Development Program.                            In order

                                          -2-
to remain in the program, appellant had to recertify her income

and household size annually.              This required her to meet with the

property manager, sign forms, and fill out a questionnaire.                            The

recertification     had     to       be     completed       before        the    current

certification expired.          In appellant‟s case, this required her to

complete the recertification on or before December 31, as her

certification expired on January 1.              In addition, there was a ten-

day grace period, so effectively appellant could complete her

paperwork as late as January 10.

     The    respondent    has    a   policy      and     practice    of     sending    out

several notices to tenants before their certifications expire.

Respondent sends a notice 120 days in advance of the expiration

date, another notice at 90 days, and a notice at 60 days.                              The

notices state that the recertification is due 45 days prior to the

certification effective date, and that a notice of termination

will be served if the recertification remains incomplete 30 days

prior to the effective date.           However, the notice also states that

a certification completed after the expiration date will not be

accepted.      Thus,     appellant         had   until    December        31,   2015    to

recertify.

     In the present case, respondent sent appellant a 120-day

notice on September 1, 2015, a 90-day notice on October 1, 2015,

and a 60-day notice on November 2, 2015.                  The 120-day notice set a

recertification    interview         for     September     11,      2015.       However,

appellant was unable to meet with the property manager during this
period because she was living in a 90-day substance abuse program.

She was not allowed to leave the facility for the first 40 days,

and even after this “blackout” period, she was only allowed to

                                           -3-
leave under very specific circumstances.

     Appellant‟s     sister,     Leticia    Llamas,   told   the    respondent‟s

property    manager,     Maria     Velez,    that     appellant     was   in   a

rehabilitation program and asked if she still had time to complete

the process.      Velez said “yes”, but told her that appellant still

had to come in personally and sign the paperwork.              Appellant also

called Velez and explained the situation.              Appellant told Velez

that she would be able to come in to complete the recertification

paperwork on November 21, 2015.

     Appellant returned home on November 22, 2015, and then met

with Velez on November 23 or 24.                However, Velez refused to

process appellant‟s recertification.           According to appellant, when

she went in to complete the recertification, Velez told her that

it was too late and that she would not be recertifying appellant.

Velez testified that when appellant came into her office and told

her she wanted to recertify, Velez told her that she had spoken to

her supervisor, Stacey Smith, and that “we will not be renewing

your lease.”      She told her that “we would not be able to do that.

Certification has ended.”         However, Velez subsequently testified

that she only told appellant that respondent would not renew her

lease, not that she could not recertify under the subsidy program.

     When appellant did not complete the recertification process,

the rent for the apartment went up to the full market rate of

$1,050.     Appellant was not able to pay the full amount, and

respondent refused to accept her usual payment of $25.
     On January 19, 2016, respondent served appellant with a 3-day

notice to quit or pay rent.            The notice stated that, because

appellant   did    not   complete    her     recertification       paperwork   by

                                      -4-
January 1, 2016, the rent for her apartment went up to the full

market rate of $1,050 per month.                 Appellant did not pay the full

market rate rent as requested, nor did she vacate the premises.

     Respondent       then     filed   its       unlawful     detainer     complaint,

alleging that appellant had been served with a 3-day notice, and

that appellant had failed to quit the premises or pay rent as

demanded.      The complaint did not allege any other ground for

relief, such as failure to comply with the 60-day notice.                       A copy

of the 60-day notice was attached to the complaint, but, although

the notice did refer generally to various other lease provisions,

the only specific ground for termination in the notice was failure

to pay rent after appellant failed to complete the recertification

process.

     The trial took place on March 7, 8, 28, and April 18, 2016,

in Department 401, Judge Ikeda presiding.                Ms. Velez and Ms. Smith

testified on behalf of respondent regarding appellant‟s failure to

recertify    and     failure    to   pay    rent    after     her    federal    subsidy

expired,     and    their    subsequent      service     of    the    3-day     notice.

Appellant testified that she was in rehabilitation and unable to

fill out the paperwork until she was allowed to leave on November

22. 2015.     She also testified that, when she went to see Velez on

November 23 or 24, Velez refused to allow her to complete the

recertification and told her that it was “too late.”

     Also, Velez testified that she refused to renew appellant‟s

lease because of “some other incident that doesn‟t serve as a
basis for this particular lawsuit.”                Appellant‟s counsel objected

that this testimony was irrelevant, but the court overruled the

objection.         Velez    then   testified      that   there      was   an   incident

                                           -5-
involving appellant‟s ex-boyfriend, Steve Valdivia, in which the

Kerman police came to the apartment.                          She also mentioned that

there had been a “rash of burglaries” in the area, and that there

was “stolen property” on the premises.                    The court then sustained a

relevance objection.

       Respondent‟s counsel also attempted to ask appellant about

her stint in the rehabilitation program, claiming that such 90-day

programs      are   imposed       by    courts    in     cases    involving     cocaine       or

methamphetamine charges, and asking appellant if she had been

convicted of any Penal Code violations.                          The court sustained a

relevance objection to this question.                      Respondent‟s counsel then

asked further questions, which established that appellant had not

been    convicted        of      any    criminal       conduct,      and    that      she    had

voluntarily enrolled in the rehab program.

       The    court      then     concluded      the    evidentiary        portion     of    the

trial, and directed the parties to submit post-trial briefs by

March 18, 2016, with closing arguments on March 28, 2016.

       However, at the hearing on March 28, the trial court informed

the    parties      that    he    had   noticed        additional      issues   that        might

require presentation of further evidence.                         In particular, Judge

Ikeda claimed that, while he had been under the impression that

the sole basis for the termination was the failure to complete the

recertification, he later realized that the termination might also

be    based   on     possible      criminal       activity       and    drug    use    at     the

apartment.          He     also   pointed     out      that    the     60-day   notice        had
referenced certain lease covenants regarding criminal activity and

drug use which might support the eviction.                             He noted that the

respondent‟s counsel had not pointed out that these provisions

                                              -6-
might support the eviction, but he believed the alleged activity

might    fall    within     the    purview    of        the   provisions.           He    also

indicated that he might not have sustained some of appellant‟s

objections if he had realized that the eviction might relate to

the criminal activity and drug use allegations.                             Respondent‟s

counsel stated that this was a “very simple” case, and that it was

based on the “three-day notice” based on a “failure to certify.”

However, the trial court concluded that it was necessary to reopen

the case and take further evidence on the issues of criminal

activity and drug use as an alternative basis for eviction.                              Thus,

the   court     continued    the    trial    to    April      18,    2016     for   further

proceedings.

        At the reopened trial on April 18, respondent presented the

testimony of Ms. Smith regarding an incident on August 24, 2015,

in which appellant‟s ex-boyfriend, Mr. Valdivia, was arrested by

the police at the apartment.           Smith testified that she was called

by the police to come to appellant‟s apartment and open the door

so they would not have to break it down.                      She opened the door as

requested, and the police then arrested Mr. Valdivia.                           They also

removed several garbage bags from the property.                             Respondent‟s

counsel attempted to ask Ms. Smith about whether Mr. Valdivia was

arrested for possession of stolen property, and whether the bags

removed from the residence contained stolen property, but the

court sustained respondent‟s counsel‟s objections as Smith had no

personal knowledge of these facts.
        Respondent‟s      counsel    was     not    able      to    present    any       other

evidence regarding Valdivia‟s alleged criminal conduct, as he was

unable    to    obtain    police    reports        or    documents     concerning          the

                                           -7-
incident.     Nor did respondent present any other evidence regarding

appellant‟s possible drug use on the premises.

      However, the trial court then searched the court‟s records

and   found   a     misdemeanor      complaint      against    Mr.    Valdivia     for

resisting arrest, but not possession of stolen property.                           The

court also found a misdemeanor change of plea form signed by

Valdivia and admitted it into evidence, along with a copy of the

misdemeanor complaint.         Appellant‟s counsel objected to admission

of the change of plea form, contending that it did not constitute

an admission of guilt, but the trial nevertheless admitted the

change of plea into evidence.

      The   court    then    granted   respondent‟s      motion       to   amend   the

complaint to add an allegation that the 60-day notice was an

alternative    basis    for   termination      based    on     criminal    activity,

which the court found to be an incurable breach of the lease.

      The   court    ruled    that   there    was    insufficient       evidence    to

support the allegation of possession of stolen property on the

premises, because there was no charge or conviction of this crime,

and Ms. Smith‟s testimony was properly objected to and sustained.

However, the court nevertheless found that there was a no contest

plea to resisting arrest, and thus there was evidence of criminal

activity that was disruptive of the stability of the premises, if

only for a short time. In addition, the court held that the

appellant‟s certification of completion of the substance abuse

program supported an inference that she had been using drugs on
the premises, which was a violation of Covenant 15D of the lease.

      Finally, the court found that appellant had not established a

reasonable    excuse    for   failing    to   complete        her    recertification

                                        -8-
paperwork in time, and that she had not submitted her paperwork

before the expiration date of December 1, 2015.                The court found

that appellant had not set up a meeting with Velez prior to the

expiration date, even though she was aware of the fact that she

needed to complete her recertification application.

      The court then granted judgment in favor of respondent, and

awarded possession of the premises to respondent.               The court also

ordered appellant to pay damages of $4,082.34 to respondent, plus

attorney‟s fees of $100, because “most of the court‟s decision is

based upon a theory not originally alleged or briefed.”

                                       III.

                                    DISCUSSION

      Standard of Review: With regard to the question of whether

the 60-day notice gave adequate notice that the lease termination

was based on criminal activity and drug use, we apply the de novo

standard of review.        Where there is no conflict in the evidence

and the sole issue is the interpretation of a contract or written

instrument,      the    appellate     court   must     make    an     independent

determination of the meaning of the contract.            (Parsons v. Bristol

Development Co. (1965) 62 Cal.2d 861, 865-866.)                Also, we review

the   trial   court‟s    application     of   federal    regulations      to   the

undisputed    content    of   the    60-day   notice    de    novo.      (Crocker

National Bank v. City and County of San Francisco (1989) 49 Cal.3d

881, 888.)

      However,    the    trial      court‟s   factual    determination         that
appellant did not comply with the recertification requirement and

failed to pay the full market rate rent must be reviewed under the

substantial evidence standard.         “When the trial court has resolved

                                       -9-
a disputed factual issue, the appellate courts review the ruling

according to the substantial evidence rule.                       If the trial court's

resolution    of     the    factual         issue    is    supported     by    substantial

evidence,    it     must    be        affirmed.       [Citation.]”          (Winograd      v.

American Broadcasting Co. (1998) 68 Cal.App.4th 624, 632.)

        “When a finding of fact is attacked on the ground that there

is not any substantial evidence to sustain it, the power of an

appellate    court       begins       and   ends    with    the   determination      as    to

whether     there    is         any    substantial         evidence     contradicted       or

uncontradicted which will support the finding of fact.” (Primm v.

Primm (1956) 46 Cal.2d 690, 693, emphasis in original.)

        “It is well established that a reviewing court starts with

the presumption that the record contains evidence to sustain every

finding of fact.”          (Tesseyman v. Fisher (1952) 113 Cal.App.2d 404,

407.)

        Analysis: In reaching its decision, the trial court relied on

two separate notices, the three-day notice and the 60-day notice,

both of which were served on appellant prior to the filing of the

unlawful detainer complaint.                 With regard to the 60-day notice,

the trial court found that appellant had used illegal drugs on the

premises     and    that        her    ex-boyfriend        had    engaged     in   criminal

activities that were disruptive to the stability of the premises.

The court also found that appellant had failed to explain why she

did   not   come    in     to    respondent‟s       office       to   recertify    for    the

federal subsidy program, and failed to pay the full market rate
rent when she was dropped from the subsidy program.

        However, the trial court‟s reliance on the 60-day notice to

support the eviction based on drug use or criminal activity was

                                             -10-
misplaced, since the 60-day notice did not mention that appellant

was going to be evicted for either using illegal drugs or engaging

in criminal activity on the premises.                   The 60-day notice states

that “The reason(s) for service of this notice and termination of

your tenancy is (are): You have failed to comply with the Notice

of Lease Agreement Violation-Recertification served upon you on

9/2/15 requiring that you comply with the recertification process.

You   have   failed     to   complete   the        recertification    process    in   a

timely manner which will result in the expiration of your Tenant

Certification on 12/31/15.           You failed to fulfill the conditions

and/or   standards       agreed    upon       in     your   Lease    for    continued

eligibility    in     this   complex;     a   redetermination        of    eligibility

shall be made by the Owner/agent once a year from the date of the

previous certification.”          Thus, the 60-day notice only relied on

appellant‟s failure to complete the recertification process in a

timely manner, not any alleged drug use or criminal activity on

the premises.

      As the trial court noted, the notice does cite to several

different covenants in the lease agreement, including Covenants

3(A), 5(C), 6(A), (B), (F), and (G), and 15(A) and (B).                      Covenants

3(A), 5(C), and 6(A), (B), (F) and (G) simply require the tenant

to meet certain income requirements and comply with the federal

subsidy certification process in a timely manner.                    Covenant 15(A)

grants the landlord the power to terminate the lease under certain

conditions, including actions by the tenant which disrupt the
livability of the project by a direct threat to the health and

safety of any person, or the right of any person to the quiet

enjoyment    of   the    Premises.        Covenant      15(B)   defines     “material

                                        -11-
noncompliance” with the lease to include nonpayment or repeated

late payment of rent, or use or sale of an illegal controlled

substance       on    the    premises      by    the     tenant      or    a    member      of     the

tenant‟s household.

        However, the 60-day notice did not specifically cite to the

covenant regarding criminal activity or drug use on the premises

to support the eviction.                As noted above, most of the covenants

cited    refer       to    failure    to      pay    rent      or   failure         to    meet    the

requirements for certification in the federal subsidy program.

The notice never expressly stated that appellant‟s lease was being

terminated for drug use or criminal activity on the premises, and

it    appears       that    the   citations         to   the   specific        covenants          were

intended to support the termination for failure to complete the

recertification process, not to place appellant on notice that she

was    being    terminated        for    engaging        in    drug       abuse     or     criminal

activities.          If respondent had intended to terminate appellant‟s

lease for criminal activities or drug use on the premises, it

would presumably have expressly stated in the 60-day notice that

it was relying on such activities as a basis for the termination.

        Even if respondent did have some unstated intent to terminate

the lease based on other grounds such as criminal activity and

drug use, it would not be fair to require a tenant to guess as to

the     underlying          reasons     for     the      termination           of    the     lease,

especially where the notice refers to only one specific ground for

termination and mentions others only by a vague and ambiguous
citation       to    the     lease    covenants.              If    respondent           wished    to

terminate the lease for appellant‟s alleged drug use and criminal

activity, it should have said so clearly in the notice rather than

                                                -12-
simply     citing      to        the   lease     covenants       without      any   further

explanation.

        Also,   respondent‟s           60-day    notice       never   cited    to   Covenant

15(D) of the lease, which is the most applicable covenant if it

intended to terminate appellant‟s lease for criminal activity or

drug use.        Covenant 15(D) specifically states that the landlord

may terminate the tenant‟s lease for criminal activity or alcohol

abuse, including drug-related criminal activity engaged in on or

near the premises.               However, despite the fact that Covenant 15(D)

most directly applies to the type of conduct that the trial court

cited     in    its   judgment,          the    60-day    notice      never     cited   this

covenant.       Instead, the notice cited to several other covenants,

which    deal     primarily        with    payment       of    rent   and     the   tenant‟s

certification under the federal subsidy program.                              Nevertheless,

the trial court appeared to rely on Covenant 15(D) in support of

its judgment.         Yet since the respondent never gave notice that it

was relying on appellant‟s alleged drug use and criminal activity

as a reason to terminate her tenancy, it was error for the trial

court to rely on such activity in support of its judgment.

        In addition, respondent‟s conduct subsequent to service of

the 60-day notice also indicated that it was not relying on any

criminal       conduct      or    drug    use   to    support     the   eviction.       The

original unlawful detainer complaint filed by respondent did not

even mention the 60-day notice, and instead relied entirely on the

three-day notice.           The complaint also alleged that the reason for
the termination of the lease was that the appellant had failed to

recertify for the federal subsidy, thus causing her to be liable

for the full fair market amount of rent.                       Thus, the complaint was

                                               -13-
clearly limited to the issue of whether appellant had failed to

complete the recertification process in a timely manner and had

subsequently failed to pay the full market rate rent, not whether

she had committed other breaches of the lease by using drugs or

engaging in criminal activity on the premises.

       During the trial, the respondent‟s counsel asserted that,

“The case as we presented it is very simple.                    It‟s a three-day

notice case.    There was a failure to certify.”                Indeed, the first

two days of trial concerned only the claim that appellant had

failed to recertify under the federal program, and no attempt was

made   to   establish     any   other   ground      for   terminating   the     lease

before evidence closed on March 9, 2016.                  It was only after the

trial court reopened evidence in the case on its own motion to

explore whether there might be other grounds for termination such

as criminal activity or drug use that the respondent attempted to

show that appellant had committed such lease violations.                      Again,

however, respondent never served appellant with notice that it

might terminate her lease based on alleged drug use or criminal

activity, so there was no basis for the trial to allow the parties

to present evidence on these issues.

       Respondent   has    argued   that       it   was   not   required   to    give

appellant specific notice and an opportunity to cure the conduct

upon which it relied to terminate the lease.                However, the federal

regulations regarding lease terminations for subsidized housing do

require notice and an opportunity to cure prior to termination of
the lease.

       Under Code of Federal Regulations, Title 7, section 3560.159,

subdivision (a), “Borrowers, in accordance with lease agreements,

                                        -14-
may   terminate   or   refuse   to   renew   a   tenant's    lease     only   for

material non-compliance with the lease provisions, material non-

compliance with the occupancy rules, or other good causes.”                    (7

C.F.R. § 3560.159, subd. (a).)

      However, “Prior to terminating a lease, the borrower must

give the tenant written notice of the violation and give the

tenant an opportunity to correct the violation.                   Subsequently,

termination may only occur when the incidences related to the

termination are documented and there is documentation that the

tenant was given notice prior to the initiation of the termination

action   that     their    activities       would   result        in   occupancy

termination.”     (Ibid, emphasis added.)

      “Material non-compliance with lease provisions or occupancy

rules,   for    purposes   of   occupancy    termination     by    a   borrower,

includes actions such as: ... (ii) Non-payment or repeated late

payment of rent or other financial obligations due under the lease

or occupancy rules; or (iii) Admission to or conviction for use,

attempted use, possession, manufacture, selling, or distribution

of an illegal controlled substance when such activity occurred on

the housing project's premises by the tenant, a member of the

tenant's household, a guest of the tenant, or any other person

under the tenant's control at the time of the activity.”                       (7

C.F.R. § 3560.159, subd. (a)(1)(ii), (iii).)

      Also, “Good causes, for purposes of occupancy terminations by

a borrower, include actions such as: (i) Actions by the tenant or
a member of the tenant's household which disrupt the livability of

the housing by threatening the health and safety of other persons



                                     -15-
or the right of other persons to enjoyment of the premises and

related facilities...”            (7 C.F.R. § 3560.159, subd. (a) (2)(i).)

        Here, the lease agreement did state that the lease could be

terminated for criminal activity or use of illegal substances on

the    premises.       (Lease          Agreement,          Covenant    15(A),       (B),    (D).)

However, the respondent never gave notice to appellant that it was

terminating her lease for such conduct, nor did it give her any

opportunity to cure the alleged conduct.                        As discussed above, the

60-day notice stated instead that her lease was being terminated

for    her   failure       to   complete       the     recertification        process       in    a

timely manner.         There was no mention of any other reasons for

termination,        such    as    drug        use     or    criminal       activity    on     the

premises.          Therefore,      the       60-day        notice    was    insufficient         to

support the judgment.

        Respondent     nevertheless                contends     that       notice     was     not

required, because there is no requirement to give notice and an

opportunity to cure where the breach of the lease is based on

criminal activity.          Respondent cites to Zucco v. Farullo (1918) 37

Cal.App. 562 in support of its position.                            However, Zucco did not

involve criminal conduct that constituted a breach of the lease,

nor    was    it   decided       under       the    federal     regulations         related      to

subsidized housing.             As discussed above, the federal regulations

here    require     notice       and    an    opportunity       to     cure   the     violation

before the tenant can be evicted.                      (24 C.F.R. § 3560.159, subd.

(a).)        The lease in the present case also provided that the
landlord might require the tenant to attend a drug counseling or

recovery program and agree not to commit another violation in the

future as a condition for reentry if the tenant commits a drug

                                               -16-
violation on the premises.            (Lease Agreement, ¶ 8 M.)             Notably, in

the present case appellant did complete a drug treatment program,

and there was no evidence that she intended to commit any future

drug    or    criminal      violations.         Thus,    Zucco     does    not     support

respondent‟s position that the appellant‟s conduct did not require

notice and an opportunity to cure.

       Respondent also cites to Code of Federal Regulations, Title

7,     section     3560.159,        subdivision      (d),     which       states    that,

“Borrowers may terminate tenancy for criminal activity or alcohol

abuse by household members in accordance with the provisions of 24

CFR 5.858, 5.859, 5.860, and 5.861.”                     Respondent contends that

this    provision        allows     the   landlord      to    terminate      the    lease

regardless of whether there are other provisions in the lease or

regulations that require notice and an opportunity to cure the

violation.         However,        section     3560.159,     subdivision      (d)     only

permits termination of a tenancy for criminal activity or alcohol

abuse “in accordance with the provisions of 24 CFR 5.858, 5.859,

5.860, and 5.861.”

       Under Code of Federal Regulations, Title 24, section 5.858,

“The    lease     must      provide    that     drug-related       criminal      activity

engaged      in   on   or   near    the   premises      by   any   tenant,    household

member, or guest, and any such activity engaged in on the premises

by any other person under the tenant's control, is grounds for you

to terminate tenancy.              In addition, the lease must allow you to

evict a family when you determine that a household member is
illegally using a drug or when you determine that a pattern of

illegal use of a drug interferes with the health, safety, or right

to peaceful enjoyment of the premises by other residents.”                             (24

                                             -17-
C.F.R. § 5.858, emphasis added.)               Likewise, sections 5.859 and

5.860 provide that the lease must provide for termination if the

tenant or household member‟s alcohol abuse or criminal activity

threatens the health, safety, or right to peaceful enjoyment of

the premises by the other residents.            (24 C.F.R. §§ 5.859; 5.860.)

     Thus,     section     3560.159,      subdivision     (d)    only    permits

termination for criminal activity where such activity is also

prohibited     by   the    lease    itself      and   provides    grounds    for

termination under the lease.             In other words, subdivision (d)

provides for termination of the lease if the tenant violates the

lease provisions barring criminal conduct.

     Here, the lease language does specifically provide that drug

use and criminal activity are grounds for termination.                    (Lease

Agreement, Covenant 15(A), (B)3, (D).)                Thus, section 3560.159,

subdivision (d), does permit termination of the lease for criminal

activity.    Again, however, there was nothing in the 60-day notice

that informed appellant that her lease might be terminated based

on any alleged criminal activity.

     To the extent that respondent argues that that subdivision

(d) allows termination of the lease without any notice whatsoever

where there is criminal activity, this interpretation would be

inconsistent    with     the   normal    notice   requirements    of    unlawful

detainer actions as well as the notice requirement of section

3560.159, subdivision (a).         Notably, subdivision (d) does not set

forth a specific procedure for terminating the lease for criminal
activity or alcohol abuse.         Instead, subdivision (d) incorporates

the language of the lease itself by referencing Code of Federal

Regulations, Title 24, sections 5.858, 5.859, 5.860, and 5.861,

                                        -18-
which indicates that any termination for criminal activity would

still have to be based on violation of the lease terms.                         Thus, a

termination        under   subdivision       (d)   would   still    be     based    on   a

“material non-compliance with the lease provisions”, and the same

procedures         required    under    subdivision        (a)     would      apply      to

subdivision (d) terminations as well.               Since the 60-day notice did

not   give    appellant       any   notice    or   an   opportunity      to   cure    the

alleged criminal conduct, the trial court erred in relying on the

criminal conduct when it granted judgment in favor of respondent.2

      However, respondent argues that, even if the trial court‟s

decision based on the 60-day notice was erroneous, the judgment

should still be affirmed based on the trial court‟s finding that

appellant failed to recertify for the federal subsidy.                          When it

ruled in favor of respondent, the trial court found that appellant

had not explained why she did not meet with respondent‟s manager

and complete the paperwork to recertify for the federal subsidy

program, and thus the full market rate rent applied and the three-

day notice correctly stated the amount of rent as $1,050 rather

than $25.          The trial court acknowledged that appellant claimed

that there should be a reasonable accommodation because she was in

the rehabilitation program, and that she was not able to leave the

program      and    meet   with     respondent‟s        manager    to    complete     the

paperwork until after the “blackout” period ended.                       However, the

trial court concluded that she could have arranged a meeting after

the blackout period ended or after she left the program, and that
2
  Since we find that the 60-day notice did not give notice that the termination
was based on criminal activity or drug use, there is no need to address
appellant‟s other arguments, including whether the trial court improperly
permitted amendment of the complaint, whether it improperly relied on a
misdemeanor plea bargain to establish criminal activity, or whether it
improperly relied on speculation to show drug use.
                                         -19-
her failure to do so meant that she was not eligible for the

federal subsidy program and thus she was liable for the full

market rate rent.

        Yet    the    trial      court‟s     findings      regarding       the      appellant‟s

failure to complete the recertification process entirely ignored

the extensive testimony at trial regarding appellant‟s meeting

with Maria Velez in late November of 2015.                                 Even though the

substantial evidence standard is highly deferential, the trial

judge‟s ruling will not be upheld if the trial court failed to

weigh    the    evidence.           (Kemp    Bros.    Construction,         Inc.      v.    Titan

Electric       Corp.   (2007)       146     Cal.App.4th     1474,     1477-1478.)            “The

[substantial evidence] rule thus operates only where it can be

presumed that the court has performed its function of weighing the

evidence.       If analysis of the record suggests the contrary, the

rule    should       not    be     invoked.”        (Estate    of     Larson        (1980)       106

Cal.App.3d 560, 567.)

        Here,    the       trial    court     did    not    discuss,        and     apparently

completely disregarded, the testimony of both appellant and Ms.

Velez regarding the meeting that took place in late November of

2015 after appellant left the rehabilitation program.                                According

to   Velez‟s     testimony,         appellant       came    into    her    office      in    late

November        and        stated     that     she      was        there       to     “do        the

recertification.”            However, Velez told her that “we would not be

renewing       her    lease.”          “I    told    her,     „Gabby,      I     spoke      to   my

supervisor Stacey and we will not be renewing your lease.‟”
        On cross-examination, Velez testified that she told appellant

that “certification has ended”, and that “we would not be able to

do that” [i.e. recertify appellant].                          However, Velez admitted

                                              -20-
that,    at    the   time    of   the   meeting,      the   deadline      to   recertify

appellant had not yet passed, and that appellant still had about

two months left to recertify.              Velez then clarified that she told

appellant that respondent would not be renewing her lease due to

another incident that was not the basis of the unlawful detainer

action.       Velez testified on redirect that she never told appellant

that she would not be recertified, only that respondent would not

renew her lease.

        Appellant then took the stand and testified that she went to

meet with Velez “around November 24th” after she had been released

from the rehabilitation program to discuss recertification.                           She

told Velez that she was there to do her recertification, and Velez

told her that they were not going to be recertifying her.                           Velez

later stopped working for respondent, and there was no manager on

the   premises,      so     appellant     had    no   one     to    contact    regarding

recertification.           Appellant finally spoke with Stacey Smith on

January 4, 2016.           Smith also told appellant that respondent would

not be recertifying her, and she refused to accept appellant‟s

offer to pay $25 in rent under the subsidized rate.                       Instead, she

insisted on payment of the full market rate rent of $1,050.

        Thus, while there was some conflict between Velez‟s testimony

and appellant‟s with regard to the issue of whether Velez refused

to recertify appellant for the subsidy program or whether she

simply    refused     to    renew   her   lease,      there    is    no   dispute    that

appellant did come into Velez‟s office in late November of 2015,
before the recertification period had expired, and attempted to

complete the recertification process.                  The trial court‟s finding

that appellant had not made any attempt to meet in person with

                                          -21-
respondent‟s      agents        to    complete       the   recertification           process

entirely disregarded all of this evidence, and failed to engage in

any weighing of the conflicting statements of Velez and appellant

on the key issue of whether appellant was allowed to recertify for

the subsidy.        Therefore, even under the deferential substantial

evidence standard, the trial court‟s finding was unsupported by

the evidence, which clearly showed that appellant had made an

attempt     to    meet     in        person     with     Velez        and    complete    the

recertification paperwork.

     Respondent      claims          that   Velez      simply    told       appellant   that

respondent would not be “renewing” the lease, not that it would

not be “recertifying” her for the subsidy program.                              Respondent

contends that, even if Velez told appellant that her lease was not

going to be renewed, appellant should still have made further

attempts to complete the recertification.                             However, the trial

court never addressed this conflict between the testimonies of the

two witnesses, or even acknowledged that there was any testimony

about the meeting, so the court never resolved the question of

which statement was more credible or whether respondent refused to

recertify appellant for the subsidy program or simply refused to

renew her lease.

     In any event, even assuming that the trial court impliedly

found that Velez‟s testimony was more credible and that respondent

simply refused to renew appellant‟s lease, the refusal to renew

appellant‟s lease was sufficient to justify appellant‟s failure to
complete    the   recertification             paperwork.         In    light    of   Velez‟s

statement    that    respondent         was    not     going    to     renew   appellant‟s

lease, given just after appellant came into her office and stated

                                              -22-
that she wanted to do the recertification paperwork, it would have

been   a     futile    act    for   appellant       to    insist    on    completing      the

recertification.            What would the purpose of further efforts to

complete      the     recertification         process     have     been    if   respondent

refused      to    allow     appellant    to    renew     her     lease?        Without    an

apartment to rent, appellant‟s completion of the recertification

for the subsidy would have accomplished nothing.                           Regardless of

whether Velez told appellant that she was not going to allow her

to recertify or whether she told her that respondent was not going

to renew her lease, the effect was the same: appellant would not

be able to continue living in the apartment.

       Therefore, we find that there was no substantial evidence to

support      the    trial     court‟s    conclusion        that    appellant      had     not

offered      any      explanation       for     her      failure    to     complete       the

recertification process.

                                              IV.

                                      DISPOSITION

       The     judgment       awarding        possession     of     the     premises      to

respondent as well as the award of money damages against appellant

is reversed.        The matter is remanded back to the trial court, with

directions that judgment is to be entered in favor of appellant.

       Dated this ___ day of May, 2017




                                    _____________________________________
                                    Hon. Donald S. Black, Presiding Judge
                                    Appellate Division of Fresno Superior
                                    Court

       WE CONCUR:


                                          -23-
_____________________________________
Hon. F. Brian Alvarez, Judge




_____________________________________
Hon. Gary D. Hoff, Judge




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