In April of 2008, Jeffrey Needelman (“Tenant”) entered into a lease agreement with DeWolf Realty Co., Inc. (“Landlord”) for an apartment in San Francisco. After the lease expired, Tenant continued on as a month-to-month tenant. In December of 2011, Landlord served a three-day notice on Needleman alleging that Needleman violated terms of the lease by harassing other tenants in the complex. In January of 2012, Tenant filed an answer to the complaint. In March of 2012, the parties entered into a settlement agreement that included the right to pursue a stipulated judgment with 24-hours notice, that Tenant was required to comply with the terms of the lease, that Tenant waived any claims he had, and that Tenant agreed that any property left in the unit would be deemed abandoned.
In May of 2012, Landlord notified Tenant that it was moving ex parte to enter a stipulated judgment for possession against him for violating the settlement agreement. Tenant failed to appear at the hearing and the court granted Landlord’s request for the stipulated judgment. Eventually, Tenant was locked out of his property. In an attempt to stop the eviction, Tenant moved to set aside the judgment. In July of 2012, the trial court denied Tenant’s motion stating that the agreement reached by the party was clear and there was sufficient evidence presented by Landlord to enter judgment against Tenant. Tenant then appealed the judgment to the appellate division of the superior court. In March of 2013, the appellate division of the superior court affirmed the trial court’s decision.
Not done with the judicial system, in May of 2013, Tenant filed a lawsuit against Landlord with claims largely based on issues that were raised during the unlawful detainer proceeding. After several motions, the court eventually dismissed Tenant’s case finding that his claims were barred by res judicata and the settlement agreement. Tenant then appealed the case to the appellate court. On appeal, Tenant argued that his claims were not barred by the judgment and the settlement agreement because the settlement agreement violated constitutional protections. Tenant contended that the 24-hour notice was insufficient as he had other obligations and could not attend the hearing.
The First Appellate District affirmed the trial court’s decision and found that Tenant’s claims were barred on multiple different grounds. The Court held that although there are heightened standards for res judicata in unlawful detainer cases than other cases, the heightened standards did not apply when the parties had an opportunity to litigate the matter. Here, the Court found that although no trial ever occurred, the mere fact that Tenant filed an answer and chose to settle the matter was sufficient to trigger res judicata of the claims. Additionally, the Court rejected held that the 24-hour notice was agreed to by the parties and Tenant chose not to attend the hearing. Because Tenant made a choice not to appear, his due process rights were not violated.
WHY THIS DECISION IS IMPORTANT:
Here, the Court upheld many of the terms routinely included in most settlement agreements including the shortened notice provision and waiver of claims. A contrary decision would have made settlement almost impossible for most civil cases, especially in the unlawful detainer context.
None of the holdings in this case were particularly surprising. Here, the Court essentially affirmed that the terms most parties use in their agreements are constitutional. However, if the Court had decided otherwise, it is unclear how parties could reach a settlement agreement in the future.