Court to Rule on Refusal to Rent to Unwed Couple : Bias: Landlords said their beliefs did not allow them to give a lease. Case will be a pivotal test of religious rights versus fair-housing laws.

In a pivotal test of religious rights versus fair-housing laws, the state Supreme Court agreed Thursday to decide whether landlords can cite their religious beliefs to refuse rentals to unmarried couples.

The high court, in a brief order signed by all seven justices, set aside a widely debated appellate court ruling that held that the constitutional right of a Downey couple to free exercise of religion would be violated by forcing them to rent to a woman and her boyfriend.

State statutes barring housing discrimination based on marital status must yield to the landlords’ sincere belief that fornication is sin, the appellate court had said in a 2-1 decision last November.

The case, apparently the first of its kind in the nation, has attracted wide attention among civil rights and religious groups. The outcome before the high court could have broad effect on the state’s increasing numbers of unmarried, cohabitating couples, including gay men and lesbians. No hearing date was set.

According to the 1990 census, about 8% of California households consist of unmarried adults living together. Another 33% contain only single adult.

Lawyers for the state and the unmarried woman in the case had warned that the appellate ruling, if left intact, could open the way for landlords to discriminate against an array of tenants--ranging from homosexuals to divorcees--whose status or practices conflict with the landlords’ religious views.

Now, the high court ruling could set new legal guidelines beyond the rights of landlords and tenants, said Thomas F. Coleman of Los Angeles, the woman’s attorney.

“The court really is going to look at freedom of religion versus civil rights in the entire spectrum of business relationships,” said Coleman. “It’s exciting--but also frightening in some respects. It’s not going to be an easy time.”

Thomas F. Donahue of Fresno, an attorney representing the landlords, who are his parents, said: “We’re looking forward to the Supreme Court hearing the case and hoping it decides in our favor.”

In a written brief, Donahue had asked the high court to leave the appellate decision intact, noting that the state sometimes denies to unmarried couples the rights granted to married couples. He said state and private colleges are allowed by law to limit student housing to married couples.

Donahue also denied that the appellate ruling would give business establishments broad freedom to discriminate on the pretext of religious views. The ruling had provided only a narrow exception based on the landlords’ view that it is morally wrong to rent to unmarried couples, he said.

The case began in 1987 when Verna Terry sought to rent a one-bedroom, $450-a-month apartment from John and Agnes Donahue of Downey. According to testimony, Terry indicated that the apartment was for her and her boyfriend, Robert Wilder. The two were not married but were considering marriage, she said. Agnes Donahue, like her husband a devout Catholic, turned Terry down, saying she was “old-fashioned” and would not rent to an unmarried couple.

Terry and Wilder filed complaints with the state Department of Fair Employment and Housing, charging housing discrimination based on marital status. The Fair Employment and Housing Commission ordered the Donahues to pay Terry and Wilder $7,480 in damages--including $6,000 for emotional distress.

The Donahues filed suit, contending that their belief that sexual intercourse outside marriage is a sin entitled them to a constitutionally based religious exemption from state statutes that ban discrimination in housing.

On Nov. 27, a state Court of Appeal in Los Angeles upheld the Donahues’ contention, finding that the state’s concern with protecting unmarried cohabitating couples was “not such a paramount and compelling interest” to outweigh the landlords’ religious freedoms.

Appellate Justice Roger W. Boren, joined by Appellate Justice Paul Turner, said that the state, in ruling against the Donahues, “has failed to explain exactly what is so invidious or unfairly offensive” about refusing rentals to unmarried couples.

In dissent, Justice Margaret M. Grignon said that renting to unmarried couples would be only a slight burden on the Donahues. They were still free to practice their religion and renting to the couple would not require them to “aid and abet ‘sinners,’ ” Grignon wrote.

Attorneys for the Fair Employment and Housing Commission asked the state high court to review the appellate ruling, saying it would open the way for businesses to assert religious views to discriminate against consumers.

Terry also sought review, saying the appellate court ruling threatened the rights of countless tenants, violating their rights of privacy in “non-traditional” living arrangements.