When I googled "unlawful occupant notice" because I had never heard of it, I got results from Oregon attorneys. It is not anything known to California law.
Generally, co-lessees have equal rights to the apartment, including the equal right to invite guests. Many leases have a provision, and this may be what the leasing agent was thinking of, that state that any guest who stays for more than a certain amount of time, say fourteen days, becomes a roommate. The landlord may then terminate the tenancy for subleasing without consent. If your leasing agent did that because of your wife's mother, you and your wife both would be evicted.
If your mother in law is nasty enough, you might be able to say that your wife constructively evicted you, making you move out. She would then in theory be liable for your share of the rent. Whether doing that would help you in any way is not clear.