I'm at a complete LOSS. I need information about Unlawful Detainer court AND Small Claims.

No. An unlawful detainer is a summary proceeding. As such, an unlawful detainer proceeding is given legal precedence over all other civil actions so that it can be quickly heard and determined. (Code of Civil Procedure §1179a.) A cross-complaint is not permitted in an unlawful detainer lawsuit. A defendant has no right to file a cross-complaint or counterclaim because possession is the only issue being litigated in an unlawful detainer action. (Vella v. Hudgins (1977) 20 Cal.3d 251, 255.) You must file a civil lawsuit for damages. The civil lawsuit may be filed as a small claims action, or a limited jurisdiction superior court action, or an unlimited jurisdiction superior court action. I don't know the basis of your small claims court case, or how you presented your case, or anything about the landlord's defense in that case. The small claims judge was probably incorrect. However, if you were the plaintiff in the small claims court case and lost, you do not have the right to appeal. You would have a right to appeal the small claims court case if the landlord filed a Defendant's Claim in that case.

The above attorney is correct, you should file the two separately.

Disclaimer: The materials provided below are informational and should not be relied upon as legal advice. The Small Claims Court judge may have misunderstood the description of your case. Even then, it is unusual for a judge to dismiss an action with prejudice. I suggest you sit down with your own attorney and go over your paperwork in detail to protect your legal rights.