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Davis-Stirling Act

The following cases discuss establishment of common interest developments and the applicability of the Davis-Stirling Common Interest Development Act.

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  • Committee to Save Beverly Highlands Homeowners Ass’n. v. The Beverly Highlands Homeowners Ass’n. (Applicability – Common Area Requirement)

    Committee to Save Beverly Highlands Homeowners Ass’n. v. The Beverly Highlands Homeowners Ass’n. (Applicability – Common Area Requirement)

    Citation

    Committee to Save Beverly Highlands Homeowners Ass’n. v. The Beverly Highlands Homeowners Ass’n. (2001) 92 Cal.App.4th 1247

    Facts

    In 1952, CC&Rs were recorded against lots in a development in Beverly Highlands. An association of the owners of the lots was created. Four of the lots in the development were not buildable, and the CC&Rs restricted their use to open space, and obligated the association to maintain them. The association was suspended in 1972, but revived in 1989. In 1996, there was debate over whether the development was subject to the Davis-Stirling Common Interest Development Act (“Davis-Stirling” or “Davis-Stirling Act”), which arose from the fact that the association owned none of the lots. The association decided not the purchase the lots. Subsequently, some of the members determined to dissolve the association. In the face of their actions, a committee of members who opposed the dissolution (“Committee”) filed legal proceedings. Both sides moved for summary judgment, and the court granted the Committee’s request to stay the dissolution of the association. The court based its ruling on a finding that the community was subject to Davis-Stirling, declared plaintiff the prevailing party and awarded attorney fees. On appeal, defendant association contended the project was not subject to Davis-Stirling.

    Held

    For association (project not subject to Davis-Stirling.) The court first noted that if the association was subject to Davis-Stirling, Corporations Code §8724 would require 100% of the members to consent to dissolution. (A smaller percentage would be required for dissolution if the association was not a Davis-Stirling homeowners association.) However, for a community to be subject to Davis-Stirling, it must have common area. For a planned development, that common area may be either separately owned lots, or easements across other lots for the benefit of members. The CC&Rs did restrict the use of the unbuildable lots, but that was not the equivalent of the easements necessary to bring the project under Davis-Stirling. The court also noted that even if the association were dissolved, individual owners still had the right, pursuant to the CC&Rs, to enforce the CC&Rs.

    ×
  • Golden Rain Foundation v. Franz

    Golden Rain Foundation v. Franz

    Summary by Mary M. Howell, Esq.:

    Facts

    Golden Rain Foundation (“Foundation”) was created in 1961, to provide services to 16 projects including condominiums and stock cooperatives, collectively referred to as the “mutuals.” Golden Rain was organized as a trust, and as trustee, it held title to streets used by all mutuals, and was obligated to maintain the “common facilities” owned by the mutuals. Franz et al. were owners within the various mutuals, and sought production of Foundation’s documents pursuant to the Davis-Stirling Act. When Foundation declined, Franz filed a small claims action, which resulted in a judgment against Foundation. Foundation then filed the current action, asking the court to rule that it was not subject to the Davis-Stirling Act.

    Held

    For homeowners. Although the Foundation did not hold fee title to all common areas, it was organized to manage the various mutuals, which were themselves subject to the Davis-Stirling Act.

    *** End Summary ***

    Golden Rain Foundation v. Franz

    163 Cal.App.4th 1141 (2008)

    1143*1143 Pray, Price, Williams & Picking, William A. Williams and Jay H. Picking for Plaintiff and Appellant.

    Fiore, Racobs & Powers, Richard S. Fiore, John R. MacDowell and Alejandro Portales for Seal Beach Mutual Nos. One-Twelve and Fifteen-Seventeen as Amici Curiae for Plaintiff and Appellant.

    Shannon M. Walpole; Bell, Rosenberg & Hughes and Robert Rosenberg for Golden Rain Foundation of Walnut Creek as Amicus Curiae for Plaintiff and Appellant.

    1144*1144 Crowell & Moring and Steven P. Rice for Defendants and Respondents Carol Franz, Richard Braun, Edmund Brian Marineau, Clara M. Vanderzee-Bos, Edmund Loritz and Jacklyn E. Shaw.

    Matison & Margolese and Wayne Hunkins for Defendant and Respondent David Lyon.

    OPINION

    IKOLA, J.

    Plaintiff Golden Rain Foundation (GRF) appeals from a judgment for defendants Carol Franz, Richard Braun, Edmund Brian Marineau, Clara M. Vanderzee-Bos, Edmund Loritz, Jacklyn E. Shaw, and David Lyon. The court found that GRF is an “association” subject to the Davis-Stirling Common Interest Development Act (Civ. Code, § 1350 et seq.) (the Davis-Stirling Act).[1] We agree, and affirm.

    FACTS

    GRF and Leisure World

    GRF is a California nonprofit corporation formed in 1961. Its articles of incorporation state that it was formed “[t]o engage primarily and specifically in providing services and furnishing community facilities to housing operated on a cooperative or other basis and to the occupants thereof.” To that end, GRF sponsored and formed 16 entities known as Seal Beach Mutual Nos. One through Seventeen (the Mutuals)—there is no Mutual No. Thirteen. Mutuals Nos. One through Sixteen are California corporations formed as stock cooperatives. Mutual No. Seventeen is a California nonprofit mutual benefit corporation formed as a condominium project. GRF sold parcels of property in Seal Beach to the Mutuals, which built multiunit residential buildings and associated common areas on them.

    GRF is the trustee of the Golden Rain Foundation Trust, created by a declaration of trust recorded in 1962. The declaration provides, “[GRF’s] present and proposed operations include (but are not limited to): [¶] (1) Sponsorship of TRUSTOR and other corporations formed primarily to provide cooperative apartment housing within the area of 540 acres more or less now known as Rossmoor Leisure World in Seal Beach, California….” The original trustor and beneficiary is Seal Beach Mutual No. One. The declaration contemplates that each other Mutual may “become an additional trustor and beneficiary hereunder by … adopting and agreeing to the terms1145*1145 of this instrument.” Every Mutual has since adopted the terms of the declaration of trust and is bound by it.

    Pursuant to the declaration of trust, GRF retains title as trustee to “common facilities” for the benefit of the Mutuals. The common facilities include the streets needed to access the residential buildings, administration buildings, utility lines, a golf course, a clubhouse, and other property. GRF maintains the common facilities, as required by the declaration, and makes them available to the Mutuals’ residents. GRF also owns nontrust property including a library and other facilities made available to the residents.

    Collectively, the property owned by the Mutuals, the property to which GRF holds title as trustee, and the nontrust property owned by GRF, is commonly known as Leisure World Seal Beach, or simply Leisure World.[2] Leisure World is a prominent senior citizen community. A person wishing to live in Leisure World must buy a share of Mutual stock (or a condominium unit in Mutual No. Seventeen) and join GRF. Residents enter into written occupancy agreements with their Mutuals.

    While the Mutuals are contractually responsible for maintaining their residential buildings and common areas, they rely upon GRF to perform management and maintenance services. The declaration of trust provides, “[GRF] shall perform for the benefit of all [the Mutuals] and their members all duties imposed upon [GRF] under separate written Agreement with … Mutual No. One and under any other written agreements of similar nature hereinafter entered into by [GRF] with other [Mutuals].” The management agreement with Mutual No. One requires GRF to, among other things, oversee final construction of the residential buildings, pay the mortgages, maintain the Mutual’s buildings and grounds, contract for utilities and “other necessary services,” maintain insurance, comply with requests by governmental authorities, coordinate each resident’s relocation, inspect each unit, handle the residents’ service requests, collect the residents’ monthly assessments, allocate the collected funds to specified reserve and expense accounts, pay all operating and maintenance expenses, maintain the Mutual’s records and books, submit accountings to the Mutual, prepare the Mutual’s operating budgets, and otherwise “operate and maintain the Project according to the highest standards achievable….” Long-standing management agreements require GRF to provide a host of similar services to the other Mutuals. GRF 1146*1146 stated in its 2003 Annual Report, “[t]he sole purpose for the existence of [GRF] is to provide management, accounting and maintenance services to the sixteen mutual corporations and to care for the community facilities.”

    The declaration of trust and the written management agreements allow GRF to charge the Mutuals for its management services, at cost and for no profit, and similarly to charge the residents for costs incurred maintaining the common facilities. GRF incorporates these charges into a monthly assessment. The residents pay their monthly assessment directly to GRF.

    Each November, GRF sends an annual letter to each resident. The letter contains GRF’s budget, the budget for the recipient’s Mutual, legal disclosures, alternative dispute resolution provisions, and other information. GRF acknowledges in the letters that it is required to send them by the Davis-Stirling Act. In at least one letter, GRF refers to the residents as “owner[s] in a Common Interest Development under [the Davis-Stirling] Act” and states, “Leisure World Seal Beach, [GRF], and the [Mutuals] are subject to a California law known as the `Common Interest Development Law,’ also known as the `Davis-Stirling Common Interest Development Act.'”

    The letters instruct residents contemplating legal action against GRF to comply with the Davis-Stirling Act’s alternative dispute resolution provisions. GRF states in the letters, in reference to those provisions, “[t]he association herein referred to relates to[,] as to the Mutual Corporations, the Mutual, and as [to] the Golden Rain Foundation, the Foundation.”

    The Litigation

    Defendants are among the 9,000 residents of Leisure World and members of GRF. They sought various documents from GRF pursuant to the Davis-Stirling Act and other statutes. GRF refused the document requests. Defendants initiated small claims actions, in which the courts found GRF wrongly withheld the documents and awarded damages to defendants. The Superior Court affirmed these decisions.

    GRF, undeterred, filed this action to obtain a declaration it is not subject to penalties pursuant to the Davis-Stirling Act for failing to produce the requested documents. Though GRF produced the documents before trial, the parties continued to seek a declaration whether GRF is an “association” pursuant to the Davis-Stirling Act. The court conducted a bench trial, received lengthy stipulations of fact and over 150 stipulated exhibits, and heard live testimony. It issued a 20-page statement of decision, finding that GRF is an “association” governed by the Davis-Stirling Act. It entered judgment accordingly.

    1147*1147 DISCUSSION

    GRF contends the court wrongly found it is an association subject to the Davis-Stirling Act. This issue turns largely on the nature of GRF’s relationship to Leisure World and whether Leisure World is a common interest development pursuant to the act. We defer to the court’s factual findings regarding the relationship between GRF and Leisure World when they are supported by substantial evidence, but independently construe the act. (Benninghoff v. Superior Court (2006) 136 Cal.App.4th 61, 66 [38 Cal.Rptr.3d 759].)

    Our Supreme Court has explained the advance of the common interest development. “[C]ondominiums, cooperatives, and planned-unit developments with homeowners associations have become a widely accepted form of real property ownership. These ownership arrangements are known as `common interest’ developments. [Citations.] The owner not only enjoys many of the traditional advantages associated with individual ownership of real property, but also acquires an interest in common with others in the amenities and facilities included in the project. It is this hybrid nature of property rights that largely accounts for the popularity of these new and innovative forms of ownership….” (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 370 [33 Cal.Rptr.2d 63, 878 P.2d 1275] (Nahrstedt).)

    “In California, common interest developments are subject to the provisions of the Davis-Stirling Common Interest Development Act…. [Citation.] The Act, passed into law in 1985, consolidated in one part of the Civil Code certain definitions and other substantive provisions pertaining to condominiums and other types of common interest developments. [Citation.] [¶] The Act enumerates the specific shared ownership arrangements that fall under the rubric `common interest development.’ [Citation.] It also sets out the requirements for establishing a common interest development… [and] grants to the owners association of the development those powers necessary to the development’s long-term operation….” (Nahrstedt, supra, 8 Cal.4th at pp. 377-378, fn. omitted.)

    The Davis-Stirling Act defines an “association” as “a nonprofit corporation or unincorporated association created for the purpose of managing a common interest development.” (§ 1351, subd. (a).) GRF concedes it is a nonprofit corporation. The issues remaining are whether GRF was “created for the purpose of managing” Leisure World, and whether Leisure World is a common interest development.

    1148*1148 Substantial Evidence Supports the Finding GRF Was Created to Manage Leisure World

    GRF’s governing documents support the court’s finding that “the only purpose GRF has ever had, from its inception to the present, is to manage Leisure World.” GRF’s articles of incorporation explain that it was formed “[t]o engage primarily and specifically in providing services and furnishing community facilities to housing operated on a cooperative or other basis and to the occupants thereof”—i.e., to provide services to the Mutuals and the residents. The declaration of trust similarly provides that GRF was “formed primarily for the purpose of providing services and furnishing community facilities” to the Mutuals and the residents. According to the declaration, GRF’s operations include sponsoring the Mutuals, conveying their parcels to them, constructing the common facilities for them, and maintaining the common facilities for the Mutuals and the residents. The declaration further provides it was executed to guarantee “the operation and management” of the common facilities by GRF.

    GRF’s management agreements with the Mutuals bolster the court’s conclusion. The declaration of trust provides, “[GRF] shall perform for the benefit of all [the Mutuals] and their members all duties imposed upon [GRF] under separate written Agreement with … Mutual No. One and under any other written agreements of similar nature hereinafter entered into by [GRF] with other [Mutuals].” An attached agreement provides, “[GRF] shall operate and manage the community facilities and maintain and repair the private streets, and provide administrative, recreational and medical services for the benefit of the members of the [Mutuals] at cost and on a nonprofit basis.” Subsequent management agreements require GRF to provide the Mutuals with the long list of management services noted above, such as maintaining their files, handling their finances and banking, and providing their property management services.

    GRF’s administrator confirmed it manages the Mutuals. He testified GRF has entered into a management agreement with each Mutual, whereby GRF provides “[a]dministrative services, maintenance services, accounting services, security, transportation, rule enforcement, and various other administrative functions for stockholder-related activities.” He further testified GRF provides management services including stock transfer services, file maintenance, and contract supervision. While GRF has 225 employees to carry out its managerial duties, the administrator conceded the Mutuals have no staff to perform administrative functions.

    Unsurprisingly, the parties stipulated GRF performs most, if not all, of the Mutual’s administrative duties. They stipulated GRF provides contract management, property management, financial, payroll, file maintenance, and stock 1149*1149 transfer services to the Mutuals. They further stipulated GRF has a staff of more than 200 administrators, property managers, and other personnel; the Mutuals have no permanent staff. Equally important is what GRF does not do. GRF does not have any independent operations other than servicing the Mutuals and maintaining the common facilities. The parties stipulated, “[GRF] has no other business except that which relates to Seal Beach Leisure World.”

    Finally, GRF has acknowledged it was created to manage Leisure World. It stated in its 2003 annual report, “[t]he sole purpose for the existence of [GRF] is to provide management, accounting and maintenance services to the sixteen mutual corporations and to care for the community facilities.” Going a step further, GRF has even acknowledged it is an “association” subject to the Davis-Stirling Act. It stated in a letter to the residents, “Leisure World Seal Beach, [GRF], and the [Mutuals] are subject to a California law known as the `Common Interest Development Law,’ also known as the `Davis-Stirling Common Interest Development Act.'” It repeatedly stated in its alternative dispute resolution letters to residents sent pursuant to the Davis-Stirling Act, “[t]he association herein referred to relates to[,] as to the Mutual Corporations, the Mutual, and as [to] the Golden Rain Foundation, the Foundation.”

    GRF unpersuasively contends it does not manage Leisure World because it does not manage the Mutuals’ residential buildings and common areas. It notes the declaration of trust requires GRF to manage only the common facilities, not the Mutuals’ property. It further notes the Mutuals’ articles of incorporation and bylaws require them to manage their own property. Finally, GRF claims it was not “created for the purpose” of managing Leisure World because it entered the management contracts after its creation; moreover, the management contracts can be terminated.

    GRF exalts form over substance. Managing the Mutuals was at the core of GRF’s formation. Its articles of incorporation provide it will “engage primarily and specifically in providing services and furnishing community facilities” to the Mutuals and their residents. (Italics added.) The declaration of trust provides GRF was “formed primarily for the purpose of providing services and furnishing community facilities” to the Mutuals and the residents. (Italics added.) The declaration of trust attaches and incorporates the first management agreement, and contemplates “other written agreements of similar nature hereinafter entered into by [GRF] with other [Mutuals].” The management agreements require GRF to manage the residential buildings and perform substantially all administrative functions. GRF in fact provides all those services for the Mutuals; it has no other business. As it aptly noted, “[t]he sole purpose for the existence of [GRF] is to provide management, 1150*1150 accounting and maintenance services to the sixteen mutual corporations and to care for the community facilities.”

    (1) In sum, substantial evidence shows GRF was created to manage the Mutuals’ residential buildings, their common areas, and its own common facilities. The court correctly found GRF was created to manage Leisure World.

    GRF alternatively contends that it manages Leisure World as an agent of the Mutuals, not as an association. The Davis-Stirling Act defines a “managing agent” as “a person or entity who, for compensation or in expectation of compensation, exercises control over the assets of a common interest development.” (§ 1363.1, subd. (b).) But the declaration of trust bars GRF from receiving any compensation for managing the common facilities, other than recouping its expenses on an at-cost basis. It provides that GRF “shall receive no profits or other compensation for any of its services rendered as trustee, but shall receive full reimbursement for its costs….” And GRF does more than merely provide management services. It holds title to common facilities pursuant to the declaration of trust. GRF’s own expert witness on the customs and practices of common interest developments conceded at trial that GRF is “unique.” To his knowledge, no other purported management company for a common interest development holds title to property in the community it manages, charges initiation fees to residents, or requires residents to acquire a membership in the management company.

    The Court Correctly Found Leisure World Is a Common Interest Development

    Because substantial evidence supports the finding GRF is a nonprofit association created to manage Leisure World Seal Beach, we now independently construe the Davis-Stirling Act to decide whether the court correctly found Leisure World is a common interest development. Three provisions of that act are relevant: sections 1351, 1352, and 1353.

    (2) Section 1351 defines “`[c]ommon interest development'” as “any of the following: [¶] (1) A community apartment project. [¶] (2) A condominium project. [¶] (3) A planned development. [¶] (4) A stock cooperative.” (§ 1351, subd. (c).) Leisure World comprises one condominium project and 15 stock cooperatives, satisfying the act’s definition of common interest development. GRF contends a common interest development cannot comprise a complex of condominiums and stock cooperatives, but it offers no support for this construction. Moreover, another provision of the Davis-Stirling Act expressly contemplates that a common interest development may comprise “a community apartment project, condominium project, planned development, stock cooperative, or combination thereof.” (§ 1353, subd. (a)(1), italics added.)

    1151*1151 Section 1352 conditions the creation of a common interest development upon (1) the conveyance of certain interests, and (2) the recordation of certain documents. It provides, “This title applies and a common interest development is created whenever a separate interest coupled with an interest in the common area or membership in the association is, or has been, conveyed, provided, all of the following are recorded: [¶] (a) A declaration. [¶] (b) A condominium plan, if any exists. [¶] (c) A final map or parcel map, if Division 2 (commencing with Section 66410) of Title 7 of the Government Code requires the recording of either a final map or parcel map for the common interest development.” (§ 1352.) Leisure World meets these conditions.

    (3) First, Leisure World residents are conveyed the required “separate interest coupled with an interest in the common area or membership in the association….” (§ 1352.) A separate interest in a condominium means “an individual unit” (§ 1351, subd. (l)(2)), i.e., an interest in space within boundaries described on a recorded parcel map or condominium plan. (§ 1351, subd. (f).) A separate interest in a stock cooperative means “the exclusive right to occupy a portion of the real property,” as “evidenced by a share of stock, a certificate of membership, or otherwise.” (§ 1351, subds. (l)(4), (m).) Each resident of Leisure World’s condominium receives exclusive title to a specific condominium unit, as described on a recorded condominium plan. Each resident of Leisure World’s stock cooperatives receives a share of stock in their Mutual and the exclusive right to occupy a unit pursuant to an occupancy agreement. Thus, each resident receives an appropriate separate interest. And each separate interest is “coupled with … membership in the association”—namely, GRF. (§ 1352.)

    Second, the necessary documents have been recorded. A condominium plan was recorded for Mutual No. Seventeen in 1980, and amended pursuant to a recorded document in 1982. (§ 1352, subd. (b).) Subdivision maps for the tracts containing Mutual Nos. One through Twelve and Fourteen through Sixteen were also recorded. The Seal Beach city engineer stamped each recorded subdivision map, certifying that “all provisions of the Subdivision Map Act… have been complied with.” The Subdivision Map Act is codified at title 7, division 2 of the Government Code, section 66410 et seq. (§ 1352, subd. (c).)

    The only necessary document remaining is a “declaration.” (§ 1352, subd. (a).) The Davis-Stirling Act defines “declaration” as “the document, however denominated, which contains the information required by Section 1353.” (§ 1351, subd. (h).) Section 1353, subdivision (a)(1), provides, “A declaration, recorded on or after January 1, 1986, shall contain a legal description of the common interest development, and a statement that the common interest development is a community apartment project, condominium project, planned development, stock cooperative, or combination 1152*1152 thereof. The declaration shall additionally set forth the name of the association and the restrictions on the use or enjoyment of any portion of the common interest development that are intended to be enforceable equitable servitudes.”[3] Section 1353, subdivision (b), provides, “The declaration may contain any other matters the original signator of the declaration or the owners consider appropriate.”

    (4) While section 1353 sets strict standards for declarations recorded in or after 1986, it imposes no such requirements for declarations recorded before 1986. At most, it implies the declaration must be recorded and may contain any matter deemed “appropriate.” (§ 1353, subd. (b).) This is no accident. The Davis-Stirling Act “governs common interest developments that predate its enactment.” (Nahrstedt, supra, 8 Cal.4th at p. 378, fn. 8.) As originally enacted in 1985, section 1353 imposed the same requirements on all common interest development declarations, even those that had already been recorded. (Former § 1353; Stats. 1985, ch. 874, § 14, pp. 2774, 2777.) The Legislature amended section 1353 in 1986 to add the limiting phrase, “recorded on or after January 1, 1986,” to the declaration requirements. (Stats. 1986, ch. 9, § 2, p. 26.) The Legislature thus intended the Davis-Stirling Act to govern preexisting common interest developments without foisting section 1353’s new declaration requirements upon them. Accordingly, the amended version of section 1353 demands little of a declaration for a pre-1986 common interest development.

    The declaration of trust meets section 1353’s minimal requirements for a pre-1986 declaration. Namely, it was recorded in 1962 and binds GRF and each Mutual. (§ 1353, subd. (a).) It contains other matter that Leisure World’s creators deemed appropriate—GRF’s duty to construct, manage, and maintain the common facilities; GRF’s title as trustee to the common facilities; and GRF’s duty to perform services for the Mutuals pursuant to contemplated agreements. The Legislature requires nothing more.

    GRF and its amici curiae offer a multitude of arguments why the declaration of trust cannot be a declaration pursuant to section 1353. None are convincing.

    (5) GRF primarily contends the declaration of trust does not satisfy section 1353 because it lacks any covenants, conditions, and restrictions (CC&R’s). But section 1353 does not require a pre-1986 declaration to contain CC&R’s or much of anything else, as already shown.

    GRF misplaces its heavy reliance on Nahrstedt, supra, 8 Cal.4th 361, taking that case’s language out of context. Before Nahrstedt addressed the 1153*1153 issue before it—whether CC&R’s barring pet ownership are enforceable—it provided “a broad overview of the general principles governing common interest forms of real property ownership” (id. at p. 370), tracing “[t]he concept of shared real property ownership” back to “its roots in ancient Rome” (id. at p. 371). Nahrstedt was still in the throes of its historical reverie when it stated that a declaration “is a collection of covenants, conditions and servitudes” and “[t]ypically … sets forth restrictions pertaining to the use of the property.” (Id. at p. 372.) It was not analyzing section 1353 when it made these observations—it was paraphrasing a law review article, a treatise, and a legal encyclopedia. (Nahrstedt, at p. 372.) Nahrstedt did not begin examining the “extent [to which] these general principles [are] reflected in California’s statutory scheme” for almost another six pages of its opinion. (Id. at p. 377.) And Nahrstedt never did analyze section 1353, except to note, “[d]eclarations recorded after January 1, 1986, the effective date of the Act, must include … `the restrictions on the use or enjoyment of any portion of the common interest development.'” (Id. at p. 378, italics added.) Nothing in Nahrstedt suggests the Davis-Stirling Act requires pre-1986 declarations to contain CC&R’s.

    GRF also relies upon section 1353’s predecessor statute, though the statutory evolution actually works against it. Before the Davis-Stirling Act was enacted to govern all types of common interest developments, the statute governing condominium projects required developers to “record a declaration of restrictions relating to such project, which restrictions shall be enforceable equitable servitudes….” (Civ. Code, former § 1355; Stats. 1963, ch. 860, § 3, pp. 2091, 2092.) But this section applies only to condominiums like Mutual No. Seventeen—it does not govern GRF or the other Mutuals. And there is no dispute that Mutual No. Seventeen has CC&R’s. Moreover, when the Legislature enacted the Davis-Stirling Act and replaced former section 1355 with current section 1353, it replaced the phrase, “a declaration of restrictions,” with the much broader term, “a declaration.” Contrary to GRF’s suggestion, this change reinforces the conclusion that pre-1986 declarations for common interest developments other than condominiums need not contain CC&R’s.

    (6) GRF also relies upon a host of practice guides, treatises, and regulations suggesting that declarations typically contain CC&R’s. That may be so. But the plain language of section 1353 does not require pre-1986 declarations to contain CC&R’s. “In the construction of a statute or instrument, the office of the Judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted….” (Code Civ. Proc., § 1858.) “`When deciding what a statute means, courts seek to determine what effect the legislative body that enacted it intended to achieve. [Citation.] To make this determination, courts begin with the text of the statute, because the words used are the best evidence of legislative intent.1154*1154 [Citations.] Unless there is reason to believe that a special or technical meaning was intended, courts give the words of the statute their usual, ordinary meaning.'” (Sacramento County Alliance of Law Enforcement v. County of Sacramento (2007) 151 Cal.App.4th 1012, 1017 [60 Cal.Rptr.3d 202].) We will not rely upon common contemporary technical practice to rewrite section 1353 or trump the ordinary meaning of its plain language. The statute simply does not require pre-1986 declarations to contain CC&R’s or much else—we will not “insert what has been omitted.” (Code Civ. Proc., § 1858.) At any rate, to whatever extent use restrictions are typical of common interest developments, Leisure World appears to have such restrictions through the occupancy agreement each resident must accept.

    Next, GRF contends that reading section 1353 as permitting pre-1986 declarations to lack CC&R’s will wreak havoc by suddenly transforming property across the state into common interest developments. Not so. A recorded declaration pursuant to section 1353 is just one element of a common interest development. The defining feature of a common interest development is the conveyance of “a separate interest coupled with an interest in the common area or membership in the association….” (§ 1352.) Construing section 1353 according to its plain language will not transform anyproperty into a common interest development unless a declaration is recorded andthe owners hold separate interests coupled with a common interest or association membership.

    (7) In addition, GRF contends the declaration of trust was recorded to satisfy the concerns of the Federal Housing Administration (FHA) and other lenders, not with the intention of creating a common interest development. But the Davis-Stirling Act conditions common interest development status on the recording of a declaration, not the subjective intention behind the recordation. And because the FHA loans were repaid decades ago, as GRF concedes, no concern about any sort of federal preemption arises.

    GRF and its amici curiae contend the declaration of trust conflicts with various Davis-Stirling Act provisions regarding common interest development declarations. They assert the declaration does not authorize GRF to levy assessments or record liens directly against residents or their separate interests, although associations have those rights pursuant to the Davis-Stirling Act. (§§ 1366, 1367.) The Davis-Stirling Act also imposes requirements on associations bringing construction defect suits, but the amici curiae note the declaration of trust imposes no such duties on GRF. (§ 1375.) The amici curiae also claim the Davis-Stirling Act allows common interest development members to amend their declaration, whereas Leisure World residents are not parties to the declaration of trust and have no amendment rights under it. (§ 1355.)

    1155*1155 There is no conflict. The declaration does not prohibit GRF from making direct assessments, direct levies, or complying with section 1375’s procedural requirement. GRF cannot avoid association status simply by noting the declaration did not expressly anticipate each of the rights and obligations it would eventually have under the Davis-Stirling Act. And section 1355, subdivision (a), provides that a development’s declaration “may be amended pursuant to the governing documents or this title.” Thus, the declaration of trust will continue to be subject to amendment pursuant to its terms or the statute.

    Contrary to GRF’s and the Mutuals’ concern, the court did not unfairly adjudicate the Mutuals’ rights in their absences by determining Leisure World is a common interest development. The judgment addresses only GRF, without mentioning the Mutuals. It provides, “Petitioner [GRF] is an `association’ within the meaning of and subject to the provisions of the Davis-Stirling Act.” The court’s observation in its statement of decision that “GRF and the Mutuals have, in effect, a master association/subassociation relationship,” was an analogy, not a finding of fact. And “even if one assumes that [the court’s] observation in the statement of decision was a finding, it was entirely unnecessary to the judgment rendered and should not be given collateral estoppel effect.” (Bronco Wine Co. v. Frank A. Logoluso Farms(1989) 214 Cal.App.3d 699, 712 [262 Cal.Rptr. 899].) We express no opinion on whether GRF and the Mutuals do, in fact, have a master/subassociation relationship, leaving that determination, if necessary, for later resolution in an appropriate forum.

    (8) Nor is the judgment suspect because the Mutuals now claim to be indispensible parties. “Since the 1971 revision of Code of Civil Procedure section 389, failure to join `indispensable’ parties does not deprive a court of the power to make a legally binding adjudication between the parties properly before it.” (Weir v. Ferreira (1997) 59 Cal.App.4th 1509, 1519 [70 Cal.Rptr.2d 33].) “[T]he failure to join an `indispensable’ party is not `a jurisdictional defect’ in the fundamental sense; even in the absence of an `indispensable’ party, the court still has the power to render a decision as to the parties before it which will stand.” (Kraus v. Willow Park Public Golf Course (1977) 73 Cal.App.3d 354, 364 [140 Cal.Rptr. 744].) And where, as here, “`a case has been fully tried without objection to the absence of parties and the claim that the absent parties were indispensable is raised for the first time on appeal, the rule’s underlying policy considerations of avoiding piecemeal litigation and multiplicity of suits [citations] are of little consequence inasmuch as the judicial and litigant resources necessary to the litigation have already been expended.'” (Id. at p. 369.)

    1156*1156 DISPOSITION

    The judgment is affirmed. Defendants shall recover their costs on appeal.

    Rylaarsdam, Acting P. J., and Aronson, J., concurred.

    [1] All further statutory references are to the Civil Code unless otherwise stated.

    [2] The parties agree Leisure World Seal Beach is not related to other senior citizen communities also commonly known as Leisure World. (See Finley v. Superior Court (2000) 80 Cal.App.4th 1152, 1155 [96 Cal.Rptr.2d 128] [discussing “Leisure World, a senior citizens community in Laguna Hills,” and noting, “Golden Rain Foundation of Laguna Hills (Golden Rain) functions as a sort of master homeowners association”].)

    [3] Section 1353, subdivision (a)(1)-(4), contains other requirements for declarations regarding property located within an “airport influence area” or the jurisdiction of the San Francisco Bay Conservation and Development Commission. No party contends these requirements apply here.

     

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  • Mount Olympus Property Owners Assn. v. Shpirt

    Mount Olympus Property Owners Assn. v. Shpirt

    Summary by Mary M. Howell, Esq.:

    Facts

    A property owners association filed legal action to enforce the CC&Rs against defendant homeowner. After the parties settled mid-trial, the court awarded attorney fees to the defendant homeowner as prevailing party, pursuant to the Davis-Stirling Act. On appeal, the association contested the award of fees arguing that the project was not subject to the Davis-Stirling Act, because it did not own any common area. The sole property owned by the association consisted of two small plots of land on one of which was located the sign for the project. Further, membership in the association was not mandatory, and the association lacked the power under the CC&Rs to impose assessments on owners.

    Held

    For defendant association: When an association has neither common area nor mandatory membership in an association which can assess members, it is not a “Davis-Stirling” common interest development; therefore, homeowner cannot recover his fees under Civil Code §1354 (now Civil Code §5975).

    *** End Summary ***

    Mount Olympus Property Owners Assn. v. Shpirt

    59 Cal.App.4th 885 (1997)

    886*886 COUNSEL

    Richards, Watson & Gershon and Gary E. Gans for Plaintiff and Appellant.

    887*887 Reznik & Reznik, Benjamin M. Reznik, Richard A. McDonald, Jeffrey S. Raskin, Jeffer, Mangels, Butler & Marmaro, Benjamin M. Reznik and Monica D. Witt for Defendants and Appellants.

    Douglas I. Pollock for Plaintiff and Respondent.

    [Opinion certified for partial publication.[*]]

    OPINION

    BARON, J.

    Boris and Jenny Shpirt appeal from a judgment granting Michael G. Ross and theMount Olympus Property Owners Association, Inc. (MOPOA) injunctive relief and punitive and general damages, and from a posttrial order awarding attorney fees to Ross. In a separate cross-appeal, Ross seeks amendment of the judgment to include a previously granted order on summary adjudication. We affirm the judgment insofar as it pertains to injunctive relief and damages, but reverse the award of attorney fees, remanding the case to the trial court for consideration of one issue: whether to award under section 2033, subdivision (o) of the Code of Civil Procedure the reasonable expenses incurred in proving the genuineness of any document or the truth of any matter, which expenses would not have been incurred but for the Shpirts’ refusal to admit such matters when requested to do so.

    I.

    APPEAL

    A. Factual and Procedural Background

    The preliminary facts which led to the initiation of the lawsuit underlying this appeal are almost entirely undisputed. In November of 1988, appellants and cross-respondents the Shpirts purchased a home at 2121 Mount Olympus Drive, located in the Mount Olympus area of Laurel Canyon. Respondent and appellant Ross lived next door at 2129 Mount Olympus Drive. The Shpirts wished to remodel their house, intending to greatly enlarge it and add a second story.

    A “Declaration of Establishment of Restrictions” had been recorded for the tract in which both properties were located. (This document shall hereinafter be referred to as the CC&R’s.) The successor in interest to the “Declarant” under the CC&R’s, and the entity responsible for approving alterations to existing structures, was respondent MOPOA. The Shpirts twice submitted plans to MOPOA, which were rejected because of its dissatisfaction with the proposed structure. The Shpirts then submitted some preliminary drawings to which MOPOA gave tentative approval subject to, among 888*888 other more minor conditions, submission of final plans and the Shpirts’ agreement to indemnify MOPOA should it be sued by Ross. The Shpirts did not fulfill the conditions, but instead demolished a portion of the existing home and allowed the property to fall into a state of disrepair.[1]

    1. The CC&R’s

    The CC&R’s included a provision that “[n]o building, fence, wall, pole or other structure shall be erected, constructed, altered or maintained upon any portion of said property, unless a complete set of plans and specifications therefor … shall have been submitted to and approved in writing by Declarant….” Approval could be withheld due to “reasonable dissatisfaction of Declarant with the grading plan, location of the structure on the building site, the color scheme, finish, design, proportions, architecture, shape, height, style or appropriateness of the proposed structure or altered structure, the materials used therein, the kind, pitch or type of roof proposed to be placed thereon, or because of its reasonable dissatisfaction with any or all other matters or things which, in the reasonable judgment of Declarant, would render the proposed structure or alteration inharmonious or out of keeping with the general plan of improvement of said property or with the structures erected on other building sites in the immediate vicinity of the building site on which said structure is proposed to be erected or altered.”

    Paragraph 8.01 of the CC&R’s further provided that “[i]n the event any structure or any part thereof on any portion of said property shall be damaged or destroyed by any cause, the owner of the building site upon which the same is located shall within ninety (90) days from and after the date of such damage or destruction commence and within one (1) year after the date of such damage or destruction complete the repair or reconstruction of said structure.” Paragraph 10.04 of the CC&R’s obligated “the owners of lots and building sites … to perform all duties incident to maintaining their respective lots and building sites including vegetation thereon, in neat, clean and good order.”

    2. The Indemnity Agreement

    In March of 1992, MOPOA entered into an agreement with Ross under which Ross and MOPOA agreed to file and prosecute a lawsuit against the Shpirts to prevent them from constructing a building which would infringe on the rights of Ross as set forth in the CC&R’s and which had not been 889*889 approved by MOPOA. The agreement gave Ross “the exclusive right to decide and determine whether any claim or cause of action brought in the Lawsuit against Shpirt shall be prosecuted, compromised, tried, appealed or dismissed,” and required “Ross’s prior written approval” before MOPOA could “approve any plans for any proposed construction at 2121 Mount Olympus Drive,” unless “all claims and disputes between Ross and Shpirt, as set forth in the Lawsuit, have been resolved, or unless ordered to do so by the Court.”

    The agreement between Ross and MOPOA also contained an assignment of “all of [MOPOA’s] rights to recover attorney’s fees in the Lawsuit, including awards of sanctions” unless “Ross and [MOPOA] are awarded attorney’s fees in excess of the amount expended by Ross or his own counsel, and the amount expended by Ross pursuant to his indemnity of [MOPOA]….” In return, Ross agreed “to indemnify and hold harmless [MOPOA], and its directors and officers, from any claim, action or suit for liability or damages arising directly from the Lawsuit,” and agreed “to indemnify [MOPOA] for legal fees and costs incurred in prosecuting the Lawsuit.”

    3. The Complaint and Cross-complaint

    In April of 1992, Ross and MOPOA (hereafter respondents) jointly sued the Shpirts for enforcement of equitable servitude, nuisance, enforcement of easement, and breach of contract.[2] The complaint alleged that the Shpirts had commenced demolition of the existing house in October 1991, before plans had been approved by MOPOA. Respondents sought an injunction preventing the Shpirts from erecting or constructing a house without the approval of MOPOA or from erecting or constructing a house which interfered with or reduced the view from Ross’s property, and an award of attorney fees under paragraph 12.04 of the CC&R’s.[3] The nuisance claim was based on the accumulation of garbage on the property, the existence of garbage containers and portable toilets in front of the house, the presence of construction materials, weeds, broken windows, and stagnant water on the property, and construction noise from 7 a.m. until 6 p.m. Ross also alleged entitlement to an easement “consisting of an unobstructed view to the south and west of the Ross Property, i.e. of Laurel Canyon and the City of Los Angeles.” The breach of contract claim was based on violation of the CC&R’s by failing to keep the property in good repair under paragraph 8.01.

    890*890 The Shpirts cross-claimed against Ross and MOPOA for conspiracy to induce breach of contract and interfere with prospective business relations. The cross-complaint alleged that the Shpirts had submitted plans to MOPOA for consideration in 1992 in accordance with the preliminary approval obtained, but that MOPOA refused to consider the plans because it had entered into the indemnity agreement with Ross under which Ross held veto power over any proposed construction on their property. The Shpirts sought an injunction requiring MOPOA to review the plans which had been submitted. The Shpirts also sought declaratory relief. They claimed that delay in obtaining approval for the construction jeopardized their ability to obtain favorable financing. Finally, the Shpirts accused Ross of trespass.

    4. Trial and Settlement With MOPOA

    As discussed in greater detail in connection with the cross-appeal (unpublished part of opn.), the Shpirts’ cross-complaint and Ross’s claim for view easement were resolved by summary adjudication. The claims for enforcement of equitable servitude, nuisance, and breach of contract were tried to the court. In the middle of trial, the Shpirts settled with MOPOA. Under the agreement, the Shpirts agreed to pay the sum of $35,000 to MOPOA for failure to maintain their property in neat, clean, and good order, and MOPOA stipulated to waive its right to file a motion for attorney fees and dismissed its own claim for breach of contract.[4] MOPOA stayed in the case for the purpose of being bound by any judgment issued by the court as to injunctive relief.

    Ross presented evidence that the Shpirts allowed large quantities of water to stagnate in their pool, which was directly under his window, such that he could smell a rancid odor emanating from it. The pool became a breeding ground for mosquitoes, and the City of Los Angeles Department of Health Services sent mosquito abatement teams out at least six times. Ross was bitten repeatedly over a five-year period.

    On June 5, 1990, shortly after he had a meeting with the Shpirts about their proposed construction, music was blasted from the Shpirts’ property from 7 a.m. until 10 p.m. at night. The music could be heard even with the windows closed. When Ross complained to the Shpirts, they responded by adding a second radio on a property they owned on the other side of Ross. The devices playing the music appeared to be on timers since they started every morning at 7 a.m. Ross reported the disturbance to the police on more than one occasion and asked the Shpirts to turn the volume down several times. He wrote a letter to the Shpirts informing them that the music was 891*891 “`interfering with my sleep and peaceful enjoyment of my premises[.]'” He also obtained a temporary restraining order which the Shpirts ignored. The music-playing ended sometime between the end of June and the early part of July, after Ross obtained a preliminary injunction.

    Ross also attested to the general state of disrepair at the Shpirt premises and showed pictures of construction debris, accumulated trash, overgrown weeds, and a partially demolished structure. Ross testified that he had “anxiety,” when he viewed appellants’ house, and that he was “embarrassed” and “angry.” He testified that it “affects [his] personality … it’s like being forced to live next to a junkyard,” and has “a radical effect on [his] whole mental state every time [he] ha[s] to take a look at it and know what’s gone on and what [they]’ve gone through, and what it appears [they] will have to continue to go through for God knows how long.” He referred to the inability of being able to use his backyard or entertain because of the mosquitos, and the “whole anxious, irritating mental state” which “goes along with having to view it and see it. [¶] … You can’t miss it, so it’s a constant source of aggravation and embarrassment and humiliation of unnecessary explanation to both new friends and old.” He told of why he no longer gardened: “… When you have a rose garden and you go to plant your roses and you look at them and immediately on the other side of your roses are weeds, and trash, and glass, and broken bottles, and broken concrete, and dried-out wood and everything else, it kind of takes the fun and the beauty out of the gardening.” He testified he had lost sleep, and developed an ulcer and tinnitus. Concerning the period of time when the music was playing, he said: “… Mr. Shpirt’s playing of the music perpetually, on what was almost a 24-hour-a-day basis for almost a week, was interfering with my ability to sleep, concentrate, deal with my family, my wife, my step-son, and my overall ability to enjoy my home.”

    5. The Trial Court’s Findings

    Based on the evidence presented, the court found that the Shpirts had breached the CC&R’s and created a nuisance. The court specifically found that the Shpirts “demolished substantial portions of the residence at 2121, piling dirt, debris, building materials or scrap and appliances on the site, on the sidewalk and in the street for periods varying from weeks to months and years.” In addition, “[the Shpirts] allowed their swimming pool for weeks and months to accumulate dirt, debris and scum.” The court believed Ross’s testimony that “the daily view of [the Shpirts’] property made him sick,” and that “[the Shpirts’] conduct caused or triggered ulcers.” The court concluded that the Shpirts “acted wilfully and with malice in demolishing portions of the structure at 2121, knowing that they had no permission to rebuild; in 892*892 using and maintaining the location as a dump and construction site; in abandoning the maintenance of their swimming pool, knowing that the pool was just below plaintiff Ross'[s] window; [and] in playing radios on unoccupied property.” The court awarded Ross $40,000 in general damages “for his physical and emotional distress in being exposed to defendants’ conduct.” The court later awarded $50,000 as exemplary damages and $218,000 for attorney fees paid to Ross’s counsel, plus $5,812 for the portion of attorney fees incurred by MOPOA to which Ross was entitled under the indemnity agreement.

    The court specifically determined both that Ross was incorrect in his contention that he was “entitled to maintain the view he has enjoyed since 1981” and that the Shpirts were incorrect in asserting that Ross was not entitled to any view under the CC&R’s. According to the court, “Mt. Olympus is … a view development, and the criteria of `location, design, proportions, architecture, shape, height, style, or appropriateness’ reasonably encompasses the factor of a `view.'”

    In accordance with these findings, the court issued a permanent injunction preventing the Shpirts from: “Erecting, constructing, improving or altering any building, wall, structure or other improvement on the real property at 2121 MountOlympus Drive (the `Shpirt Property’) without the prior written approval of [MOPOA].” The Shpirts were likewise not to erect or construct “any building, wall, structure or other improvement on the Shpirt Property containing a second story which unreasonably interferes with or reduces the view from the existing house at 2129 Mount Olympus Drive of Laurel Canyon or the City of Los Angeles, unless defendants, their successors or assigns have obtained the approval of MOPOA.” The Shpirts were further “enjoined and directed to clear and render the Shpirt Property in neat and clean condition, within 90 days, and to maintain the Shpirt Property in a neat and clean condition thereafter.”

    B. Discussion

    1. Emotional Distress[*]

    …. …. …. …. …. …. …. .

    2. Ross’s Attorney Fees

    (1) The second question to be considered in connection with the appeal is whether the trial court erred in granting attorney fees or in the amount of fees awarded.

    893*893 After judgment, Ross claimed entitlement to attorney fees on four separate grounds: (1) Civil Code section 1354;[6] (2) paragraph 12.04 of the CC&R’s; (3) the indemnity agreement’s assignment of MOPOA’s rights to attorney fees; and (4) Code of Civil Procedure section 2033.[7] He sought attorney fees in the total amount of $380,228.25. This included $246,213.75 out of a total of $268,592.75 billed by Gary Gans, who had represented Ross, and $134,014.50 billed by Douglas I. Pollock, who had represented MOPOA. Ross conceded he was not entitled to recover attorney fees for time spent in seeking damages for nuisance and punitive damages, and his attorney stated that such amounts had been deleted from the amount sought. The declarations indicated that he had attributed approximately $20,000 to these claims.

    The trial court ruled: “… Ross is entitled to attorneys fees under CC section 1354 (f) but is not entitled to attorneys fees under the CC&R’s. [¶] The CC&R’s involve a `common interest development’ (CC 1352) because it is undisputed … MOPOA owns and pays taxes on a small landscaped parcel. [¶] The CC&R’s, however, clearly exclude the award of attorneys fees in actions brought by individual homeowners, in contrast to actions brought by the Association. Although Section 12.01 provides that the CC&R’s are enforceable by either the `Declarant’ (MOPOA) and the owners, Section 12.04 provides for attorneys fees only to the Declarant. CC Section 1717 and the cases cited by plaintiff involve reciprocity; here, neither a plaintiff nor a defendant homeowner could recover attorneys fees under the CC&R’s in an action between homeowners. [¶] Plaintiff Ross, however, is entitled to attorneys fees under the Indemnity Agreement between plaintiffs MOPOA and Ross. (Such an assignment is specifically authorized by the CC&R’s, Section 12.01.) Defendants Shpirt knew about the assignment years ago, certainly, before entering into the settlement agreement with plaintiff MOPOA.”

    Turning to the appropriate amount of fees to award, the court concluded: “… Ross is entitled to recover all attorney’s fees under both the Indemnity Agreement and Civil Code Section 1354 (f) incurred to enforce the building restriction and nuisance provisions of the CC&R’s. This means that Ross is entitled to recover all attorney’s fees, except those fees incurred in litigating 894*894 the money damages portions of Ross’ action. Ross has allotted only $20,000 to the money damages portion of this litigation. Although that allocation does not seem adequate, in fact the substance of Ross’ action was encompassesd [sic] by the CC&R’s. The court will award $218,000 for Ross’ own attorney’s fees.”[8]

    The court next considered what portion, if any, of MOPOA’s attorney fees to award to Ross. Pollock stated in a supplemental declaration that of the $134,014.50 incurred by MOPOA, $5,812.75 represented amounts expended on joint claims which were the only attorney fee amounts MOPOA intended to assign to Ross. Of that amount $2,500 had been reimbursed by Ross prior to the settlement, and $3,312.75 represented time spent by Pollock on joint claims since the settlement. Since MOPOA did not intend to settle any joint claims in its settlement agreement with the Shpirts, this amount was not subject to the settlement agreement. The trial court concurred in that analysis and added the amount suggested by MOPOA’s counsel to Ross’s attorney fee award.

    The parties dispute whether the Mount Olympus tract is a common interest development for purposes of the Davis-Stirling Common Interest Development Act (the Act). The parties focus on the portion of the Act that defines a common interest development as “(1) A community apartment project. [¶] (2) A condominium project. [¶] (3) A planned development. [¶] (4) A stock cooperative.” (Civ. Code, § 1351, subd. (c).) The statute further defines “planned development,” the only category possibly applicable here, as follows: “`Planned development’ means a development (other than a community apartment project, a condominium project, or a stock cooperative) having either or both of the following features: [¶] (1) The common area is owned either by the association or in common by the owners of the separate interests who possess appurtenant rights to the beneficial use and enjoyment of the common area. [¶] (2) A power exists in the association to enforce an obligation of an owner of a separate interest with respect to the beneficial use and enjoyment of the common area by means of an assessment which may become a lien upon the separate interests in accordance with Section 1367.” (Civ. Code, § 1351, subd. (k).)

    Civil Code section 1374 goes on to state that “[n]othing in this title may be construed to apply to a development wherein there does not exist a common area as defined in subdivision (b) of Section 1351, nor may this 895*895 title be construed to confer standing pursuant to Section 383 of the Code of Civil Procedure to an association created for the purpose of managing a development wherein there does not exist a common area.” (Civ. Code, § 1374.) “Common area” is defined by Civil Code section 1351, subdivision (b), as “the entire common interest development except the separate interests therein.”

    Respondents argue, and so persuaded the trial court, that the Mount Olympus tract fell within the definition of planned development under Civil Code section 1351, subdivision (k)(1) because MOPOA owns two small plots of land on which the sign for the tract is located. The Shpirts contend that the Act does not apply because MOPOA does not own all streets, roads, open spaces, or other property within the neighborhood that is not separately owned by the individual property owners.

    By concentrating on the definitional provisions of the Act rather than the general provision which governs its application, both sides misdirect their focus. The scope of the Act is set out in Civil Code section 1352 which provides: “This title applies and a common interest development is created whenever a separate interest coupled with an interest in the common area or membership in the association is, or has been, conveyed, provided, all of the following are recorded: [¶] (a) A declaration. [¶] (b) A condominium plan, if any exists. [¶] (c) A final map or parcel map, if Division 2 (commencing with Section 66410) of Title 7 of the Government Code requires the recording of either a final map or parcel map for the common interest development.” (Italics added.)

    The evidence at trial established that MOPOA owned and maintained two small plots of land on one of which the Mount Olympus sign is located. It did not establish that a “separate interest coupled with an interest in the common area or membership in the association” had been conveyed. Indeed, it is clear from testimony at trial that there was no mandatory membership in MOPOA, and that it was a purely voluntary association of homeowners with no power to charge or collect assessments.

    In interpreting a statute, we are bound to give credence to its express terms unless some overarching statutory purpose compels us to depart from them. For a development to fall within the governance of the Act, the statutory requirements are clear: (1) there must exist a common area owned either by the association or “by the owners of the separate interests who possess appurtenant rights to the beneficial use and enjoyment of the common area” (Civ. Code, §§ 1351, subd. (k)(1), 1374); (2) there must have been recorded “[a] declaration,” “[a] condominium plan, if any exists,” and “[a] final map or parcel map” (id., § 1352); and (3) there must have been896*896 conveyed “a separate interest coupled with an interest in the common area or membership in the association” (ibid.). Respondents failed to establish that the latter criteria had been met.[9]

    Respondents contend that any error in awarding attorney fees to Ross under Civil Code section 1354, subdivision (f), is harmless because the identical fees could have been awarded under the CC&R’s. We see no reason to disturb the trial court’s ruling in this regard. As the court noted, paragraph 12.01 of the CC&R’s permits both MOPOA and individual homeowners to enforce its provisions, but paragraph 12.04 specifies that fees are awardable only to “Declarant” (MOPOA). The CC&R’s do not assist Ross in his quest for attorney fees.

    Although we hold that the court erred in awarding attorney fees under Civil Code section 1354, subdivision (f), we note that Ross also sought fees pursuant to Code of Civil Procedure section 2033, subdivision (o), which allows recovery of attorney fees provided they can be linked to a failure to admit facts proven at trial. The trial court did not rule on the issue of fees awardable under section 2033, reasoning that that point was rendered moot by virtue of the other fees awarded. The case must be remanded for consideration of this question.

    3., 4.[*]

    …. …. …. …. …. …. …. .

    II.

    THE CROSS-APPEAL

    A., B.[*]

    …. …. …. …. …. …. …. .

    DISPOSITION

    The judgment is affirmed. That portion of the court’s posttrial order awarding attorney fees to Ross under the indemnity agreement in the amount 897*897 of $5,812.75, representing fees incurred by MOPOA and assigned to Ross, is affirmed. That portion of the order awarding attorney fees to Ross under Civil Code section 1354, subdivision (f) and the indemnity agreement, in the amount of $218,000, representing fees incurred by Ross, is reversed and the case is remanded for consideration of whether to award fees pursuant to section 2033, subdivision (o) of the Code of Civil Procedure for reasonable expenses incurred in proving the genuineness of documents and the truth of matters which the Shpirts failed to admit in response to a formal request. Each party is to bear his, her, or its own costs on appeal.

    Vogel (C.S.), P.J., and Hastings, J., concurred.

    A petition for a rehearing was denied December 22, 1997, and the opinion was modified to read as printed above. The petition of appellant Michael G. Ross for review by the Supreme Court was denied February 25, 1998.

    [*] Pursuant to California Rules of Court, rules 976(b) and 976.1, this opinion is certified for publication with the exception of parts I.B.1., I.B.3., I.B.4., II.A. and II.B.

    [1] The parties disputed whether the Shpirts intentionally demolished a portion of the existing structure or whether the approved construction of a retaining wall caused a portion of the house to collapse. For purposes of appeal, we accept the findings of the trial court as true.

    [2] Although the complaint was jointly filed, both parties maintained separate counsel, and often filed separate papers on issues which arose during the course of the litigation.

    [3] Paragraph 12.04 provided in relevant part: “… In any legal or equitable proceeding by Declarant for the enforcement, or to restrain a violation of, this Declaration or any provisions hereof, the losing party or parties shall pay the attorneys’ fees of the winning party or parties in such amount as may be fixed by the court in such proceeding.”

    [4] MOPOA also agreed to expedite approval of any plans submitted by the Shpirts in the future after the litigation was concluded.

    [6] The Davis-Stirling Common Interest Development Act, Civil Code section 1350 et seq., permits any owner of a separate interest in a “common interest development” to enforce the covenants and restrictions set forth in the declaration. (Civ. Code, § 1354, subd. (a).) Section 1354, subdivision (f), entitles any prevailing party, in an action under subdivision (a) to enforce the governing documents, to an award of reasonable attorney fees.

    [7] Code of Civil Procedure section 2033, subdivision (o), permits recovery of the expense of establishing the genuineness of a document or the truth of any matter, including reasonable attorney fees, when the losing party failed to admit these matters in response to a request for admission.

    [8] To the extent the court found that the indemnity agreement entitled Ross to recover attorney fees personally incurred by him, such finding is not supported by the evidence. The agreement obligated Ross to indemnify MOPOA for the cost of attorney fees incurred by MOPOA, and granted him a coextensive right to recover such fees from the Shpirts. It did not, and could not, assign to Ross a right to recover his own fees.

    [9] In Gantman v. United Pacific Ins. Co. (1991) 232 Cal. App.3d 1560 [284 Cal. Rptr. 188], cited extensively by the parties in their briefs and at oral argument, the issue was whether the association or the individual homeowners had standing to sue an insurer where the association was the named insured. The court held that the association should be treated as a separate entity under Civil Code section 1363. (232 Cal. App.3d at p. 1566, fn. 4.) In that case, the CC&R’s “cause[d] each residential lot owner to be a member of [the] Association.” (Id. at p. 1564.)

     

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