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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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  • Bel Air Ridge v. Rosenberg

    Bel Air Ridge v. Rosenberg

    Unpublished Decision (2015) 

    Dickstein Shapiro, James H. Turken and Christopher Kadish for Defendant and Appellant Mark Rosenberg.

    Dapeer, Rosenblit & Litvak, William Litvak and Eric P. Markus for Defendants and Appellants William Litvak and Andrew Bagnall.

    Kulik Gottesman & Siegel and Glen L. Kulik for Plaintiff and Respondent.

    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

    California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

    STROBEL, J.[*]

    Appellants Mark Rosenberg (Rosenberg), William Litvak (Litvak), and Andrew Bagnall (Bagnall) appeal from an order under Civil Code section 1356[1] to reduce the required voting percentage and approve the First Restated Declaration of Covenants, Conditions and Restrictions of the Bel Air Ridge Homeowners Association (HOA). Appellants contend the trial court abused its discretion in granting the petition because various requirements of section 1356 were not met. We affirm.

    FACTUAL AND PROCEDURAL BACKGROUND

    A. Bel Air Ridge

    Bel Air Ridge is a common interest development located south of Mulholland Drive and adjacent to Beverly Glen Boulevard. It was constructed on five separate lots. It contains 337 townhomes and detached houses.

    The original Declaration of Covenants, Conditions and Restrictions (original CC&Rs) for Bel Air Ridge[2] were written by the developer and recorded in 1976. In particular, they provided: “This Declaration may be amended only by an instrument executed and acknowledged by (i) the Owners of at least seventy-five percent (75%) of the Condominiums in the Project, and (ii) the holders of all Mortgages which are of record prior to the effective date of such amendment.” The original CC&Rs have never been amended.

    The original declarant of the CC&Rs was BGP Corporation. In 1977, a notice of designation of declarant was filed, adding a number of declarants, including Fountainwood-Agoura, a general partnership.

    B. The Davis-Stirling Act

    The Davis-Stirling Act was adopted in 1985 and became operative January 1, 1986. (Stats. 1985, ch. 874, § 14.) It “consolidated the statutory law governing condominiums and other common interest developments.” (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 81.) Among other things, the Act contains provisions concerning amendment of the declaration of Covenants, Conditions and Restrictions (CC&Rs) governing a common interest development. Section 1356 provides a mechanism by which an association, or an individual member, may petition the court for relief when the CC&Rs require a supermajority vote to effectuate an amendment.

    Section 1356[3] (stats. 1985, ch. 1003, § 1) provides “`that a homeowners association, or any member, may petition the superior court for a reduction in the percentage of affirmative votes required to amend the CC & R’s if they require approval by “owners having more than 50 percent of the votes in the association. . . .” [Citation.] The court may, but need not, grant the petition if it finds all of the following: Notice was properly given; the balloting was properly conducted; reasonable efforts were made to permit eligible members to vote; “[o]wners having more than 50 percent of the votes, in a single class voting structure, voted in favor of the amendment”; and “[t]he amendment is reasonable.” [Citation.]’ [Citation.]” (Mission Shores Assn. v. Pheil (2008) 166 Cal.App.4th 789, 794.)

    Section 1356 was enacted “to give a property owners’ association the ability to amend its governing documents when, because of voter apathy or other reasons, important amendments cannot be approved by the normal procedures authorized by the declaration. [Citation.] In essence, it provides the association with a safety valve for those situations where the need for a supermajority vote would hamstring the association.” (Blue Lagoon Community Assn. v. Mitchell (1997) 55 Cal.App.4th 472, 477.)

    C. The First Attempt To Amend the Original CC&Rs

    Over the years, Bel Air Ridge’s general counsel discussed with members of the HOA’s Board of Directors (Board) the need to rewrite the original CC&Rs to modernize them and to make them consistent with the provisions of the Davis-Stirling Act. The HOA had encountered situations “where legal issues arose in which the CC&Rs, due to their age and the fact that they were written by the developer, either did not address an issue at all or did not address it clearly.” Some of these resulted in litigation which, counsel believed, “probably could have been avoided had the CC&Rs been clear and up to date.”

    In 2005 the HOA held an election to amend the CC&Rs but was unable to get 75 percent of the homeowners’ vote in the election. In August 2006 the HOA filed a petition under section 1356 to reduce the required voting percentage and approve the amended CC&Rs. The court denied the petition under subdivisions (e)(2) and (e)(3) of section 1356, finding that the amended CC&Rs eliminated rights of the declarant and impaired the security interest of a mortgagee. (In the Matter of Glenridge Homeowners Association (Super. Ct. L.A. County, 2006, No. SS014657).)

    D. The Second Attempt To Amend the Original CC&Rs

    In 2009 the Board decided to make a second attempt to amend the original CC&Rs. It formed a CC&R Amendment Committee (Committee) comprised of HOA members. The Board, the Committee and legal counsel came to the conclusion that the CC&Rs should be completely rewritten. Counsel drafted new CC&Rs and presented the first draft of the proposed Restated CC&Rs to the Board and the Committee early in 2010. Between February 2010 and May 2011, six drafts of the Restated CC&Rs were presented to the Committee and critiqued. Members of the HOA were notified about the progress in drafting new CC&Rs at HOA meetings and in the minutes of the meetings, which were available to all homeowners. The Board approved the sixth draft of the proposed Restated CC&Rs.

    On August 9, 2011, the Board sent a copy of the sixth draft of the proposed Restated CC&Rs and a comparison with the original CC&Rs to the homeowners. The Board also notified the homeowners that it would hold two “town hall” meetings for comments and questions. Following the meetings, a seventh and final draft of the Restated CC&Rs was prepared in response to input from the homeowners.

    On September 30, 2011, the Board sent a copy of the Restated CC&Rs to all homeowners, along with a summary of changes to the CC&Rs, a secret ballot, and voting instructions. The Board informed the homeowners that “[i]n order to adopt the Restated CC&Rs, we need the approval of at least 75% of the [HOA] Members, and all of the mortgage holders. Accordingly, it is extremely important that you review all of the enclosed documents and vote.” The Board also requested that the homeowners provide it with contact information for the mortgage holders. The deadline for voting was the start of the annual HOA meeting on December 8, 2011. However, the ballot itself advised the homeowners “THAT THE BOARD RESERVES THE RIGHT TO EXTEND THE DEADLINE DATE BY WHICH SECRET BALLOTS ARE TO BE RETURNED BY PROVIDING WRITTEN NOTICE OF SUCH EXTENSION.”

    On November 28, 2011, the Board wrote to the homeowners reminding them to vote and extending the voting deadline to April 2, 2012. On February 7, 2012 the Board sent a letter to the homeowners reminding them to vote and of the April 2 deadline.

    The Board wrote to the homeowners again on March 12, 2012, reminding them to vote and extending the voting deadline to October 1, 2012. The Board sent out a reminder letter on July 30, announcing that 203 out of 377 homeowners had submitted their ballots.

    On September 19, 2012, the Board wrote to the homeowners reminding them to vote and extending the voting deadline to February 1, 2013. The Board noted that 211 out of 377 homeowners had submitted their ballots. The Board sent a letter to the homeowners on January 8 reminding them to vote and extending the voting deadline to May 15. The Board stated that 223 homeowners had submitted their ballots.

    On March 22, 2013, the Board sent the homeowners another letter reminding them to vote and included a copy of the secret ballot in case the first one had been misplaced. On April 26, the Board sent reminder letters and copies of the secret ballot to all homeowners who had not yet voted. Board members also called homeowners who had not voted and knocked on doors to encourage homeowners to vote. The Board sent out a final letter on May 30, extending the deadline to June 5, when a meeting would be held to open the ballots and count the votes. The Board stated that 244 out of 377 homeowners had submitted their ballots.

    At the June 5, 2013 meeting, the Board opened the ballots and counted the votes. There were 198 votes approving the Restated CC&Rs, 13 approving except disapproving as to certain sections, and 40 votes opposed. Those in favor (not disapproving of any sections) constituted 53 percent of the homeowners.

    In addition to the difficulties in getting the homeowners to vote, the Board had difficulty in getting them to provide information regarding their mortgage holders. The HOA retained a title insurance company to obtain information as to the mortgage holders. Once this information was obtained, the Board wrote to the mortgage holders regarding the vote. The Board notified the mortgage holders that if they did not return a ballot opposing the Restated CC&Rs, they would be deemed to have approved. Only 10 mortgage holders voted; 9 in favor of the Restated CC&Rs in whole or in part and 1 opposed. Seventy-one ballots were returned as undeliverable.

    The Board also contacted BGP Corporation, the declarant in the original CC&Rs. BGP Corporation signed a declaration agreeing to deletion of references to the declarant in the Restated CC&Rs and acknowledging that it no longer had any rights or interests under the CC&Rs.

    E. The Section 1356 Petition

    The HOA filed the instant petition on August 15, 2013, seeking “an order dispensing with the requirement in the current CC&Rs that all amendments be approved by 75% of the voting power, and all `Mortgagees of record,’ and substituting therefor the court’s order that, by virtue of substantial compliance with the provisions of Section 1356 of the Civil Code, the First Restated CC&Rs can be and hereby are deemed adopted by virtue of approval of a majority of the total voting power of the [HOA]. . . .”

    Rosenberg filed opposition to the petition on September 13, 2013. He claimed the HOA did not meet the requirements of section 1356, the Restated CC&Rs would impair the security interests of the mortgagees, and the Restated CC&Rs would eliminate his rights and status as a declarant. In his supporting declaration,Rosenberg stated: “My family, including me specifically, comprise Fountainwood-Agoura.” Rosenberg also requested that the court take judicial notice of the first section 1356 petition and the denial of that petition.

    Bagnall and Litvak each filed opposition to the petition. Bagnall pointed to the denial of the first section 1356 petition and claimed lack of compliance with section 1356. He sought not only denial of the petition but also an award of attorney’s fees and costs to himself;[4] removal of the Board, counsel, and the HOA manager “since the [HOA] can no longer govern itself honestly and fairlyon behalf of its homeowners”; and an award of sanctions against the HOA. Litvak claimed the balloting was not conducted in accordance with the law, and the Restated CC&Rs were unreasonable.

    On September 25, 2013, Rosenberg filed a “Notice of Bank of America, N.A.’s Objection to” the petition. Attached as an exhibit was a one page document purporting to be Bank of America’s disapproval of the Restated CC&Rs on the ground “they do substantially impair our security interest” in properties in Bel AirRidge. The document did not address the manner in which those interests were impaired.

    The matter was heard on September 27, 2013. A number of homeowners spoke at the hearing. The trial court allowed Litvak to file a sur-reply brief but indicated that if it was not persuaded by the brief, it would grant the petition. On October 17, after reading Litvak’s sur-reply brief and the HOA’s response, the trial court granted the petition.

    DISCUSSION

    A. Standard of Review

    Section 1356, subdivision (c), provides the trial court with broad discretion in ruling on the petition. (Mission Shores Assn. v. Pheil, supra, 166 Cal.App.4th at p. 795.) We review the trial court’s ruling on the petition for abuse of discretion. (Quail Lakes Owners Assn. v. Kozina (2012) 204 Cal.App.4th 1132, 1139; Mission Shores Assn., supra, at p. 795.) The trial court is not required to make any particular findings in ruling on the petition. It is sufficient if the record shows that the court considered the requisite factors in making its ruling. (Quail Lakes Owners Assn., supra, at p. 1140.) However, to the extent we are required to interpret the applicable statutes or the governing documents, our review is de novo. (Friars Village Homeowners Assn. v. Hansing (2013) 220 Cal.App.4th 405, 411-412 [suit to enforce CC&Rs]; see Villa De Las Palmas Homeowners Assn. v. Terifaj, supra, 33 Cal.4th at p. 82 [application of rules of statutory construction in interpreting Davis-Stirling Act].)

    B. Section 1356, Subdivision (c)(2), Whether the Balloting Was Properly Conducted

    1. Whether the Ballots Sent to the Homeowners Complied with the Bylaws

    Under subdivision (c)(2) of section 1356 (as it existed at the time the petition was approved), the trial court may not grant the petition unless it finds “[b]alloting on the proposed amendment was conducted in accordance with all applicable provisions of the governing documents.” Appellants contend that balloting was not conducted in accordance with the governing documents because the repeated extensions of the voting deadline violated section 3.7(c) of the Restated Bylaws of the HOA (Bylaws). The Bylaws are part of the “`[g]overning documents'” of the HOA. (§ 1351, subd. (j).)

    Appellants claim the balloting was not conducted in accordance with the governing documents because section 3.7(c) of the Bylaws permits only one 30-day extension of the voting deadline. Respondent contends that the voting extensions did not violate section 3.7(c) of the Bylaws and that, in any event, the requirements of section 3.7(c) of the Bylaws have been displaced by the enactment of section 1363.03 governing the conduct of homeowner association elections.

    Section 3.7 of the Bylaws is entitled “Action by Written Consent of Members.” That section provides that other than the election of directors, “any action which may be taken at any annual or special meeting of Members may be taken without a meeting if the [HOA] distributes a written ballot to every Member entitled to vote. . . .” As a threshold issue, we must then consider whether amendment of the CC&Rs is an action which may be taken at a special or annual meeting within the meaning of section 3.7 of the Bylaws. We conclude it is not, and the strictures of section 3.7(c) regarding voting extensions are thus inapplicable to the CC&R amendment process.

    The original CC&Rs provide that “[t]his declaration may be amended only by an instrument executed and acknowledged by (i) the Owners of at least seventy-five percent (75%) of the Condominiums in the Project, and (ii) the holders of all Mortgages which are of record prior to the effective date of such amendment.” This section does not otherwise specify how the written instrument is to be obtained. Further, the CC&Rs provide that at annual meetings of the HOA, the HOA shall conduct such business as shall be provided in the Bylaws.

    The Bylaws provide for both meetings of the members, as well as meetings of the Board. The Bylaws do not specify that amendment of the CC&Rs can be effectuated at an annual or special meeting of members. However, the Bylaws do provide that there shall be at least one meeting of the owners each year “for the purpose of electing directors and conducting any other legitimate business of the [HOA].”

    The CC&Rs and Bylaws do not appear to expressly contemplate that obtaining written consent to CC&R amendments would take place at an annual or special meeting of the members. If so interpreted, the Bylaws would directly conflict with section 1363.03.

    The Bylaws were adopted in 2003. In 2005, the Legislature adopted section 1363.03, governing homeowner association elections. (Stats. 2005, ch. 450, § 3.) Subdivision (b) of section 1363.03 provides in pertinent part: “Notwithstanding any other law or provision of the governing documents, elections regarding . . . amendments to the governing documents . . . shall be held by secret ballot in accordance with the procedures set forth in this section.” Thus after the passage of section 1363.03 any bylaw in conflict with that section is preempted. To the extent the Bylaws here could be interpreted as allowing amendment to occur at an annual or special meeting of the members thus triggering the applicability of section 3.7 of the Bylaws, that provision cannot be enforced.

    Nothing in the language of section 1363.03 precludes a homeowners’ association from adopting rules regarding elections which are not inconsistent with the provisions of the section. As a whole, the text of section 1363.03 demonstrates a legislative intent to provide minimum requirements for elections, and to preempt only those provisions of the governing documents which are in conflict with the statute. (See, e.g., § 1363.03, subd. (b) [“[a] quorum shall be required only if so stated in the governing documents]; and § 1363.03, subd. (c)(3)(H) [an election inspector is to “[p]erform any acts as may be proper to conduct the election with fairness to all members in accordance with this section . . . and all applicable rules of the association regarding the conduct of the election that are not in conflict with this section”].)

    Here, however, if the Bylaws were interpreted to allow amendment to CC&Rs to occur at a meeting of the members, that rule would be in direct conflict with section 1363.03 which, among other things, requires a secret ballot to be mailed to every member “not less than 30 days” (id., subd. (e)) prior to the deadline for voting, and for votes to be tallied by the inspector of elections at an open and public meeting of the directors or members. If amendment to CC&Rs is not an act which may occur at a meeting of the members (since section 1363.03 specifically requires a secret ballot), section 3.7 of the Bylaws is wholly inapplicable to the CC&R amendment process.[5]In that case we look to the statute itself, which contains no restrictions on extensions of time to cast a ballot on amended CC&Rs. We conclude that the balloting on the proposed amendments was consistent with the applicable provisions of the governing documents and statute for purposes of section 1356.

    2. Whether the Ballots Sent to Mortgage Holders Complied with the CC&Rs

    Rosenberg also contends that the ballots sent to the mortgage holders violated article 23 of the original CC&Rs and thus the trial court abused its discretion in finding under subdivision (c)(2) of section 1356 that the “[b]alloting on the proposed amendment was conducted in accordance with all applicable provisions of the governing documents.”

    Article 23, section 23.1, of the original CC&Rs provides in pertinent part: “This Declaration may be amended only by an instrument executed and acknowledged by . . . the holders of all Mortgages which are of record prior to the effective date of such amendment.” The letters sent to the mortgage holders stated: “If you, as a lender, do not complete and return your ballot in a timely manner indicating your disapproval of all or part of the document, it will be deemed that you have voted in favor of approving the entire Restated CC&Rs.” (Bold omitted.)

    Rosenberg argues that deeming the non-receipt of a ballot to be consent to the amendment is not “an instrument `executed and acknowledged'” by a mortgage holder. In addition, because so many of the ballots were returned as undeliverable, “the balloting process did not even ensure simple acknowledgement by the mortgage holders,” and the Board “did not make the . . . effort to ensure receipt, acknowledgement, and endorsement of the proposed changes by the lenders.”

    The record demonstrates that the HOA made reasonably diligent efforts to notify mortgage holders of the election and to seek their approval. The HOA sought mortgage holder information directly from its members and retained a title insurance company to obtain information as to the mortgage holders. Despite those efforts, 71 ballots were returned as undeliverable. Of the 10 mortgage holder ballots returned, one was a disapproval.

    Even if the trial court did not consider the non-return of ballots of the mortgage holders as an approval, section 1356 still permits approval of an amendment that does not meet the voting threshold set forth in the governing documents, as long as certain requirements are met. With respect to approval by mortgage holders, section 1356 permits approval of the amendment as long as it does not “impair the security interest of a mortgagee of a mortgage or the beneficiary of a deed of trust without the approval of the percentage of the mortgagees and beneficiaries specified in the declaration, if the declaration requires the approval of a specified percentage of the mortgagees and beneficiaries.” (§ 1356, subd. (e)(3).) The trial court did not abuse its discretion in failing to deny the petition under subdivision (c)(2) of section 1356 on the ground the balloting did not comply with the governing documents. Whether the amendment impaired the security interest of mortgagees under subdivision (e)(3) is discussed in section D below.

    C. Section 1356, Subdivision (c)(5), Whether the Amendment Is Reasonable

    1. Rosenberg’s Claims of Unreasonableness

    Under subdivision (c)(5) of section 1356, the trial court may not grant the petition unless it finds “[t]he amendment is reasonable.” Rosenberg noted in his opening brief that the HOA did not simply amend the CC&Rs but presented the homeowners with entirely new CC&Rs. He stated: “Far from seeking and justifying a single amendment, the [HOA] bears the burden of proving the reasonableness of the wholesale replacement of the [original] CC&Rs. Aside from making conclusory statements about the more `streamlined, user friendly, and focused on the law’ Proposed CC&Rs . . ., the [HOA] has not demonstrated the reasonableness of the Proposed CC&Rs, and the Superior Court did not find that the [HOA] had done so.”

    Neither in his opening brief nor in the trial court did Rosenberg identify a single provision in the Restated CC&Rs that he contends is unreasonable. In his reply brief,Rosenberg listed seven paragraphs of the Restated CC&Rs, which he identified as unreasonable. He did not explain why they were unreasonable but reiterated that the HOA failed to meet its burden of establishing that the Restated CC&Rs were reasonable.

    “`Perhaps the most fundamental rule of appellate law is that the judgment [or order] challenged on appeal is presumed correct, and it is the appellant’s burden to affirmatively demonstrate error.'” (Ruelas v. Superior Court (2015) 235 Cal.App.4th 374, 383, quoting People v. Sanghera (2006) 139 Cal.App.4th 1567, 1573; accord, In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.) “`To demonstrate error, appellant must present meaningful legal analysis supported by citations to authority and citations to facts in the record that support the claim of error. [Citations.]’ [Citation.] `Mere suggestions of error without supporting argument or authority other than general abstract principles do not properly present grounds for appellate review.’ [Citation.] `Hence, conclusory claims of error will fail.’ [Citation.]” (Multani v. Witkin & Neal (2013) 215 Cal.App.4th 1428, 1457; accord, Rojas v. Platinum Auto Group, Inc. (2013) 212 Cal.App.4th 997, 1000, fn. 3.) “`[E]very brief should contain a legal argument with citation of authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration. [Citations].'” (Mission Shores Assn. v. Pheil, supra, 166 Cal.App.4th at p. 796,quoting 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 594, p. 627.)

    While the HOA had the burden of establishing the reasonableness of the Restated CC&Rs in the trial court, Rosenberg has the burden on appeal of demonstrating that the court abused its discretion in finding the provisions reasonable. He has failed to meet that burden, and his claim of unreasonableness fails.

    2. Litvak and Bagnall’s Claims of Unreasonableness

    For purposes of ruling on a section 1356 petition, “[t]he term `reasonable’ . . . has been variously defined as `not arbitrary or capricious’ [citations], `rationally related to the protection, preservation and proper operation of the property and the purposes of the Association as set forth in its governing instruments,’ and `fair and nondiscriminatory.’ [Citation.]” (Fourth La Costa Condominium Owners Assn. v. Seith(2008) 159 Cal.App.4th 563, 577; see also Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 382.) In determining the reasonableness of a provision of CC&Rs, the court’s focus is on the effect of that provision on the development as a whole, not its effect on individual homeowners. (Nahrstedt, supra,at pp. 387, 389.)

    a. Elimination of Easements of Enjoyment

    Litvak and Bagnall contend that the Restated CC&Rs are unreasonable because they eliminate easements owned by the homeowners. Section 5.3 of the original CC&Rs, entitled “Easements of Enjoyment,” provided: “Every Owner shall have a right and nonexclusive easement of enjoyment in and to all the Common Area included within the Project, wherever located, and notwithstanding location on other than his Condominium Lot, and such easement shall be appurtenant to and for the benefit of his Unit. . . .”

    The Restated CC&Rs contain no provision for easements of enjoyment. They provide in section 2.2, “Right of Ownership. Each Member shall have the following ownership interests in the Development: (i) fee title interest in a Unit, (ii) the right to exclusive use of his or her Exclusive Use Common Area, and (iii) an equal, undivided, fractional interest, as tenant-in-common, in the Common Area situated within the Common Area Lot on which his or her Detached Dwelling or Townhouse is situated. . . .”[6] In addition, section 2.3 of the Restated CC&Rs provides that “[w]hen an Owner has an actual, bonafide need to maintain, repair or replace his or her Unit or Exclusive Use Common Area, in order to access such area when there is no other reasonable alternative, he or she shall have a nonexclusive easement over all portions of the Common Area, Exclusive Use Common Area, and Common Area Lots.” Section 16.1 of the Restated CC&Rs provides that all homeowners “shall have and are hereby granted the right to use and enjoy the Recreational Facilities. . . .”

    Litvak and Bagnall did not raise this issue of elimination of easements of enjoyment in the trial court. Having not raised it below, the claim is waived. (Fourth La Costa Condominium Owners Assn. v. Seith, supra, 159 Cal.App.4th at p. 582, fn. 5 [“[t]he first restated CC&R’s contain dozens of new provisions and amended provisions, and the trial court could not be expected to comb through them and independently research each one to determine its reasonableness” and “[i]t was incumbent on [the appellant] to raise all objections she had”].)

    Even if we were to consider the claim, Litvak and Bagnall have not shown it would have been an abuse of discretion to find the easement provision reasonable. While the restated CC&Rs may eliminate certain easement rights previously held by unit owners, that does not in and of itself dictate that the amendment is unreasonable. Homeowners are specifically granted the right to enjoy recreational facilities, no matter upon which lot their unit is located. The HOA argues that the common areas on lots other than those upon which the unit is located consist of unusable slope area and some landscaped areas. Litvak and Bagnall fail to show that a loss of easements to these areas is unreasonable, i.e., arbitrary or capricious or not rationally related to the protection, preservation or proper operation of the property and the purposes of the HOA as set forth in its governing instruments.

    b. Elimination of Easements Created by the Developer

    Section 5.4 of the original CC&Rs provided that “[i]f any part of a Unit encroaches or shall hereafter encroach upon the Common Area, or upon another Unit, a valid easement shall exist for the encroachment and for the maintenance of same, so long as the encroachment shall and does exist.” Section 2.9 of the Restated CC&Rs provides: “As of the date this Declaration is adopted, if any part of a Unit or Improvement encroaches upon the Common Area, by inadvertence and without intent of the Owner or his or her predecessors, a valid easement exists for the encroachment and for the maintenance of same so long as there is no serious threat of injury or damage to other Owners or the [HOA].”

    Litvak and Bagnall argue that “[t]he language of [section] 2.9 [of the Restated CC&Rs] disallows an easement if the predecessor in interest acted intentionally. In laying out the locations of the buildings, the developer often acted intentionally and without regard for the exact location of the homes, as identified on the condominium plan. Thus, overnight, easements for encroachments that might have existed for thirty (30) or more years were eliminated.”

    Litvak and Bagnall point to no evidence to support their claim of intentional encroachment by the developer or of elimination of 30-year-old easements. The theoretical possibility that section 2.9 of the Restated CC&Rs could eliminate easements created when the properties were developed does not render the section unreasonable. The HOA persuasively argues that nothing in the new CC&Rs would retroactively affect an encroachment which was lawful under the original CC&Rs or revive an expired statute of limitations. Litvak and Bagnall have failed to demonstrate that the challenged provision of the Restated CC&Rs is unreasonable.

    c. Judicial Reference

    Section 10.11 of the Restated CC&Rs provides: “Any dispute arising from or related to the Governing Documents or to the management and operation of the [HOA] or the Development shall be submitted for determination by judicial reference pursuant to [s]ections 638[] et seq. of the Code of Civil Procedure.[7] The decision of the referee shall be the decision of the court and shall be entered as a judgment pursuant to [s]ection 644[, subdivision] (a) of the Code of Civil Procedure. The decision of the referee shall be appealable in the same manner as any other court judgment or order is appealable.” (Italics omitted.) We conclude this provision is not unreasonable.

    Litvak and Bagnall contend this provision is unreasonable because “the parties lose the right to have a public trial by a duly authorized public officer,” they must pay in advance the high cost of a private judge, and they lose the right to a jury trial.[8]Litvak and Bagnall claim “[t]he courts have already determined that a judicial reference is not appropriate for a homeowners association.”

    Treo @ Kettner Homeowners Assn. v. Superior Court (2008) 166 Cal.App.4th 1055 (Treo), on which Litvak and Bagnall rely, involved a construction defect lawsuit by a homeowners association against a developer. The CC&Rs required disputes between the association and the developer to be decided by a judicial referee. (Id. at p. 1059.) The association challenged the trial court’s order for general reference on the ground the CC&Rs were not a contract within the meaning of Code of Civil Procedure section 638, and the judicial reference provision was unconscionable and unenforceable. (Ibid.)

    The Treo court ultimately determined the judicial reference procedure in the CC&Rs could not be enforced. The court noted that waiver of the right to a jury trial requires “actual notice and meaningful reflection.” (Treo, supra, 166 Cal.App.4th at p. 1066.) While acknowledging that Code of Civil Procedure section 638 allowed parties to agree to a judicial reference by contract in lieu of a jury trial, the Treo court concluded that CC&R provisions are not the type of agreement contemplated under that section. (Id. at p. 1067.) Although the question presented here regarding the propriety of the judicial reference requirement in the Restated CC&Rs differs somewhat from that presented in Treo,[9] we recognize our conclusion that the judicial reference provision is reasonable cannot be fully squared with the Treo decision.

    We are guided in our conclusion by the California Supreme Court’s more recent analysis in Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223 (Pinnacle). Pinnacle upheld as reasonable a provision in CC&Rs that required disputes between the homeowners association and the developer to be resolved through binding arbitration. The California Supreme Court reviewed the history of enforceability of CC&Rs as equitable servitudes, concluding that “there appears no question that, under the Davis-Stirling Act, each owner of a condominium unit either has expressly consented or is deemed by law to have agreed to the terms in a recorded declaration.” (Id. at p. 241.) Pinnacle specifically disagreed with the lower court’s finding that the arbitration provision embedded in a recorded declaration was not binding because “`the waiver of the right to a jury requires an actual “agreement.”‘” (Id. at p. 244.)

    While Pinnacle did not expressly overrule Treo, it distinguished and impliedly criticized that holding. The Pinnacle court observed that Treo had relied on the Supreme Court’s prior decision in Grafton Partners v. Superior Court (2005) 36 Cal.4th 944. Pinnacle noted that “Grafton also distinguished predispute jury waivers from the very type of predispute reference agreement at issue in Treo, noting that Code of Civil Procedure section 638 authorizes reference agreements.” (Pinnacle, supra, 55 Cal.4th at p. 245, fn. 10.)

    Alternative dispute resolution through arbitration, just as through judicial reference, requires agreement by the parties. (Compare Code Civ. Proc., § 1281 with Code Civ. Proc., § 638.) Pinnacle found the binding nature of CC&Rs to satisfy this requirement for arbitration. If the binding nature of CC&Rs equates to an agreement to arbitrate, it is equally valid as to an agreement for reference. Treo‘s additional requirement that a reference agreement be the product of “actual notice and meaningful reflection” suffers from two infirmities. That condition is not contained in the language of Code of Civil Procedure section 638, and is contrary to the reasoning in Pinnacle. We conclude that the reference provision in the Restated CC&Rs constitutes a predispute agreement authorized by Code of Civil Procedure section 638, and does not violate the right to a jury trial.

    Finally, Litvak and Bagnall have failed to show that the costs involved, or non-public nature of dispute resolution through reference renders the reference provision otherwise unreasonable.

    d. Regulation of Pets

    Section 6.13 of the original CC&Rs provided “that dogs, cats or other domestic household pets may be kept in a Unit and permitted upon the Common Appurtenant Area surrounding the Unit and upon any other portion of the Common Association Area designated therefor by the [HOA]. . . .” However, such pets could not be kept “in unreasonable numbers” or “for any purpose if there would be involved an odor or noise such as would unreasonably disturb the use and enjoyment of any portion of the Project by the Owners.” Pet owners agreed to indemnify the Board, HOA, and other homeowners for losses caused by their pets and to accept liability for such losses.

    Section 9.19 of the Restated CC&Rs contains similar provisions. It provides: “a.Number and Size. The Board may decide in its absolute discretion whether the number or size of pets living in a Unit is unreasonable, and it may include such standards in the Rules.[10] [¶] . . . [¶] c. Removal. The Board may cause the removal of any animal or pet which in its subjective opinion is disturbing the quiet enjoyment, health, safety or welfare of any other Owner.”

    Litvak and Bagnall challenge as unreasonable the absolute discretion given to the Board to determine which pets may live in a unit and to order a pet removed from a unit. They claim the Board should not be able to take pets away “without any hearing and without any criteria.”

    Both Nahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th 361 andVilla De Las Palmas Homeowners Assn. v. Terifaj, supra, 33 Cal.4th 73 involved challenges to pet restrictions in CC&Rs. In both cases, the court upheld a use restriction prohibiting pets entirely, finding such a restriction “not unreasonable as a matter of law.” (Villa De Las Palmas, supra, at p. 93.)

    Here, rather than a complete pet ban, the Restated CC&Rs vest discretion in the Board to determine whether the number or size of pets living in a unit is unreasonable and to include standards in its rules. Litvak and Bagnall argue that investing the Board with “sole discretion” renders the restriction unreasonable as a matter of law. However, numerous courts have reviewed the exercise of discretion by a homeowners board and imposed a requirement that the discretion be exercised in good faith and not in an arbitrary or capricious fashion. (See, e.g. Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 265 [discretion to determine method for eradicating termites]; Ironwood Owners Assn. IX v. Solomon(1986) 178 Cal.App.3d 766, 772 [discretion to approve landscaping plans]; andCohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642, 650 [discretion to approve or disapprove construction plans].) Thus, while the Restated CC&Rs vest “sole discretion” in the Board to determine the appropriate number and size of pets, the Board will be obligated to exercise its discretion in good faith in a non-arbitrary or capricious manner.

    Litvak and Bagnall also challenge the grant of authority to the Board to “cause the removal of any . . . pet . . . which in its subjective opinion is disturbing the quiet enjoyment, health, safety or welfare of any other Owner.” The HOA argues that this provision does not allow self-help; the HOA would be obligated to enforce this provision in the same manner as it imposes other discipline through a hearing process before the Board. As the Restated CC&Rs do not otherwise define the method by which a pet could be removed, the HOA’s interpretation that any method would require a hearing before the Board is consistent with the body of law discussed above requiring a Board to exercise its discretion in a non-arbitrary or capricious manner. Appellants have not shown that the trial court abused its discretion in concluding the Restated CC&R provisions concerning pets were reasonable.

    e. Maintenance and Improvements

    Section 4.9 of the Restated CC&Rs provides: “If an Owner fails, in the Board’s opinion, to adequately maintain, repair or replace the exterior of his or her Unit or Exclusive Use Common Area, or any elements thereof, the [HOA] may, after giving not less than twenty (20) days written notice to the Owner (except in case of an emergency), enter the Unit or Exclusive Use Common Area and make the necessary repairs or perform maintenance on the Owner’s behalf. In such event, Owner shall reimburse the [HOA] for all costs incurred and should Owner fail to do so the [HOA] may impose a Special Assessment on the Owner for the cost which shall be enforceable by any means available under this Declaration of California law.”

    Article 8 of the Restated CC&Rs provides that “[i]t is the [HOA’s] duty to exercise architectural and landscaping control over Improvements constructed or installed in the Development. . . .” The Board is required to appoint an architectural and landscaping committee (§ 8.2), and no alteration or improvement to the exterior of a Unit may be commenced without prior approval of the committee (§ 8.3). In making a decision whether to approve an alteration or improvement, “the Committee may properly consider (i) its subjective belief that the plans are or are not consistent with the general design, construction, appearance, and harmony of other improvements in the Development. . . .” (§ 8.6.)

    Litvak and Bagnall challenge as unreasonable these provisions which allow the Board to employ its “sole `opinion'” in requiring homeowners to perform maintenance or repairs and allow the architectural and landscaping committee to base its decisions on proposed improvements on its “subjective belief.” Courts “have long upheld such general covenants vesting broad discretion in homeowners associations or boards to grant or withhold consent to construction.” (Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 977) [finding discretion to apply subjective aesthetic criteria to be reasonable].) Litvak and Bagnall fail to show that a grant of discretion to determine the need for maintenance should be treated any differently. We uphold the trial court’s determination that such provisions in the Restated CC&Rs are reasonable.[11]

    f. Limitation of Liability

    Section 3.7 of the Restated CC&Rs provides that “[i]n the absence of clear and convincing evidence of negligence or willful misconduct,” the HOA and its officers and agents will not be liable for loss or damage. Litvak and Bagnall challenge the “clear and convincing evidence” standard as unreasonable particularly since the Restated CC&Rs “did not create a clear and convincing burden of proof for claims made by the Board against a homeowner.”

    The original CC&Rs did not contain a clear and convincing evidence burden of proof regarding misconduct by the Board. However, the original CC&Rs limited liability unless “gross negligence” on the part of the HOA and its officers and agents was shown, not simple negligence. (§ 8.11.)

    In Franklin v. Marie Antoinette Condominium Owners Assn. (1993) 19 Cal.App.4th 824, the court found an exculpatory clause in CC&Rs which provided that the association was not liable for damages to property in the project resulting from leaking water unless it was grossly negligent to be reasonable. The court reasoned: “[b]y reducing the Association’s risk of liability, the condominium owners have reduced their own risk. The condominium owners are, after all, the ones who are assessed to pay for improvements, insurance premiums, liability judgments not covered by insurance, and the like. . . . A reasonable and fair reduction of the Association’s risk which mutually benefits the condominium owners as a whole does not suddenly become violative of public policy upon the nonnegligent infliction of property damage to an individual unit. While plaintiff may bear the loss in this case, she may benefit in the next.” (Id. at p. 833.)

    Similarly here requiring clear and convincing evidence of negligence before the HOA may be held liable may benefit the owners as a whole by reducing the potential the owners’ assessment will be increased to cover the costs of HOA liability. Litvak and Bagnall have failed to demonstrate that the clear and convincing evidence standard in section 3.7 of the Restated CC&Rs is unreasonable.

    g. Occupancy Restrictions

    Section 9.16 of the Restated CC&Rs provides that “[t]he maximum number of Persons who may reside in any Unit at any time shall not exceed two (2) Persons per bedroom, plus one. . . . The [HOA] may require Owners to disclose in writing the names of the Persons residing in the Unit at any time.”

    Litvak and Bagnall assert that the occupancy restrictions may open the HOA up to liability under the Federal Fair Housing Act (42 U.S.C. § 3604(b)), the California Fair Housing Act (Gov. Code, § 12955) and the Unruh Civil Rights Act (Civ. Code, § 51), which bar discrimination in housing. Even “facially neutral numerical occupancy restrictions” may violate the law “if they have a discriminatory effect, irrespective of intent.” (Fair Housing Council of Orange County, Inc. v. Ayres (C.D. Cal. 1994) 855 F.Supp. 315, 318.)

    However, restrictions on population density are valid if tied “`to objective standards such as across-the-board minimum floor space per person requirement, person per quantum of open space, persons per a bedroom or bathroom, or any other generally accepted standard which defines “overcrowding.”‘ [Citation.]” (Park Redlands Covenant Control Committee v. Simon (1986) 181 Cal.App.3d 87, 97; see City of Santa Barbara v. Adamson (1980) 27 Cal.3d 123, 131-134.) Litvak and Bagnall do not identify any discriminatory effect of section 9.16 of the Restated CC&Rs but merely claim it “places the HOA in peril of lawsuits based on violations of myriad constitutional rights.” The theoretical possibility that section 9.16 could lead to a discrimination lawsuit does not render the section unreasonable.

    Litvak and Bagnall also claim that “[n]o reasonable person could believe that one can be forced to disclose the identity of guests or those persons living in one’s home. Such an invasion of privacy cannot be justified.” However, those who choose to live in a common interest development are necessarily subject to restrictions on the use of their property. (Nahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th at p. 373 [“restrictions on the use of property in any common interest development may limit activities conducted in the common areas as well as in the confines of the home itself”].)

    In support of its petition, the HOA presented the declaration of Robert Avila, its general manager, who stated that Bel Air Ridge has 377 members living on 100 acres, and the development is not gated. Recreational facilities are for the use of residents and guests only, and entry to those facilities is secure since members of the public are able to enter the development. “To provide safety and security, our staff needs access to the names of all residents of the community” to make sure only authorized people are using the facilities. “In addition, we employ a security company that has a roving patrol in order to prevent break-ins and burglaries. They must be able to determine if a person they see inside or adjacent to a property is a resident and thus authorized to be there.” Because use of recreational facilities and presence in portions of the development is restricted to residents only, it is not unreasonable to require homeowners to disclose who is residing in their units.

    h. Executive Sessions of the Board

    Section 1363.05 of the Davis-Stirling Act, the Common Interest Development Open Meeting Act (id., subd. (a)), provides that any member of a homeowners association may attend meetings of the board of directors “except when the board adjourns to, or meets solely in, executive session to consider” certain matters including “member discipline.” (Id., subd. (b).) Section 10.5 of the Restated CC&Rs, governing hearing procedures, provides that before the Board may impose a fine or suspension, “[t]he Board shall convene a hearing in executive session to consider the issue of possible discipline against the Owner.” (Id., subd. a.) The homeowner has the right to attend the executive session and to have an attorney present. (Id., subd. c.)

    Litvak and Bagnall contend a homeowner should be allowed the choice to have his or her discipline considered at a public meeting. But the question before us is not whether a homeowner should be allowed such a choice but whether the requirement that discipline be considered in executive session is reasonable, i.e., “`not arbitrary or capricious’ [citations], `rationally related to the protection, preservation and proper operation of the property and the purposes of the Association as set forth in its governing instruments,’ and `fair and nondiscriminatory.’ [Citation.]” (Fourth La Costa Condominium Owners Assn. v. Seith, supra, 159 Cal.App.4th at p. 577; see alsoNahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th at p. 382.)

    Because the Davis-Stirling Act permits the Board to consider member discipline in executive session and there is a rational reason for doing so—allowing matters of discipline to remain private in order to avoid embarrassing homeowners or making their private business public—we conclude the trial court did not err in finding section 10.5 of the Restated CC&Rs is reasonable.

    i. Power To Assess Fines and Accelerate Dues

    Section 10.4 of the Restated CC&Rs gives the Board the power “to assess fines against any Owner who violates the Governing Documents, or if there is a violation by his or her Residents or Guests. In the case of ongoing violations the fine may be imposed on a daily basis. The Board shall adopt a fine schedule as described in [s]ection 1363[, subdivision] ([f]) . . . and may impose other conditions on the imposition of fines in the Rules. No fine may exceed $500 per incident, or, in the case of continuing violations, $500 for the first day and $200 per day thereafter.”

    Section 5.8 of the Restated CC&Rs governs delinquencies in payment of assessments. Subsection c provides: “At the Board’s election the total Regular Assessment due to be paid by the delinquent Owner during that fiscal year may be accelerated in which case the total annual Regular Assessment will be due and payable immediately by that owner.”

    Litvak and Bagnall claim these provisions grant excessive power to the Board. They complain that “a simple violation that goes for a month without abatement may result in fines totaling $6,300.00; or, over $72,000.00 per year.” In addition, “[t]here is absolutely no restriction on what the Board may consider or how it will exercise its power.” Finally, they point out that under “[s]ection 1365.1 of the Davis-Stirling Act, no fines under $1,800.00 can be a basis for a nonjudicial foreclosure. With fines permissible under the new scheme, it is conceivable that all violations could result in someone losing their home.”

    Subdivision (f) of section 1363 requires the board of a homeowners association intending to impose monetary fines to “adopt and distribute to each member . . . a schedule of the monetary penalties that may be assessed for those violations. . . .” This schedule serves as a limitation on the Board’s exercise of discretion to impose fines.

    Both the Davis-Stirling Act and the Restated CC&Rs contain procedural safeguards against wrongful foreclosure. Litvak and Bagnall cite no authority for the proposition that a homeowners association cannot foreclose on a unit for nonpayment of fines where the statutory prerequisites have been followed.[12]

    Litvak and Bagnall also complain that the Restated CC&Rs provide “[n]o standards, procedures, guidelines or requirement[s]” for acceleration of annual regular assessment payments. As previously discussed, discretion must be exercised in good faith and in a non-arbitrary and fair manner.

    Under the circumstances, we conclude the challenged provisions of the Restated CC&Rs are “`not arbitrary or capricious’ [citations], `rationally related to the protection, preservation and proper operation of the property and the purposes of the Association as set forth in its governing instruments,’ and `fair and nondiscriminatory.’ [Citation.]” (Fourth La Costa Condominium Owners Assn. v. Seith, supra, 159 Cal.App.4th at p. 577; see also Nahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th at p. 382.) Accordingly, the trial court did not abuse its discretion in finding these provisions reasonable.

    D. Section 1356, Subdivision (e)(3), Whether the Amendment Impaired the Security Interests of the Mortgagees

    Subdivision (e)(3) of section 1356 provides that “the court shall not be empowered by this section to approve any amendment to the declaration” if the amendment “[w]ould impair the security interest of a mortgagee of a mortgage or the beneficiary of a deed of trust without the approval of the percentage of the mortgagees and beneficiaries specified in the declaration, if the declaration requires the approval of a specified percentage of the mortgagees and beneficiaries.”

    Rosenberg claims “there is no doubt that the [Restated] CC&R’s substantially impair the security interests of mortgagees” by “eliminat[ing] the rights of lenders to notification and approval of some amendments that may affect their security interests.” This is because, he claims, section 18.1 of the Restated CC&Rs “allows for amendments without the consent of any lender.”

    We reject the argument put forward by the HOA that Rosenberg lacks standing to assert this claim (see Quail Lakes Owners Assn. v. Kozina, supra, 204 Cal.App.4th at pp. 1137-1139). Unlike the objector in Quail Lakes, Rosenberg is not attempting to enforce the due process rights of third persons, but rather is contesting whether the statutory requirements of section 1356 have been met.

    Although he has standing to raise the issue, Rosenberg fails to demonstrate that the Restated CC&Rs impair the security of the mortgage holders. Section 18.1 of the Restated CC&Rs merely allows the Board “by unanimous vote [to] permit minor amendments to the Declaration which only correct errors associated with the restatement process, typos, internal inconsistencies, and any other technical errors.”

    Section 17.2 of the Restated CC&Rs, by contrast, expressly protects a mortgagee against amendments to which it has not agreed: “No amendment to this Declaration shall adversely affect the rights of the Mortgagee of any Mortgage . . . provided that any such mortgage is recorded prior to the recordation of such amendment; and provided further that the benefit of this Section shall not apply to the Mortgagee of any such Mortgage if such Mortgagee shall (i) join in the execution of such document or (ii) approve said amendment in writing.”

    We fail to discern any impairment of the security interests of the mortgagees.

    E. Section 1356, Subdivision (e)(2), Whether the Amendment Eliminated Rosenberg’s Rights and Status as a Declarant

    Section 1356, subdivision (e)(2), prohibits the court from granting the petition if the amended CC&Rs “[w]ould eliminate any special rights, preferences, or privileges designated in the declaration as belonging to the declarant, without the consent of the declarant.”

    The declarant in the original CC&Rs is BGP Corporation which signed a declaration agreeing to deletion of all references to the declarant, and acknowledging it had no ongoing rights or interest under the CC&Rs. Rosenberg submitted a copy of a recorded document indicating that in 1977 additional declarants were added, including Fountainwood-Agoura, a general partnership. Rosenberg stated in a declaration, “My family, including me specifically, comprise Fountainwood-Agoura.” He claims, “[a]ccordingly, as set forth in Rosenberg’s Declaration, Rosenberg is authorized to act on behalf of Fountainwood-Agoura, who is a Declarant.” The HOA’s counsel provided a declaration indicating that there is no reference to Fountainwood-Agoura with the Secretary of State’s office.

    It is Rosenberg’s burden to demonstrate that he is a declarant, or authorized to represent the interests of the declarant. A statement that his family, including him, “comprises” Fountainwood-Agoura is insufficient to establish that he is authorized to represent Fountainwood-Agoura. (See Corp. Code, §§ 16301-16308 [authority of partners to represent partnership].) Rosenberg does not state his position in the general partnership, if any, nor his authority to act on its behalf.

    Moreover, in his opening brief, Rosenberg failed to identify any “special rights, preferences, or privileges” that the Restated CC&Rs eliminated. In response, the HOA claimed that the only special rights reserved for the declarant expired in 1986, when development and sale of the units was complete. Rosenberg, in his reply brief, claims that “multiple sections of the original CC&Rs continue to grant special rights and privileges to the Declarant that survive the building and development phase.” He lists those sections, without any discussion of how they are relevant, i.e., what special rights they currently provide the declarants.

    Ordinarily, we do not consider points raised for the first time in reply briefs unless good cause is shown for the failure to raise them in the opening brief. (Julian v. Hartford Underwriters Ins. Co. (2005) 35 Cal.4th 747, 761, fn. 4; In re Marriage of Turkanis & Price (2013) 213 Cal.App.4th 332, 355.) Rosenberg makes no showing of good cause. He also includes no “`meaningful legal analysis supported by citations to authority and citations to facts in the record that support the claim of error.'” (Multani v. Witkin & Neal, supra, 215 Cal.App.4th at p. 1457.) We therefore deem his claim of error forfeited.

    F. Whether the Trial Court Weighed the Relevant Factors

    Rosenberg argues that the record does not reflect that the trial court weighed the relevant factors in considering the section 1356 petition (Quail Lakes Owners Assn. v. Kozina, supra, 204 Cal.App.4th at p. 1140), requiring reversal of the order granting the petition. However, the record reflects that the parties discussed the requirements for granting a section 1356 petition and the trial court read and considered those papers before ruling there was good cause for granting the petition. Nothing more was required. (Ibid.)

    G. Whether the Petition and Solicitation for Votes Were Deficient, Inaccurate and Misleading

    Litvak and Bagnall contend the section 1356 petition and the documents sent to homeowners to solicit votes on the Restated CC&Rs were deficient, inaccurate, and misleading. In particular, they claim the comparison chart between the original CC&Rs and the Restated CC&Rs was so deficient that it “must be deemed to be a violation of a basic equitable principle that a person seeking equity must act with equity and fairness.” Therefore, they claim, the HOA acted with unclean hands and should have been denied relief.

    Unclean hands is an affirmative defense which should be raised in the trial court. (See Park Place Estates Homeowners Assn. v. Naber (1994) 29 Cal.App.4th 427, 433; 3 Witkin, Cal. Procedure (5th ed., 2014 supp.) Actions, § 622A, p. 64.) Neither Litvak nor Bagnall raised the issue of unclean hands in the trial court. They therefore cannot raise it on appeal. (Cf. People v. Simmons (2012) 210 Cal.App.4th 778, 793[factual determinations related to the statute of limitations waived if not raised at trial];JSJ Limited Partnership v. Mehrban (2012) 205 Cal.App.4th 1512, 1526 [res judicata is an affirmative defense which must be pled or is waived]; Quantification Settlement Agreement Cases (2011) 201 Cal.App.4th 758, 812-813 [affirmative defenses must be pled or are waived].)

    As to their claim that the documents sent to the homeowners were deficient, inaccurate, and misleading, Litvak and Bagnall made that claim below, and the trial court impliedly found it did not provide a basis for denying the section 1356 petition. On appeal, they argue in their opening brief that the documents did not clearly explain how the Restated CC&Rs differed from the original CC&Rs, and the chart in which the Board attempted to list the major differences between the two documents provided little substantive information and was so vague as to be misleading as to the nature of the changes. Other than noting that the provisions to which they now take exception were not identified in the chart, Litvak and Bagnall do not point to specific misleading portions of the documents or cite any authority to support a claim that the failure to set forth the changes in the CC&Rs is grounds for denying the petition.

    In its August 9, 2011 letter to the homeowners, accompanying the sixth draft of the proposed Restated CC&Rs, the Board stated: “We wish to stress that this is a new document, not a copy of our current document with a few isolated changes. Therefore, it is not possible to simply send you a mark up of what we have now to show you the changes. However, while we encourage you to actually read the proposed Restated CC&Rs, which are very streamlined over what we have now, enclosed is a chart in which we attempt to list some of the major differences between the existing CC&Rs and the proposed Restated CC&Rs. [¶]. . . [¶] We realize the enclosed proposed Restated CC&Rs, though shorter than the current document, are still lengthy. However, we urge each and every [HOA] Member to participate in this very important process by reading the document in its entirety.”

    In the September 30, 2011 letter accompanying the final draft of the Restated CC&Rs, the Board noted that it had made changes to the proposed Restated CC&Rs previously distributed in response to input received from the homeowners, and it was enclosing a redlined version showing these changes. It again encouraged the homeowners to read the entire document. The Board repeated this exhortation in subsequent letters.

    Litvak and Bagnall do identify in their reply brief portions of the comparison chart which they claim contained “misinformation.” The claimed misinformation is the omission from the chart of what Litvak and Bagnall consider to be important information, such as the failure to notify the homeowners about the provision regarding judicial reference, the Board’s power to remove pets based on its subjective opinion, and the Board’s power to accelerate annual regular assessment payments based on delinquency.

    Litvak and Bagnall also claim that they presented evidence they were misled. Litvak stated in his declaration that in discussions with other homeowners, when he mentioned the portions of the Restated CC&Rs to which he objected, he “was met with uniform concern and confusion.” Additionally, “[i]n reviewing the documents, it was impossible to discern the substantive changes being made. Substantial time was necessary to compare the two documents, requiring a substantial number of hours and much of my legal experience to get an understanding of the changes.”

    Litvak and Bagnall conclude that due to the “misrepresentation” in the comparison chart, the HOA “should be deemed to have failed to meet their burden of proof under . . . [s]ection 1356 (e.g. that the amendment was reasonable).”

    These are all points that Litvak and Bagnall should have raised in their opening brief, and their failure to do so forfeits the points on appeal. (Julian v. Hartford Underwriters Ins. Co., supra, 35 Cal.4th at p. 761, fn. 4; In re Marriage of Turkanis & Price, supra,213 Cal.App.4th at p. 355.) In any event, that the Restated CC&Rs were long and required a substantial amount of time to review, that there were portions which may have been confusing to a layperson, and that the comparison chart did not contain an in-depth analysis of the changes from the original CC&RS, does not necessarily make the Restated CC&Rs unreasonable. Litvak and Bagnall point to no requirement that the Board provide the homeowners with an in-depth comparison chart. Moreover, in addition to the chart, the Board held two “town hall” meetings for comments and questions from the homeowners regarding the proposed Restated CC&Rs.

    Neither do Litvak and Bagnall cite any authority for the proposition that proof of reasonableness within the context of a section 1356 petition focuses on the steps taken in seeking homeowner votes on proposed amendments to CC&Rs rather than the provisions of the amended CC&Rs themselves. Section 1356, subdivision (c)(3) and (5), provide that the court may grant the petition if “[a] reasonably diligent effort was made to permit all eligible members to vote on the proposed amendment,” and “[t]he amendment is reasonable.” (Italics added.)

    Litvak and Bagnall have failed to meet their burden of demonstrating that the trial court abused its discretion in granting the section 1356 petition based on deficiencies in the documents sent to the homeowners regarding the differences between the original CC&Rs and the Restated CC&Rs.

    DISPOSITION

    The order is affirmed. The HOA shall recover its costs on appeal from Rosenbergand from Litvak and Bagnall.

    PERLUSS, P. J. and ZELON, J., concurs.

    [*] Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

    [1] Section 1356 was part of the Davis-Stirling Common Interest Development Act (Davis-Stirling Act), Civil Code section 1350 et seq. The act was repealed and reenacted operative January 1, 2014 in Civil Code section 4000 et seq. (Stats. 2012, ch. 180, §§ 1, 2.) Section 1356 has been renumbered section 4275. For ease of reference, unless otherwise specified, statutory references are to the former provisions of the Davis-Stirling Act, under which this case was decided.

    [2] The development originally was called Beverly Glen Village, then became Glenridge, and finallyBel Air Ridge.

    [3] Section 1356 provides: “(a) If in order to amend a declaration, the declaration requires members having more than 50 percent of the votes in the association, in a single class voting structure, or owners having more than 50 percent of the votes in more than one class in a voting structure with more than one class, to vote in favor of the amendment, the association, or any owner of a separate interest, may petition the superior court of the county in which the common interest development is located for an order reducing the percentage of the affirmative votes necessary for such an amendment. The petition shall describe the effort that has been made to solicit approval of the association members in the manner provided in the declaration, the number of affirmative and negative votes actually received, the number or percentage of affirmative votes required to effect the amendment in accordance with the existing declaration, and other matters the petitioner considers relevant to the court’s determination. . . .”

    Section 1356 further provides: “(c) The court may, but shall not be required to, grant the petition if it finds all of the following:

    “(1) The petitioner has given not less than 15 days written notice of the court hearing to all members of the association, to any mortgagee of a mortgage or beneficiary of a deed of trust who is entitled to notice under the terms of the declaration, and to the city, county, or city and county in which the common interest development is located that is entitled to notice under the terms of the declaration.

    “(2) Balloting on the proposed amendment was conducted in accordance with all applicable provisions of the governing documents.

    “(3) A reasonably diligent effort was made to permit all eligible members to vote on the proposed amendment.

    “(4) Owners having more than 50 percent of the votes, in a single class voting structure, voted in favor of the amendment. In a voting structure with more than one class, where the declaration requires a majority of more than one class to vote in favor of the amendment, owners having more than 50 percent of the votes of each class required by the declaration to vote in favor of the amendment voted in favor of the amendment.

    “(5) The amendment is reasonable.

    “(6) Granting the petition is not improper for any reason stated in subdivision (e). [¶] . . . [¶]

    “(e) Subdivisions (a) to (d), inclusive, notwithstanding, the court shall not be empowered by this section to approve any amendment to the declaration that:

    “(1) Would change provisions in the declaration requiring the approval of members having more than 50 percent of the votes in more than one class to vote in favor of an amendment, unless owners having more than 50 percent of the votes in each affected class approved the amendment.

    “(2) Would eliminate any special rights, preferences, or privileges designated in the declaration as belonging to the declarant, without the consent of the declarant.

    “(3) Would impair the security interest of a mortgagee of a mortgage or the beneficiary of a deed of trust without the approval of the percentage of the mortgagees and beneficiaries specified in the declaration, if the declaration requires the approval of a specified percentage of the mortgagees and beneficiaries.”

    [4] Bagnall and Litvak are both attorneys and represented themselves.

    [5] Further, if section 3.7 of the Bylaws were applicable, arguably the balloting procedures employed by the HOA here did not violate that provision. Section 3.7(c) allows the Board to extend the balloting period when the time for return of the ballots has run, but no quorum achieved. Here, with the exception of the final 20 day extension, all of the previous extensions were adopted and announced weeks prior to the voting deadline. None were expressly premised on the failure to achieve a quorum. Section 3.7(c) does not state that extensions may only be granted for lack of a quorum.

    [6] The Restated CC&Rs define “`Common Area'” as “the entire Development except for the Units and Exclusive Use Common Areas. . . .” (Restated CC&Rs, § 1.7.) “`Exclusive Use Common Areas'” are portions of the common areas “reserved for the exclusive use of one Owner. . . .” (Id., § 1.18.) “`Common Area Lots'” are “the separate parcels of real property” on which the development was constructed. (Id., § 1.8.)

    [7] Code of Civil Procedure section 638 provides: “A referee may be appointed upon the agreement of the parties filed with the clerk, or judge, or entered in the minutes, or upon the motion of a party to a written contract or lease that provides that any controversy arising therefrom shall be heard by a referee if the court finds a reference agreement exists between the parties: [¶] (a) To hear and determine any or all of the issues in an action or proceeding, whether of fact or of law, and to report a statement of decision.”

    [8] The HOA does not appear to dispute that judicial reference would result in the elimination of a jury trial.

    [9] Treo involved CC&Rs created by the developer without agreement by the homeowners and prohibited amendment of the provision without the developer’s consent. Here the Restated CC&Rs were created by the HOA and submitted to a vote by the homeowners. Further, the Restated CC&Rs do not prohibit the reference provision from being subsequently amended.

    [10] The rules are the “rules and regulations . . . adopted and amended from time to time in accordance with [s]ections 1357.100[] et seq. . . .” (Restated CC&Rs, § 1.33, italics omitted.)

    [11] As the HOA points out, the original CC&Rs allowed the Board to order a homeowner to make repairs “as may be deemed necessary in the judgment of the Board.” (§ 6.2.) Article 12 of the original CC&Rs provided the architectural committee with broad discretion over proposed improvements. Thus, the discretion provided in the Restated CC&Rs is not significantly broader than that provided in the original CC&Rs.

    [12] The HOA argues that under section 1367, subdivision (b), “foreclosure is for delinquent regular and special assessments only and no matter what may be stated in the governing documents a fine cannot be treated as an assessment.” Section 10.6 of the Restated CC&Rs states: “Unless prohibited by law, any fine imposed pursuant to this Declaration shall constitute a Special Assessment against the Owner and shall be enforceable by any means available under this Declaration or as prescribed in the Civil Code.” Because Litvak and Bagnall do not establish that foreclosure for nonpayment of fines is per se unreasonable, we need not address the question whether a homeowners association may treat delinquent fines as a special assessment.

     

    ×
  • 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.

     

    ×
  • 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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