Winchester Community Association v. Perrotta

Winchester Community Association v. Perrotta

(July 20, 2021, No. C085295)___Cal.App.5th___ [2021 Cal. App. Unpub. LEXIS 4684].

Court of Appeals of California, Third District, Placer

Filed July 20, 2021

No. C085295

Summary by Jillian M. Wright, Esq.:

After a dispute over approval of a landscape plan was litigated, the parties disagreed over which party had won, and which party was therefore entitled to attorney fees. The court determined the association was the prevailing party under Civil Code section 5975 because the owner failed to establish that the settlement agreement they disputed was invalid.

TAKEAWAY: In suits to enforce the governing documents, the prevailing party is entitled to attorney fees. However, which party prevails is not always clear, and the court must make that determination. This case holds that a court has not abused its discretion in awarding attorney’s fees if its determination regarding the prevailing party does not exceed the bounds of reason.

***End Summary***

WINCHESTER COMMUNITY ASSOCIATION, Plaintiff, Cross-defendant and Respondent,
v.
CHARLES FRANK PERROTTA et al., Defendants, Cross-complainants and Appellants.

Appeal from the Super. Ct. No. SCV0029936.

NOT TO BE PUBLISHED
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

BLEASE, Acting P. J.

A dispute between the appellants, husband and wife Charles Frank Perrotta and Charlotte Van Warmerdam Perrotta (collectively the Perrottas), and respondent Winchester Community Association (Association) over the landscaping of appellants’ home that they purchased in respondent’s development is before us for a second time. In the first appeal, we held a settlement agreement between the Perrottas and the Association was enforceable, it required the Perrottas to submit both a landscape plan and a site plan to the Association for approval before beginning work on their property, the Perrottas submitted the necessary plans within the time required under the agreement, and the Association prevented the Perrottas from performing the work under the settlement agreement. We accordingly reversed the judgment entered in favor of the Association and the postjudgment order awarding the Association attorney fees and costs and remanded with directions.

The case before us now involves the trial court’s award on remand of attorney fees to the Association as the prevailing party in the litigation. The Perrottas contend on appeal they were entitled to recover fees under the Davis-Stirling Act (Act) as the prevailing party, they are entitled to costs as a matter of law even if they are not entitled to fees, and the award of fees and costs to the Association was excessive.

We conclude it was within the trial court’s discretion to find the Association as the prevailing party, the Perrottas are not entitled to costs under Code of Civil Procedure section 1032 as the trial court had discretion to determine the Association was the prevailing party, and the amount of fees and costs awarded by the trial court was not affected by a prior award of fees stemming from the Association’s successful anti-SLAPP motion against the Perrottas. We shall affirm.

BACKGROUND
The relevant facts and procedure are taken largely from our opinion in the prior appeal,[1] supplemented where necessary by the records in this and the prior appeal.

Winchester is a common interest development governed by the Act, which is set forth in Civil Code[2] section 4000 et seq. and provides general rules for the governance of planned developments. The community is comprised of upscale, single-family homes in the Sierra Foothills and is managed and maintained by the Association, which is governed by a board of directors (Board) and subject to a recorded declaration of conditions, covenants, and restrictions (CC&R’s), the Bylaws of the Association, and the Design Guidelines and Regulations (Design Guidelines). All lot owners in the community are members of the Association.

The Perrottas own lot 85, located at 1101 Holly Leaf Lane. As such, they are members of the Association and subject to the CC&R’s, Bylaws of the Association, and Design Guidelines. They purchased the lot, which had been in foreclosure, on September 30, 2009. At that time, the lot contained a residence that was nearly complete and a driveway, but was devoid of any landscaping. The original owner/builder had submitted a site plan that had been approved by the Winchester Design Review Committee (Committee), but he had not submitted a landscape plan. It was a common practice, and completely acceptable, for owners to defer submission of a landscape plan.

Pursuant to section 5.01(a) of the CC&R’s, subject to certain exceptions not applicable here, “prior to submittal to the County for building permits and before commencement of construction or installation of any Improvement within Winchester, the Owner planning such Improvement must submit to the Design Committee a written request for approval. The Owner’s request shall include structural plans, specifications and plot plans satisfying the minimum requirements set forth in the Design Guidelines . . . .” “The term `Improvement’ . . . includes, without limitation, the construction, installation, alteration or remodeling of any Residence structures, garages, out buildings, walls, fences, swimming pools, landscaping, landscape structures, skylights, patios . . . or any other structure of any kind. Any clearing or grading of a Homesite or alteration of natural drainage courses shall be considered a work of `Improvement’ requiring approval hereunder.”

The Design Guidelines set forth a “design review process,” which must be followed for all major site and/or landscaping improvements. Improvement plans are reviewed by the Committee, which evaluates such plans on the basis of the Design Guidelines.

On December 22, 2009, about three months after the Perrottas purchased their lot, Kyle Bodyfelt, the Association’s property manager, directed the Perrottas to provide him with a copy of their “landscape plan” by January 8, 2010. The Perrottas responded that they were “focusing on completing the inside” of their residence and had yet to decide what they wanted outside or “locate and hire a competent landscape designer.” Accordingly, they advised Bodyfelt that May 30, 2010, would be a “more realistic” date on which to submit the landscape plan.

On February 17, 2010, the Committee advised the Perrottas that their request for an extension to May 30 was denied and directed them to submit a landscape plan by March 19, 2010. The Committee explained that the Perrottas’ occupancy of the residence “on a fairly regular basis without having submitted the required landscaping plans,” constituted a clear violation of section 5.14(b) of the CC&R’s, which requires that “[a]ll approved landscaping” be completed by the time the county issues a certificate of occupancy.

In February or March 2010, the Perrottas retained Jeff Ambrosia, a licensed landscape architect employed by Yamasaki Landscape Architecture, to develop landscape construction documents for their property. At all relevant times herein, Ambrosia also served as a consultant to the Committee, and as such, reviewed landscaping documents of new homeowners. As a result, he was familiar with the CC&R’s and Design Guidelines. The Perrottas instructed Ambrosia to prepare a landscape plan that would be accepted by the Association.

On March 25, 2010, Ambrosia sent the Committee a diagram showing a secondary driveway across the front of the residence that was intended to provide access to the front door. The Committee denied the Perrottas’ request to install the proposed driveway.

On April 16, 2010, Bodyfelt and members of the Committee met with Charles Perrotta and Ambrosia on the Perrottas’ property to discuss the proposed secondary driveway. A week later, the Committee wrote to the Perrottas and proposed three alternatives to the Perrottas’ proposed secondary driveway. Ambrosia responded to the letter, noting that the options provided by the Committee “would require a tremendous expense” and result in an unnecessary hardship.

On May 26, 2010, the Committee notified the Perrottas that it was standing by its denial of their request for a “second driveway” and requested that the Perrottas meet with members of the Board and the Committee on June 15, 2010, “to discuss . . . a time frame for submittal and completion of landscape plans . . . .” The Perrottas advised the Committee that they had business out of the area on June 15, 2010, and would be on vacation in early July, and suggested a meeting in late July.

On July 16, 2010, the Board sent the Perrottas written notice of a hearing on August 3, 2010, to address various alleged violations of the Association’s governing documents, including the lack of landscaping and failure to submit “plans and fee[s].” The Perrottas advised the Board that they were unavailable on August 3, 2010, and on July 30, 2010, submitted a landscape plan for the property. According to Nancy Jakse, the Board president, the landscape plan contained “a number of elements . . . that were inconsistent with the site plan of the already approved plans” submitted by the prior owner. Accordingly, the landscape plans were not approved.

The hearing went forward on August 3, 2010, without the Perrottas. The Board determined that it needed more information and continued the hearing to October 6, 2010. Meanwhile, on August 4, 2010, the Committee wrote to the Perrottas and requested clarification as to whether they intended to use the previously approved site plan or submit a modified plan of their own.

At the October 6, 2010, hearing, the Perrottas indicated that they intended to complete the project according to the previously approved site plans, and Jakse informed them that there were many elements on the previously rejected landscape plan for which the Board had no “architectural information.” The Perrottas agreed to submit a new landscape plan by the end of October 2010, and complete landscaping their property by the end of January 2011. The deadline for submitting the revised landscape plan was later extended to November 2010. Following the hearing, the parties continued to discuss the Perrottas’ desire for a secondary driveway but were unable to resolve the issue. The Perrottas did not submit a revised landscape plan by the end of November 2010, and in January 2011, the parties agreed to mediate the dispute.

The mediation took place on April 1, 2011, before retired superior court judge Darrel Lewis. Board president Jakse and Committee chair Richard Breaux represented the Association at the mediation and were accompanied by the Association’s counsel. The Perrottas and their counsel were also present. The mediation continued all day and ended with the formulation of a “Settlement Agreement.” The document is seven pages in length, with one attachment. The mediator provided a three-page printed document with general terms as a courtesy to the parties to expedite the formulation of the agreement. Some of the provisions set forth therein are crossed out, while others have been edited by hand. Specific terms negotiated by the parties and their attorneys are set forth in four handwritten pages. The document was executed by the parties and their attorneys.

The first three printed pages provided in pertinent part: “The parties hereby agree to settle this dispute in its entirety on the terms set forth below.” “[E]ach party waives . . . the right to any known claims” against the other.”It is the intent of the parties that this agreement is binding and enforceable.” “This Agreement represents the complete understanding between the parties.”

The remainder of the agreement was handwritten. It provided in its entirety:

“This agreement pertains to driveway and landscape issues only. All other issues are dropped at this time.
“Both parties agree that the goal of this agreement is to complete the landscaping and driveway of the residence in question and to obtain a certificate of occupancy from Placer County at the earliest practicable date.
“Perrotta agrees to obtain [a] signed final inspection from Placer County on all permits relating to the subject property not later than September 15, 2011.[3]
“The above deadline of September 15, 2011 shall be extended by the number of calendar days that elapse between the simultaneous submission date of landscape plans and separate site plans to Winchester and the date Perrotta is notified of approval of both said plans.
“The above deadline of September 15, 2011 shall be extended additionally by the number of calendar days that elapse between the submission date of any necessary plans to Placer County and the date Perrotta is notified of approval of said plan.
“Perrotta will submit payment of $300 simultaneously with submission of the landscape plans to Winchester.
“Perrotta will submit payment of $5,000 as a compliance deposit to Winchester simultaneously upon receiving the stamped site plans and landscape plans. Said deposit shall be placed in escrow and returned to Perrotta upon completion of the site plans and landscaping plans referred to above. See Section 5.3 of Winchester design guidelines and regulations. Final inspection of the property will be to determine that the Perrottas are in compliance with the plans.
“Perrotta agrees to obtain a $75,000 completion bond, prior to starting construction, wherein Winchester is solely named as beneficiary of the bond, to be paid to Winchester in the event Perrotta fails to complete their obligations as specified in this agreement. The parties agree that each party will pay 50% of the fees for obtaining this bond.
“Winchester agrees to drop the April 6, 2011 compliance and fine meeting.
“The parties agree that in the event that Perrotta submits a landscape and/or site plan which envisions construction of a second driveway/turnaround within the shaded portion of the setback area as depicted in Attachment A & said plans are otherwise in compliance with the Association[‘s] governing documents & Design Review Guidelines, the Association agrees to issue Perrottas a variance to permit construction of said driveway [within] the shaded portion of the setback in Attachment A. The parties further agree and understand that the Association’s issuance of a variance does not otherwise supersede or replace any additional requirements that may be required by the County for approval of said plan(s) &/or issue of a variance for construction [within] the setback.
“The Association further represents that as of the date of this agreement, the Association is of the opinion that that Perrotta building structure is in compliance with the Association’s governing documents and Design Review Committee Guidelines.”
On May 19, 2011, the Perrottas submitted a seven-page set of “Landscape Development Plans” and a $300 landscape review fee to the Committee. The plans were prepared by the Perrottas’ landscape architect Ambrosia. In addition to a “Cover Sheet,” the plans consist of the following pages: “Amenities Plan”; “Hardscape Plan”; “Planting Plan”; “Irrigation Plan”; “Lighting Plan”; “Planting Details”; and “Irrigation Details.” Among other things, the plans showed property lines, site envelope, building envelope, building footprint, proposed secondary driveway, fencing, retaining and seating walls, flagstone and asphalt paving, hot tub and concrete pad, pizza oven, stepping stones, metal gate, existing rock shale, and existing drainage canal.

Jakse and Breaux reviewed the plans and found them deficient. In a letter dated May 25, 2011, Breaux informed the Perrottas that “per page 4 of the mediation settlement agreement, you were required to simultaneously submit landscape plans and separate siteplans for approval. Since you failed to submit site plans for architectural review to replace or modify the currently approved . . . site plan sheets . . ., no approval action can be taken by the [Committee] relative to the landscape plans. As has been communicated many times before, landscape plans must conform to approved architectural plans.” Breaux continued, “There are numerous elements depicted on your landscape plans that are beyond the scope of landscape review and must go through architectural approval; e.g., the driveways, parking pad, spa, expanded deck, retaining walls, fencing, and gate. Any element shown on sheets 1 and 2 of your currently-approved plans that you don’t intend to install needs to be removed from your site plan. Similarly, any new or modified elements must be shown with supporting engineering/architectural detail, if required. The proposed site plan must also reflect the grading and drainage modifications that go along with your new or modified elements.” Breaux further advised that the landscape elements of the plans (planting, irrigation, & lighting) had been reviewed by the Committee’s outside landscape review consultant, who saw no issues, but explained that “approval of the landscape plans can only occur when site plans have been approved first or simultaneously.” Finally, Breaux indicated that the “second driveway/turnaround” depicted in the plans extended beyond the shaded area of the setback as agreed to in attachment A to the settlement agreement and noted that “this issue will have to be corrected” in order for “your site plan to be approved when you submit it.”

Shortly thereafter, Jakse, Breaux, Bodyfelt, and Ambrosia met on the Perrottas’ property to discuss the proposed secondary driveway. During the meeting, Ambrosia acknowledged that the proposed driveway depicted in the plans extended beyond the area provided for in attachment A to the settlement agreement and provided a revised layout, which he “put on the ground so that [Jakse and Breaux] could see that it truly did fit within the shaded area.” The Association was concerned that the county might not approve the variance agreed to at the mediation, and Jakse suggested that the Perrottas obtain approval from the county for the proposed driveway before submitting revised plans to the Committee to avoid wasting money on engineering expenses.

Sometime prior to June 30, 2011, Ambrosia, on behalf of the Perrottas, submitted “an exhibit [to the county’s planning division] that showed what [they] were trying to do” in terms of the driveway. On June 30, 2011, the Perrottas met with the county’s senior planner, and on August 22, 2011, were advised that the agency’s director had approved their “request to construct the driveway as shown on the draft Yamasaki plan,” contingent upon the submission of “a new grading plan for review and approval by the Placer County Engineering and Surveying Division prior to initiating work on the driveway and/or landscaping.” On September 19, 2011, the county advised the Perrottas that a grading permit was not required.

Meanwhile, on August 30, 2011, the Association wrote to the Perrottas, reminding them that the settlement agreement “requires you to `obtain a signed final inspection from Placer County on all permits relating to the subject property not later than September 15, 2011,'” and noted that “[w]ith less than a month to complete your project, you have yet to obtain landscape and site plans stamped by Winchester, and to pay the $5,000 compliance deposit, both of which are prerequisites to obtaining final County approvals.”

The Perrottas did not respond to the Association’s August 30, 2011, letter, and on September 23, 2011, the Association sued the Perrottas for breach of the settlement agreement and specific performance.

On October 10, 2011, Ambrosia, on behalf of the Perrottas, submitted a revised 10-page set of “Landscape Development Plans” to the Association. In addition to a “Cover Sheet,” the plans consist of the following pages: “Amenities Plan”; “Grading & Drainage Plan”; “Grading Profile”; “Hardscape Plan”; “Construction Details”; “Planting Plan”; “Irrigation Plan”; “Lighting Plan”; “Planting Details”; and “Irrigation Details.” The proposed secondary driveway depicted in the revised plans falls within the area set forth in attachment A to the settlement agreement. As compared to the May 2011 plans, the revised plans “added a tremendous amount of detail in terms of grading, drainage, [and] driveway layout,” and included elevations as requested by the Association.

On October 20, 2011, the Association advised the Perrottas that “[t]he tendered landscape development plans will be held by the Association with the review of those plans by the Association’s Design Review Committee being held in abeyance until such time as a site plan is also furnished to the Association.”

On February 14, 2012, the Perrottas filed a cross-complaint against the Association for cancelation and rescission of the settlement agreement and declaratory relief. Among other things, the Perrottas sought a declaration that the Association violated and continues to violate its own CC&R’s and Design Guidelines in the landscape approval process.

The cross-complaint also alleged defamation, intentional infliction of emotional distress, elder abuse, and breach of contract. Pursuant to the anti-SLAPP statute, Code of Civil Procedure section 425.16, the Association filed a successful special motion to strike the defamation, intentional infliction of emotional distress, elder abuse, and breach of contract claims. The trial court awarded the Association $5,000 attorney fees for the anti-SLAPP motion.

Following a five-day bench trial in May 2013, the trial court entered judgment in favor of the Association and against the Perrottas. The trial court found that the Perrottas breached the settlement agreement and ordered them to perform their obligations there under the same. In particular, the trial court determined that the settlement agreement constituted a valid and enforceable agreement and rejected the Perrottas’ claim that the agreement was ambiguous as to whether they were required to submit both a landscaping and a site plan to the Association for approval. The court found that “[u]nder a plain meaning interpretation, the Settlement Agreement required [Perrotta] to submit both landscape plans and site plans,” and determined that “no site plan [had] ever been submitted.” The trial court rejected the Perrottas’ claim that the September 15, 2011, deadline had been extended and ordered the Perrottas “to file a separate site plan . . . as defined in the Appendix to the Design Guidelines, within 60 days from the date this Judgment is entered.” The trial court found against the Perrottas on their cross-complaint. In particular, the trial court found that the Perrottas’ claim that the Association violated the CC&R’s and Design Guidelines in failing to approve the Perrottas’ plans was superseded by the settlement agreement and therefore declined to address it.

Following the trial, the court determined that the Association was the prevailing party and entered a postjudgment order awarding the Association $159,269.61 in attorney fees and costs.

The Perrottas appealed, contending (1) the settlement agreement was unenforceable because it was never consummated, (2) even if it was enforceable, it did not require them to submit a separate site plan in addition to a landscape plan, (3) the September 15, 2011 deadline was extended approximately three months, and (4) even if they were required to submit a separate site plan, the revised plans submitted on October 10, 2011, included such a plan. The Perrottas also assert that the trial court erred in declining to address their claim that the Association violated its own policies and procedures, and awarding the Association attorney fees and costs.

We concluded the settlement agreement was enforceable and required that the Perrottas submit both a landscape plan and a site plan to the Association for approval before beginning work on their property, the September 15, 2011 deadline was extended 81 days, the trial court’s implied finding that the revised plans submitted in October 2011 did not include a site plan is not supported by substantial evidence, and the Association prevented the Perrottas from performing under the settlement agreement by refusing to review those plans. Accordingly, we reversed the judgment entered in favor of the Association, as well as the postjudgment order awarding the Association attorney fees and costs, which was based on the judgment.

On remand, the Association filed a motion to strike or tax costs and renewed its motion for attorney fees totaling an adjusted amount of $157,146.44 as the prevailing party, while the Perrottas filed a bill of costs and a motion for $275,932.90 in attorney fees.

The trial court found “the Association ultimately met its objective to force the Perrottas to comply with the settlement agreement, and by extension, the CC&Rs.” While the Perrottas achieved some positive net effects, “they were unsuccessful in obtaining a finding of invalidity of the settlement agreement, or a violation by the Association of the CC&Rs and Design under the Guidelines,” leading the court to conclude the Association was the prevailing party. The court also found the amount requested by the Association was reasonable and accordingly awarded it the full $157,146.44, and granted its motion to strike or tax costs. The trial court denied the Perrottas’ motion to tax or strike costs and for fees pursuant to the Act and section 1717, finding the Association was the prevailing party. The court also modified its prior judgment to include these orders and to conform to our ruling in the prior appeal.

DISCUSSION
I
Prevailing Party
The Perrottas contend the trial court erred in finding the Association rather than they were the prevailing party under the Act, and they were therefore entitled to fees and costs under it, or in the alternative, the attorney fee provision in section 1717.

“`The Davis-Stirling Act, enacted in 1985 [citation], consolidated the statutory law governing condominiums and other common interest developments.’ [Citation.] `The Davis-Stirling Act includes provisions addressing alternative dispute resolution (ADR), including the initiation of such nonjudicial procedures, the timeline for completing ADR, and the relationship between ADR and any subsequent litigation.’ [Citation.] [¶] Among other things, the legislation provides that `[a]n association or a member may not file an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution pursuant to this article.’ [Citation.]” (Rancho Mirage Country Club Homeowners Assn. v. Hazelbaker (2016) 2 Cal.App.5th 252, 258 (Rancho Mirage).)

The Act contains the following provision: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” (§ 5975, subd. (c).) This has been extended to include costs and fees expended in ADR under the Act. (Grossman v. Park Fort Washington Assn. (2012) 212 Cal.App.4th 1128, 1134.)

In determining who is the prevailing party, a trial court is not bound by any “rigid interpretation” of that term, but instead must determine “on a practical level” which side prevailed. (Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574.) The trial court’s determination of the prevailing party is reviewed for abuse of discretion. (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 94.) “`”The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced [from the facts, the reviewing court has no authority to substitute its decision for that of the trial court.”‘ [Citations.]” (Goodman v. Lozano (2010) 47 Cal.4th 1327, 1339.)

The Perrottas claim they were the prevailing party by accomplishing their primary objective, to show that they did not breach the settlement agreement and were entitled to have the Association accept their October 2011 plans. They assert the cross-complaint was essentially defensive in nature, and that a defendant who alleges an essentially defensive cross-complaint may be the prevailing party notwithstanding an adverse result on the cross-complaint. The Perrottas additionally note that their answer to the Association’s complaint included affirmative defenses such as failure of performance by the Association, waived claims by the Association, and the Association’s breach excused the Perrottas’ performance, which would help achieve their primary objective. In addition, the Perrottas observe the Association refused their request to admit they received the revised plans in October 2011, and refused to admit that it never responded to this submission of completed plans.

The trial court was guided by two cases, Rancho Mirage and Almanor Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th 761 (Almanor). We are likewise persuaded by these cases.

Rancho Mirage involved a dispute between a condominium owner and the homeowner’s association regarding changes the owner made to the patio area of the condominium unit. (Rancho Mirage, supra, 2 Cal.App.5th at pp. 255-256.) Pursuant to mediation under the Act, the parties agreed for the owners to make certain modifications within 60 days. (Rancho Mirage, at p. 256.) When the modifications were not made in the allotted time, the association sued, seeking specific performance and declaratory relief; subsequently the parties reached agreement on modifications slightly different from those set forth in the mediation agreement. (Id. at p. 257.) The parties could not agree on who should bear the litigation expenses, and the trial court ultimately awarded attorney fees and costs to the homeowner’s association. (Id. at pp. 257-258.)

The award was affirmed on appeal. (Rancho Mirage, supra, 2 Cal.App.5th at p. 256.) It found the trial court’s determination that the homeowner’s association was the prevailing party on a practical level was “not beyond the bounds of reason.” (Id. at p. 261.) While the owners focused on the differences between the modifications made and those in the settlement agreement, the Court of Appeal noted that “[t]he `action’ at issue in the section 5975 analysis includes not only the litigation in the trial court, but also the prelitigation ADR process. [Citation.]” (Ibid.) The Court of Appeal found “[t]he Association wanted defendants to make alterations to their property to bring it in compliance with the applicable CC&Rs, specifically, by installing openings in the side wall of the patio, and altering the drapery on the patio. The Association achieved that goal, with defendants completing the modifications to the patio in September 2014.” (Ibid.)

Almanor involved a dispute in which the homeowners association sought to impose fines and related fees for the property owners’ alleged rules violations related to the owners’ leasing of their properties as short-term vacation rentals. (Almanor, supra, 246 Cal.App.4th at p. 765.) The defendant property owners disputed both the fines and the association’s authority to enforce restrictions on their properties. (Id. at pp. 766-767.) They filed a cross-complaint “for damages and equitable relief based on breach of contract, private nuisance, and intentional interference with prospective economic advantage,” as well as establishing the imposition of fines was unlawful, arbitrary, and unfair. (Id. at p. 767.) The trial court ruled against the defendants on the cross-complaint, but also rejected many of the fines, upholding only $6,000 of the $54,000 in fines assessed by the homeowner’s association. (Id. at pp. 767-768, 769.) It found the homeowner’s association to be the prevailing party and awarded it costs and fees under the Act. (Id. at pp. 768-769.)

The Court of Appeal affirmed the award of costs and fees. (Almanor, supra, 246 Cal.App.4th at p. 765.) It found the pivotal issue in the litigation was whether the fines were enforceable under California law and the CC&Rs. (Id. at pp. 774-775.) While the defendants’ partial success on the fines imposed substantially reduced their liability for damages and supported their position that the rules could not impose an unreasonable burden on their property, “by upholding a subset of the fines, the court ruled more broadly that Almanor could impose reasonable use restrictions on the Carsons’ properties, despite their authorized commercial use. That ruling echoed Almanor’s stated objective at trial that the association sought to counter the Carsons’ position that `because their lot is zoned “Commercial,” they are not bound by the CC&R’s or the Rules.'” (Id. at p. 775.) Finding Almanor was the prevailing party was not an abuse of discretion. (Id. at p. 776.)

We likewise find no abuse of discretion in finding the Association to be the prevailing party. Both in the events leading up to the mediation and those after, the Association sought to get the Perrottas to submit acceptable landscaping plans and then landscape their home in accordance with the CC&R’s and the settlement agreement. While the Perrottas sought to submit the necessary plans following the agreement, a dispute over their timely compliance led to the instant litigation. In response to the Association’s suit, the Perrottas claimed, at trial and on appeal, that they did not breach the agreement and that the agreement was invalid and unenforceable. While they ultimately succeeded in establishing that they had not breached the agreement and that the Association prevented them from completing one of their obligations, the Perrottas nonetheless failed to establish that the settlement agreement was invalid or that they were excused from their duty of performance.[4]

We are unpersuaded by the Perrottas’ claim that their failure to prevail on the cross-complaint should be overlooked as the claims therein were essentially defensive in nature. This argument is based on Hsu v. Abbara (1995) 9 Cal.4th 863, where the Supreme Court held a trial court may not find there was no prevailing party under section 1717 “when the court renders a simple, unqualified decision in favor of the defendant on the only contract claim in the action.” (Hsu, at pp. 865-866.) The Perrottas rely on footnote 10 of the Hsu opinion, which states in full, “When there are cross-actions on a contract containing an attorney fees provision, and no relief is awarded in either action, a trial court is not obligated to find that there is no party prevailing on the contract for purposes of section 1717. If the court concludes that the defendant’s cross-action against the plaintiff was essentially defensive in nature, it may properly find the defendant to be the party prevailing on the contract.” (Id. at p. 875, fn. 10.) This does no more than state a court has the discretion to determine a cross-complaint was defensive rather than a focus of the litigation when determining the prevailing party. It was within the trial court’s discretion to conclude the cross-complaints were more than merely defensive when determining who prevailed in this litigation.[5]

In applying the abuse of discretion standard to the trial court’s determination of the prevailing party under the Act, we are mindful that we cannot substitute our decision for that of the trial court. Whether or not we agree with the court’s decision is immaterial. Since the determination that the Association is the prevailing party does not exceed the bounds of reason, it must be upheld on appeal.[6]

II
Costs Were Properly Awarded to the Association
The Perrottas claim they are entitled to costs pursuant to Code of Civil Procedure section 1032.

“Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.” (Code Civ. Proc., § 1032, subd. (b).) “`Prevailing party’ includes the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. If any party recovers other than monetary relief and in situations other than as specified, the `prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed, may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under Section 1034.” (Id., subd. (a)(4).)

The Perrottas assert they are statutorily entitled to costs because the Association was denied relief on its complaint and the Perrottas were denied relief on their complaint, making them, as defendant to the action, the prevailing party. The Association obtained other than monetary relief here, a judgment that the Perrottas were bound to comply with the settlement agreement and must complete the landscaping of their property and obtain a final inspection within 56 days of the issuance of our remittitur. It was therefore within the trial court’s discretion to determine the prevailing party. As with the award of attorney fees, the implied finding that the Association was the prevailing party for the purposes of awarding costs was within the trial court’s sound discretion.

III
The Fees and Costs were Proper
The Perrottas’ final contention is the fees and costs should be lowered by $14,222.50. According to the Perrottas, pursuant to the anti-SLAPP motion, the association sought $19,222.50 in fees but was awarded only $5,000 by the trial court. This amount was not included in the awards of costs and fees reversed by this court in the first appeal. The Association did not seek the $5,000 it received for the anti-SLAPP motion in its motion for fees on remand, but on remand, sought an additional $14,222.50 in fees related to its work on the motion, which the trial court awarded. They contend the trial court was bound by the original award as the Association did not timely move for reconsideration of the original award pursuant to Code of Civil Procedure section 1008.

The Association asked for only $11,615 in fees associated with the anti-SLAPP motion in the original proceedings. The $14.222,50 amount asserted by the Perrottas on appeal is supported by a citation to the opposition to the Association’s motion for attorney fees they filed in the trial court on remand. That amount is determined by the Perrottas’ counsel by identifying entries in the billing records submitted by the Association that counsel believed were attributable to the anti-SLAPP motion.

Even assuming the Perrottas cite sufficient facts to support their claim, it was within the trial court’s authority to reconsider its earlier ruling on its own motion. A trial court retains jurisdiction to reconsider any final order. (Le Francois v. Goel (2005) 35 Cal.4th 1094, 1103-1104.) A court may reconsider a prior ruling so long as it notifies the parties and allows briefing and argument on the issue. (Id. at p. 1008.) Whether and how much the Association’s fees should be reduced because of the $5,000 awarded for the anti-SLAPP litigation was before the trial court, the matter was briefed, and the court held a hearing on the issue of costs and fees. It was within the trial court’s discretion to conclude the Association was entitled to additional fees related to the anti-SLAPP motion, or that the fees disallowed in the original were fairly attributable to the remaining litigation.[7]

DISPOSITION
The judgment is affirmed. Respondent shall recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).)

HULL, J. and MURRAY, J., concurs.

[1] Winchester Community Assn. v. Perrotta et al. (C075562, July 21, 2016) [nonpub. opn.].

[2] Undesignated statutory references are to the Civil Code.

[3] The trial court assumed, and the parties did not dispute, that the Perrottas were required to complete all construction, including landscaping, in order to obtain a “signed final inspection” from the county.

[4] Among the affirmative defenses raised by the Perrottas was that performance of their landscaping obligations was excused by the Association’s failure of performance and the Association’s actions also excused their duty to perform.

[5] At oral argument, there was a dispute between the parties as to whether the Perrottas breached the settlement agreement by failing to pay the $5,000 deposit. We do not address the dispute, as it is unnecessary to resolve this appeal.

[6] Since there is a separate statutory ground for fees and costs, it is unnecessary to consider the attorney fee provision for contract claims in section 1717. (Rancho Mirage, supra, 2 Cal.App.5th at p. 260.)

[7] This inference is supported by the fact that the anti-SLAPP motion obtained the dismissal of only four of the Perrottas’ seven cross-claims. It was within the court’s discretion that the $5,000 originally awarded was attributed to work associated with the dismissed claims, and the Association sought on remand fees related to work relevant to the claims not dismissed in the anti-SLAPP motion, but upon which the Association ultimately prevailed.

 

Champir LLC v. Fairbanks Ranch Association

Champir LLC v. Fairbanks Ranch Association
No. D077384, 2021 Cal. App. LEXIS 576 (Ct. App. June 22, 2021).

Court of Appeals of California, Fourth District, Division One

Filed June 22, 2021

No. D077384

Summary by Jillian M. Wright, Esq.:

Plaintiff owners sued an association over a dispute arising from the association’s plan to install traffic signals. The court issued a temporary restraining order and then a preliminary injunction blocking the project. The association then obtained consent from a majority of its members to proceed with the project, so the court dissolved the preliminary injunction. Both parties claimed they were the prevailing party in the lawsuit and sought their respective attorneys fees from the other. The court found the plaintiff owners to be the prevailing party and awarded the owners their fees and costs because their litigation was initiated to compel the association to comply with the CC&Rs, not to block the project.

TAKEAWAY: Determination of who is prevailing party requires ascertaining the parties litigation objective.

***End Summary***

CHAMPIR, LLC, et al., Plaintiffs and Respondents,
v.
FAIRBANKS RANCH ASSOCIATION, Defendant and Appellant.

APPEAL from a judgment of the Superior Court of San Diego County, Super. Ct. No. 37-2018-00028289-CU-NP-NC, Jacqueline M. Stern, Judge. Affirmed.

Gordon & Rees Scully Mansukhani, Thomas J. Stoddard and Casey Shaw for Defendant and Appellant.

Nicholas & Tomasevic, Craig M. Nicholas and Ethan T. Litney for Plaintiffs and Respondents.

NOT TO BE PUBLISHED IN 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.

DO, J.

INTRODUCTION
Champir, LLC (Champir), Daniel Javaheri, and Shiva Dehghani (collectively, Plaintiffs) sued the Fairbanks Ranch Association (the Association) to enforce the recorded covenants, conditions, and restrictions (CC&Rs) of their planned development community. Upon resolution of the litigation, both parties sought an award of attorney fees and costs as the “prevailing party” under Civil Code section 5975, subdivision (c).[1] The court determined Plaintiffs were the prevailing party and entered judgment for Plaintiffs with an award of $112,340 in attorney fees, plus costs of suit. The Association appeals, asserting the court should have determined that it was the prevailing party in the litigation. We affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND
I.
Plaintiffs’ Lawsuit
Champir owns a home in Fairbanks Ranch, a planned development community in Rancho Santa Fe, California, where Javaheri and his wife, Dehghani, reside. Javaheri is the manager and a member of Champir. The Association is a non-profit homeowners’ association that governs and oversees the common areas of Fairbanks Ranch pursuant to recorded CC&Rs. Champir is a member of the Association with voting rights under the CC&Rs.

In June 2018, Plaintiffs sued the Association over a dispute arising from the Association’s plan to install traffic signals at the entrance gates of Fairbanks Ranch, one of which would be directly outside Plaintiffs’ home.

Plaintiffs alleged that in May 2008 the Association obtained majority approval from its voting members to spend a little over $5.3 million for improvements to the common areas, including installation of traffic signals at two entrance gates to Fairbanks Ranch, Gates 1 and 6 (Gates Project). The Gates Project was to be funded with money received from the Association’s settlement of an unrelated lawsuit in 2000, totaling $3.2 million, and a special assessment against the properties in Fairbanks Ranch for the balance. In June 2017, the Association moved $390,470 of the funds approved for the Gates Project into another fund called the San Dieguito Road Safety Fund. The Association believed that amount represented funds from the 2000 settlement that may have been improperly designated for “`purposes outside the scope of the settlement fund.'”

In October 2017, the Association informed its members that it had obtained approval from the County Board of Supervisors for installation of traffic signals at Gates 2 and 6, rather than Gates 1 and 6, as originally approved by the members. Plaintiffs’ home is at the intersection of Gate 2, “directly next to the proposed traffic signal.” Plaintiffs claimed that this was the first time they learned of the Association’s intention to install a traffic signal at Gate 2. In a written notice, the Association told members that “`[t]he Board worked through the administrative process quietly to avoid the political hurdles [their] community encountered in past attempts to get speed control on San Dieguito Road. That is the reason [homeowner members] may not have been aware of this effort until now.’ “A month later, the Association informed its members that it was in the process of collecting bids and the traffic signals would be completed within six months.

Plaintiffs alleged the Association breached the CC&Rs and exceeded its authority in several ways. First, the Association failed to request a vote and obtain approval from its members before entering into a contract to install the traffic signals at Gates 2 and 6. Such a vote, according to Plaintiffs, was required by the CC&Rs for any capital expenditure that exceeded five percent of the Association’s annual budget for the year allocated, or $200,000 for the relevant time period. Here, the contracted price for the project was estimated to cost $430,000. Second, the Association improperly proposed to pay for the traffic signals at Gates 2 and 6 with money previously approved by members in 2008 for the Gates Project involving Gate 1, without a new vote authorizing a different use of previously allocated funds. Third, the Association planned to transfer operation and maintenance of the traffic signals after construction to the County of San Diego, which Plaintiffs alleged would be an improper transfer of Association funds to a third party, without a prior vote or majority approval.

Plaintiffs asserted five causes of action, including claims for breach of governing documents, trespass, nuisance, declaratory relief, and injunctive relief. Plaintiffs claimed the proposed traffic light at Gate 2 would encroach on their property and cause a nuisance as a result of “increased noise, traffic, pollution, and light.” In addition to monetary damages, Plaintiffs sought to enjoin the Association from construction of the traffic lights until a judicial determination of the rights and responsibilities of the parties.

II.
The TRO and Preliminary Injunction
On June 14, 2018, the trial court granted Plaintiffs’ ex parte application for a temporary restraining order (TRO) and enjoined the Association from construction of a traffic signal at Gate 2, pending a hearing on Plaintiffs’ motion for a preliminary injunction.

The Association filed a request to modify the TRO to enjoin it from construction of “any part of the Gate 2 traffic signal on Plaintiff[s’] property” only. It presented evidence of a professional land survey to show construction of the traffic signal would not encroach on Plaintiffs’ property. On June 21, 2018, the trial court modified the TRO to allow the project to proceed on “non-plaintiff land” but enjoined the Association from construction of any part of the traffic signal on Plaintiffs’ property.

On September 7, 2018, Plaintiffs filed a motion for a preliminary injunction against the Association, seeking to enjoin it from construction of the traffic signal at Gate 2 and further expenditure of funds for the traffic signal at Gate 2. On October 5, the court granted Plaintiffs’ motion in part and issued a preliminary injunction enjoining the Association from proceeding with construction of the traffic signal at Gate 2 during the pendency of the lawsuit. The court specifically found that “Plaintiffs have established a reasonable probability of success on the merits of their claim for breach of the Association’s governing documents and that Plaintiffs will suffer irreparable injury if the injunction is not issued.”

On November 20, 2018, the Association requested the court dissolve the preliminary injunction due to a “material change in the facts.” After the preliminary injunction was issued, the Association had requested a vote and obtained written consent from a majority of its members to proceed with construction of the traffic signal at Gate 2, even if expenditures exceeded 5 percent of its budgeted expenses for the year. The Association argued it would, therefore, be acting within its authority under the CC&Rs to install the traffic signal at Gate 2. On December 14, the court ordered the preliminary injunction dissolved, finding a material change in facts based on the Association’s evidence showing that it “recently obtained the written consent of a majority of the Association’s members to proceed with the installation of a traffic signal at Gate 2.” Accordingly, the court concluded “the evidence no longer support[ed] restraining the Association” from constructing the traffic signal at Gate 2.

III.
Prevailing Party Fee Award
After the preliminary injunction was dissolved, Plaintiffs voluntarily dismissed their causes of action for trespass and nuisance on May 1, 2019 and the remaining causes of action on September 17, 2019.[2] Plaintiffs and the Association then filed respective motions for attorney fees, each claiming to be the prevailing party under section 5975, subdivision (c). The Association also requested attorney fees pursuant to the CC&Rs, which provided that the Association would be entitled to reimbursement of its legal expenses if a member sued it and the Association was “`successful or sustained in its position in such suit.'”

On November 5, 2019, after a hearing, the trial court determined Plaintiffs, and not the Association, were the prevailing party. The court awarded Plaintiffs their attorney fees in the amount of $112,340 and denied the Association’s motion for attorney fees. On December 6, the court entered judgment for Plaintiffs. The Association appeals, asserting the trial court should have found that it was the prevailing party.

DISCUSSION
I.
“Prevailing Party” Under Section 5975
The Davis-Stirling Common Interest Development Act (Davis-Stirling Act or the Act) governs an action to enforce the recorded CC&Rs of a common interest development. (§§ 4000-6150 [formerly sections 1350-1376].) Section 5975 provides that CC&Rs may be enforced as equitable servitudes, unless unreasonable, and “[i]n an action to enforce the governing documents [of a common interest development], the prevailing party shall be awarded reasonable attorney[ ] fees and costs.” (§ 5975, subds. (a), (c).) The prevailing party is entitled to attorney fees “`as a matter of right'” and the trial court is “`obligated to award attorney fees[ ] whenever the statutory conditions have been satisfied.'” (Salehi v. Surfside III Condominium Owners Assn. (2011) 200 Cal.App.4th 1146, 1152 (Salehi) [construing former section 1354], quoting Hsu v. Abarra (1995) 9 Cal.4th 863, 872 (Hsu).)

The Act does not define “prevailing party.” However, it is well established that “[t]he analysis of who is a prevailing party under the fee-shifting provisions of the Act focuses on who prevailed `on a practical level’ by achieving its main litigation objectives[.]” (Rancho Mirage Country Club Homeowners Assn. v. Hazelbaker (2016) 2 Cal.App.5th 252, 260 (Rancho Mirage), citing Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574 (Heather Farms); Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 94 (Villa De Las Palmas) [affirming trial court’s determination that an association was the prevailing party because “[o]n a `practical level’ [citation], [it] `achieved its main litigation objective'”]; Almanor Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th 761, 773 (Almanor) [“[T]he test for prevailing party is a pragmatic one, namely whether a party prevailed on a practical level by achieving its main litigation objectives.”].)

II.
Standard of Review
On appeal, the Association’s sole contention is that the trial court “incorrectly concluded that the [Plaintiffs] were the prevailing parties in this action, and that [the Association] was not the prevailing party.”[3] It does not challenge the reasonableness of the fee amount.

We review the trial court’s determination of the prevailing party under the Davis-Stirling Act for abuse of discretion. (Villa De Las Palmas, supra, 33 Cal.4th at p. 94; Rancho Mirage, supra, 2 Cal.App.5th at p. 260; Almanor, supra, 246 Cal.App.4th at p. 774; Heather Farms, supra, 21 Cal.App.4th at p. 1574.) “`”`The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court.'”‘” (Rancho Mirage, supra, at pp. 260-261.)

The Association argues we should apply de novo review because the “determination of the legal basis for an attorney fee award is a question of law, reviewed de novo.”[4] We disagree. There is no dispute as to the “legal basis” for the court’s attorney fee award. Both parties sought an award of attorney fees as the prevailing party under section 5975, subdivision (c). On appeal, both parties agree section 5975, subdivision (c) provides the statutory basis for the prevailing party to recover attorney fees. The Association’s dispute is not with the legal basis for the trial court’s attorney fee award, but with the “factual underpinnings” of the court’s determination that Plaintiffs prevailed in this action.

III.
No Abuse of Discretion in Trial Court’s Determination of Prevailing Party
In determining the prevailing party under the Davis-Stirling Act, “the trial court should `compare the relief awarded on the [ ] claim or claims with the parties’ demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. The prevailing party determination is to be made . . . by “a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.”‘” (Almanor, supra, 246 Cal.App.4th at p. 774, citing Hsu, supra, 9 Cal.4th at p. 876.)

The trial court engaged in that comparative analysis and determined that “Plaintiffs’ main objective in filing suit was to require the Association to comply with . . . [the CC&Rs] before proceeding with the installation of the traffic signal.” The court further found that Plaintiffs succeeded in their objective. By obtaining a TRO and a preliminary injunction, Plaintiffs compelled the Association to “immediately . . . obtain the written consent of its members” and were therefore “successful in their attempt to have the Association comply with the CC&Rs before installing the traffic signal.” Accordingly, the court determined Plaintiffs were the prevailing parties entitled to their reasonable attorney fees.

We will not disturb the trial court’s determination absent a clear showing of an abuse of discretion. (Villa De Las Palmas, supra, 33 Cal.4th at p. 94; Rancho Mirage, supra, 2 Cal.App.5th at p. 260; Almanor, supra, 246 Cal.App.4th at p. 774; Heather Farms, supra, 21 Cal.App.4th at p. 1574.) It is the Association’s burden to demonstrate the trial court abused its discretion by “`”`exceed[ing] the bounds of reason.'”‘” (Rancho Mirage, supra, at p. 260.) However, rather than presenting their appeal under the applicable standard of review, the Association continues to press their “respectful disagreement with the factual foundation” for the trial court’s conclusion “that the [P]laintiffs’ primary objective was met in this case.”

It argues the record does not support the trial court’s finding that Plaintiffs’ litigation objective was to obtain membership approval before installation of the traffic lights. It contends that “Plaintiffs’ own pleadings and motions in this case reveal that their singular goal in this litigation was to try to prevent the construction of a traffic signal next to their home.” It further contends “[t]he only remedy which Plaintiffs sought for Breach of Governing Documents was money.” Thus, the Association argues that since Plaintiffs failed to stop the construction of the traffic signal and failed to obtain any monetary relief, Plaintiffs were not the prevailing parties “as a matter of law.” We disagree.

First, the Association’s arguments ignore the governing standard of review. In deciding whether the trial court abused its discretion, we are bound by the substantial evidence rule. (Salehi, supra, 200 Cal.App.4th at p. 1154.) We presume the trial court’s judgment is correct, with “`”all intendments and presumptions . . . indulged to support the judgment[.]”‘” (Ibid.) “`”[T]he trial court’s resolution of any factual disputes arising from the evidence is conclusive.”‘” (Ibid.) “[W]e do not substitute our judgment for that of the trial court when more than one inference can be reasonably deduced from the facts.” (Almanor, supra, 246 Cal.App.4th at p. 776.)

Second, the record simply belies the Association’s contentions and demonstrates the trial court’s determination that Plaintiffs prevailed on a practical level was well within the bounds of reason. As set forth in the complaint, Plaintiffs’ primary cause of action was for breach of the governing documents, wherein they alleged the Association breached the CC&Rs and exceeded its authority in failing to request a vote and obtain majority approval from its members before taking actions to install the traffic lights, including the expenditure of Association funds. In seeking a TRO, Plaintiffs argued the Association had “completely ignored” and “disregarded” the CC&Rs and its actions should be enjoined until the rights and responsibilities of the parties under the CC&Rs could be judicially determined.

In seeking a preliminary injunction, Plaintiffs again made clear their objective: “[T]he Association approved . . . the construction of traffic signals at Gates 2 and 6 improperly because the Association did not seek a vote of the Members of the Association. [Plaintiffs’] ultimate goal in this Action is not to prevent the construction of the [traffic lights]. It is to compel the Association to submit this project to a vote of the Members and to let them decide. This authorizing procedure is required by the CC&Rs, Civil Code section 5605, . . . . If the Members decided to approve the project, Plaintiffs, as part of the Association, must live with that decision. Plaintiffs in this Motion [for a preliminary injunction] seek only to preserve the Status Quo until that vote can be had.” (Italics added.)

Further still, Plaintiffs asserted the burden of an injunction on the Association was “miniscule” because “it can simply hold a vote of the Members for the [installation of the traffic lights], vitiating an injunction.” (Italics added.) Promptly after the issuance of the preliminary injunction, the Association did just that. It put the matter to a vote and obtained majority approval from its members for the traffic lights and, on the basis of that material change in facts, the court granted the Association’s motion to dissolve the preliminary injunction. Only after the Association came into compliance with the CC&Rs did Plaintiffs voluntarily dismiss their entire action for mootness.

The Association argues, however, that Plaintiffs’ voluntary dismissal of the action, without any finding of liability against it, compels the conclusion that it is the prevailing party, as a matter of law. In support of this argument, the Association relies on the statutory definition of “prevailing party” under the general cost statute of Code of Civil Procedure section 1032, subdivision (a)(4), which provides that a “`[p]revailing party'” includes “a defendant in whose favor a dismissal is entered[.]” (Code. Civ. Proc. § 1032, subd. (a)(4).) But “the premise for this argument, that a litigant who prevails under the cost statute is necessarily the prevailing party for purposes of attorney fees, has been uniformly rejected by the courts of this state.” (Heather Farms, supra, 21 Cal.App.4th at p. 1572.) And as noted by the Heather Farms court, “Code of Civil Procedure section 1032, subdivision (a) only defines `”[p]revailing party”‘ as the term is used `in [that] section.’ It does not purport to define the term for purposes of other statutes.” (Ibid.) Moreover, elsewhere in its opening brief,[5] citing Heather Farms, the Association agrees the prevailing party under section 5975, subdivision (c), is determined by the pragmatic test of identifying “which party has prevailed on a `practical level.'”

The Association also relies on Coltrain v. Shewalter (1998) 66 Cal.App.4th 94 (Coltrain) to argue Plaintiffs’ voluntary dismissal of the action makes it the prevailing party. But Coltrain does not help advance the Association’s argument. There, the trial court awarded attorney fees to defendants as “a prevailing defendant” under Code of Civil Procedure, section 425.16, subdivision (c), the fee-shifting provision of the anti-SLAPP statute. (Coltrain, supra, at p. 100.) Although concluding the trial court erroneously applied the standard under Code of Civil Procedure section 1032, subdivision (a)(4), the Court of Appeal affirmed the fee award. (Id. at p. 107.) In doing so, the Court of Appeal held that “where the plaintiff voluntarily dismisses an alleged SLAPP suit while a special motion to strike is pending, the trial court has discretion to determine whether the defendant is the prevailing party for purposes of attorney[ ] fees under Code of Civil Procedure section 425.16, subdivision (c). In making that determination, the critical issue is which party realized its objectives in the litigation.” (Ibid., italics added.)

The Coltrain court rejected “defendants’ contention that a voluntary dismissal while a special motion to strike is pending should automatically entitle a defendant to attorney’s fees.” (Coltrain, supra, 66 Cal.App.4th at p. 107.) Rather, the court noted that “regardless of whether the action is a SLAPP suit or not, the plaintiff may have good faith reasons for the dismissal that have nothing to do with oppressing the defendant or avoiding liability for attorney’s fees.” (Ibid.) The Coltrain court also reiterated what the California Supreme Court has previously said on this subject: “`In particular, it seems inaccurate to characterize the defendant as the “prevailing party” if the plaintiff dismissed the action only after obtaining, by means of settlement or otherwise, all or most of the requested relief, or if the plaintiff dismissed for reasons, such as the defendant’s insolvency, that have nothing to do with the probability of success on the merits.'” (Coltrain, supra, 66 Cal.App.4th at p. 103, quoting Santisas v. Goodin (1998) 17 Cal.4th 599, 621-622.)

Here, the trial court acknowledged that “Plaintiffs eventually dismissed their claims without prejudice” and concluded “such conduct does not deprive them of prevailing party status.” It is a reasonable conclusion, from the litigation history, that Plaintiffs voluntarily dismissed the action because the Association’s capitulation after issuance of the preliminary injunction had mooted their action. The court did not find and nothing in the record suggests, as the Association argues, that “[r]ather than face trial, Plaintiffs dismissed” their claims.

The Association’s reliance on Salehi, supra, 200 Cal.App.4th 1146 is similarly unhelpful. In Salehi, the plaintiff dismissed without prejudice eight of ten causes of action against her condominium association on the eve of trial because her construction expert suddenly became unavailable. (Id. at pp. 1151-1152.) The plaintiff obtained a continuance of trial on the remaining two causes of action for negligent misrepresentation and fraud, believing she would not need the expert to prove those claims. (Ibid.) Before the trial date, the association moved for attorney fees as the prevailing party on the eight dismissed causes of action. (Id. at pp. 1152-1153.) The Court of Appeal reversed the trial court’s order denying the fee award. (Id. at pp. 1155, 1162.) In doing so, the Court of Appeal concluded that “[t]he record does not suggest that [plaintiff] would have prevailed on the merits. It does not appear that she was ready to go forward procedurally and prove the case substantively.” (Id. at p. 1155.) Here, unlike Salehi, the trial court specifically found “Plaintiffs have established a reasonable probability of success on the merits of their claim for breach of the Association’s governing documents” when it issued the preliminary injunction enjoining the Association from proceeding with construction of the traffic signal at Gate 2 during the pendency of the lawsuit.

Third, the Association’s focus on Plaintiffs’ prayer for relief to argue the true intent of Plaintiffs’ action was to prevent a traffic light from being installed, not enforcement of the governing documents, is misplaced. In determining litigation success, the court respects substance rather than form. (Rancho Mirage, supra, 2 Cal.App.5th at p. 260 [“We see nothing in the Davis-Stirling Act that suggests we should give more weight to the form of a complaint . . . than to the substance of the claims asserted and relief sought, in determining whether an action is one `to enforce the governing documents’ in the meaning of section 5975.”].) A prayer is not part of a cause of action. (Berg v. Investors Real Estate Loan Co. (1962) 207 Cal.App.2d 808, 815 [“It is elementary that the prayer is no part of the statement of the cause of action [citations] and that the issues involved are determinable from the facts alleged rather than from the prayer.”].)

Moreover, while preventing the installation of the traffic light “might have been a litigation `dream'” for Plaintiffs (Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn. (2008) 166 Cal.App.4th 103, 127), it does not undercut their main litigation objective of requiring the Association to comply with the CC&Rs and obtain majority approval from its members before installing the traffic light. (See ibid. [Plaintiff homeowners were determined to be prevailing party despite not achieving “litigation `dream'” of obtaining correction of building defect where they succeeded in compelling membership vote. “The fact that the membership did not vote to correct this defect in the building does not mean that the [plaintiffs] failed on their main litigation objective.”].)

In sum, we conclude the trial court’s determination that Plaintiffs prevailed on a practical level was supported by substantial evidence and well within the bounds of reason. The Association has failed to demonstrate any abuse of discretion in the court’s award of attorney fees to Plaintiffs and denial of attorney fees to it under section 5975, subdivision (c).

IV.
Association’s Remaining Arguments
A. Any Claim of Error as to Inclusion of Javaheri and Dehghani in the Fee Award Is Forfeited
The Association argues the trial court erred in awarding attorney fees to Javaheri and Dehghani because they “are not the owners of the property” and therefore have “no right to enforce the CC&Rs.” As such, the Association argues, Javaheri and Dehghani “cannot be `prevailing parties’ in an action to enforce the governing documents of the Fairbanks Ranch Association.”

In support of this claim of error, the Association dedicates two short paragraphs in their opening brief, cites to no legal authorities whatsoever for their contentions, and provides unhelpful record citations. The record citations merely refer this court back to the Association’s Memorandum of Points and Authorities in Opposition to Plaintiffs’ Notice of Motion for Attorneys’ Fees and Costs, to pages which contain almost verbatim the same two short paragraphs as in their opening brief, and to a Notice of Lodgment which indicates the Fairbanks Ranch CC&Rs were at some point lodged as an exhibit with the trial court. Having not seen the CC&Rs, we do not know what the governing documents provide.

The Association also fails to provide any discussion of how the inclusion of Javaheri and Dehghani in the fee award resulted in prejudice.[6] Indeed, it does not even challenge the reasonableness of the fee amount.

“To prevail on appeal, an appellant must establish both error and prejudice from that error. [Citation.] In order to demonstrate error, an appellant must supply the reviewing court with some cogent argument supported by legal analysis and citation to the record. Rather than scour the record unguided, we may decide that the appellant has forfeited a point urged on appeal when it is not supported by accurate citations to the record. [Citations.] Similarly, we may disregard conclusory arguments that are not supported by pertinent legal authority.” (WFG National Title Ins. Co. v. Wells Fargo Bank, N.A. (2020) 51 Cal.App.5th 881, 894 (WFG).)

Simply put, the reviewing court is not required to develop the Association’s arguments or search the record for supporting evidence. For these reasons, we conclude the Association has forfeited the claim of any prejudicial error as it relates to the inclusion of Javaheri and Dehghani in the fee award. (WFG, supra, 51 Cal.App.5th at p. 894.)

B. Section 1717 Does Not Provide the Association with Any Basis for Recovering Attorney Fees Pursuant to the CC&Rs
In addition to section 5975, subdivision (c), the Association also sought an award of attorney fees pursuant to the CC&Rs, which provides the Association would be entitled to reimbursement of its legal expenses if a member sued it and the Association was “`successful or sustained in its position in such suit.’ “Although not raised in the trial court or in its opening brief, the Association argues in its reply brief that its “claim in this case that it is the prevailing party is based upon a contractual right to attorneys’ fees pursuant to Civil Code section 1717[.]” Although we do not consider arguments raised for the first time in a reply brief absent good cause (see footnote 3 ante), we quickly dispose of the Association’s argument.

Section 1717 provides that “[i]n any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, . . . shall be entitled to reasonable attorney’s fees in addition to other costs.” (§ 1717, subd. (a).) Section 1717, subdivision (b)(2) creates an exception to the recovery of attorney fees under this statute, and states that “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.” (§ 1717, subd. (b)(2).) That exception codifies the holding in International Industries, Inc. v. Olen (1978) 21 Cal.3d 218, in which the Supreme Court “determined that a defendant could not recover attorney fees under section 1717 when the plaintiff voluntarily dismissed the action before trial.” (Hsu, supra, 9 Cal.4th at pp. 872-873.)

Thus, notwithstanding the trial court’s determination that the Association was not the prevailing party, and we find no abuse in that determination, the Association may not recover attorney fees under section 1717, subdivision (b)(2), since Plaintiffs voluntarily dismissed their lawsuit.

DISPOSITION
The judgment is affirmed. Plaintiffs are entitled to their costs on appeal.

McCONNELL, P. J. and DATO, J., concurs.

[1] All further undesignated statutory references are to the Civil Code, unless specified otherwise.

[2] Plaintiffs had previously moved on May 14, 2019 for an order dismissing the entire action “for mootness” and a determination that they were the “prevailing party” entitled to attorney fees. The court denied Plaintiffs’ motion because it was not persuaded the statute cited by Plaintiffs authorized dismissal and stated Plaintiffs may seek dismissal of their remaining claims under Code of Civil Procedure section 581, subdivision (b). The court also denied Plaintiffs’ request for a determination of prevailing party as premature because judgment had not been entered.

[3] The Association raises, for the first time in its reply brief, that the trial court abused its discretion by granting Plaintiffs’ motion for preliminary injunction. “Normally, a contention may not be raised for the first time in a reply brief.” (People v. Peevy (1998) 17 Cal.4th 1184, 1206; accord People v. Silveria and Travis (2020) 10 Cal.5th 195, 255 [“`”[i]t is axiomatic that arguments made for the first time in a reply brief will not be entertained because of the unfairness to the other party”‘”].) We do not consider arguments raised for the first time in the reply brief without a showing of good cause, which the Association did not make. (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 894, fn. 10.)

[4] The Association cites to Conservatorship of Whitley (2010) 50 Cal.4th 1206 (Whitley) and Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169 (Connerly) to argue for de novo review. These cases are inapposite because they involved “`”the determination of whether the criteria for an award of attorney fees and costs . . . have been satisfied amounts to statutory construction and a question of law.”‘” (Whitley, at pp. 1213-1214, italics added [addressing whether a litigant’s nonpecuniary interests can disqualify him from eligibility for attorney fees under Code of Civil Procedure section 1021.5], quoting Connerly, at p. 1175 [determining whether the California Business Council can be assessed attorney fees under section 1021.5 as an “`opposing part[y]’ within the meaning of that statute”].) There is no issue of statutory construction here.

[5] On March 16, 2021, the Association filed a Notice of Errata regarding its opening brief, indicating that it “inadvertently listed incorrect citations to the record” and filed with the notice, a “corrected copy of Appellant’s Opening Brief” which “corrects such citation errors and makes no other changes other than to the form of the citations to the record.” On March 18, 2021, we issued notice that the Association’s Notice of Errata will be treated as a motion for leave to file an amended appellant’s opening brief and will be considered concurrently with the appeal. We hereby grant the Association’s unopposed motion for leave to file an amended opening brief.

[6] When the Association raised this standing argument at the hearing on attorney fees, Plaintiffs’ counsel argued “all litigation efforts in this case are consolidated . . . there’s [no] reasonable way to chop up the plaintiffs in this case.” The trial judge asked the Association, the work for all plaintiffs are “all intertwined, though, aren’t they?” Despite these questions being raised below, the Association does not address them on appeal.

 

Issakhani v. Shadow Glen Homeowners Association, Inc.

Issakhani v. Shadow Glen Homeowners Association, Inc.

(2021) 63 Cal.App.5th 917.

Court of Appeals of California, Second District, Division Two

April 30, 2021

No. B301746

Summary by Jillian M. Wright, Esq.:

A pedestrian jaywalked across a five-lane highway at night and was struck by a car. The pedestrian sued the association she was trying to visit for negligence and premises liability for having too few onsite parking spaces for guests. This appeal therefore presents the question: Does a landowner owe a duty of care to invitees to provide adequate onsite parking, either (1) under common law principles, or (2) by virtue of a 1978 city ordinance that rezoned the complex’s specific parcel for multifamily dwellings and conditioned that rezoning on providing a specific number of guest parking spaces? The court concluded that the answer to both questions is “no.”

TAKEAWAY: Associations do not have a duty to provide onsite guest parking for invitees. Even if a city ordinance or statute requires an association to establish a certain number of guest parking spaces, the association is not liable for any harm that results from its lack of guest parking.

***End Summary***

63 Cal.App.5th 917 (2021)

278 Cal. Rptr. 3d 270

ANAEIS ISSAKHANI, Plaintiff and Appellant,
v.
SHADOW GLEN HOMEOWNERS ASSOCIATION, INC., Defendant and Respondent.

APPEAL from a judgment of the Superior Court of Los Angeles County, Super. Ct. No. BC623438, Melvin D. Sandvig, Judge. Affirmed.

Gusdorff Law, Janet Gusdorff; Aghabegian & Associates and Alan Aghabegian, for Plaintiff and Appellant.

Horvitz & Levy, Daniel J. Gonzalez and Mitchell C. Tilner, for Defendant and Respondent.

922*922 OPINION
HOFFSTADT, J.—

A pedestrian who decided to jaywalk across a five-lane highway at night was struck by a car. The pedestrian sued the owner of the condominium complex she was trying to visit for negligence and premises liability for having too few onsite parking spaces for guests. This appeal therefore presents the question: Does a landowner owe a duty of care to invitees to provide adequate onsite parking, either (1) under common law principles, or (2) by virtue of a 1978 city ordinance that rezoned the complex’s specific parcel for multifamily dwellings and conditioned that rezoning on providing a specific number of guest parking spaces? We conclude that the answer to both questions is “no.” We accordingly affirm the trial court’s grant of summary judgment to the condominium complex.

FACTS AND PROCEDURAL BACKGROUND
I. Facts
After nightfall on June 10, 2014, Anaeis Issakhani (plaintiff) parked her car on the far side of a five-lane street. Rather than walk to the next marked crosswalk several hundred feet away, she jaywalked. She was struck by a car, and sustained a traumatic brain injury along with several skull fractures.

At the time she was struck, plaintiff was crossing the street to get to the Shadow Glen condominium complex where her friend lived. The complex has 170 onsite parking spaces, and they are marked as “Reserved” for residents or as “Visitor” for guests. Before parking on the street, plaintiff had tried to find a parking space onsite; specifically, she followed another car through the complex’s security gate and then drove around for two or three minutes before deciding there was no available space.

The Shadow Glen complex was built in 1979 as a 68-unit housing development in Sun Valley, California. Because the parcel was originally zoned for single and dual family housing, the complex’s original developer applied to the City of Los Angeles (the City) to have the parcel rezoned as a multiple dwelling zone. As required by the City’s municipal code, the developer’s application was considered by the City’s planning department, by a hearing examiner, by the City’s planning commission, and ultimately by the Los Angeles City Council (City Council). Because the City’s zoning map is set forth in a City ordinance, a City Council-enacted ordinance is required to rezone a parcel.

923*923 In enacting ordinance No. 151,411, the City Council granted the developer’s application on five conditions[1] that the City deemed “necessary to protect the best interests of and assure a development more compatible with the surrounding neighborhood”—namely, that (1) “[n]o building located on the site … exceed two stories or 25 feet in height,” (2) “[a]ll open areas not used for buildings, driveways, parking areas, recreational facilities, or walks … be attractively landscaped” and “equipped with automatic sprinklers,” (3) “[a] 10-foot landscaped buffer setback … be provided along [the five-lane street],” and populated with trees of a specified height and at a specified density, (4) “[a]ll lighting … be directed onto the site … to eliminate any glare to adjoining residential properties,” and (5) “guest parking” be “provide[d]” “at a ratio of one-half space per dwelling unit in excess” of that otherwise required by the municipal code. Because the complex was to have 68 units, ordinance No. 151,411 requires 34 “guest parking” spaces.

After construction was completed, the City issued a certificate of occupancy that reflected 170 parking spaces, which was 13 spaces more than required by the municipal code and ordinance No. 151,411.

By the time of the accident, the complex still had 170 parking spaces but only six of them were marked as “Visitor” spaces.

II. Procedural History
On June 10, 2016, plaintiff sued the Shadow Glen Homeowners Association, Inc. (the Association), which is the current owner of the Shadow Glen complex. In the operative, second amended complaint, plaintiff asserts claims for negligence and premises liability. Both claims rest on the premise that the Association’s failure to maintain the number of guest parking spaces mandated by ordinance No. 151,411 “created a foreseeable risk of harm for the Condominium’s guests.”

The Association moved for summary judgment. Following briefing and a hearing, the trial court granted summary judgment on the grounds that the Association owed plaintiff no duty under the common law or under ordinance No. 151,411.[2]

Following the entry of judgment, plaintiff filed this timely appeal.

924*924 DISCUSSION
Plaintiff argues that the trial court erred in granting summary judgment for the Association. A defendant is entitled to summary judgment if it can “show that there is no triable issue as to any material fact.” (Code Civ. Proc., § 437c, subd. (c).)[3] The defendant bears the initial burden of establishing that the plaintiff’s cause of action has “no merit” by showing that the plaintiff cannot establish “[o]ne or more elements of [her] cause of action.” (Code Civ. Proc., § 437c, subds. (o) & (p)(2).) If this burden is met, the “burden shifts” to the plaintiff “to show that a triable issue of one or more material facts exists as to that cause of action….” (Id., subd. (p)(2); see Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849 [107 Cal.Rptr.2d 841, 24 P.3d 493].)

Plaintiff’s claims for negligence and premises liability have the same elements—namely, (1) “a legal duty of care,” (2) “breach of that duty,” and (3) “proximate cause resulting in injury.” (Kesner v. Superior Court (2016) 1 Cal.5th 1132, 1158 [210 Cal.Rptr.3d 283, 384 P.3d 283] (Kesner).) Thus, if the Association does not owe plaintiff a duty of care, it is entitled to summary judgment.

We independently decide whether summary judgment is appropriate and whether a duty of care exists. (Jacks v. City of Santa Barbara (2017) 3 Cal.5th 248, 273 [219 Cal.Rptr.3d 859, 397 P.3d 210] [summary judgment]; Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 57 [77 Cal.Rptr.2d 709, 960 P.2d 513] [duty of care].) We accordingly owe no deference to the trial court’s rulings or reasoning. (Burgueno v. Regents of University of California (2015) 243 Cal.App.4th 1052, 1057 [197 Cal.Rptr.3d 44].)

I. Analysis of Duty of Care
A duty of care exists when one person has a legal obligation to prevent harm to another person, such that breach of that obligation can give rise to liability. (Brown v. USA Taekwondo (2021) 11 Cal.5th 204, 209 [___ Cal.Rptr.3d ___, 483 P.3d 159] (Brown); Paz v. State of California (2000) 22 Cal.4th 550, 559 [93 Cal.Rptr.2d 703, 994 P.2d 975] (Paz); Coffee v. McDonnell-Douglas Corp. (1972) 8 Cal.3d 551, 559, fn. 8 [105 Cal.Rptr. 358, 503 P.2d 1366]; Annocki v. Peterson Enterprises, LLC (2014) 232 Cal.App.4th 32, 37 [180 Cal.Rptr.3d 474] (Annocki).) Whether a duty of care exists is not a matter of plucking some immutable truth from the ether; instead, the 925*925 existence of a particular duty of care reflects a determination that the “`”sum total”‘” of “`”considerations of [public] policy [should] lead the law to say that the particular plaintiff is entitled to protection.”‘” (Paz, at p. 559; see Cabral v. Ralphs Grocery Co. (2011) 51 Cal.4th 764, 771 [122 Cal.Rptr.3d 313, 248 P.3d 1170] (Cabral); Scott v. Chevron U.S.A. (1992) 5 Cal.App.4th 510, 515 [6 Cal.Rptr.2d 810].)

In determining whether public policy warrants the creation of a duty of care, courts can look to the public policy (1) found in the common law (California Service Station etc. v. American Home Assurance Co. (1998) 62 Cal.App.4th 1166, 1175 [73 Cal.Rptr.2d 182] (California Service Station) [“The courts have always had the responsibility to define negligence duties….”]), and (2) embodied in statutes, regulations, and the like. (Vesely v. Sager (1971) 5 Cal.3d 153, 164 [95 Cal.Rptr. 623, 486 P.2d 151] (Vesely) [“A duty of care … may … be found in a legislative enactment”], overruled on other grounds as stated in Ennabe v. Manosa (2014) 58 Cal.4th 697, 707 [168 Cal.Rptr.3d 440, 319 P.3d 201]; J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 803 [157 Cal.Rptr. 407, 598 P.2d 60] [“A duty of care may arise through statute …”].)

A. Common law-based duty
An owner of land has a common law duty “to maintain land in [its] possession and control in a reasonably safe condition” “as to avoid exposing others to an unreasonable risk of injury.” (See Ann M. v. Pacific Plaza Shopping Center (1993) 6 Cal.4th 666, 674 [25 Cal.Rptr.2d 137, 863 P.2d 207], overruled on other grounds as stated in Reid v. Google, Inc. (2010) 50 Cal.4th 512, 527 [113 Cal.Rptr.3d 327, 235 P.3d 988]; Barnes v. Black (1999) 71 Cal.App.4th 1473, 1478 [84 Cal.Rptr.2d 634] (Barnes); Alcaraz v. Vece (1997) 14 Cal.4th 1149, 1156 [60 Cal.Rptr.2d 448, 929 P.2d 1239]; see generally Civ. Code, § 1714, subd. (a) [codifying this common law duty].) Because plaintiff alleges that she was struck by a car in the street due to the Association’s failure to provide enough onsite parking for guests, the question in this case becomes: Does the landowner’s common law duty of care entail protecting an invitee against injuries incurred offsite due to an alleged deficiency on the landowner’s property?[4]

926*926 It certainly can. The landowner’s “`duty of care encompasses a duty to avoid exposing persons to risks of injury that occur off site if the landowner’s property is maintained in such a manner as to expose persons to an unreasonable risk of injury offsite.'” (Kesner, supra, 1 Cal.5th at p. 1159, quoting Barnes, supra, 71 Cal.App.4th at p. 1478, italics added; see McDaniel v. Sunset Manor Co. (1990) 220 Cal.App.3d 1, 7 [269 Cal.Rptr. 196] (McDaniel) [“The fact that the injuries occurred on the adjacent property does not automatically bar recovery”].) But whether it should in a specific circumstance turns on the considerations articulated by our Supreme Court in Rowland v. Christian (1968) 69 Cal.2d 108, 113 [70 Cal.Rptr. 97, 443 P.2d 561] (Rowland), partially superseded by statute on other grounds as stated in Smith v. Freund (2011) 192 Cal.App.4th 466, 473, fn. 5 [121 Cal.Rptr.3d 427]. (Barnes, at p. 1479 [“The Rowland factors determine the scope of a duty of care whether the risk of harm is situated on site or off site”]; cf. Brown, supra, 11 Cal.5th at p. 217 [Rowland factors “not designed as a freestanding means of establishing duty” in a specific circumstance where, unlike here, there is no underlying duty running between the parties that might apply].)

We conclude that a landowner’s common law duty of care does not encompass a duty to provide onsite parking for invitees in order to protect them from traffic accidents occurring offsite as they travel to the premises, and we do so for two reasons: (1) such a duty is foreclosed by precedent, and (2) even if not foreclosed, the so-called Rowland factors counsel against such a duty.

1. Precedent
In Vasilenko v. Grace Family Church (2017) 3 Cal.5th 1077 [224 Cal.Rptr.3d 846, 404 P.3d 1196] (Vasilenko), our Supreme Court held that “a landowner who does no more than site and maintain [an offsite] parking lot that requires invitees to cross a public street to reach the landowner’s premises does not owe a duty to protect those invitees from the obvious dangers of the public street.” (Id. at p. 1092; see id., at p. 1097.)

Vasilenko forecloses imposing a duty upon a landowner to provide invitees with onsite parking in order to protect them from the dangers of crossing nearby streets to get to the property. If, as plaintiff contends, a landowner had a duty to provide onsite parking to invitees, the landowner in Vasilenko would have automatically breached that duty when it directed its invitees to offsite parking facilities; there would have accordingly been no reason for Vasilenko to examine whether, under the Rowland factors, a landowner had a duty to safely shepherd those invitees onto its property from those facilities. In other words, the only reason Vasilenko exists is because a landowner owes no duty to provide onsite parking to invitees. Vasilenko even made this explicit: 927*927 “[L]andowners are not required to provide parking for their invitees.” (Vasilenko, supra, 3 Cal.5th at p. 1090.)

What is more, Vasilenko is merely the most recent in a longer line of cases that have consistently refused to impose a duty upon landowners to provide onsite parking to protect their invitees from the dangers of crossing nearby streets to access the property. In McGarvey v. Pacific Gas & Electric Co. (1971) 18 Cal.App.3d 555 [95 Cal.Rptr. 894] (McGarvey), the plaintiff was injured when one of the defendant’s employees was making a U-turn on an adjacent street, a maneuver necessitated by the absence of any onsite parking for employees. McGarvey rejected the plaintiff’s argument that the defendant had “a duty … to provide … adequate [onsite] automobile parking facilities for all employees” and “customers.” (Id. at pp. 558, 562.) In Seaber v. Hotel Del Coronado (1991) 1 Cal.App.4th 481 [2 Cal.Rptr.2d 405] (Seaber), the plaintiff was killed in a crosswalk as he traveled from a hotel’s offsite parking lot to the hotel, a task necessitated by the absence of any onsite guest parking. Seaber rejected plaintiff’s argument that the hotel was liable for plaintiff’s death, a holding that would make no sense if the hotel had a precursor duty to provide onsite parking for its guests. (Id. at pp. 484-485, 492-493.)

Although a landowner’s duty of care encompasses a more specific duty not to maintain conditions on its property that exacerbate the dangers of invitees entering or exiting the property (Swanberg v. O’Mectin (1984) 157 Cal.App.3d 325, 330 [203 Cal.Rptr. 701] [obstructing shrubbery makes exiting the property more dangerous]; Annocki, supra, 232 Cal.App.4th at pp. 38-39 [layout of onsite parking lot encourages invitees to make a dangerous left turn when exiting the property]; Constantinescu v. Conejo Valley Unified School Dist. (1993) 16 Cal.App.4th 1466, 1473-1474 [20 Cal.Rptr.2d 734] [layout of onsite parking lot creates “`snarl-ups'” and congestion that make nearby streets more dangerous (italics omitted)]), McDaniel, Seaber and Vasilenko necessarily reject the notion that the absence of onsite parking by itself amounts to a “condition” on the property that exacerbates the offsite danger to invitees and gives rise to an actionable duty.

2. Analysis of the Rowland factors
The so-called Rowland factors fall into two broad categories— namely, (1) foreseeability-related factors, and (2) other “public policy factors.” (Cabral, supra, 51 Cal.4th at pp. 774, 781.) There are three foreseeability-related factors; they are (1) “the foreseeability of harm to the plaintiff,” (2) “the degree of certainty that the plaintiff suffered injury,” and (3) “the closeness of the connection between the defendant’s conduct and the injury suffered.” (Rowland, supra, 69 Cal.2d at p. 113; see Cabral, at p. 774.) 928*928 In assessing these foreseeability-related factors, the focus is general rather than specific: We are to ask whether the “kind of harm experienced” is “generally” foreseeable from the “category of negligent conduct at issue” rather than “whether a particular plaintiff’s injury was reasonably foreseeable in light of a particular defendant’s conduct.” (Ballard v. Uribe (1986) 41 Cal.3d 564, 572, fn. 6 [224 Cal.Rptr. 664, 715 P.2d 624].) There are four public policy factors; they are (1) “the policy of preventing future harm,” (2) “the moral blame attached to the defendant’s conduct,” (3) “the extent of the burden to the defendant and [the] consequences to the community of imposing a duty to exercise care with resulting liability for breach,” and (4) “the availability, cost, and prevalence of insurance for the risk involved.” (Rowland, at p. 113; see Cabral, at p. 781.)

The foreseeability-related factors counsel against imposing a duty upon landowners to provide onsite parking to avoid injury to invitees as they travel from offsite parking locales. To be sure, as in Vasilenko, the first two foreseeability factors favor imposing a duty to provide onsite parking. That is because it is “foreseeable that an invitee” forced to park offsite due to the lack of sufficient onsite parking—like the invitee in Vasilenko who was “directed to park in an overflow lot on the other side of a public street”— “might be struck by oncoming traffic while crossing the street” and because the plaintiffs in both cases certainly suffered injury when struck by cars. (Vasilenko, supra, 3 Cal.5th at p. 1085.) However, also as in Vasilenko and as plaintiff concedes, the third foreseeability factor counsels strongly against imposing a duty. That is because the “connection between the [landowner-]defendant’s conduct and the injury suffered” is “attenuated” rather than “close.” (Id., at pp. 1083, 1086.) If, as in Vasilenko, the connection was too attenuated because the invitee’s injury was most directly the product of his “decision as to when, where, and how to cross” the street as well as the driver’s “ability to see and react to crossing pedestrians” (id., at p. 1086), the connection is even more attenuated in this case, where it was the visitor’s decision—rather than the landowner’s—to select an offsite parking space on the far side of a busy street.

The public policy factors also counsel against imposing a duty upon landowners to provide onsite parking to avoid injury to invitees as they travel from offsite parking locales. Imposing a duty to provide sufficient onsite parking to accommodate all invitees would not be especially effective in preventing future harm. Most commercial and residential properties actively used by people consist of structures along with a finite number of parking spaces. Short of requiring landowners to bulldoze structures or excavate and build underground structures to create more parking spaces, imposing a duty upon landowners to set aside enough parking spaces for all invitees is likely to do nothing more than shift the identity of who is forced to park offsite— instead of invitees, it may instead be residents and employees who have to 929*929 park offsite. But shifting the identity of who has to park offsite would not do much to prevent future harm in the aggregate. Conversely, the persons best suited to prevent future harm from street-crossing accidents, Vasilenko noted, are the “drivers[] and invitees themselves.” (Vasilenko, supra, 3 Cal.5th at p. 1090.) Because there are few “reasonable ameliorative steps” available to landowners to create more parking spaces, landowners are not “particularly blameworthy” for failing to take them. (Id. at p. 1091.) Imposing a duty to provide sufficient onsite parking for all invitees would also impose an unacceptably heavy burden, as every business and every multifamily residential dwelling complex would be required to provide parking for every guest, or else face liability for damages incurred when those guests cannot find onsite parking and are injured when trying to access the property from offsite. If, as in Vasilenko, requiring landowners “to continuously monitor the dangerousness of the abutting street and other streets in the area,” “to relocate their [offsite] parking lots as conditions change,” and potentially “to hire employees to assist invitees with crossing the street” was considered a “significant burden[]” (id. at p. 1090), the burden imposed by the proffered duty here—that is, reconfiguring the property to accommodate parking for every guest or face liability for all accidents arising from their offsite parking—is massive. (See McGarvey, supra, 18 Cal.App.3d at p. 562 [noting similarly unachievable burden].) Indeed, it is this type of “`”potentially infinite liability”‘” that “`the concept of duty'” is designed to “`limit.'” (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 397 [11 Cal.Rptr.2d 51, 834 P.2d 745].) Lastly, because insurance could be available to the landowner, the invitee, and the driver, the insurance factor is neutral in the analysis. (Accord, Vasilenko, at p. 1091.)

Thus, even if Vasilenko’s analysis of the Rowland factors did not dictate a finding of new duty, our own independent analysis of those factors counsels that finding.

B. Statute-based duty
A duty of care can also be grounded in—and hence “borrowed” from—the public policy embodied in a legislatively enacted statute or ordinance. (Elsner v. Uveges (2004) 34 Cal.4th 915, 927 & fn. 8 [22 Cal.Rptr.3d 530, 102 P.3d 915] (Elsner); see Vesely, supra, 5 Cal.3d at p. 164.)

Plaintiff argues that the Association owes her a duty of care by virtue of the guest parking conditions set forth in ordinance No. 151,411. We reject this argument for two reasons: (1) ordinance No. 151,411 is a parcel-specific ordinance adopted as the final step of a multistep administrative procedure and is therefore incapable of forming the basis for a duty of care, and (2) the 930*930 guest parking condition of ordinance No. 151,411 was aimed at preserving the aesthetic character of the surrounding neighborhood, and not at protecting invitees from traffic accidents.

1. Ordinance No. 151,411 is a special ordinance incapable of forming the basis for a duty of care
Not all legislative enactments—that is, not all statutes and ordinances —are capable of forming the basis for a duty of care giving rise to a negligence claim.

Legislative enactments sometimes embody and implement “a `broad, generally applicable rule of conduct on the basis of general public policy.'” (Horn v. County of Ventura (1979) 24 Cal.3d 605, 613 [156 Cal.Rptr. 718, 596 P.2d 1134] (Horn), quoting San Diego Building Contractors Assn. v. City Council of San Diego (1974) 13 Cal.3d 205, 212-213 [118 Cal.Rptr. 146, 529 P.2d 570].) When they do, they set forth the same type of “fundamental policy decisions” that are capable of forming the basis for a duty of care. (California Service Station, supra, 62 Cal.App.4th at p. 1176 [“The creation of a negligence duty of care involves fundamental policy decisions”].)

Other times, however, legislative enactments embody no fundamental policy decision. One such instance is where, as here, the enactment applies to a single parcel of property.[5]

There is no question that the City Council’s rezoning the Shadow Glen parcel was “a legislative act” because it was effectuated by means of an ordinance amending the City’s municipal code. (Arnel Development Co. v. City of Costa Mesa (1980) 28 Cal.3d 511, 516 [169 Cal.Rptr. 904, 620 P.2d 565]; Johnston v. Claremont (1958) 49 Cal.2d 826, 835 [323 P.2d 71], overruled on other grounds as stated in Associated Home Builders etc., Inc. v. City of Livermore (1976) 18 Cal.3d 582, 596 [135 Cal.Rptr. 41, 557 P.2d 473]; Mountain Defense League v. Board of Supervisors (1977) 65 Cal.App.3d 723, 728 [135 Cal.Rptr. 588]; Federation of Hillside & Canyon Assns. v. City of Los Angeles (2004) 126 Cal.App.4th 1180, 1195 [24 Cal.Rptr.3d 543].) But that act embodied no generally applicable, fundamental public policy. Instead, 931*931 ordinance No. 151,411 was a parcel-specific enactment that served as the culmination of a process of an internal, parcel-specific administrative review. The original developer of the Shadow Glen complex filed an application to rezone its parcel of property (and only its parcel of property), and that application proceeded through several levels of administrative review by City officials until the City Council, as the final level of that review, approved the developer’s rezoning application. Although the City Council’s mechanism for doing so was through enacting ordinance No. 151,411, that was necessary because the City’s zoning map was set forth in an ordinance (at the time, L.A. Mun. Code, § 12.04) and thus could be modified only through another ordinance. However, the mechanism of enacting an ordinance did not alter the fundamental character of the City Council’s act as embodying merely a parcel-specific policy that was tied to the “`facts peculiar to the individual case.'” (See Horn, supra, 24 Cal.3d at p. 613; Anaheim Redevelopment Agency v. Dusek (1987) 193 Cal.App.3d 249, 258 [239 Cal.Rptr. 319].)

Because ordinance No. 151,411 embodies no “general public policy,” it cannot be used as a fulcrum to create a duty of care.

2. Ordinance No. 151,411 was not designed to protect invitees against injuries suffered from parking offsite
Even if a statute or ordinance is designed to embody and effectuate fundamental public policy by setting forth a generally applicable rule of conduct, it can give rise to a duty of care actionable in negligence only if (1) the plaintiff invoking the statute is “`a member of the class of persons the statute [or ordinance] … was designed to protect,'” and (2) the “`harm'” the plaintiff suffered was “`one the statute [or ordinance] … was designed to prevent.'” (Ramirez v. Nelson (2008) 44 Cal.4th 908, 918 [80 Cal.Rptr.3d 728, 188 P.3d 659], quoting Stafford, supra, 33 Cal.3d at p. 324; see Nunneley v. Edgar Hotel (1950) 36 Cal.2d 493, 497-498 [225 P.2d 497] (Nunneley); Keech v. Berkeley Unified School Dist. (1984) 162 Cal.App.3d 464, 469 [210 Cal.Rptr. 7] (Keech).) Whether a statute or ordinance satisfies these requirements is a question of law. (Jacobs Farm/Del Cabo, Inc. v. Western Farm Service, Inc. (2010) 190 Cal.App.4th 1502, 1526 [119 Cal.Rptr.3d 529].)

Ordinance No. 151,411 satisfies neither of these prerequisites.

In assessing whom an ordinance was designed to protect and the harm it was designed to prevent, we apply the usual canons of statutory construction. (1300 N. Curson Investors, LLC v. Drumea (2014) 225 Cal.App.4th 325, 332 [170 Cal.Rptr.3d 173] [“The canons of statutory construction apply to local ordinances”].) We start with the text of the ordinance, and read that text “`”in the context of the statute … as a 932*932 whole.”‘” (People v. Valencia (2017) 3 Cal.5th 347, 358 [220 Cal.Rptr.3d 230, 397 P.3d 936], quoting Professional Engineers in California Government v. Kempton (2007) 40 Cal.4th 1016, 1037 [56 Cal.Rptr.3d 814, 155 P.3d 226]; see California Charter Schools Assn. v. Los Angeles Unified School Dist. (2015) 60 Cal.4th 1221, 1237 [185 Cal.Rptr.3d 556, 345 P.3d 911].) If the text does not provide a clear answer, we may also look to other “`extrinsic sources'” such as the ordinance’s legislative history. (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 531 [117 Cal.Rptr.2d 220, 41 P.3d 46].)

The condition in ordinance No. 151,411 that, as part of granting the developer’s rezoning request, required the developer to provide an additional 34 “guest parking” spaces was one of five such conditions. As noted above, the other conditions required the builder not to exceed a specified building height, to “attractively landscape” the complex’s “open areas,” to landscape a buffer setback on the main street outside the complex, and to point all lighting inward. The City specifically found that all five conditions were “necessary to protect the best interests of and assure a development more compatible with the surrounding neighborhood.” Indeed, the City’s municipal code defined a condition to rezoning—that is, a “Q classification”—as a condition “deemed necessary to protect the best interests of and assure a development more compatible with the surrounding property or neighborhood or to secure an appropriate development in harmony with the objectives of the General Plan.” As the plain text of the conditions themselves, the finding that justified them, and the codified definition of a rezoning condition all make clear, these conditions in ordinance No. 151,411—including the guest parking condition that would avoid overcrowded curbsides—were designed to preserve the residential character and aesthetics of the surrounding neighborhood. Indeed, the entire purpose of ordinance No. 151,411 was to rezone the complex’s parcel, and the chief purposes of most zoning laws are to “maint[ain] … the character of residential neighborhoods” and “`”advance aesthetic values.”‘” (Ewing v. City of Carmel-by-the-Sea (1991) 234 Cal.App.3d 1579, 1590 [286 Cal.Rptr. 382]; Echevarrieta v. City of Rancho Palos Verdes (2001) 86 Cal.App.4th 472, 478 [103 Cal.Rptr.2d 165].) What is more, the penalty for noncompliance with ordinance No. 151,411’s conditions is the imposition of administrative fines (L.A. Mun. Code, §§ 12.29, 11.2.01, 11.2.03, 11.2.04), a remedy that reinforces the notion that the developer’s duty was to the City (Selger, supra, 222 Cal.App.3d at p. 1591 [so holding]). As a result, ordinance No. 151,411 was designed to protect “the community at large” from the harm of deleterious aesthetics and degradation of the surrounding neighborhood. (Accord, Nunneley, supra, 36 Cal.2d at p. 497 [no duty where statute was “`intended to protect the interests of the … 933*933 community at large, rather than those of any particular class of individuals'”].) Nothing in ordinance No. 151,411 or its legislative history evinces any intent to protect invitees from traffic accidents that occur when they park offsite.

Plaintiff responds with three arguments.

First, she cites the section of the City’s municipal code introducing the “purpose” of the City’s zoning provisions. Among the seven general purposes of those code provisions is “to promote health, safety, and the general welfare.” (Italics added.) However, that all zoning activities by the City might be designed to further “promote … safety” in the general sense is irrelevant. What matters is whether the class of plaintiffs and the harm are “of the precise nature [the] statute [or ordinance at issue] was designed [to protect and] to prevent,” respectively (Bologna v. City & County of San Francisco (2011) 192 Cal.App.4th 429, 435 [121 Cal.Rptr.3d 406]; see Keech, supra, 162 Cal.App.3d at p. 469), not whether the “[city]wide scheme” for zoning “has an overall purpose of promoting … safety” (Capolungo v. Bondi (1986) 179 Cal.App.3d 346, 352 [224 Cal.Rptr. 326] (Capolungo)).

Second, plaintiff contends that the guest parking condition would have the inevitable effect of “lessening congestion on the streets” and obviating some of the need for offsite parking, and thus must have been designed in part to protect guests from the harm of traffic accidents. However, the fact that an ordinance not designed to protect the class of persons of which plaintiff is a part and not designed to protect against the harm she suffered might have a secondary effect or design to protect that class against that harm is not enough to create a duty of care. (See Capolungo, supra, 179 Cal.App.3d at pp. 351-352 [ordinance that prohibits motorists from parking in yellow curb loading zones for more than 24 minutes designed to facilitate loading and unloading, not to prevent traffic accidents; no duty]; Gilmer v. Ellington (2008) 159 Cal.App.4th 190, 203-204 [70 Cal.Rptr.3d 893] [statute prohibiting grid-locking of intersections designed to encourage free flow of traffic, not to protect against traffic accidents; no duty]; Lua v. Southern Pacific Transportation Co. (1992) 6 Cal.App.4th 1897, 1902-1903 [9 Cal.Rptr.2d 116] [regulation specifying when trains can block roadways designed to facilitate free flow of traffic, not to prevent accidents; no duty]; Selger, supra, 222 Cal.App.3d at pp. 1590-1591 [ordinance requiring property owners to keep abutting sidewalks clean designed to assist city in those duties, not to protect passersby from injury; no duty]; Urhausen v. Longs Drug Stores California, Inc. (2007) 155 Cal.App.4th 254, 269-270 [65 Cal.Rptr.3d 838] (Urhausen) [regulations governing the slope of parking spaces for disabled persons designed to enable access parking in those spaces, not to protect persons walking across those spaces on foot with crutches; no duty]; Victor v. 934*934 Hedges (1999) 77 Cal.App.4th 229, 234-238 [91 Cal.Rptr.2d 466] [statute prohibiting parking vehicles on sidewalks designed to prevent obstruction of sidewalks and injuries to pedestrians forced to walk around the “obstructing vehicle,” not to protect pedestrians on the sidewalk from being struck by vehicles not illegally parked; no duty]; Wawanesa Mutual Ins. Co. v. Matlock (1997) 60 Cal.App.4th 583, 587 [70 Cal.Rptr.2d 512] [statute that prohibits furnishing tobacco to minors designed to prevent addiction, not to prevent fires; no duty]; cf. Thomson v. Bayless (1944) 24 Cal.2d 543, 546 [150 P.2d 413] [ordinance prohibiting parking on highway when parking elsewhere is practicable “designed to protect persons traveling on the highway”; duty].)

Lastly, plaintiff cites the testimony of an expert that the “purpose” of ordinance No. 151,411’s guest parking condition was to “promote[] public safety” and to “reduce” the number of vehicles “park[ed] on the street.” However, the meaning and purpose of a legislative enactment is a question of law for the court; an expert’s opinion on such matters is an inadmissible legal conclusion. (Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1179 [78 Cal.Rptr.3d 572] [expert opinion on meaning of statute “[ir]relevant” because statutory interpretation is for the court].) We therefore disregard it.

II. Plaintiff’s Further Arguments
Plaintiff assails our conclusion with several assertions that boil down to two arguments.

First, plaintiff argues that the Association engaged in active misfeasance because it reduced the number of available guest parking spaces from 34 to 6, and thereby engaged in affirmative misconduct that violated ordinance No. 151,411.

This argument is without merit for several reasons.

To begin, it conflates a duty of care with the standard of care. Although a statute or ordinance can give rise to a duty of care and simultaneously fix the standard of care (Elsner, supra, 34 Cal.4th at p. 927, fn. 8; Vesely, supra, 5 Cal.3d at p. 164; Johnson v. Honeywell Internat. Inc. (2009) 179 Cal.App.4th 549, 558 [101 Cal.Rptr.3d 726]), the two concepts are “analytical[ly] distinct[]” (California Service Station, supra, 62 Cal.App.4th at p. 1178). The duty of care establishes whether one person has a legal obligation to prevent harm to another (Paz, supra, 22 Cal.4th at p. 559), while the standard of care defines what that person must do to meet that obligation and thus sets the standard for assessing whether there has been a breach (Webster v. Claremont Yoga (2018) 26 Cal.App.5th 284, 288 [236 Cal.Rptr.3d 802]). The default standard of care is the obligation to take 935*935 “reasonable care” (Lopez, supra, 55 Cal.App.5th at p. 250; Flowers v. Torrance Memorial Hospital Medical Center (1994) 8 Cal.4th 992, 999 [35 Cal.Rptr.2d 685, 884 P.2d 142] (Flowers); see Ramirez v. Plough, Inc. (1993) 6 Cal.4th 539, 546 [25 Cal.Rptr.2d 97, 863 P.2d 167] (Ramirez), although a statute may define a more specific obligation (Ramirez, at p. 547; Flowers, at p. 997, fn. 2) and, under the doctrine of negligence per se, may erect a rebuttable presumption of breach if that obligation is not met (Evid. Code, § 669, subd. (a); California Service Station, at p. 1177; see also Sierra-Bay Fed. Land Bank Assn. v. Superior Court (1991) 227 Cal.App.3d 318, 333-334 [277 Cal.Rptr. 753] [“Nearly all the cases in which the presumption of negligence under Evidence Code section 669 has been applied involve what may be termed `safety’ statutes, ordinances or regulations, that is, governmentally designed standards of care intended to protect a particular class of persons from the risk of particular accidental injuries”]). The standard of care is relevant only if there is a duty of care for it to impose. The standard of care presupposes a duty; it cannot create one. (See Urhausen, supra, 155 Cal.App.4th at p. 270 [“a regulation will not be found to have … intended to prevent a particular accident merely because compliance with the regulation would foreseeably have prevented the accident”].) Yet that is what plaintiff invites us to do—to infer a duty of care from the fact that, if a duty of care otherwise existed, 34 guest parking spaces would set the standard of care. Because this puts the cart before the horse, we must decline plaintiff’s invitation.

Further, plaintiff’s invocation of the doctrine of misfeasance is of no aid. “Misfeasance exists when [a] defendant,” through its “affirmative actions,” “is responsible for making the plaintiff’s position worse” by “creat[ing] a risk of harm to the plaintiff.” (Weirum v. RKO General, Inc. (1975) 15 Cal.3d 40, 49 [123 Cal.Rptr. 468, 539 P.2d 36] (Weirum); Minch v. Department of California Highway Patrol (2006) 140 Cal.App.4th 895, 908 [44 Cal.Rptr.3d 846]; Romero v. Superior Court (2001) 89 Cal.App.4th 1068, 1079 [107 Cal.Rptr.2d 801].) “Liability for misfeasance is based on the general duty of ordinary care to prevent others from being injured by one’s conduct.” (Seo v. All-Makes Overhead Doors (2002) 97 Cal.App.4th 1193, 1202 [119 Cal.Rptr.2d 160]; see Weirum, at p. 49.) Thus, if a defendant has no duty of care under the general principles set forth above and does not otherwise undertake acts that prompt the plaintiff to be less careful (e.g., McDaniel, supra, 220 Cal.App.3d at pp. 9-10), its misfeasance is not actionable. As explained above, the Association owes plaintiff no duty of care under the general principles of the law of negligence and there was no evidence that plaintiff was less careful in crossing the street because the complex had fewer onsite parking spaces than required by ordinance No. 151,411.

Lastly, accepting plaintiff’s misfeasance-based argument creates perverse incentives inimical to tort law. If, as plaintiff suggests, the Association 936*936 commits actionable misfeasance by reducing the number of guest parking spaces from 34 to six—but engages in nonactionable nonfeasance if it never reserved 34 spaces in the first place—landowners, by virtue of tort law, would have every incentive to offer no guest parking. Yet the net effect of offering no guest parking is to make more people park offsite and thereby risk injury in traffic accidents.

Second, plaintiff argues that even if ordinance No. 151,411 does not by itself give rise to a duty of care, we should rebalance the Rowland factors through the prism of the ordinance’s requirement to have 34 guest parking spaces. We reject this argument. This argument once again commits the sin of conflating a standard of care with a duty of care. It also lacks the support of precedent and logic. Although a statute that does not support an evidentiary presumption of breach of the standard of care may still be considered when fixing the standard of care (e.g., Powell v. Pacific Electric Railway Co. (1950) 35 Cal.2d 40, 46 [216 P.2d 448]), plaintiff cites no precedent where a court in weighing the Rowland factors has considered a statute that does not by itself give rise to a duty. This is hardly a surprise, at least where, as here, one of the reasons the statute does not give rise to a duty of care is because it is not designed to protect the plaintiff against the harm at issue. Such a statute is, by dint of those reasons, irrelevant to the analysis dictated by the Rowland factors and thus should not influence them.

* * *
Because we have concluded that summary judgment is appropriate because the Association owes plaintiff no duty of care as a matter of law, we have no occasion to address the parties’ further arguments regarding the existence or nonexistence of proximate causation.

DISPOSITION
The judgment is affirmed. The Association is entitled to its costs on appeal.

Ashmann-Gerst, Acting P. J., and Chavez, J., concurred.

[1] In the lingo used in the zoning provisions of the City’s municipal code, these conditions are called “`Q’ Qualified classifications.”

[2] The trial court’s subsequent order stated that summary judgment was also granted on the ground that plaintiff could not prove causation.

[3] All further statutory references are to the Code of Civil Procedure unless otherwise indicated.

[4] This case therefore presents a different question than cases examining whether a landowner’s duty of care extends to deficiencies located on property adjacent to—but not on—the landowner’s property. (E.g., Lopez v. City of Los Angeles (2020) 55 Cal.App.5th 244, 256 [269 Cal.Rptr.3d 377] (Lopez) [defect on abutting public sidewalk]; Selger v. Steven Brothers, Inc. (1990) 222 Cal.App.3d 1585, 1588 [272 Cal.Rptr. 544] (Selger) [same]; Schaefer v. Lenahan (1944) 63 Cal.App.2d 324, 325-326 [146 P.2d 929] [same]; Williams v. Foster (1989) 216 Cal.App.3d 510, 515 [265 Cal.Rptr. 15] [same].)

[5] If a duty of care otherwise exists, a special ordinance that regulates a specific person or parcel can set the standard of care used to evaluate whether that independently existing duty has been breached. (Simoneau v. Pacific Electric Ry. Co. (1913) 166 Cal. 264, 269-270 [136 P. 544] [special ordinance granting defendant a franchise on condition that it operate its streetcars at no more than eight miles per hour can be used to assess whether defendant breached its existing duty of care when operating at faster speeds]; accord, Stafford v. United Farm Workers (1983) 33 Cal.3d 319, 324 [188 Cal.Rptr. 600, 656 P.2d 564] (Stafford) [injunction may be used to define standard of care].)

 

Clayton v. Bigelo, LLC

Clayton v. Bigelo, LLC
(S.D.Cal. Mar. 24, 2021, No. 21cv285-GPC(BLM)) 2021 U.S.Dist.LEXIS 55670.

Summary by Jillian M. Wright Esq.:

Owner Clayton sued another owner Bigelo, LLC (“Bigelo”) arguing the construction of a two-story home on the lot was prohibited by the CC&Rs and interfered with his view rights and right to privacy. Bigelo argued two-story homes were not prohibited but rather that the association had the power to review applications for two-story homes if an architectural committee was in place. An architectural committee was not in place, so approval was not necessary as long as the structure was in harmony with other homes in the community. The court found the home was in harmony since there were other two-story homes in the community. The court held that a declaration did not impose a ban on two-story homes or include view protections for surrounding property.

TAKEAWAY: View disputes are amongst the most frequently litigated association issues. Note, however, that absent an express covenant protecting view, there are generally no view rights in California.

***End Summary***

 

Coley v. Eskaton

51 Cal.App.5th 943 (2020)

RONALD F. COLEY, Plaintiff and Appellant,
v.
ESKATON et al., Defendants and Appellants.

No. C084328.
Court of Appeals of California, Third District.
June 11, 2020.

Association directors may be found personally liable for damages stemming from their breach of their fiduciary duty by imposing improper assessments (and disclosing confidential information) if the director approved a transaction wherein that director (an employee of developer) had a material financial interest unless the affected directors can prove the transaction was entered into in good faith and was inherently fair to the association and its members.

*** End Summary ***

Appeal from the Super. Ct. No. 34-2014-00171851-CU-MC-GDS.

Diepenbrock Elkin Gleason, David A. Diepenbrock; Brady & Vinding, Michael E. Vinding and Michael V. Brady for Plaintiff and Appellant.

Horvitz & Levy, Jon B. Eisenberg, Peder K. Batalden; Hefner Stark & Mariois, Kenneth R. Stone, Michael R. Williams; Law Office of Jon B. Eisenberg and Jon B. Eisenberg for Defendants and Appellants.

947*947 [CERTIFIED FOR PARTIAL PUBLICATION[*]]

OPINION

RAYE, P. J.—

Eskaton, Eskaton Village-Grass Valley (Eskaton Village), and Eskaton Properties Inc. (collectively, the Eskaton entities) are related corporations that develop and support common interest developments for older adults in Northern California. Ronald F. Coley owns a home in one of their developments, Eskaton Village Grass Valley (the Village). He brought this suit against the Village’s homeowners association, two of the directors on the association’s board, and the directors’ employers (the Eskaton entities), alleging these directors ran the association for the benefit of the Eskaton entities rather than the association and its members.

The trial court agreed with Coley in part, finding these directors breached their fiduciary duty to the homeowners association and its members in several respects. In particular, the court found one director improperly shared with the Eskaton entities the association’s privileged communications with its counsel, and both directors, in violation of the association’s governing documents, approved certain assessments that benefited the Eskaton entities and harmed many of the association’s members. Based on this conduct, the court found the directors’ employers, the Eskaton entities, were liable for any 948*948 damages Coley suffered as a result, though it declined to find the directors liable in their personal capacities. It awarded Coley damages of $2,328.51 and attorney fees of $654,242.53.

Both parties appealed. The Eskaton entities and the two director defendants (collectively, the defendants) contend the court should have afforded the directors more deference under the business judgment rule—a rule under which courts tend to defer to the decisions of corporate directors. They also claim the court misread the association’s governing documents, miscalculated appropriate damages, and misapplied vicarious liability principles in finding the Eskaton entities liable for their employees’ conduct even though their employees were not liable themselves. Finally, they assert the court awarded an excessive amount of attorney fees. Coley, in his cross-appeal, raises several additional issues. He contends the court should have found the two directors personally liable for their conduct, and alleges the court wrongly rejected several of his claims against the defendants.

We agree in part with both of the parties. We find, as the defendants contend, that the court miscalculated the damages on certain claims and should, after reducing the damages award on remand, reconsider the awarded attorney fees in light of this reduction. We also agree, as Coley asserts, that the court should have found the two directors personally liable for their actions. In all other respects, we affirm the judgment.

BACKGROUND

I. The Village and the Association

The Eskaton entities, among other things, develop and support common interest developments for older adults in Northern California. One of those developments is the Village. The Village consists of 130 homes known as the “Patio” homes and 137 rented residences housed in a building known as the “Lodge.” It also consists of several common areas accessible to both Patio and Lodge residents, including walking paths and a maintenance building. Eskaton Village, an Eskaton subsidiary, owns the Lodge and its 137 residences, and various individual homeowners, including Coley, own the 130 Patio homes. Eskaton Properties, another Eskaton subsidiary, is responsible for the Village’s day-to-day management.

Eskaton Village and the Patio homeowners are members of the Eskaton Village, Grass Valley Homeowners Association (the Association), a nonprofit mutual benefit corporation. A five-member board of directors runs the Association subject to the requirements of the Association’s governing document, 949*949 the “Declaration of Covenants, Conditions and Restrictions for Eskaton Village-Grass Valley Homeowners Association” (or the CC&Rs).

II. The Association’s Governance Structure

Since the Association’s inception, Eskaton Village has controlled three out of the five seats on the Association’s board. Under the CC&Rs, the owners of the 267 housing units (the 137 Lodge residences and 130 Patio homes) are entitled to one vote per housing unit owned. Because Eskaton Village owns a majority of these units (137 of 267), it holds a perpetual voting majority.

Exercising its majority voting power, Eskaton Village has consistently elected three employees of the Eskaton entities to sit on the Association’s board. And, at least in recent years, it has appointed directors who are financially incentivized to run the Association for the benefit of Eskaton Village. Two of those employees are defendants here, Todd Murch and Elizabeth L. Donovan. Murch is the chief executive officer and president of all the Eskaton entities. Donovan is the chief operating officer of all the Eskaton entities. Both are paid by Eskaton Properties and receive bonuses and incentive compensation in part based on Eskaton Properties’ performance. Eskaton Properties’ performance, in turn, is based in part on Eskaton Village’s performance. The higher Eskaton Village’s operating losses, for example, the lower Eskaton Properties’ profits given the latter’s subsidizing of Eskaton Village in years of operating losses—which, in fiscal year 2015 alone, amounted in a subsidy of hundreds of thousands of dollars. Given Murch’s and Donovan’s pay structure, the lower this subsidy (i.e., the better Eskaton Village performs) the higher their potential compensation.

III. The Association’s Assessments for Security Services

Under the CC&Rs, the Association is authorized to levy various assessments against Eskaton Village and the Patio owners. Using this authority, the Association has assessed both for, among other things, “Security/Emergency Response” services since its creation in the early 2000s.

For its initial 10 years, the Association allocated the cost of providing these security and emergency response services equally between Eskaton Village and the Patio owners, with each covering 50 percent of the total cost. But in late 2012, the Association’s board, in a three-to-two vote, approved a new budget that increased the Patio owners’ relative responsibility for the cost of these services. Under the new budget, the Patio owners would cover 83.3 percent of the total costs of security services and Eskaton Village would cover the remaining 16.7 percent. The Eskaton-affiliated directors, including Murch and Donovan, all voted in favor of the new budget. The two other directors, including Coley, voted against.

950*950 IV. Coley’s Suit and the Trial Court’s Judgment

In November of 2014, Coley and another Patio homeowner, Karen B. Lorini, filed a class action against the Eskaton entities, Murch, Donovan, and, as a nominal defendant, the Association.[1] In their complaint, the two named plaintiffs alleged that Murch and Donovan, acting pursuant to the direction of the Eskaton entities, were managing the Association for the benefit of the Eskaton entities and to the detriment of the Patio owners. In particular, the plaintiffs contended that Murch and Donovan unlawfully voted to require the Patio homeowners to cover 83 percent of the cost associated with security services, allowed Eskaton Village to use the Association’s maintenance building rent free, and engaged in various other acts of misconduct to benefit the Eskaton entities. In doing so, the plaintiffs asserted, the defendants breached their fiduciary obligations to the Association and its members and committed elder abuse against Patio owners like Coley who were aged 65 or older.

Coley and Lorini later amended their complaint to add additional causes of action in light of the defendants’ postcomplaint conduct. The first addition concerned the Association’s assessment for legal fees. To cover the cost of litigation in this case, the Association initially relied on assessments imposed on both the Patio and Lodge owners. But beginning in late 2015, it began imposing certain fees on the Patio owners alone. Coley and Lorini contended the director defendants violated the Association’s CC&Rs in approving this change. The second addition concerned Murch’s disclosure of certain records. The Association’s attorneys advised the Association on certain matters relating to this litigation. At some point, Murch shared this information with his personal counsel and the Eskaton entities’ counsel. Based on this conduct, Coley and Lorini alleged Murch breached his fiduciary duty to the Association by disclosing the Association’s privileged communications.

Before trial, Coley and Lorini moved to certify their action as a class action on behalf of themselves and similarly situated Patio homeowners. But after Coley’s individual claims were severed from the proposed class to expedite the resolution of his claims, the parties agreed to stay the hearing on the motion for class certification until after the resolution of Coley’s claims.

The trial on Coley’s claims began in December of 2015, and in early 2017, the trial court issued its judgment. Before addressing Coley’s specific claims, the court first noted a “principle issue in this case guiding the Court’s determination of Plaintiff’s claims against Defendants is whether a conflict of 951*951 interest was created when Eskaton retained control of the [Association] Board of Directors by filling three positions with its own employees.” The court concluded it was. Although Murch and Donovan, as directors of the Association, were charged with serving the best interest of the Association and all its members, the court found both were financially incentivized to operate the Association for the benefit of one member in particular—Eskaton Village. The court explained that both directors were paid in part based on Eskaton Properties’ performance, and that Eskaton Properties’ performance in turn was based in part on Eskaton Village’s performance. Thus, the court reasoned, “the conclusion is inescapable that the financial success of [Eskaton Village] plays a role in determining [the directors’] compensation and advancement, even if is not the only factor.” The court found this pay structure left the directors in an “irreconcilable conflict of interest.”

Turning to Coley’s specific claims, the trial court agreed in part with six of his 12 causes of action, several of which overlapped. It found Murch and Donovan breached their fiduciary duties and violated the Association’s CC&Rs when they voted to raise the Patio owners’ share of the security and emergency response costs from 50 percent to 83.3 percent. It found they further breached their fiduciary duties and violated the Association’s CC&Rs when they voted to charge certain legal expenses to the Patio owners alone. And it found Murch also breached his fiduciary duty when he disclosed the Association’s privileged communications with its counsel to further his own “interest rather than the interest of the [Association].” Because of this conduct, the court found all the defendants—including the corporate defendants—were liable to pay damages to Coley that resulted from the various breaches of fiduciary duty. The court calculated these damages to be $2,328.51.

The court, however, clarified in a prejudgment order that only the corporate defendants were in fact liable to pay this amount. Following the court’s proposed statement of decision, Coley asked the court to clarify that Murch and Donovan were liable in their personal capacities. But the court declined to find the two directors liable, reasoning that Coley had failed to show they acted in self-interest, benefited from their breach of fiduciary duty, or mismanaged the Association. The court went on to note, however, that Eskaton Properties and Eskaton Village were “vicariously liable” for damages caused by the directors within the scope of their employment.[2]

Following the court’s judgment, Coley moved to obtain attorney fees under Civil Code section 5975, which allows the prevailing party in any action to enforce the CC&Rs of a common interest development to obtain attorney fees 952*952 and costs. Coley contended the court should find all his attorneys’ time compensable, apply a positive multiplier to enhance the fee award, and award total fees in the amount of $1,140,445.03. The defendants, in opposition, contended the court should instead apply a negative multiplier and award fees only for the time spent on claims that allowed attorney fees. The court struck a middle path. Because it believed the considerations in favor of either a positive or negative multiplier canceled out, it rejected the parties’ competing demands for a multiplier and instead declined to apply any multiplier. And because it found “the factual issues between fee-eligible and non-fee eligible claims were inextricably intertwined,” it also rejected the defendants’ request that Coley be awarded fees only for the time spent on fee-recoverable claims. The court awarded Coley attorney fees in the amount of $648,058.25 plus accrued interest of $6,184.28, for a total of $654,242.53.

Both parties timely appealed the court’s judgment.

DISCUSSION

I. The Defendants’ Appeal

A. The Corporate Defendants’ Liability[*]

……………………………………………………………………..

B. Application of the Business Judgment Rule

The defendants’ next claim the court misapplied the business judgment rule. The business judgment rule is a policy of deference to a corporate board’s decisionmaking. (Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 257 [87 Cal.Rptr.2d 237, 980 P.2d 940] (Lamden).) But the trial court here found the rule inapplicable because the Eskaton entities’ employees who sat on the Association’s board had an “irreconcilable conflict of interest” that “preclude[d] the business judgment rule as a defense to liability in this case.” According to the defendants, rather than finding this conflict precluded the business judgment rule altogether, the court instead should have afforded the defendants an opportunity to reclaim the benefit of the rule by showing they acted in good faith after reasonably investigating material facts. We view the law differently.

1. Background law

California recognizes two types of business judgment rules: one based on statute and another on the common law. (Lamden, supra, 21 Cal.4th at 953*953 p. 259 & fn. 6.) Corporations Code section 7231 supplies the relevant statutory rule for nonprofit mutual benefit corporations like the Association. Under that statute, a director is not liable for “failure to discharge the person’s obligations as a director” if the director acted “in good faith, in a manner such director believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.” (Corp. Code, § 7231, subds. (a), (c).) The common law business judgment rule is similar but broader in scope. It is similar in that it immunizes directors for their corporate decisions that are made in “good faith … to further the purposes of the [corporation], are consistent with the [corporation’s] governing documents, and comply with public policy.” (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 374 [33 Cal.Rptr.2d 63, 878 P.2d 1275]; see Lamden, supra, 21 Cal.4th at p. 257.) And it is broader in that it also “`insulates from court intervention those management decisions'” that meet the rule’s requirements. (Lamden, supra, 21 Cal.4th at p. 257.)

A director, however, cannot obtain the benefit of the business judgment rule when acting under a material conflict of interest. (Everest Investors 8 v. McNeil Partners (2003) 114 Cal.App.4th 411, 430 [8 Cal.Rptr.3d 31] (Everest Investors); Gaillard v. Natomas Co. (1989) 208 Cal.App.3d 1250, 1263 [256 Cal.Rptr. 702].) Deference under the business judgment rule is premised on the notion that corporate directors are best able to judge whether a particular transaction will further the company’s best interests. (Gaillard, supra, 208 Cal.App.3d at p. 1263.) But that premise is undermined when directors approve corporate transactions in which they have a material personal interest unrelated to the business’s own interest. And it is particularly undermined when a majority of these directors approve transactions while having a material conflict of interest. Under those circumstances, the directors carrying this conflict of interest are precluded from seeking the benefit of the business judgment rule. (See Everest Investors, supra, 114 Cal.App.4th at p. 430; Gaillard, supra, 208 Cal.App.3d at p. 1263.)

But although the business judgment rule is inapplicable under these circumstances, that is not to say that corporate decisions affected by these types of conflicts are improper as a matter of law. As with the business judgment rule generally, statutory and common law requirements are again relevant in this context. Corporations Code section 7233 supplies the relevant statutory rule. It provides, among other things, that an interested director who casts a deciding vote on a transaction must show the “transaction was just and reasonable as to the corporation at the time it was authorized, approved or ratified.” (Corp. Code, § 7233, subd. (a)(3).) Section 7233, however, only applies to transactions “between a corporation and one or more of its directors, or between a corporation and any domestic or foreign corporation, firm or association in which one or more of its directors has a material 954*954 financial interest.” (Corp. Code, § 7233, subd. (a).) The common law rule, as before, is similar but broader in scope. It is similar in that it requires interested directors to “prove that the arrangement was fair and reasonable”—a rigorous standard that requires them “`not only to prove the good faith of the transaction but also to show its inherent fairness from the viewpoint of the corporation and those interested therein.'” (Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 31-32 [216 Cal.Rptr. 130, 702 P.2d 212] (Tenzer).) And it is broader in that, unlike Corporations Code section 7233, it is not concerned only with transactions between a corporation and either its directors or a business in which its directors have a material financial interest. (See Corp. Code, § 7233, subd. (a).) Rather, recognizing the potential for self-dealing may also exist outside this particular context, courts have found directors must also satisfy the common law requirements when they approve other transactions in which they have a material financial interest distinct from the corporation’s own interest. (See Heckmann v. Ahmanson (1985) 168 Cal.App.3d 119, 127-128 [214 Cal.Rptr. 177] (Heckmann) [directors who approved corporate action intended to stave off a company takeover and protect their board positions were required to show “the transaction was entered in good faith” and was “inherent[ly] fair[] from the viewpoint of the corporation and those interested therein”]; see also Remillard Brick Co. v. Remillard-Dandini (1952) 109 Cal.App.2d 405, 416-421 [241 P.2d 66] [common law requirements of “good faith” and “inherent fairness” exist independent of statutory “`just and reasonable'” requirements].)

2. The trial court’s application of the business judgment rule

Turning to the trial court’s decision here, we find the court appropriately summarized the relevant principles governing the business judgment rule. It correctly explained that directors acting under a conflict of interest cannot obtain the benefit of the business judgment rule. (See Everest Investors, supra, 114 Cal.App.4th at p. 430.) And it rightly added that although “a conflict does not necessarily establish actionable impropriety,” it shifts the burden to the director to show the transaction was “`fair and reasonable.'”[3] (See Tenzer, supra, 39 Cal.3d at pp. 31-32.)

955*955 The defendants make no effort to satisfy this “just and reasonable” standard, but instead assert the trial court should have shifted the burden to the Eskaton directors to show they approved the disputed transactions in “good faith” after a “reasonable inquiry.”

In support of this alternative standard, the defendants rely on Katz v. Chevron Corp. (1994) 22 Cal.App.4th 1352 [27 Cal.Rptr.2d 681] and Lee v. Interinsurance Exchange (1996) 50 Cal.App.4th 694 [57 Cal.Rptr.2d 798]. Katz concerned a corporate board’s defensive actions in response to an attempted corporate takeover—actions that were reviewed under Delaware law. (Katz, supra, 22 Cal.App.4th at pp. 1367-1368.) Applying Delaware law, the Katz court found that because the board directors might have acted to protect their own interests in adopting these defensive measures, the board was not entitled to deference under the business judgment rule unless it first passed the “enhanced” scrutiny test—that is, unless the board showed (1) it had reasonable grounds for believing that “`a danger to corporate policy and effectiveness existed because of another person’s stock ownership'”—which could be established by “`”showing good faith and reasonable investigation”‘” —and (2) its action was “`reasonable in relation to the threat posed.'” (Id. at p. 1367.) The Lee court, in turn, relied on Katz in discussing California’s general background rules on conflicts of interest—even though the Katz decision concerned Delaware, not California, law. (Lee, supra, 50 Cal.App.4th at p. 715.) Never mentioning its principles derived from Delaware law, the Lee court suggested that a director is not entitled to the benefit of the business judgment rule in the event of a conflict of interest, unless the director first shows “good faith and reasonable investigation.” (Ibid.) But that suggestion was ultimately irrelevant to the case, as the appellants there did not even allege facts establishing a conflict of interest. (Id. at pp. 701, 715.)

The defendants, in sum, rely on one case that summarized Delaware law, and another case that, in dictum, summarized a case that summarized Delaware law. Belatedly recognizing this heavy reliance on Delaware law after oral argument, the defendants submitted a postargument letter asserting that California courts “may properly rely on corporate law developed in the State of Delaware given that it is identical to California corporate law for all practical purposes.” (Oakland Raiders v. National Football League (2001) 93 Cal.App.4th 572, 586, fn. 5 [113 Cal.Rptr.2d 255].) But even if that were true, it would not favor the defendants’ argument.

To begin, even under Delaware law, the defendants’ position would fail. Under Delaware law, courts apply “`[e]nhanced'” scrutiny—the type of scrutiny the defendants’ request here—in a narrow set of cases; specifically, “`whenever the record reflects that a board of directors took defensive measures in response to a perceived threat to corporate policy and effectiveness which touches on issues of control.'” (Gantler v. Stephens (Del. 2009) 956*956 965 A.2d 695, 705.) But they apply “even more exacting scrutiny” when there is evidence of “actual self-interest” that “affects a majority of the directors approving a transaction.” (Paramount Communications Inc. v. QVC Network Inc. (Del. 1994) 637 A.2d 34, 42, fn. 9.) And it is the latter scenario, not the former, that describes the facts of our case. Under those circumstances, the directors must prove the “entire fairness” of the transaction—a test requiring directors to “demonstrate both their utmost good faith and the most scrupulous inherent fairness of transactions in which they possess a financial, business or other personal interest which does not devolve upon the corporation or all stockholders generally.” (Mills Acquisition Co. v. Macmillan, Inc. (Del. 1989) 559 A.2d 1261, 1280; see Weinberger v. UOP, Inc. (Del. 1983) 457 A.2d 701, 710 [“When directors of a Delaware corporation are on both sides of a transaction, they are required to demonstrate their utmost good faith and the most scrupulous inherent fairness of the bargain”].)

California law, more importantly, demands the very same of majority directors who approve transactions while operating under a material conflict of interest. Directors faced with such divided loyalties must show the approved transaction was “fair and reasonable”—meaning they must not only “`prove the good faith of the transaction but also … show its inherent fairness from the viewpoint of the corporation and those interested therein. [Citation.]'” (Tenzer, supra, 39 Cal.3d at pp. 31-32; see Heckmann, supra, 168 Cal.App.3d at pp. 127-128.) And again, we find the trial court fairly captured this requirement in concluding the Eskaton-affiliated directors, because of their conflict of interest, had the burden to show their approved assessments were “just and reasonable.” The defendants here, however, never made this showing.[4]

Finally, as an alternative argument, the defendants argue that the Eskaton-affiliated directors had no improper conflict of interest at all, relying on Lexin v. Superior Court (2010) 47 Cal.4th 1050 [103 Cal.Rptr.3d 767, 222 P.3d 214] (Lexin). But Lexin offers them no support. The court in Lexin considered whether six city officials who voted on a matter that affected their government pension benefits violated Government Code section 1090—a 957*957 statute barring public officials from being personally financially interested in the contracts they form in their official capacities. (Lexin, supra, 47 Cal.4th at p. 1062.) It ultimately concluded most did not as a matter of law in light of a statutory exception to Government Code section 1090 that applies when the official’s financial interest is the same as the official’s constituency. (Lexin, supra, 47 Cal.4th at pp. 1063, 1094.) As the court explained, although the charged officials were financially interested in the matter, their interest was shared by “thousands of their fellow retirement system members.” (Id. at p. 1063.)

But the defendants here can point to no similar statutory exception to absolve them of their conflict. Nor would it matter if they could. The city officials in Lexin voted on a matter that affected them and their constituents in similar ways. For that reason, the court found, “the financial interest in question is not personal to an employee or official because it is shared with like members of the public agency’s constituency.” (Lexin, supra, 47 Cal.4th at p. 1095.) But the same cannot be said of the Eskaton-controlled directors. Their financial interest was personal and distinct from that enjoyed by the Association members generally. As the trial court explained, the directors’ incomes were tied in part to the financial performance of Eskaton Village—incentivizing the directors to shift costs from Eskaton Village to the Patio owners. And that is what they ultimately did, to the benefit of the Eskaton entities and the detriment of the Patio owners.

C.-F.[*]

……………………………………………………………………..

II. Coley’s Cross-appeal

A. Murch’s and Donovan’s Liability

Coley, in his cross-appeal, first contends the trial court should have found Murch and Donovan liable in their personal capacities. The trial court declined to do so because it concluded “the evidence failed to establish (1) conduct by the majority directors was motivated by specific self-interest; (2) the individual directors benefited from their breach of fiduciary duty or (3) that the actions of the directors amounted to mismanagement of the HOA.” According to Coley, the court erred in requiring this showing; it was enough, he maintains, that he showed (1) the directors had a fiduciary obligation to him and other Patio owners, (2) they breached this duty by approving transactions—while acting under a material conflict of interest—that were 958*958 unfair to Coley and other Patio owners, and (3) Coley suffered damages as a result of this breach. We agree.

The trial court correctly set out the three elements of the cause of action at issue: existence of a fiduciary relationship, breach of fiduciary duty, and damages. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820 [124 Cal.Rptr.3d 256, 250 P.3d 1115] (Oasis West Realty).) And as it further explained, the directors of a nonprofit mutual benefit corporation, like the Association here, are fiduciaries who must act for the benefit of the corporation and its members. (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 513 [229 Cal.Rptr. 456, 723 P.2d 573] (Frances T.) [“Directors of nonprofit corporations … are fiduciaries who are required to exercise their powers in accordance with the duties imposed by the Corporations Code”]; Cohen v. S & S Construction Co. (1983) 151 Cal.App.3d 941, 945 [201 Cal.Rptr. 173] [“This fiduciary duty extends to individual homeowners, not just the homeowner’s association”].)

The court also correctly applied these principles to the facts. It found the directors Murch and Donovan owed a fiduciary duty to the Association and its members—satisfying the first element for breach of fiduciary duty. It then concluded they breached their fiduciary duties by voting, inconsistent with the CC&Rs, to (1) raise the Patio owners’ share of the security services from 50 percent to 83.3 percent, and (2) require the Patio owners alone, and not also the Lodge owners, to cover certain legal fees—satisfying the second element. It found Murch further breached his fiduciary responsibility by disclosing the Association’s privileged communications with its counsel. Finally, the court found Coley suffered damages as a result of the directors’ breaches of their fiduciary duties—satisfying the third and final element for breach of fiduciary duty.

Each of these findings were supported by substantial evidence. First, as all parties accept, Murch and Donovan owed a fiduciary duty to Coley and other Patio owners. (See Frances T., supra, 42 Cal.3d at p. 514; Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 108-110 [81 Cal.Rptr. 592, 460 P.2d 464].) Second, substantial evidence supports the court’s finding that Murch and Donovan breached this duty. As fiduciaries, Murch and Donovan were bound not to approve a transaction in which they had a material financial interest unless that transaction was “fair and reasonable”—meaning the transaction was entered in “`good faith'” and was “`inherent[ly] fair[] from the viewpoint of the corporation and those interested therein.'” (See Tenzer, supra, 39 Cal.3d at pp. 31-32; see also id. at p. 32 [discussing “the standards of fairness and good faith required of a fiduciary” in cases involving potential self-dealing]; Jones, supra, 1 Cal.3d at pp. 110, 112 [majority shareholders owe a fiduciary duty of “good faith and inherent fairness to the minority in 959*959 any transaction where control of the corporation is material”; this “comprehensive rule of `inherent fairness'” also applies to directors who engage in transactions that conflict with their duty to shareholders]; see Heckmann, supra, 168 Cal.App.3d at pp. 127-128.)

But they failed to meet this standard. Even if the directors required the Patio owners to pay a greater share of the security-services fees and legal fees in good faith—which is debatable (see fn. 4, ante)—it could not be said that their doing so in violation of the CC&Rs was fair from the viewpoint of the Patio owners. Nor do we find Murch’s disclosure of the Association’s privileged communications was fair from the Patio owners’ perspective. Finally, substantial evidence supports the court’s finding that Coley and similarly situated Patio owners suffered damages as a result of these breaches—though, as discussed ante in the unpublished portion, some of the awarded damages must be adjusted downward.

Although the trial court found the directors breached their fiduciary duties, it declined to find them personally liable, reasoning in a prejudgment order that something more is required before the directors may be found personally liable for their misconduct. In the court’s view, Coley needed to show, in addition to the directors’ breach of their fiduciary duties, that they acted in self-interest, benefited from their breach of fiduciary duty, and mismanaged the Association.

This was error. Once Coley established the existence of a fiduciary relationship, breach of fiduciary duty, and damages, he was entitled to damages absent some applicable affirmative defense. (See Meister v. Mensinger (2014) 230 Cal.App.4th 381, 395-397 [178 Cal.Rptr.3d 604] [“`Where a breach of fiduciary duty occurs, a variety of equitable [and legal] remedies are available'”]; see also Oasis West Realty, supra, 51 Cal.4th at p. 820 [“The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages”]; Frances T., supra, 42 Cal.3d at pp. 503-504 [corporate directors and officers may be liable for corporate wrongs when they “`authorize[], direct[], or in some meaningful sense actively participate[] in the wrongful conduct'”].) As we have explained, although the common law business judgment rule may generally provide a director with immunity for decisions made in good faith, such immunity does not apply when, as here, the director is acting under a material conflict of interest.

In demanding more from Coley before awarding damages, the court asked for too much. The court first faulted Coley for failing to show the “conduct by the majority directors was motivated by specific self-interest.” But even if the directors were not “motivated by specific self-interest,” and even if they 960*960 acted in good faith, that would not be reason enough to avoid liability. Again, considering the directors’ material conflict of interest in the transactions they approved, they were required “`not only to prove the good faith of the transaction but also to show its inherent fairness from the viewpoint of the corporation and those interested therein.’ [Citation.]” (Tenzer, supra, 39 Cal.3d at p. 32.) And for reasons already discussed, the directors could not show their challenged actions were fair to Coley and other Patio owners.

The court next took issue with Coley’s failure to show “the individual directors benefitted from their breach of fiduciary duty.” But a director may still be liable for damages resulting from his or her breach of fiduciary duties, even if the director did not personally benefit from that breach. (See St. James Armenian Church of Los Angeles v. Kurkjian (1975) 47 Cal.App.3d 547, 553 [121 Cal.Rptr. 214] [“where a fiduciary, in breach of his duty of disclosure, causes secret profits to flow to a third party, the fiduciary may be held liable for those profits even though he did not personally receive any part of them”].) To find otherwise would absolve directors of liability when they abuse their positions to benefit, for example, friends and family. It would also inappropriately immunize directors who abuse their positions to benefit themselves but fail to succeed for reasons outside their control.

Finally, the court faulted Coley for failing to show “that the actions of the directors amounted to mismanagement of the [Association].” But the directors’ failure to comply with the Association’s CC&Rs was mismanagement—at least to the extent of this failure. It may not have been pervasive mismanagement. It may not have been egregious mismanagement. But an unlawful failure to abide by an association’s governing documents is mismanagement to some degree nonetheless.

We find, in sum, the trial court should have found both Murch and Donovan personally liable for any damages resulting from their breaches of their fiduciary duties. We remand to allow the court to determine the amount of these damages consistent with the unpublished potion of our opinion. We also remand to allow the court to determine the directors’ liability, if any, for Coley’s attorney fees.

B., C.[*]

……………………………………………………………………..

DISPOSITION

The judgment is reversed in part and affirmed in part. We direct the trial court to enter a modified judgment finding Murch and Donovan liable in their 961*961 personal capacities for their respective breaches of their fiduciary duties. We also remand to allow the court to recalculate the damages award consistent with the unpublished portion of our opinion; to consider whether the awarded attorney fees should be reduced in light of the reduced damages; and to determine Murch’s and Donovan’s liability for damages and their liability, if any, for Coley’s attorney fees. In all other respects, the judgment is affirmed. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)

Mauro, J., and Renner, J., concurred.

[*] Pursuant to California Rules of Court, rules 8.1105 and 8.1110, this opinion is certified for publication with the exception of parts IA., IC., ID., IE., IF., IIB., and IIC. of the Discussion.

[1] Coley and Lorini also originally named Mark T. Cullen and Trevor Hammond as additional defendants, but neither were listed in the plaintiffs’ final amended complaint.

[2] As the defendants note, the court’s reference to Eskaton Properties and Eskaton Village alone, and not also Eskaton, was an apparent oversight.

[*] See footnote, ante, page 943.

[3] The trial court derived the “just and reasonable” standard from Corporations Code section 7233. On the facts here, however, we believe it better to find these principles derive from the common law rather than section 7233. As discussed in part I.B.1. ante, section 7233 only applies to transactions between a corporation and its directors or a business in which its directors have a material financial interest. (Corp. Code, § 7233, subd. (a).) And the disputed transactions here do not fit within one of these categories. But even so, we still agree with the court’s finding that the director had the burden to show the transaction was just (or fair) and reasonable. (See Tenzer, supra, 39 Cal.3d at pp. 31-32 [discussing the common law “fair and reasonable” requirements].)

[4] Although the defendants never contend the directors’ actions were inherently fair, they at least assert the directors acted in good faith. But even there, we question whether their showing could be found sufficient. To demonstrate good faith, the defendants rely principally on two points. First, they contend the Department of Real Estate’s approval of the creation of the Association (including its management structure) “demonstrates the requisite element of good faith.” But that the department initially approved the creation of the Association does not show the Association’s directors later governed the Association in good faith. Second, the defendants contend the trial court itself found their appointed directors “did nothing worse than make honest mistakes.” But the court only found that Coley failed to show these directors were “motivated by specific self-interest.” It never made an affirmative finding that the directors in fact acted in good faith.

[*] See footnote, ante, page 943.

[*] See footnote, ante, page 943.

 

Hill v. River Run Homeowners Ass’n

BRIAN HILL, ANNE HILL, and INTERMOUNTAIN FAIR HOUSING COUNCIL, INC., Plaintiffs,
v.
RIVER RUN HOMEOWNERS ASSOCIATION, INC., Defendant.

Case No. 1:18-cv-00281-CWD.
United States District Court, D. Idaho.
February 7, 2020.

An association’s rules giving adults preferential use of certain common area amenities violated the Fair Housing Act being facially discriminatory based on familial status.  Additionally, a reasonable jury could infer that the association’s denial of an owner’s architectural application to enclose their backyard with a fence for the safety of their young children while approving other owners’ backyard fencing enclosures for other purposes likely violated the Fair Housing Act.

**END SUMMARY**

Brian Hill, Plaintiff, represented by Brian A. Ertz, Christopher Brancart, Brancart & Brancart, pro hac vice, Liza Cristol-Deman, Brancart & Brancart & Eileen R. Johnson, Ertz Johnson LLP.

Anne Hill, Plaintiff, represented by Brian A. Ertz, Christopher Brancart, Brancart & Brancart, pro hac vice, Liza Cristol-Deman, Brancart & Brancart, Michael Thomas Witry, Office of the Attorney General Department of Insurance & Eileen R. Johnson, Ertz Johnson LLP.

Intermountain Fair Housing Council, Plaintiff, represented by Brian A. Ertz, Christopher Brancart, Brancart & Brancart, pro hac vice, Michael Thomas Witry, Office of the Attorney General Department of Insurance, Monica R. Fabbi, Intermountain Fair Housing Council & Eileen R. Johnson, Ertz Johnson LLP.

River Run Homeowners Association, Inc., Defendant, represented by Terrence Scott Jones, Quane Jones McColl, PLLC.

MEMORANDUM DECISION AND ORDER RE: DKT. 39, 42, 50, and 53

CANDY W. DALE, Magistrate Judge.

INTRODUCTION

Plaintiffs Brian and Anne Hill, and the Intermountain Fair Housing Council,[1] allege that Defendant River Run Homeowner’s Association, Inc., violated the Fair Housing Act’s prohibition against discrimination on the basis of familial status. The Hills claim River Run’s common area signs and other printed material setting forth the rules for use of the neighborhood pool, tennis courts, and clubhouse, as well as River Run’s denial of the Hills’ application for permission to build a fence, violated 42 U.S.C. §§ 3604(a), (b), (c), and 42 U.S.C. § 3617 of the Fair Housing Act.

Pending before the Court are the parties’ motions for summary judgment, and River Run’s related motions to strike the affidavit of Brian Hill submitted in support of the Hills’ motion, and Brian Hill’s declaration submitted in opposition to River Run’s motion. The Hills’ motion seeks partial summary judgment limited to the issue of liability with regard to the claims asserted under Sections 3604(b) and (c) concerning the River Run signs and printed materials. River Run’s motion seeks summary judgment as to all causes of action asserted under the FHA by the Hills and IFHC.

The Court conducted oral argument on the motions on December 10, 2019. After careful consideration of the parties’ arguments, the legal authorities cited, and a thorough review of the record, the Court will deny Defendant’s motion for summary judgment; grant Plaintiffs’ motion for partial summary judgment; and deny Defendant’s two motions to strike.

STANDARD OF REVIEW

1. Summary Judgment Standard

Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). This Court’s role at summary judgment is not “to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Zetwick v. Cty. of Yolo, 850 F.3d 436, 441 (9th Cir. 2017) (citation omitted). When parties submit cross-motions for summary judgment, “[e]ach motion must be considered on its own merits.” Fair Hous. Council of Riverside Cty., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001).

2. Applicable Fair Housing Act Provisions

42 U.S.C. § 3604(a) provides that it is unlawful “[t]o refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of . . . familial status. . . .”

42 U.S.C. § 3604(b) prohibits discrimination “against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of . . . familial status. . . .”

42 U.S.C. § 3604(c) provides that it is unlawful to “make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement, with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on . . . familial status, . . . or an intention to make any such preference, limitation, or discrimination.”

42 U.S.C. § 3617 provides that it “shall be unlawful to coerce, intimidate, threaten, or interfere with any person in the exercise or enjoyment of, or on account of his having exercised or enjoyed, or on account of his having aided or encouraged any other person in the exercise or enjoyment of, any right granted or protected by section 3603, 3604, 3605, or 3606 of this title.”

Regulations adopted by the United States Department of Housing and Urban Development (HUD) state that it is “unlawful, because of . . . familial status, . . . to impose different terms, conditions or privileges relating to the sale or rental of a dwelling or to deny or limit services or facilities in connection with the sale or rental of a dwelling.” 24 C.F.R. § 100.65(a). Prohibited actions include, but are not limited to, “[l]imiting the use of privileges, services or facilities associated with a dwelling because of . . . familial status, . . . of an owner, tenant or a person associated with him or her.” 24 C.F.R. § 100.65(b)(4).

“Familial status” is defined as “one or more individuals (who have not attained the age of 18 years) being domiciled with. . . a parent or another person having legal custody of such individual or individuals.” 42 U.S.C. § 3602(k)(1). Familial status discrimination thus entails “discrimination against families with children.” Fair Housing Congress v. Weber, 993 F.Supp. 1286, 1290 (C.D. Cal. 1997).

FACTS

In support of their motion for partial summary judgment, the Hills submitted a statement of undisputed facts which River Run did not contest with a separate statement of disputed facts. (Dkt. 42-2.)[2] An independent review of the record establishes the facts as set forth in Docket 42-2 in support of the Hills’ motion for summary judgment, and the Court therefore finds the facts undisputed.

In support of its motion, River Run submitted a statement of undisputed facts with numbered paragraphs 1 through 59. (Dkt. 39-2.) The Hills disputed certain statements confined to paragraphs 6, 10, 11, 21, 22, 23, 24, 26, 27, 34, 36, 37, 39, 40-41, 44, 48, 50, and 58 of River Run’s statement of facts. (Dkt. 46-1.) An independent review of the record establishes that the facts related to the Hills’ application to construct a fence are genuinely disputed.

River Run does not dispute that the Hills’ residence constitutes a “covered dwelling” as defined under the Fair Housing Act, or that the Hills meet the definition of familial status in 42 U.S.C. § 3602(k).

The facts material to the Court’s determination, and which the Court finds not subject to reasonable dispute, follow.

Intermountain Fair Housing Council (“IFHC”) is an Idaho nonprofit corporation operating in the state Idaho. IFHC’s stated mission is to advance equal access to housing for all persons and assist with housing complaints. River Run is now, and has been, an Idaho nonprofit corporation since 1980. The officers of River Run Homeowner’s Association, Inc. in late 2014 and early 2015 included Lloyd Cox, President; Dave Holm, Vice President; Norm Beckert, Treasurer; and Linda Strauss, Secretary. (Dkt. 40-6 at 2.) Tom Roush served as the Architectural Chair, and Danielle Drake was the Association Manager. Id.

The River Run subdivision (the “Subdivision”) includes 333 dwellings located within various phases of the Subdivision. The Subdivision is a planned community situated along the Boise River containing multiple creeks and water areas that adjoin the river. Amended CC&Rs were recorded on April 17, 1995. (Dkt. 39-2 at ¶ 3.)

Brian and Anne Hill purchased a residence (the Property) on White Pine Lane, located within the Subdivision, in April of 2013. (Dkt. 39-2 at ¶ 6.) At the time they purchased the Property, the Hills received a copy of the CC&Rs, the 2013 River Run Handbook, and the Architectural Committee Rules and Regulations governing the Subdivision. (Dkt. 39-2 at ¶ 15.) The Hills and their three children, ages 5, 3, and 1, resided on the Property from August of 2014 through March of 2015. (Dkt. 42-2 at ¶ 7.) The Property is a single-family residence located within Phase 2, the White Pine phase, of the Subdivision. The backyard of the Hills’ property abuts a small creek with a riparian area and a common area walking path which leads to the community pool.

The 2013 River Run Handbook included the following provisions related to the use of the Subdivision’s Recreation Center, which includes the clubhouse, pool, and tennis courts:

RECREATION CENTER

The Recreation Center includes the clubhouse, swimming pool, spa, deck, patio area, and tennis courts. Members are residents of River Run with the exception of The Island and Heron Cove (which have their own Phase recreation facilities).

An “Adult” is defined as an individual nineteen (19) years of age or older.

* * *

* The pool, pool deck and spa are closed Iron the weekend after Labor Day until the weekend before Memorial Day. Quiet swimming is required from 9 to 10 p.m.

CLUBHOUSE

During the summer season when the pool is open, the Recreation Center Manager will unlock the Clubhouse for ADULT USE ONLY. This service will be provided only during the time that the Recreation Center Manager is on the premises. The Clubhouse will remain locked at all other times, except when it has been reserved and checked out to a member.

* * *

Reservations may be made through the Association Manager during office hours stating the nature of the function and the number of guests expected. Members will be asked to complete a “Clubhouse Rental Agreement’ form. The maximum number of guests in the Clubhouse is twenty-five (25). The reservation does not extend to the patio area. swimming pool, spa or tennis courts. A limit of six guests (6) per household at the pool also applies to guests at private parties using the Clubhouse,

SWIMMING POOL and SPA

No member or guest under the age of 14 may use the pool or spa unless accompanied by an adult (19 or older) member or adult guardian authorized by an adult member.

Guests are limited to six (6) per `household. Residents 14 through 18 years of age are limited to one guest per person notwithstanding the household limit, Guests must be accompaniec by a member.

* * * *

The Recreation Manager is on duty at times as determined by the Board of Directors. The Recreation Manager has the authority to enforce compliance with regulations and to require members and guests violating rules to leave the premises. The Board will support the good judgment of our Recreation Manager in arriving at the best solution to any problem which may arise.

Decl. of Ertz Ex. 4. (Dkt. 42-3 at 36-37.)

In August of 2014 and for the remainder of the Hills’ residency in the Subdivision, signs were posted on the tennis court gate and on the recreation center clubhouse wall, near the pool. (Dkt. 42-2 ¶ 31, 34.) The sign on the tennis court gate was visible to any resident or guest near the tennis court entrance. Id. ¶ 32. The tennis court gate sign stated: “Adults have court privileges over children after 3:00 p.m. weekdays and any time on weekends or holidays.” Id. ¶ 33. The sign on the recreation center clubhouse wall read: “Quiet Swimming Only in Pool & Jacuzzi.” Id. ¶ 34. The pool sign was visible to residents and guests outside of the pool area, and was visible from the backyard of the Hills’ property. Id. ¶¶ 35-36.

Brian Hill noticed the sign posted on the fence outside the tennis courts giving preference to adults after 3:00 p.m. He noticed also the pool sign admonishing “quiet swimming only.” Mr. Hill took photographs of the tennis court and pool signs on January 22, 2015. Aff. of Hill ¶¶ 8-9, Exs. A, B. (Dkt. 42-4 at 3.) Mr. Hill claims the signs were visible to him and his family, guests, and other residents, and seeing the signs “made us feel like our family would have to be especially careful using the common areas and facilities of the homeowners’ association. It felt like we would have to tip toe around with our children since the needs of adults have preference. Seeing these rules contributed to my feeling that my kids and our family were unwelcome in the community.” Aff. of Hill ¶ 13. Neither Brian nor Anne Hill recall an instance, however, when they could not use the pool with their children, and they do not recall using the tennis courts, or an instance when their children may have used the tennis courts. (See Dkt. 50-1 at 9.)

River Run adopted, posted, and had the power to rescind or alter the rules governing the use of the Recreation Center.

After moving into the Property, Brian Hill applied on October 19, 2014, to construct a fence to enclose their back yard. (Dkt. 40-4 at 2.) The River Run Architectural Committee Rules, effective January 2014 applicable to fencing, stated that the design of the Subdivision was intended to “minimize the need for fencing, especially perimeter fencing.” However, the rules allowed perimeter fencing “under special circumstances and only according to approved plans and specifications approved by the Architectural Committee.” The stated goal of the fencing rules was to “achieve the appearance of a grouping of homes that have been placed in a park-like setting. To achieve this effect, it is necessary that the lawn area of one neighbor run into the lawn area of another without property boundaries being defined by fencing or landscaping.”

The rules allowed four types of fences:

(1) the privacy fence/screen, (2) the enclosing fence which, under very special circumstances, may be allowed for the safety of children, and (3) the sound abatement fence which shall be approved for the homes immediately abutting Park Center Blvd, specifically lots 13-17 of Block 3, and lots 5,6,7,8 of Block 1, Phase 1A; and 4) only for houses where the back yard is along Loggers Creek, short wire fences may be installed if approved by the Architectural Committee. Fences must be constructed and installed in accordance with para 3.12.2.

Architectural Rules § 3.12 Fencing. (Dkt. 49-2 at 41.)[3]

With regard to enclosing fences, the Architectural Rules specified that the fence “must be of open construction with at least 6 inches between solid elements which themselves may not be more than 4 inches wide (a ratio of 1/3 solid to 2/3 open construction must always be maintained). This fence may not exceed four feet in height, may not enclose more than forty percent (40%) of the rear yard area and may not be situated on a property line, except in limited areas.” (Dkt. 49-2 at 41-42.)

The Rules required submission of an application form, two neighbor notification forms, a description of the height, location, color and design of the fence, a site plan, a sample of the proposed building materials, a paint or stain chip, and any other information requested. (Dkt. 40-3 at 12.) The Rules required also that enclosing fences be screened on the neighbor’s side of the fence with groupings of landscaping materials placed on the applicant’s property. (Dkt. 40-3 at 13.) And last, the Rules indicated that the homeowner could expect a determination by the committee within twenty calendar days after submission of the application. (Dkt. 40-3 at 7.)

The Hills’ application was submitted on the proper form, and contained a letter describing the proposed project; a photograph depicting the proposed height, color, design, and building materials; and a drawing depicting the location of the proposed fence. (Dkt. 49-5.) Brian Hill explained the purpose of the fence was for the safety of his young children, due to the waterway that bordered the rear yard of the Property. (Dkt. 49-1 at 37.) The minutes of the River Run HOA meeting conducted on October 20, 2014,[4] reflect that Tom Roush, Architectural Committee Chair, presented the Hills’ fence application. (Dkt. 40-6 at 3.) Another topic on the agenda was the consideration of amendments to Section 3.12 of the Architectural Rules governing fencing, during which River Run discussed the “type, color and plantings around the Enclosing Fences.” (Dkt. 40-6 at 4.)

Emails prior to the October 20 meeting indicated that the proposed fence rule changes under consideration would “specifically prohibit wrought iron as a fencing material. The same effect and containment can be achieved with wood.” (Dkt. 49-1.) Another email to the members of the River Run Architectural Committee from Tom Roush indicated that Brian Hill’s proposal “complies with River Run Rules and Regs, except for some landscaping aspects. However by our Rules, the AC may decide whether to allow it, based on circumstances.” (Dkt. 49-1 at 3.)

Emails circulated among the Architectural Committee members and River Run board members after the October 20 meeting indicate that River Run considered rejecting the Hills’ application for noncompliance with planting regulations. (Dkt. 49-1 at 4, 5.) Tom Roush proposed, however, that the Architectural Committee treat the proposal the same as others, because the Committee has “NEVER required a homeowner to submit an acceptable project proposal before we review and vote on it. I see no reason to single him out by returning his `incomplete’ project proposal and making him change it in a way he and his neighbors don’t want.” (Dkt. 49-1 at 4.)

On October 23, 2014, Linda Strauss emailed members of the Architectural Committee indicating that the problem with the current fencing rules was the provision for the “enclosed Fence. . . .I would hate to see small fences popping up everywhere. . . . Enclosed Fences do not go along with the `park like setting’ that the homeowners of River Run bought into when they purchased their homes here. . . .Changing the rules and reg to comply to one family (or even more) does not do that. I understand the [] demographics of the neighborhood are changing, but what about those homeowners that bought into the idea of a `parklike setting’ a long time ago.” (Dkt. 49-1 at 13-14.)

Another email, drafted by Tom Roush on October 23, 2014, indicated there was “no Board intention or direction to change the rules about enclosing fences until Dave [Holm] decided he wanted to do it. . . .A decision [on the Hill Application] should NOT be based on rules adopted as a result of his project proposal.” (Dkt. 49-1 at 16.) On October 24, 2014, Linda Strauss wrote again to restate that, “as the demographics change, if this clause [regarding enclosing fences] is left in the rules and regs, I believe we will see many more requests for such fences, which will have a real impact on our `park-like setting’ and I believe will impact property values.” (Dkt. 49-1 at 22.)

An email dated October 28, 2014, authored by David Holm and addressed to Lloyd Cox, Danielle Drake, Norm Beckert, and Linda Strauss, indicated that he had “been trying to come up with a way to appeal a yes vote on Hill and the only way I can come up with is to personally appeal it based on the requirement that landscaping materials shall be part of the project . . . It is not a strong position . . . but unless the Executive Board would, as a group, appeal based on the timing of the application conflicting with a re-write . . . that might make a stronger case.” (Dkt. 49-1 at 29.) David Holm later wrote that it would be “much cleaner if Hill would see the handwriting on the wall and withdraw his proposal until the new language is adopted,” to eliminate enclosing fences. (Dkt. 49-1 at 30.)

On October 29, Tom Roush wrote to the members of the Architectural Committee that there were “fences ALL OVER the place on White Pine Lane,” complaining that the Architectural Committee had treated the Hills’ fence application “entirely differently than other homeowners’ applications.” (Dkt. 49-1 at 32.) Roush also noted that the Architectural Committee had approved “other such fences over the years; there are at least three [enclosing fences] in place now . . . to an outside observer there would seem to be fences of all kinds on White Pine Lane,” and that, all of a sudden, a rule that has been in place “for, what, twenty years? . . . without any objections or heartburn? And all of a sudden, now that Brian [Hill] has submitted his application, we eliminate that kind of fence?” (Dkt. 49-1 at 32-33; see also Dkt. 49-1 at 37, acknowledging original intent of the modifications to the fencing rules proposed in October 2014 was not to eliminate an option for an enclosing fence, but “as a result of” the Hills’ application, the Board was considering eliminating the option for the enclosing fence entirely.”).

The Architectural Committee met on November 6, 2014, in the Hills’ back yard to vote on the fence application. (Dkt. 49-2 at 1.) The application was denied with a vote of 6 to 1. (Dkt. 49-2 at 1.) The Committee did not give the Hills “specific direction” with regard to what it might approve. (Dkt. 49-2 at 2, 9.) Tom Roush thereafter resigned as the Chair of the Architectural Committee. (Dkt. 49-2 at 21.) Roush expressed his opinion that the re-write of the rules eliminated the “long-standing fence rules (since 1988 . . . ) so that neither Brian [Hill] nor anyone else with children would ever be able to build a fence for their children’s safety. This is despite the fact that such fences had been permitted over the years for other residents. . . .” (email, Feb. 11, 2015, Dkt. 49-2 at 21.)

On November 17, 2014, the Hills resubmitted their fence application with the original submissions; a color swatch; a second letter and two letters from the adjacent neighbors, both of whom supported the application, with one expressly requesting that the fence remain open and without landscaping; and proposed the following changes: the installation of bushes along the waterway near the pool (the back of the fence); and reduction of the depth of the fence by five feet. (Dkt. 49-6.)

On November 17, 2014, River Run adopted new Fence Rules and Regulations, eliminating the enclosing fence as an option but leaving in the Privacy Screen option. (Dkt. 49-2 at 8; 49-3 at 32.) The Architectural Committee discussion, as recorded in the minutes, indicated that the “fencing requirements have not kept up with the change in our demographics.” (Dkt. 49-3 at 36.)

David Holm on November 19 proposed that the Executive Board reject the Hills second application, because the Architectural Committee had “no interest in discussing a modification to allow a play area. . . .” (Dkt. 49-2 at 3.) The Executive Board elected to treat the Hills’ second application as an “Appeal to proceed with the original plan with minor modifications,” and it notified Brian Hill that the appeal would be brought before the River Run Homeowner’s Association Board for further discussion and a vote. (49-2 at 3-4.) On November 25, 2014, Lloyd Cox informed Brian Hill that his second application would be considered an appeal under the prior fencing rules, or he could “submit a new application under the new rules that reflects the revised Privacy Screen definition and allowed characteristics.” (Dkt. 49-2 at 8.) Brian Hill objected to the characterization of his second application as an appeal, and requested a vote on the second application by the Architectural Committee under the prior enclosing fence guidelines. (Dkt. 49-2 at 9; see also Dkt. 49-2 at 10, “We [the Committee] told him we would review his request under the old rules, but that is about to change . . . Maybe if he would get real and submit something that the AC could/would approve we could move on.”).

The Hills’ attorney on December 19, 2014, notified River Run it was in violation of its CC&Rs by failing to vote on the second application within twenty days; therefore, the second application was deemed approved, and the Hills would be proceeding with construction of the fence. (Dkt. 40-13.)

On January 6, 2015, Lloyd Cox wrote to Brian Hill notifying him there was “no willingness to consider an alternate enclosing fence,” and inviting him to appeal the AC denial of his original application at the January 19, 2015 Board meeting. (Dkt. 49-19 at 1.) Mr. Cox stated also that, “Speaking for the Executive Committee and knowing the attitude of the Board Members, I can assure you RRHOA will litigate the matter should you choose to construct the fence. . . .” (Dkt. 49-19 at 2.)

River Run’s Board of Directors met on January 19, 2015, to consider Brian Hill’s appeal of his fence application. (Dkt. 49-4 at 1.) Brian Hill did not attend the meeting. Id. River Run did not vote on the appeal. Rather, a motion was made and seconded to “engage Givens Pursley to review our documentation. . . .” (Dkt. 49-4 at 3.)

River Run produced a photograph during discovery depicting a wrought iron enclosing fence similar to that proposed by the Hills. (Dkt. 49-7.)[5] An application to construct a fence along Loggers Creek to prevent geese from coming into the yard resulted in a re-write of the rules, which were approved January of 2014, to allow wire fences for all residents along Loggers Creek. (Dkt. 49-2 at 19, 22; 49-2 at 33; 49-3 at 24.) Mike M. submitted a proposal to the Architectural Committee on or about August of 2014, to enclose his back yard by connecting a rear fence to the two existing side fences, which proposal was approved on August 18, 2014. (Dkt. 49-3 at 2.) Brian Hill’s affidavit submitted in opposition to River Run’s motion included fifty-two photographs of fences in the White Pine phase and other phases in the Subdivision. (Dkt. 48-2.) Lloyd Cox recalled one other instance where the AC Committee approved an enclosing fence for a special needs child prior to the adoption of the new rules eliminating enclosing fences. (Dkt. 49-20 at 11.)

After the change to the Architectural Committee Rules in November of 2014 to eliminate enclosing fences, the Architectural Committee, on June 15, 2015, indicated that a fence application submitted by Marv and Frances W. seeking to build a fence at the back of their property connecting two existing side fences would be “approved,” even though the rules “regarding fences does [sic] not allow for this type of fence.” (Dkt. 49-2 at 27.) In or about September of 2017, the Architectural Committee allowed an enclosing fence for 1981 Springbrook Lane projecting into a rear yard for the safety of a “special needs” individual, who was 22 years old and came home on the weekends. (Dkt. 49-20 at 11; 49-9 at 10.) The purpose of the fence was to “ensure his safety.” (Dkt. 49-9 at 10.)

In November of 2014, the Hills engaged IFHC to assist them. Aff. of Olsen ¶6. (Dkt. 42-5 at 2.) On May 27, 2015, the Hills, on behalf of themselves and their three minor children, filed an administrative complaint with HUD alleging River Run violated 42 U.S.C. §§ 3604(a), (b), and (c). IFHC acted as the Hills’ representative before HUD, and for the duration of the HUD investigation of the Hills’ administrative complaint. IFHC worked also to remedy familial status discrimination occurring at the Subdivision. Id.

The HUD complaint filed on May 27, 2015, alleged that River Run issued discriminatory statements and had adopted discriminatory terms and conditions based upon familial status. (Dkt. 51-4 at 1.) The HUD complaint included an allegation that “River Run also has overly restrictive rules on children. At the tennis courts, it is posted that adults have preference over children after 3:00 p.m. on weekdays, and at all times on weekends and holidays.” (Dkt. 51-4 at 4.) The complaint alleged also that the Hills were not allowed to construct a fence due to discrimination based on familial status.

The HUD complaint was amended on July 15, 2015. (Dkt. 51-5.) The amended HUD complaint alleged that River Run had “overly restrictive rules on children. On or about August 5, 2014, Complainants noticed at the tennis courts, it is posted that adults have preference over children after 3:00 p.m. on weekdays and at all times on weekends and holidays. A posting at the pool says, `Quiet swimming only in pool and Jacuzzi.'” (Dkt. 51-5 at 2.) The allegations included also the Hills’ assertion that River Run denied their application to construct a fence based upon their belief that they were subject to discrimination based upon familial status. (Dkt. 51-5 at 2.)

River Run removed and replaced the tennis court and pool signs in February of 2015. In March of 2015, River Run voted to revise the 2013 River Run Handbook and Pool Rules. Aff. of Jones ¶ 2, Ex. A. (Dkt. 51-1.) The River Run Handbook was amended and published in or about July of 2015, eliminating the restrictions placed upon children’s use of the Recreation Center. Aff. of Jones ¶ 3 Ex. B. (Dkt. 51-1.)

The Hills timely filed this lawsuit.

ANALYSIS

1. The Hills’ Motion for Partial Summary Judgment and River Run’s Related Motion to Strike

A. River Run’s Motion to Strike — Docket 50

In support of their motion for partial summary judgment, the Hills submitted the Affidavit of Brian Hill. (Dkt. 42-4.) The affidavit describes the tennis court, pool, and clubhouse signs, and attaches two photographs of the tennis court and pool signs that Brian Hill took on January 22, 2015. He explains the rules contributed to his feeling that his children and his family were unwelcome in the community. River Run requests the Court enter an order striking the affidavit entirely, and deny Plaintiffs’ motion for partial summary judgment as a discovery sanction, on the grounds that: (1) the Hills failed to disclose the photographs during discovery; and, (2) Brian Hill’s prior deposition testimony contradicts his affidavit.

River Run claims Plaintiffs’ motion for partial summary judgment should be denied pursuant to Fed. R. Civ. P. 37(c)(1) as a discovery sanction, because the Hills failed to disclose or produce the two photographs during discovery. River Run relies also upon Fed. R. Civ. P. 56(c)(2), which allows objections to material cited to support or dispute a fact if it cannot be presented in a form that would be admissible in evidence. The Court finds River Run’s arguments lack merit. First, River Run does not dispute the language or existence of the tennis court and pool signs, as depicted in the photographs. Both the initial and amended HUD complaint contained allegations regarding the signs. The Complaint filed in this matter quoted the signs’ language. And, River Run admitted removing the signs in February of 2015. The Court finds the failure to disclose the photographs harmless pursuant to Fed. R. Civ. P. 37(c)(1).

Next, River Run argues summary judgment should be denied as a sanction because the Hills’ deposition testimony regarding emotional distress damages contradicts Mr. Hill’s affidavit, and the Hills did not disclose information supporting their claim for emotional distress damages during discovery. River Run argues it is prejudiced, because it was not aware of the Hills’ claim for emotional distress damages and therefore did not inquire about the same during discovery. The Court finds River Run misunderstands the Hills’ claim and misrepresents the evidence in the record regarding the Hills’ claims for emotional distress.

The Complaint alleges the rules and signs published by River Run are facially discriminatory. When a claim involves facial discrimination under the Fair Housing Act, injury is presumed once a violation is established. Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 827 (9th Cir. 2001) (“Where a defendant has violated a civil rights statute, we will presume that the plaintiff has suffered irreparable injury from the fact of the defendant’s violation.”). Even if some showing was required, it is not onerous. Such injury may include humiliation, embarrassment, and emotional distress. Green v. Rancho Santa Margarita Mortgage Co., 28 Cal.App.4th 686, 699, 33 Cal.Rptr.2d 706 (1994). It could also include “inconvenience” and “loss of enjoyment of life.” U.S. v. Burke, 504 U.S. 229, 241 (1992).

River Run relies upon deposition testimony wherein Brian Hill and Anne Hill were asked about their pool and tennis court use. River Run asserts the Hills did not suffer damages, because they testified that they were not prevented from using the pool with their children, and they did not recall using the tennis courts, while they resided in the Subdivision. However, that testimony does not preclude damages for the injury presumed under Silver Sage Partners when facial discrimination is claimed, as it is here.

The record also reflects that River Run had prior knowledge of the nature of the Hills’ emotional distress damages. The HUD report of investigation reflects the Hills referenced feeling uncomfortable and unwanted in the neighborhood, especially when at the pool with their children. (Dkt. 57-1 at 14.) Brian Hill asserts the same in his affidavit. (Dkt. 42-2 at 4 ¶ 13.) The Complaint in this matter sets forth a claim for emotional distress damages, and the Hills’ initial disclosures indicate they are seeking emotional distress damages. (Dkt. 50-3 at 3.) Thus, Brian Hill’s affidavit is not the first time River Run was on notice of the Hill’s claim for emotional distress damages related to the signs at the pool and tennis courts.

Despite prior knowledge of the Hills’ claim for emotional distress, the record reflects River Run did not ask either Brian Hill or Anne Hill during their depositions about their emotional distress upon viewing the signs at the pool or tennis courts, or upon reading the Recreation Center rules in the 2013 River Run Handbook. Instead, the questions posed during the Hills’ depositions focused solely upon whether the Hills and their children were ever denied access to the tennis court, pool, and clubhouse. However, as explained above, proof of denial of access is not required in connection with a claim of facial discrimination.

The Court will deny the Motion to Strike.

B. The Hills’ Motion for Partial Summary Judgment — Docket 42

The Hills move for partial summary judgment with respect to liability on their FHA claims asserted under 42 U.S.C. § 3604(b) and (c) related to the signs and printed materials governing the use of the Recreation Center.[6] The Hills assert the tennis court signs and clubhouse rules targeting children and families with children were facially discriminatory.[7]

River Run argues The Hills have not set forth sufficient admissible evidence to support their motion for summary judgment. River Run contends: (1) The Hills lack standing;[8] (2) the rules were not discriminatory and were implemented for a legitimate business purpose; (3) Section 3604(c) does not apply because the publication of the rules did not relate to the rental or sale of a dwelling; and (4) even if the rules were discriminatory, such does not equate to a finding of liability under the FHA or entitle the Hills to recover damages.

(1) Standing Under the Fair Housing Act

(a) Brian and Anne Hill

Contrary to River Run’s argument, the Hills have standing. The United States Supreme Court has long held that claims brought under the FHA are to be judged under a very liberal standing requirement. The sole requirement for standing under the FHA is the “Article III minima of injury in fact.” Havens Realty Corp. v. Coleman, 455 U.S. 363, 372 (1982). To meet this requirement, a plaintiff need only allege “that as a result of the defendant’s [discriminatory conduct] he has suffered a distinct and palpable injury.” Id.

Under the FHA, any person harmed by discrimination, whether or not the target of the discrimination, can sue to recover for his or her own injury. Harris v. Itzhaki, 183 F.3d 1043, 1050 (9th Cir. 1999) (citing Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 212 (1972)). “This is true, for example, even where no housing has actually been denied to persons protected under the Act.” San Pedro Hotel, Inc. v. City of Los Angeles, 159 F.3d 470, 475-76 (9th Cir. 1998) (upholding standing of hotel owners in suit alleging that the City interfered with the housing rights of the mentally ill); Smith v. Stechel, 510 F.2d 1162, 1164 (9th Cir. 1975) (real estate agent fired for renting apartments to minorities allowed to sue under the Act)).

River Run argues that the Hills allege a “stigmatic injury,” and must therefore show discriminatory treatment together with substantial emotional injury. River Run argues the Hills have not met their burden upon summary judgment to establish an actionable injury sufficient to confer standing, because the Hills and their children were never denied access to the Recreation Center, and suffered mere discomfort. River Run, however, conflates the Hills’ claims. As discussed above, injury is presumed once a violation is established. Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 827 (9th Cir. 2001) (“Where a defendant has violated a civil rights statute, we will presume that the plaintiff has suffered irreparable injury from the fact of the defendant’s violation.”). Even if some showing is required, it is not onerous. Such injury may include humiliation, embarrassment, and emotional distress. Iniestra v. Cliff Warren Investments, Inc., 886 F. Supp. 2d 1161, 1167 (C.D. Cal. 2012). It could also include “inconvenience” and “loss of enjoyment of life.” U.S. v. Burke, 504 U.S. 229, 241 (1992). Here, the Hills have produced evidence establishing emotional distress injury sufficient to meet their prima facie burden. Mr. Hill set forth in his declaration that he and his family experienced emotional distress upon viewing the signs and printed materials. Therefore, the Hills have adequately met their burden to establish they are “aggrieved persons” entitled to maintain an action under the FHA. Whether the Hills’ injury is ultimately an appropriate basis for anything more than a nominal damages award by the jury is not an issue currently before the Court. See, e.g., Blomgren v. Ogle, 850 F.Supp. 1427, 1440-41 (E.D. Wash. 1993) (granting partial summary judgment on section 3604(c) claim, but noting damages must be proven at trial).

(b) The IFHC

River Run also argues IFHC suffered no damages, because the tennis court sign was removed, and the Recreation Center rules changed, prior to IFHC becoming actively involved in the case. However, the record reflects that IFHC assisted the Hills beginning in or about November of 2014, and investigated, educated, pursued outreach regarding familial status discrimination, filed the complaint with HUD in May of 2015 on behalf of the Hills, provided legal resources and assistance to the Hills, and worked to remedy familial status discrimination occurring at River Run. (Aff. of Olsen, Dkt. 42-5 at 3.) The May 2015 HUD complaint, expressly mentioned the overly restrictive rules, and quoted the tennis court sign as an example. The July 2015 amended HUD complaint included also a quote of the rule requiring quiet swimming.

Diverted staff time of an organizational plaintiff such as the IFHC has been recognized as a compensable injury. Pac. Shores Properties, LLC v. City of Newport Beach, 730 F.3d 1142, 1166 (9th Cir. 2013) (citing Walker v. City of Lakewood, 272 F.3d 1114, 1124-25 (9th Cir. 2001); Convoy Co. v. Sperry Rand Corp., 672 F.2d 781, 785-86 (9th Cir. 1982); and cf. Fair Housing of Marin v. Combs, 285 F.3d 899, 903-04 (9th Cir. 2002) (holding that an organizational plaintiff suffered injury sufficient to confer Article III standing where it diverted staff resources to combating FHA violations)). River Run did not remove the tennis court (and pool) sign until February of 2015, after IFHC had begun assisting the Hills. And it was not until March of 2015 that River Run voted to revise its 2013 River Run Handbook and Pool Rules. The final published handbook eliminating the restrictions placed upon children’s use of the Recreation Center was not printed and published until July of 2015. Based upon the evidence in the record, the Court finds IFHC has adequately substantiated its allegations that it suffered an actual and palpable injury to confer standing to bring this action.

(2) The Hills’ Section 3604(b) Claim

The Hills argue that the tennis court sign, adult only clubhouse rule, and pool guest rule are facially discriminatory and were not implemented for a legitimate business purpose.

Section 3604(b) of the FHA prohibits discrimination “against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of . . . familial status. . . .” A plaintiff may bring a Section 3604(b) claim by alleging disparate treatment or disparate impact. Budnick v. Town of Carefree, 518 F.3d 1109, 1114 (9th Cir. 2008). The Hills claim disparate treatment. A plaintiff may establish a prima facie violation of section 3604(b) by establishing the existence of “facially discriminatory rules which treat children, and thus, families with children, differently and less favorably than adults-only households.” U.S. v. Plaza Mobile Estates, 273 F.Supp.2d 1084, 1091 (C.D. Cal. 2003). Section 3604(b) reaches post-acquisition discrimination, because the inclusion of the word “privileges” in the statute implicates continuing rights, “such as the privilege of quiet enjoyment of the dwelling.” The Comm. Concerning Cmty. Improvement v. City of Modesto, 583 F.3d 690, 713 (9th Cir. 2009).[9]

The three-part test set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), is used to evaluate claims of discrimination brought under Section 3604(b) of the FHA. U.S. v. Badgett, 976 F.2d 1176, 1178 (8th Cir. 1992). The plaintiff must first prove a prima facie case of discrimination by a preponderance of the evidence. If the plaintiff sufficiently establishes a prima facie case, the burden shifts to the defendant to articulate some legitimate non-discriminatory reason for its action.

“Once a prima facie case is established, defendants must articulate a legitimate, non-discriminatory justification for the challenged policy.” Fair Hous. Council of Orange Cty., Inc. v. Ayres, 855 F. Supp. 315, 318 (C.D. Cal. 1994) (citing Badgett, 976 F.2d at 1178); see also Pfaff v. U.S. Dep’t of Hous. & Urban Dev., 88 F.3d 739 (9th Cir. 1996); Pack v. Fort Washington II, 689 F. Supp. 2d 1237, 1243 (E.D. Cal. 2009). “To accomplish this, the defendant is only required to set forth a legally sufficient explanation.” Harris v. Itzhaki, 183 F.3d 1043, 1051 (9th Cir. 1999) (citing Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 255 (1981)).

If the defendant satisfies this burden, the plaintiff must prove by a preponderance of the evidence that the legitimate reasons asserted by the defendant are pretextual. Intermountain Fair Hous. Council v. Orchards at Fairview Condo. Ass’n, Inc., No. 1:09-CV-522-CWD, 2011 WL 162401, at *9 (D. Idaho Jan. 18, 2011) (citing Pollitt v. Bramel, 669 F.Supp. 172, 175 (S.D. Ohio 1987)).

a) Tennis Court Sign

The tennis court sign stated: “Adults have court privileges over children after 3:00 p.m. weekdays and any time on weekends or holidays.” The uncontroverted facts establish that the sign was visible to any resident or guest, including the Hills, and adorned the gate to the tennis courts at all times the Hills resided at the Property. The rule on its face describes a preference given to adults. At the hearing, River Run conceded the rule stated a clear preference for adults and could not articulate, or point to evidence in the record of, a legitimate, non-discriminatory reason for implementation of the rule.[10]

b) Clubhouse Rule

The River Run Handbook provided that the clubhouse was reserved for “ADULT USE ONLY” during the summer months, while the pool was open. The clubhouse’s use was for “private parties,” which included parties such as birthday parties, and meetings or gatherings. The rule on its face constitutes an outright prohibition on children’s use of common area facilities. See Fair Housing Congress v. Weber, 993 F.Supp. 1286, 1292-1293 (C.D. Cal. 1997) (“outright prohibitions on children’s use of facilities like a billiards room and shuffleboard facility were not justified, and that rules requiring adult supervision of all children (up to age 18) at all times were not justified.”). Consistent with the authorities discussed in Orchards at Fairview Condo. Ass’n, Inc., 2011 WL 162401 at *10, the Court finds rule is facially discriminatory because it is expressly premised upon familial status, and imposes different terms upon, and limits services to, families with children.

River Run argues that the clubhouse has no amenities, but is simply a small room used for meetings, implying it was not attractive for use by children. (Dkt. 51-6 at 2.) And, River Run indicated that, “out of concerns for damage and vandalism,” River Run required an adult to reserve the room. Id. Ms. Drake, the Association Manager, also stated that no one ever actually excluded children from the clubhouse, and the rule was simply meant to require adult supervision.

Similar arguments used to justify “adults only” rules, or “adult supervision” rules, have been found by other courts to be illegitimate justifications for such rules. For instance, in Plaza Mobile Estates, the court granted partial summary judgment for the plaintiffs because a rule prohibiting children walking around the mobile home park without adult supervision was an overbroad attempt to ensure the safety of children. United States v. Plaza Mobile Estates, 273 F.Supp.2d 1084, 1091 (C.D. Cal. 2003). In Fair Housing Congress, the court granted partial summary judgment for plaintiff because an apartment rule which stated that, “[c]hildren will not be allowed to play or run around inside the building area at any time because of disturbance to other tenants or damage to building property” was overbroad. Fair Housing Congress v. Weber, 993 F.Supp. 1286, 1289 (C.D. Cal. 1997); see also Pack v. Fort Washington II, 689 F. Supp. 2d 1237, 1244 (E.D. Cal. 2009) (granting partial summary judgment for plaintiff because rule requiring children “10 and under to be supervised by an adult” violated § 3604(b)); Llanos v. Estate of Coehlo, 24 F.Supp.2d 1052, 1061-1062 (E.D. Cal. 1998) (defendant’s rule restricting children under 18 from using adult pools was “overly broad, `paternalistic’ and unduly restrictive”); Landesman v. Keys Condo. Owners Ass’n, 2004 WL 2370638, at *4 (N.D. Cal. 2004) (“The desire for peace and quiet—while a worthy goal—is not a valid justification for denying access to common facilities on the basis of familial status”); Iniestra v. Cliff Warren Investments, Inc., 886 F. Supp. 2d 1161, 1168 (C.D. Cal. 2012) (finding safety and noise justifications uncompelling justifications for rule prohibiting use of pool by children without an adult).

Here, the rule on its face does not purport to allow use of the clubhouse by children, even with an adult. The rule expressly states the clubhouse is for adult use only. Thus, River Run’s ad hoc justification, that it was meant to require a reservation by an adult, is belied by the express language of the rule itself. And, to state that a meeting room is simply “not attractive” for children’s use is a nonstarter to justify a ban on its use by children. Children could presumably use the table to eat lunch, play cards, play board games, take a break from the sun, read a book, or any number of other activities while using the pool. The Court therefore finds River Run’s justification for the adults only clubhouse rule to be meritless.

c) Pool Guest Rule

The handbook expressly stated that, while adults were permitted to have up to six guests per household, “residents 14 through 18 years of age” were limited to one guest per person “notwithstanding the household limit.” The rule unambiguously targets children of a certain age group and treats families with children differently than other households. It is therefore facially discriminatory under the authorities discussed above.

River Run argues its pool guest rule applicable to children ages fourteen to eighteen was meant to address concerns of overcrowding, “vandalism, drug use, sexual assault, etc.” (Dkt. 51 at 17.) For instance, Ms. Drake stated in her affidavit that the purpose of the rule was to set a limit on the number of guests unsupervised teens could have at the pool, “out of concern that this area would be taken over by one or two young residents and their non-resident friends___and thus be unavailable for other members.” (Dkt. 51-6 at 2.) She stated also that the limit on unaccompanied non-resident teens served “to address concerns of damage and vandalism that may be caused by large groups of unsupervised teens.” Id.[11]

The Court finds, however, that River Run’s concerns are not tied to the proffered reasons. Adults can also overcrowd and vandalize the pool and surrounding area, yet adults were allowed up to six guests. River Run offers no justification why teenagers with six guests are more problematic than adults with six guests, who would also “take over” the pool to the exclusion of other residents by bringing more guests. Prohibiting certain children from bringing more than one guest to the pool while allowing adults to do so cannot be justified. See United States v. Plaza Mobile Estates, 273 F. Supp. 2d 1084, 1092 (C.D. Cal. 2003) (finding prohibition against all children from playing in common areas while allowing individuals eighteen and older to do so cannot be justified). And, the rule is not age-neutral.[12]

“The statute does not distinguish among any of the protected characteristics, in the sense of indicating that some are more worthy of protection than others. Thus, there is no exception to the scope of protection, such that discriminatory treatment based on familial status would be acceptable under the FHA if there is a showing that adult residents of a housing complex do not like sharing a swimming pool with children.” Landesman v. Keys Condo. Owners Ass’n, No. C 04-2685 PJH, 2004 WL 2370638, at *4 (N.D. Cal. Oct. 19, 2004), aff’d, 125 F. App’x 146 (9th Cir. 2005). The rule was expressly directed at children, specifically teenagers, and the Court finds River Run’s proffered purpose is not legitimate.

The Court therefore finds that River Run has not raised a genuine issue of material fact as to a legitimate, non-discriminatory reason for its tennis court, clubhouse, and pool guest rules. The Court therefore needs not address pretext.

(3) The Hills’ Claim Under 3604(c)

River Run argues the Hills cannot maintain a claim under Section 3604(c), because the Recreation Center rules and tennis court sign do not relate to the sale or rental of a dwelling. River Run asserts actionable publications are limited to those provided to the Hills prior to their purchase of the Property. River Run argues the Hills have not presented sufficient evidence to establish that the rules and signage related to the sale or rental of a dwelling, because the rules were provided to the Hills after they purchased the Property. See Morris v. W. Hayden Est. First Addition Homeowners Ass’n, Inc., No. 2:17-CV-00018-BLW, 2017 WL 3666286, at *3 (D. Idaho Aug. 24, 2017) (denying motion to dismiss and finding letter sent by HOA prior to plaintiffs’ purchase of home related to the sale or rental of a dwelling).

Section 3604(c) does not require discriminatory intent and is not analyzed under a burden-shifting paradigm. Rather, the inquiry under this section of the FHA is whether the statement at issue suggests a preference to an “ordinary reader or listener.” Fair Housing Congress v. Weber, 993 F.Supp. 1286, 1290 (C.D. Cal. 1997); Llanos v. Estate of Coehlo, 24 F.Supp.2d 1052, 1057 (E.D. Cal. 1998) (noting that the Ninth Circuit has not addressed the issue but adopting the “sound” reasoning of other circuits). Proof of discriminatory intent is not required. Llanos, 24 F.Supp.2d at 1056. Discriminatory preference, rather than an outright ban, is the basis for a Section 3604(c) violation. Weber, 993 F.Supp. at 1291; Pack v. Fort Washington II, 689 F. Supp. 2d 1237, 1245 (E.D. Cal. 2009). The Court finds the tennis court sign and Recreation Center rules meet this test.

HUD regulations make clear that Section 3604(c)’s prohibitions apply to “[w]ritten notices and statements includ[ing] any application, flyers, brochures, deeds, signs, banners, posters, billboards or any documents used with respect to the sale or rental of a dwelling.” 24 C.F.R. § 100.75(b). The prohibition applies “to all written or oral statements by a person engaged in the sale or rental of a dwelling.” 24 C.F.R. § 100.75(b). Discriminatory notices and statements “include, but are not limited to . . . [e]xpressing to agents, brokers, employees, prospective sellers or renters or any other persons a preference for or limitation on any purchaser or renter because of . . . familial status. . . .” 24 C.F.R. § 100.75(c)(2).[13]

While the majority of Section 3604(c) case law “involve[s] allegations of `steering’ protected individuals away from certain housing opportunities and/or obviously discriminatory statements made to prospective renters,” see Pack v. Fort Washington II, 689 F.Supp.2d 1237, 1245 (E.D. Cal. 2009), several courts have entertained Section 3604(c) claims based upon rules or restrictions published by entities such as homeowners’ associations. See Lath v. Oak Brook Condo. Owners’ Ass’n, No. 16-CV-463-LM, 2017 WL 1051001, at *8 (D.N.H. Mar. 20, 2017) (finding service dog policy actionable); Fair Housing Ctr. of the Greater Palm Beaches, Inc. v. Sonoma Bay Cmty. Homeowners Ass’n, Inc., 136 F. Supp. 3d 1364, 1368 (S.D. Fla. 2015) (condominium rules alleged to discriminate against children); Llanos v. Estate of Cohelo, 24 F. Supp. 2d 1052, 1060 (E.D. Cal. 1998) (apartment complex rules that discriminated against children).

The Hills have presented sufficient factual allegations in the record to survive summary judgment. River Run admitted that every homeowner is given a copy of the River Run Handbook, the CC&R’s and the Architectural Committee Rules and Regulations when they purchase their home in the Subdivision. (Dkt. 40-2 ¶¶3-6; Dkt. 39-2 at ¶ 15.) Ms. Drake, the Association Manager, stated in her affidavit that each homeowner received a copy of the River Run CC&Rs from their realtor. (Dkt. 40-2 at ¶ 6.) Ms. Drake stated also that she was “directly involved in giving every new homeowner a welcome packet that included the River Run Handbook and the [Architectural Committee Rules and Regulations] when they purchase[d] their home.” Id. Last, Brian Hill stated that the tennis court sign was clearly visible to any resident or guest. (Dkt. 42-4 at 2.) A reasonable juror could, therefore, infer based upon this evidence that prospective buyers and their real estate agents were provided with the written materials and would see the signs prior to the sale of a house within the subdivision.

The Court finds the Hills have met their burden upon summary judgment establishing a violation of Section 3604(c).

(4) The Hills Have Established Liability

River Run argues the Hills cannot establish liability, because a finding that certain rules are discriminatory does not equate to a finding of liability under the FHA, nor does it entitle the Hills to recover damages. River Run asserts that, for the Hills to be entitled to damages, they must show the rules were enforced against them and other families with children. That is not, however, the law in the Ninth Circuit, as discussed above. See also Pac. Shores Properties, LLC v. City of Newport Beach, 730 F.3d 1142, 1172 (9th Cir. 2013) (citing 24 C.F.R. § 180.670(b)(3)(i) (HUD regulations recognizing availability of damages for “humiliation and embarrassment” in FHA cases); Krueger v. Cuomo, 115 F.3d 487, 492 (7th Cir. 1997) (tenant’s testimony sufficient to establish FHA liability for emotional distress where her landlord’s discriminatory actions made her “feel `real dirty,’ `like a bad person,’ and `scared’ her”)); Blomgren v. Ogle, 850 F.Supp. 1427, 1440 (E.D. Wash. 1993) (rule per se discriminatory without proof that defendant had knowledge of the rule, . . . “[d]amages, however, may be imposed only where there is credible proof of harm proximately caused by the violation.”). The Court finds the Hills have set forth sufficient factual allegations to survive summary judgment and to support a claim for emotional distress damages. The Hills still bear the burden of proving damages at the time of trial.

2. River Run’s Motion for Summary Judgment and its Related Motion to Strike

A. Motion to Strike — Docket 53

River Run moves to strike the Declaration of Brian Hill (Dkt. 48) submitted with the Hills’ response in opposition to the motion for summary judgment, pursuant to the sham affidavit rule. “The general rule in the Ninth Circuit is that a party cannot create an issue of fact by an affidavit contradicting his prior deposition testimony.” Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262, 266 (9th Cir. 1991). The reasoning behind such a rule is, “if a party who has been examined at length on deposition could raise an issue of fact simply by submitting an affidavit contradicting his own prior testimony, this would greatly diminish the utility of summary judgment as a procedure for screening out sham issues of facts.” Id. However, the rule “does not automatically dispose of every case in which a contradictory affidavit is introduced to explain portions of earlier deposition testimony . . . rather the district court must make a factual determination that the contradiction was actually a “sham.” Id. at 266-67. Additionally, the inconsistency between a party’s deposition testimony and later affidavit must be clear and unambiguous to justify striking the affidavit. Minor inconsistencies that result from an honest discrepancy or mistake afford no basis for excluding an affidavit. See Messick v. Horizon Indus., 62 F.3d 1227, 1231 (9th Cir. 1995).

Brian Hill was asked during his deposition to recall whether there are fences that encompass the back yards of any property on White Pine Lane. He testified he did not know, and was not aware of any. (Dkt. 39-4 at 10.) Later, in his declaration, Mr. Hill stated he observed fences in every phase of the Subdivision, and that fences were present in the vicinity of his former home. (Dkt. 48 at 2.)[14] Mr. Hill also took photographs of fences present in the subdivision.[15] Furthermore, the existence of fences throughout the Subdivision is consistent with the evidence in the record. For instance, Tom Roush, the Architectural Chair, indicated at the time the Architectural Committee was considering the Hills’ fence application that there are “fences ALL OVER the place on White Pine Lane.” (Dkt. 49-1 at 32.) Roush stated that there are “at least three [such perimeter fences] in place now, including two high-visibility ones right on River Run Drive,” and a “fourth one that existed for many years on a high-visibility lot on Pebblecreek.” (Id.)[16] Put simply, the existence of fencing throughout the Subdivision, and on White Pine Lane, both prior to and during the time the Hills lived there cannot reasonably be disputed, and Brian Hill’s declaration is not a “sham.”

In addition, River Run seeks to strike statements in the Declaration regarding Mr. Hill’s conversations with various architectural committee members during the time the Hills’ fence application was pending, and which he could not specifically recall during his deposition. The Court need not rely upon the statements Brian Hill made in his declaration; rather, the Court will rely upon the affidavits of Chynna Simmons and Dannielle Drake River Run submitted; and the Declaration of Brian Ertz Plaintiffs submitted, and to which River Run did not object. (Dkt. 39-3, 40, and 49.)

The Motion to Strike (Dkt. 53) will be denied.

B. Motion for Summary Judgment — Docket 39

River Run moves for summary judgment on the grounds that it did not discriminate against the Hills, or otherwise violate the FHA, with regard to the Hills’ application to construct an enclosing fence in their back yard. River Run asserts the following arguments: (1) Section 3604(a), (b), and (c) do not apply, because River Run is an HOA and was not engaged in the sale or rental of housing when it denied the Hills’ fence application; (2) the Hills have failed to establish a prima facie case of discrimination; (3) even if the Hills establish a prima facie case, River Run had a legitimate, non-discriminatory reason for rejecting the Hills’ fence application; (4) there is no evidence that River Run’s fence rules disproportionately impact families with children;[17] and (5) there is no evidence River Run retaliated against the Hills within the meaning of Section 3617.

(1) Post-Acquisition Discrimination

Sections 3604(a), (b), and (c) apply to post-acquisition discrimination. River Run’s argument that the FHA was not designed to prohibit conduct that merely interferes with a homeowner’s later use and enjoyment of a dwelling contradicts binding Ninth Circuit authority. The Comm. Concerning Cmty. Improvement v. City of Modesto, 583 F.3d 690, 713 (9th Cir. 2009); Morris v. West Hayden Estates First Addition Homeowners Association, Inc., No. 2:17-cv-00018-BLW, 2017 WL 3666286 *2 n.2 (D. Idaho Aug. 24, 2017) (noting the court in City of Modesto held that the FHA reaches post-acquisition discrimination). At the hearing, River Run conceded there is a basis for post-acquisition claims under section 3604. Accordingly, the Court will address this argument only briefly.

The Hills’ claim is that River Run denied the Hills’ fence application, and imposed different terms and conditions of approval for the same, because of their familial status. The claim concerns the provision of services or facilities in connection with a dwelling, and is squarely addressed in Section 3604(b). City of Modesto, 583 F.3d at 713 (explaining the statute’s inclusion of the phrase, “the provision of services or facilities in connection therewith,” is broad enough to encompass the “many `services or facilities’ provided to the dwelling associated with the occupancy of the dwelling.” Id.

The Hills claim that River Run engaged in conduct that effectively made their property unavailable to their family within the meaning of Section 3604(a). 24 C.F.R. § 100.60(b) provides that Section 3604(a) prohibits “[s]ubjecting a person to harassment because of . . . familial status . . . that causes the person to vacate a dwelling or abandon efforts to secure the dwelling.” Although “[Section] 3604(a) does not reach every event that might conceivably affect the availability of housing,” the statute “is designed to ensure that no one is denied the right to live where they choose for discriminatory reasons.” Jersey Heights Neighborhood Ass’n v. Glendening, 174 F.3d 180, 192 (4th Cir. 1999).

In line with the reasoning in City of Modesto, the regulations applicable to Section 3604(a) clearly contemplate after-acquired conduct that results in constructive eviction— a resident cannot “vacate a dwelling” unless it is first occupied. Here, the Hills assert that River Run deviated from the procedures previously employed for considering applications to construct enclosing fences, and later changed the architectural rules to eliminate the option for enclosing fences in the Subdivision. A reasonable juror could infer River Run’s actions evinced a preference for homeowners without young children,[18] which effectively made the Hills’ property unavailable to them, causing them to move.

Section 3604(c) applies also to the Hills’ claim concerning the fence application.[19] Brian Hill testified in his deposition that he reviewed the Architectural Rules, including the requirements for enclosing fences, prior to purchasing the Property. The Architectural Rules contain an express statement directed at children, indicating their safety is not a “special circumstance” warranting an enclosing fence, but allowing for the construction of enclosing fences in “very special circumstances” for children’s safety. A reasonable juror could infer that the rules concerning backyard fences limited the use and enjoyment of property by children. See Fair Housing Congress v. Weber, 993 F.Supp. 1286 (C.D. Cal. 1997) (permitting a claim to move forward under Section 3604(c) based upon similar rules and regulations because the rules expressed a limitation on the use of the apartment complex by children tenants, and an ordinary reader could not interpret otherwise).

(2) Prima Facie Case of Discrimination — Disparate Treatment

The Hills contend the circumstances surrounding the rejection of their fence application demonstrate discrimination based on familial status. To prove discrimination under a disparate treatment theory, “the prima facie case elements are: (a) plaintiff is a member of a protected class;[20] (b) plaintiff [submitted a fencing application] and was qualified to receive [a fence]; (c) the [fencing application] was denied despite plaintiff being qualified; and (d) defendant approved a [fencing application] for a similarly situated party during a period relatively near the time plaintiff was denied. . . .” Gamble v. City of Escondido, 104 F.3d 300, 305 (9th Cir. 1997). See also Reynolds v. Quarter Circle Ranch, Inc., 280 F. Supp. 2d 1235 (D. Colo. 2003) (applying McDonnell Douglas burden shifting framework to plaintiffs’ FHA claims arising from attempt to gain architectural committee approval of plans to build a house).

In lieu of satisfying the elements of a prima facie case, a plaintiff may also “simply produce direct or circumstantial evidence demonstrating that a discriminatory reason more likely than not motivated” the challenged decision. Budnick v. Town of Carefree, 518 F.3d 1109, 1114 (9th Cir. 2008) (quoting McGinest v. GTE Serv. Corp., 360 F.3d 1103, 1122-23 (9th Cir. 2004) (“[I]t is not particularly significant whether [a plaintiff] relies on the McDonnell Douglas presumption or, whether he relies on direct or circumstantial evidence of discriminatory intent to meet his [initial] burden”)); see also Metoyer v. Chassman, 504 F.3d 919, 931 (9th Cir. 2007) (stating that a plaintiff suing under 42 U.S.C. § 1981, like a plaintiff bringing a suit for disparate treatment, may proceed under the McDonnell Douglas framework or by producing direct or circumstantial evidence showing that a discriminatory reason “more likely than not” motivated the employer). Under either method, however, the plaintiff must counter the defendant’s explanation with some evidence suggesting that the challenged action “was due in part or whole to discriminatory intent.” Budnick, 518 F.3d at 1114 (quoting McGinest, 360 F.3d at 1123).

River Run argues the Hills cannot prove the second and third elements of their prima facie case, because the Hills did not submit a complete application; River Run did not issue a decision on the application appeal; and, there is no evidence of similarly situated applications being approved. In response, the Hills argue there are disputed issues of fact with respect to the motive for denying the Hills’ fence application. Alternatively, the Hills argue the fence application was adequate and other similarly situated applicants were treated more favorably.

The Court finds the Hills point to numerous pieces of evidence that raise a triable issue of fact whether River Run’s reasons for denying the Hills’ fence application were more likely than not motivated by a discriminatory intent. For instance, the Architectural Committee Rules were amended to allow fences, in contravention of the stated purpose to maintain a “park like setting,” for several other purposes, such as sound abatement; geese control; and privacy. Shortly after the Hills submitted their fence application for the stated purpose of ensuring their children could play safely in their backyard, the Architectural Committee decided to eliminate all enclosing fences. Numerous emails exchanged after the Hills submitted their fence application referred to the “changing demographics” of the subdivision, and “protecting the property values of the homeowners.” When read in context, the statements appear to infer that more families with children were moving to River Run, and that fences to ensure children’s safe play should not be allowed. (See, e.g., Dkt. 49-1 at 13-21.)

Additionally, even under a traditional McDonnell Douglas analysis, the Court finds material facts regarding motivation for the denial, and whether the reasons were pretextual, are disputed. The Hills’ first fence application was denied, ostensibly because it was missing the “required” landscaping element. However, Tom Roush indicated in an email directed to the Architectural Committee members that the committee has “never required a homeowner to submit an acceptable project proposal before we review and vote on it.” (Dkt. 49-1 at 4; 49-2 at 21-22.). David Holm testified in his deposition that, during his time on the Architectural Committee, residents submitted applications that were missing required elements. (Dkt. 39-11 at 8.) Docket 49-9 contains incomplete applications from other River Run homeowners that the Architectural Committee considered. Tom Roush noted that the Architectural Committee had, in the past, ignored the landscaping requirements for privacy screens and enclosing fences. (Dkt. 49-1 at 20.) And, there is evidence the Architectural Committee knew the Hills’ neighbors specifically requested there be no landscaping. (Dkt. 49-6 at 5; see also 49-6 at 6.)

Accordingly, the Court finds there is evidence in the record from which a juror could reasonably infer that the denial of the Hills’ application, based upon the lack of the landscaping element, was pretext for familial status discrimination.

Next, River Run argues it never issued a decision on the Hills’ appeal of the fence application, and therefore never denied it, asserting the Hills did not complete the application process and therefore cannot maintain a case for discrimination. The facts here are disputed. The Hills’ first application was denied with a vote of 6:1. The Hills next submitted what they considered to be a new application, and asked that it be treated as such. Instead, the Architectural Committee indicated it was treating the Hills’ second application as an appeal, which would be presented to and considered by the Executive Board. Yet, the Architectural Committee Rules contain no appeal procedure. No vote appears in the Executive Board’s January 20, 2015 meeting minutes or at any time after the application’s submission. If indeed there was never a vote, then an inference could be made, as argued by the Hills, that the second application (or appeal) was approved. Thereafter, upon notice that the Hills would be proceeding with construction, Mr. Cox threatened Brian Hill on January 6, 2015, with litigation.

The Court finds there is a dispute as to what action, if any, was taken by the Architectural Committee or the River Run Executive Board at its January 2015 meeting. The Court finds also that a reasonable juror could infer that River Run did not follow its own CC&Rs and rules, and unilaterally changed them to the detriment of the Hills.

Last, there is sufficient evidence before the Court upon which a reasonable juror could infer that similarly situated applications considered near the time of the Hills’ application were treated more favorably. See Gamble, 104 F.3d at 305 (requiring evidence that a permit was granted to a similarly situated party relatively near the time of the applicant’s denial). First, there is ample evidence in the record that fences existed throughout the subdivision. This evidence includes a photograph of a wrought iron enclosing fence projecting into the rear yard, similar to the fence proposed by Brian Hill. (Dkt. 48-2 at 22.)[21]

Next, there is evidence River Run approved non-conforming fences near the time the Hills submitted their application. For instance, the Architectural Committee approved an application from Mike K. for a fence to inhibit geese, dated August 20, 2013, despite the fact the fence did not meet River Run’s rules at the time. (Dkt. 49-2 at 19.) The architectural rules were later changed to expressly allow this type of fence. Mike M. submitted a fence application on July 14, 2014, that did not meet the Architectural Rules, yet his application was approved. Id.[22] And Tom Roush recalled that enclosing fences “had been permitted over the years.” (Dkt. 49-2 at 21.)

The Court finds that, viewing the facts in the light most favorable to the Hills, a reasonable juror could conclude River Run had approved non-conforming fence applications, and allowed enclosing fences, at or near the time of Mr. Hill’s application on October 19, 2014. The Hills have presented sufficient facts demonstrating similarly situated persons without children were treated more favorably when they requested to build fences. See Reynolds v. Quarter Circle Ranch, Inc., 280 F. Supp. 2d 1235, 1243 (D. Colo. 2003)(“[T]he requirement of producing evidence of a similarly situated party does not mean the plaintiff must produce an identical match: `When comparing the relative treatment of similarly situated minority and non-minority employees, the comparison need not be based on identical violations of identical work rules; the violations need only be of `comparable seriousness.'”).

(3) Non-Discriminatory Reason

River Run argues it had multiple legitimate and non-discriminatory reasons for seeking to limit the type of fence the Hills sought to place on their property. However, there are genuine disputes as to the material facts regarding River Run’s alleged non-discriminatory reasons for rejecting the Hills’ fence application. Several documents suggest that members of the Architectural Committee and Executive Board considered the “changing demographics” of the subdivision; changed the architectural rules applicable to fences to eliminate enclosing fences in response to the Hills’ application; and did not discuss alternatives to the Hills’ proposed fence. Rather, River Run voted to eliminate the type of fence that a reasonable juror could conclude would most effectively provide for children’s safety and enjoyment.

(4) Retaliation

To establish a prima facie case under Section 3617, “a plaintiff must show that (1) he engaged in a protected activity; (2) the defendant subjected him to an adverse action; and (3) a causal link exists between the protected activity and the adverse action.” Walker v. City of Lakewood, 272 F.3d 1114, 1128 (9th Cir. 2001).

River Run construes protected activity too narrowly, arguing that conduct predating the July 16, 2015 HUD complaint[23] is irrelevant to the Hills’ retaliation claim and therefore not actionable. However, the retaliation claim is based upon the Hills’ desire to enjoy their home free from familial status discrimination, and there is evidence the Hills exercised their right to do so prior to the filing of their HUD complaint.

The Hills’ first fence application expressly stated that they sought to construct an enclosing fence “for the safety of children.” (Dkt. 49-5 at 2.) After the first application was denied, the second submittal mentions the safety of the Hills’ children as a reason for the fence application, and explains that a patio fence “works great for adults, but doesn’t really work as well for kids. I suppose that is why there is separate fence category specifically for children, the enclosing fence . . . [allowing] room for kids to move around and play.” (Dkt. 49-6 at 1.) The letter authored by neighbors Bill and Pat Kolb states that they “welcome the Hills and their beautiful young children, they are such a delight and wonderful addition to our aging community.” (Dkt. 49-6 at 5.) The letter authored by the Hills’ other neighbors, the Penningtons, states that when “discrimination becomes part of the narrative, it is time to re-address 20 year old bi-laws. This is not a 55 and older designated neighborhood. . . .We hope you consider the needs of the younger families, that are moving to Idaho and welcome them with open arms.” (Dkt. 49-6 at 6.) River Run was therefore put on notice that the Hills were contesting the initial denial of their application based on familial status, and exercising their right to have their application considered free from familial status discrimination.

A reasonable juror may also infer adverse action. After the denial of the Hills’ first application and the submission of the revised application, the Hills’ attorney on December 19, 2014, notified River Run it was in violation of its CC&Rs by failing to vote on the second application within twenty days, and therefore the second application was deemed approved and the Hills would be proceeding with construction of the fence. (Dkt. 40-13.) On January 6, 2015, Lloyd Cox wrote to Brian Hill, stating that the Executive Board exhibited “no willingness to consider an alternate enclosing fence.” (Dkt. 49-19 at 1.) Mr. Cox threatened litigation, stating: “Speaking for the Executive Committee and knowing the attitude of the Board members, I can assure you RRHOA will litigate the matter should you choose to construct the fence as stated by your attorney.” (Dkt. 49-19 at 2.)

Thereafter, evidence in the record indicates Brian Hill engaged in a discussion with members of the Executive Committee sometime after January 6, 2015, and that it was clear to him “the Executive Committee will not compromise on any type of enclosing fence for any child under any circumstance, even though the enclosing fence has been an allowed category of fence for years and years.” (Dkt. 40-12 at 10.)

The above evidence may be construed by a reasonable juror as evidence of protected activity, and evidence that River Run threatened, intimidated, and interfered with the Hills’ enjoyment of their right to be free from familial status discrimination. At the very least, there are disputed issues of fact as to why River Run acted in the manner it did, in light of the existence of similar fences throughout the neighborhood. Thus, there is evidence in the record sufficient to preclude summary judgment with respect to the three elements required to prove the retaliation claim under Section 3617.

And last, there is evidence upon which a reasonable juror could find a causal link between the Hills’ protected activity and the adverse action.[24] The Hills claim they could not enjoy their home because their young children could not play safely in their yard, which backed up to a creek.[25] They felt uncomfortable going to the pool and viewing the signs around the common areas. And the Hills saw all sorts of other fences, including fences to keep out geese, but they were not allowed to construct a fence enclosing their back yard for their children’s safety and enjoyment according to established Architectural Rules. As a result, they moved.

CONCLUSION

The Court concludes there are no disputed issues of material fact precluding partial summary judgment on Plaintiffs’ motion. The Hills and IFHC have established liability under 42 U.S.C. §§ 3604(b) and (c) for River Run’s discriminatory tennis court sign, pool guest rule, and adult only clubhouse rule. That leaves the issue of damages for trial on these claims. Conversely, the Court finds there are genuine issues of material fact concerning Plaintiffs’ claims under 42 U.S.C. §§ 3604(a), (b), and (c), as well as under 42 U.S.C. § 3617, related to the Hills’ application to construct a fence in their backyard for the safety and enjoyment of their children. Defendant’s motion for summary judgment will therefore be denied.

The Court will contact the parties to discuss a trial setting.

ORDER

1) Defendant’s Motion for Summary Judgment (Dkt. 39) is DENIED.

2) Plaintiffs’ Motion for Partial Summary Judgment (Dkt. 42) is GRANTED.

3) Defendant’s Motion to Strike (Dkt. 50) is DENIED.

4) Defendant’s Motion to Strike (Dkt. 53) is DENIED.

[1] Plaintiffs will be referred to collectively as the Hills, unless otherwise indicated.

[2] Although River Run’s memorandum filed in opposition to the Hill’s motion for partial summary judgment indicated it “dispute[d] the Plaintiffs’ statement of facts as set forth herein and as addressed” in its motion to strike the declaration of Brian Hill, River Run did not file a statement of disputed facts, or otherwise dispute the Hills’ recitation of the relevant facts for purposes of the Hills’ motion. As discussed below, the motion to strike the declaration of Brian Hill will be denied. The Court has, however, considered the arguments and disputed facts raised by River Run in its motion to strike the declaration of Brian Hill.

[3] There is no dispute that the Architectural Rules allowed enclosing fences at the time Brian and Anne Hill purchased the property in April of 2013. The provision allowing short wire fences along Logger’s Creek was added in January of 2014.

[4] The minutes indicate that the River Run HOA held a regular meeting, and a quorum was present. Mr. Hill was present also.

[5] The location, timing of construction, or any other details regarding the construction of this fence are not clear from the record.

[6] The Recreation Center encompasses the tennis courts, pool, and clubhouse.

[7] Although Brian Hill’s affidavit includes also allegations related to the “quiet swimming only” sign at the pool, Plaintiffs’ motion for partial summary judgment addresses only the tennis court sign and not the pool sign. River Run admitted it removed and changed the language of both the tennis court and pool signs in February of 2015.

[8] In Section III (2) of its motion for summary judgment, River Run argues also that Plaintiffs lack standing.

[9] In its briefing, River Run argued that Section 3604 did not reach post-acquisition conduct. However, at the hearing, River Run conceded that binding authority, including City of Modesto, holds that section 3604 reaches post-acquisition conduct.

[10] River Run argued that the rule was somehow saved because it stated a preference, rather than an outright ban, on the use of the tennis courts by children during certain times. However, when pressed at the hearing to distinguish the tennis court rule preferring adults after 3:00 p.m. from a rule that stated a preference for “whites only after 3:00 p.m.,” River Run could not articulate a distinction. The Court finds none. Further, River Run conceded that, on the record before the Court, there was no evidence of a legitimate purpose for the rule.

[11] River Run, in footnote 5 of its brief, argues that the sign requiring “quiet swimming” was not discriminatory because it applied to everyone. The Court declines to address the sign for purposes of the Plaintiffs’ motion for partial summary judgment, because the issue was not raised in the motion.

[12] For instance, certain age-neutral rules limiting the number of guests have been justified. See Landesman v. Keys Condo. Owners Ass’n, No. C 04-2685 PJH, 2004 WL 2370638, at *4 n.4 (N.D. Cal. Oct. 19, 2004), aff’d, 125 F. App’x 146 (9th Cir. 2005) (“This is not to say that The Keys Association cannot impose other reasonable, age-neutral restrictions on the use of one or more of the pools.”).

[13] The Court questions the applicability of the reasoning in Morris v. W. Hayden Est. First Addition Homeowners Ass’n, Inc., No. 2:17-CV-00018-BLW, which purports to limit actionable publications to those provided to the buyers prior to the point of sale. The regulations include publications expressing to “sellers . . . or any other persons a preference. . . .” The 2013 Handbook and pool sign could be construed as a discriminatory statement expressing to sellers or other persons a preference because of familial status. However, whether Morris is distinguishable was not presented to the Court.

[14] Although Mr. Hill did not state when he observed the fences, there are sufficient facts in the record for a reasonable juror to infer that fences existed throughout the Subdivision during the time the Hills lived at the Property.

[15] Mr. Hill does not indicate when he took the photographs. However, from the record, it appears Plaintiffs’ counsel provided River Run with “photographs of fences and fence-like structures in River Run,” having identified the fence photographs in Plaintiffs’ initial disclosures. (Dkt. 50-3 at 3.) It therefore seems disingenuous for River Run to object to the introduction of these photographs via Brian Hill’s declaration in these proceedings.

[16] Emails containing the above quotations attributed to Tom Roush were submitted attached to the Declaration of Brian Ertz in opposition to River Run’s motion for summary judgment.

[17] River Run argues also that there is no evidence River Run’s rules or restrictions disparately impact families with children. (Dkt. 39-1 at 21.) Plaintiffs do not advance a disparate impact theory, and did not address the argument in their response brief. Accordingly, the Court has not considered this argument.

[18] It is difficult to conceive of any other reason for a fence enclosing the patio and yard area, other than to allow for play space, and for the protection and safety of children and pets. While the Architectural Rules expressly provided (and still provide) for “privacy fence/screen[s],”such fences are limited to enclosing only patios and decks, or screening utilities and trash containers. Thus, it would provide a limited enclosed space of a hard surface area (concrete or wood/composite decking), and may not allow children and pets to enjoy the entire yard area.

[19] The Court discussed above that Section 3604(c) applies to the Hill’s claim related to the Recreation Center rules published in the Handbook and the tennis court sign.

[20] It is undisputed that the Hills are members of a protected class.

[21] It is not clear from the record when this particular wrought iron fence was constructed or why. However, construing the evidence in the record in favor of the Hills, the fact it existed at all, and was similar to the design proposed by Mr. Hill, may be construed by a reasonable juror as constituting favorable treatment to other similarly situated applications.

[22] Marv and Francis applied to construct a fence to enclose their entire yard on or about June 15, 2015, after the re-write to the rules eliminated that option. (Dkt. 49-2 at 27.) Their application was allowed to proceed, and Danielle Drake indicated that the Board of Directors “will look favorably on approving it given the other fences on nearby units.” Id. The Architectural Committee approved an enclosing fence at 1981 S. Springbrook Lane in September of 2017, for the purpose of providing for the safety of a special needs adult and two small dogs. (Dkt. 49-10 at 4.)

[23] The Hills filed their HUD Complaint on May 27, 2015, and amended it on July 16, 2015.

[24] River Run did not address IFHC’s claimed damages other than in the context of its argument regarding standing in Section III (C). And, Plaintiffs did not move for summary judgment on damages.

[25] Brian Hill stated also in his declaration that the community pool backed up to the backyard of the Property, and his children could fit through the pickets of the pool fence. (Dkt. 48 at 2.)

 

Sanzaro v. Ardiente Homeowners Ass’n, LLC

364 F.Supp.3d 1158 (2019)

Deborah SANZARO and Michael Sanzaro, Plaintiffs,
v.
ARDIENTE HOMEOWNERS ASSOCIATION, LLC et al., Defendants.

Case No. 2:11-cv-01143-RFB-CWH.
United States District Court, D. Nevada.
Signed March 5, 2019.
An association’s refusal to grant an owner a reasonable accommodation which would allow her to bring her service dog with her into the common area clubhouse violated the Fair Housing Act.  The court imposed compensatory and punitive damages totaling $635,000 against the association, the association’s developer, individual board members, the association’s management company, the association’s former manager, and the association’s manager.  The court also awarded plaintiff her attorneys’ fees and costs.

*** End Summary ***

1163*1163 Deborah Sanzaro, Las Vegas, NV, pro se.

Michael Sanzaro, Las Vegas, NV, pro se.

Joseph P. Garin, Kaleb D. Anderson, Lipson Neilson P.C., Las Vegas, NV, Jason C. Gless, Wood, Smith, Henning & Berman, Riverside, CA, for Defendant.

AMENDED ORDER

Findings of Fact and Conclusions of Law After Court Trial

RICHARD F. BOULWARE, II, UNITED STATES DISTRICT JUDGE.

I. INTRODUCTION

Plaintiffs in this case are Deborah Sanzaro (“Mrs. Sanzaro”) and Michael Sanzaro (“Mr. Sanzaro”) (collectively, “Plaintiffs” or “the Sanzaros”). Plaintiffs are homeowners and members of the Ardiente Homeowners Association (“HOA”). This case involves three incidents between 2009 and 2011, during which Mrs. Sanzaro, alone or accompanied by Mr. Sanzaro, attempted to enter the Ardiente HOA clubhouse (“the Ardiente clubhouse”) with Mrs. Sanzaro’s alleged service animal, a Chihuahua named Angel. On each of these three occasions, Mrs. Sanzaro was denied access to the clubhouse while accompanied by Angel. The Court held a bench trial in this case on April 9, 2018, April 10, 2018, April 16, 2018, April 17, 2018, April 18, 2018, April 20, 2018, and May 11, 2018. The Court rules in favor of Plaintiffs based on the following findings of fact and conclusions of law.

II. PROCEDURAL HISTORY

Plaintiffs’ operative Amended Complaint was filed on July 22, 2013. (ECF No. 78). Plaintiffs brought 102 causes of action for “discrimination against the disabled, breach of contract and other torts,” including claims under the Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12182, and the Fair Housing Act (“FHA”), 42 U.S.C. §§ 3601-19, and NRS § 651.075. On November 29, 2017 the Court entered an order on various motions, including a motion for summary judgment filed by Plaintiffs, which the Court denied. (ECF No. 381). The remaining causes of action were Claims 1, 2, 6, 7, 11, and 12 which relate to 1164*1164 the three incidents that took place on March 11, 2009 (“Incident 1”), July 26, 2010 (“Incident 2”), and January 29, 2011 (“Incident 3”). Based on these causes of action and the prior rulings of the Court, the issues remaining for trial were: (1) whether the HOA clubhouse was a place of public accommodation under the ADA and NRS § 651.075, and (2) whether Plaintiffs requested, and were ultimately refused, a reasonable accommodation under the FHA.[1]

III. JURISDICTION AND VENUE

This Court has federal question jurisdiction pursuant to 28 U.S.C. § 1331 for claims arising under the ADA and the FHA. The Court has supplemental jurisdiction over state law claims under 28 U.S.C. § 1367. Venue is proper because the underlying actions and corresponding damages occurred within Clark County, Nevada.

IV. FINDINGS OF FACT

Federal Rule of Civil Procedure 52(a)(1) requires the Court to “find the facts specially and state its conclusions of law separately” in a bench trial. Fed. R. Civ. P. 52(a)(1). Factual findings must be sufficient to indicate the basis for the Court’s ultimate conclusion. Unt v. Aerospace Corp., 765 F.2d 1440, 1444-45 (9th Cir. 1985) (citing Kelley v. Everglades Drainage Dist., 319 U.S. 415, 422, 63 S.Ct. 1141, 87 L.Ed. 1485 (1943)). The findings must be “explicit enough to give the appellate court a clear understanding of the basis of the trial court’s decision, and to enable it to determine the ground on which the trial court reached its decision.” United States v. Alpine Land & Reservoir Co., 697 F.2d 851, 856 (9th Cir. 1983), cert. denied, 464 U.S. 863, 104 S.Ct. 193, 78 L.Ed.2d 170 (1983) (citations and quotation marks omitted). Accordingly, the Court makes the following findings of fact on this matter.

1. The Ardiente HOA

a. Ardiente is a restricted-access residential HOA neighborhood located in North Las Vegas, Nevada. The community is gated and requires a remote transponder or access code for entry. Members of the public cannot enter the Ardiente community without prior permission from the property management unless they have assistance or consent from a current homeowner for a particular visit.

b. In addition to private residences, the community contains common-use facilities such as the Ardiente clubhouse. The Ardiente clubhouse has several amenities including a gym, a pool and sauna, and rooms to rent for private events. The Ardiente clubhouse also has restricted access, monitored by Ardiente and property management staff. Members of the public cannot enter the Ardiente clubhouse without prior permission from staff. The office for Ardiente is located within the clubhouse.

c. At all times relevant to this litigation, the Declarant—either Defendant Corona Ardiente (“Corona”) or non-party Shea Homes—hosted programs called “Stay and Play” and “Taste of the Good Life,” in which members of the public who were not residents of the Ardiente community could stay overnight in an Ardiente model home and access community facilities, including the clubhouse. 1165*1165 The purpose of these programs was to induce these guests to purchase an Ardiente home. Members of the public were not permitted to access the Ardiente community and facilities unless they indicated potential interest in purchasing a home within the community and were part of the aforementioned marketing programs.

d. In October 2010, Shea Homes hosted a Grand Opening of the Ardiente community, which was advertised to the public in the local newspaper. As part of the Grand Opening, activities such as yoga, dog training, and line dancing occurred inside of the clubhouse. The purpose of the event was to induce members of the public to purchase an Ardiente home.

2. The Parties

a. Since August 2007, Plaintiffs have been owners of a single family home within the Ardiente community located at 3609 Inverness Grove, North Las Vegas, Nevada. The value of Plaintiffs’ home at the time of purchase was $ 212,800.00.

b. Plaintiffs lived in their Ardiente home from October 2008 to January 2018. Plaintiffs used the Ardiente clubhouse facilities without incident two to three times per day on average between November 2008 and March 2009. While Plaintiffs still own the home, they moved out of the home and away from the Ardiente community due to ongoing and persistent harassment and threats, which they continue to experience in connection with the events described herein.

c. Defendant Ardiente Homeowners Association (“Ardiente” or “the HOA”) is the entity that maintains and operates the community. Ardiente is governed by a Board of Directors (“the Board”) pursuant to its governing documents, including Bylaws, Rules & Regulations, and a Declaration of Covenants, Conditions, Restrictions (“CC & Rs”) (collectively, “Ardiente’s governing documents”). Plaintiffs received a copy of these governing documents when they purchased their home

d. Pursuant to Ardiente’s governing documents, at the time Plaintiffs purchased their home and until 2010, the majority of the Board positions were filled by the Declarant, with remaining seats filled by homeowners.

e. Defendant Corona was the Declarant prior to non-party Shea Homes. Under the terms of the CC & Rs and Bylaws, the Declarant developed the community and sold lots to homeowners. The Declarant also had authority to appoint and oversee voting members to the Board.

f. Neither Ardiente nor Corona provided any training to their Board representatives or relevant employees about the requirements or prohibitions of the ADA, FHA, or NRS § 651.075, such as what, if any, documentation is required to establish that an animal is a service or assistance animal.

g. Neither Ardiente nor Corona provided any training to their Board representatives about how to engage with homeowners seeking to bring service or assistance animals into the clubhouse.

h. Defendant RMI Management, LLC (“RMI”) was the property management company hired by the community developer. RMI managed Ardiente between 2009 and 2011. During the Incidents at issue in 1166*1166 this case, RMI property management staff were employed at Ardiente facilities, including at the Ardiente clubhouse. RMI employed property managers, called Community Managers, at all relevant times during the events that gave rise to this litigation.

i. RMI did not provide any training to its Community Managers about the requirements or prohibitions of the ADA, FHA, or NRS § 651.075, such as what, if any, documentation is required to establish that an animal is a service or assistance animal.

j. RMI did not provide any training to its Community Managers about how to engage with homeowners seeking to bring service or assistance animals into the clubhouse.

k. Defendant Scott Harris (“Harris”) is a former member of the Ardiente Board and former appointee of Corona. Harris was a voting Board member during the first Incident involving the Sanzaros. Harris participated in and ratified decisions regarding the Sanzaros, including to prohibit them from accessing the clubhouse.

l. Defendant Ryan Smith (“Smith”) was a member of the Ardiente Board between February 2010 and January 2013. Smith took over the position from Harris. Smith was appointed to the Board by Corona, and was an employee of non-party successor Declarant Shea Homes. Smith was a voting Board member during the second and third Incidents involving the Sanzaros. Smith participated in and ratified decisions regarding the Sanzaros, including to prohibit them from accessing the clubhouse.

m. Defendant Kevin Wallace (“Wallace”) is the Chief Executive Officer of RMI. Wallace was not a member of the Board and had no authority to vote on Board decisions. Wallace never attended any Board meetings, and did not communicate directly with the Sanzaros.

n. Defendant Laury Phelps was the Community Manager of the Ardiente community, and a former employee of RMI, between 2007 and 2010. She was the Community Manager during the first two Incidents involving the Sanzaros. During her tenure, Phelps sent out communications regarding animals in the Ardiente clubhouse to Ardiente homeowners, including the Sanzaros, on behalf of the Board. She also actively prevented the Sanzaros from entering the Ardiente clubhouse with Angel at the direction of the Board. However, she was not a voting member of the Board.

3. Mrs. Sanzaro’s Disability and Use of an Assistance Animal

a. Mrs. Sanzaro became disabled on March 12, 2004. Her disability is permanent, impedes her ability to walk without assistance, and generates significant and ongoing incidents of pain.

b. As a result of her disability, Mrs. Sanzaro uses a walker.

c. Mrs. Sanzaro needed, and continues to need, the assistance of a service dog in or around October 2008 until the present, and began using the services of Angel, a Chihuahua, at that time.

d. Between November 2008 and February 2009, Angel was trained to assist Mrs. Sanzaro with her disability. Initially, Angel assisted Mrs. Sanzaro in coping with acute pain arising from Mrs. Sanzaro’s disability. Angel was subsequently trained 1167*1167 to retrieve Mrs. Sanzaro’s walker and car keys in the event that those items were out of Mrs. Sanzaro’s reach.

4. 2009 Incident and Interactions between Plaintiffs and Defendants

a. Incident 1 occurred at the clubhouse on March 11, 2009. That day, Mrs. Sanzaro entered the clubhouse with Angel and her walker. Defendant Phelps, then Community Manager of the HOA, was working at the clubhouse that day. Prior to this incident, Phelps had seen Mrs. Sanzaro use her walker and was aware that Mrs. Sanzaro suffered from a physical impairment that significantly impaired her ability to walk. Phelps asked Mrs. Sanzaro why the dog was in the clubhouse. Sanzaro then explained that the dog assisted her with her disability as a service animal. Phelps asked Mrs. Sanzaro if she had with her any documentation for the dog, and Mrs. Sanzaro responded that she did not. Phelps then asked Mrs. Sanzaro to leave. When Mrs. Sanzaro refused to leave, Phelps called the HOA’s attorney and also called security. After security was called, Mrs. Sanzaro left the clubhouse with Angel.

b. On March 13, 2009, Phelps sent an email on behalf of the HOA Board with subject line “RE: Animals in the clubhouse,” stating in part: “Persons with service animals should notify the clubhouse staff about their service animal when they come into the clubhouse, or let the clubhouse staff know, if asked, that the animal is a service animal. If a homeowner refuses to say whether the animal is a service animal or not, the animal will have to stay outside of the clubhouse. If you do have certification papers, it would be helpful to provide them for inclusion in your file.”

c. The same day, Mrs. Sanzaro entered the clubhouse with Angel, without incident.

d. Additionally on March 13, 2009, counsel for the HOA sent Plaintiffs a letter describing Incident 1 as a violation of the HOA’s governing documents, and also informing Plaintiffs that a hearing before the HOA Board regarding the incident before the HOA Board would be set for March 30, 2009. The letter stated in part: “[T]his letter is a formal request that, at the hearing, you provide the [HOA] with additional documentation from Mrs. Sanzaro’s doctors to substantiate the existence of a handicap/disability and the necessity for the presence of the dog in the clubhouse in order to accommodate that handicap/disability.”

e. On March 16, 2009, Phelps sent another email to Ardiente homeowners on behalf of the Board, stating in part: “The clubhouse staff wants everyone to know that if someone enters the clubhouse with a legitimate service animal, and properly advises the staff of such, that person will be granted all privileges and assistance by the staff to accommodate their disability…. If you have a service animal, and require them to be in the clubhouse, please advise the staff so that we can properly accommodate you and your service animal.”

f. On March 29, 2009, non-party James Marsh (“Marsh”), then President of the HOA and homeowner representative on the HOA Board, sent a letter to Ardiente homeowners regarding Plaintiffs’ hearing set the following day. In the letter, Marsh 1168*1168 stated that, although he was “not at liberty to discuss the nature and extent of the alleged violations” against the Sanzaros, he nonetheless “[could] ensure [homeowners] that Mr. Sanzaro’s recitation of the facts is inaccurate, self-serving and intentionally misleading.” He further informed homeowners that Mrs. Sanzaro did not introduce her dog as a service animal to staff and never presented documentation that the dog was a service animal during Incident 1. He concluded the letter by writing “I, and the Board, sincerely apologize to all of you that have had to endure Mr. and Mrs. Sanzaro’s emails to assist him in furthering his personal vendetta against you, the HOA.” Marsh sent the letter on behalf of the Board and at the direction of counsel for the HOA.

g. On March 30, 2009, a hearing was held before the HOA regarding Incident 1. The meeting was conducted in “open” format such that other Ardiente homeowners were permitted to attend. Plaintiffs were not present.

h. Beginning in March 2009 and at least through 2010, the Sanzaros received hate letters and emails as well as verbal harassment from other homeowners in the Ardiente community regarding the Sanzaros’ dispute with the Board over Angel’s documentation. At no point did representatives of Ardiente or Corona, Board member Harris, or Phelps take any action to discourage homeowners from harassing the Sanzaros despite being aware of the harassment and threats.

i. After the March 30, 2009 hearing, an Ardiente homeowner anonymously sent the Sanzaros a letter that read in part: “We hear you are going to file a lawsuit against the HOA and us. Jim [Marsh] was right when he told a large group of us at Sage Park a couple years ago that you are going to cost each of us a lot of money…. Leave this community. We don’t want you here…. You and [Mrs. Sanzaro] have lost every action against the HOA…. Don’t sue us. Just get the hell out of here! If you sue us I hope your little dog gets loose and someone catches it and drops it deep in the desert….”

ii. On approximately June 21, 2009, the Sanzaros found a letter tucked inside of their door handle which read in part: “Our group has combined our efforts to rid our community of undesirables such as you two. The board meeting a few days ago was only a small example of our combined power. In a meeting attended by many homeowners our group devised a plan to disrupt the two of you from speaking at the board meeting. As you know it worked very well. You two looked like idiots trying to talk. Our group followed our plan and heckled and yelled obscenities at you until you were force [sic] to stop talking and sit down. Jim [Marsh] said he would not stop us from heckling you…. At first you two were a fun part of this community, but when you turned on Jim Marsh and Laury Phelps your fight against them and [Ardiente] became our fight against you two. A very good proverb works well here. An enemy of our friend is our enemy. Do our community a big favor, GET THE HELL OUT OF OUR COMMUNITY!” The letter was signed by 1169*1169 “Ardiente Residents for Solidarity.”

iii. At some point in Summer 2009, an anonymous homeowner spray painted a threatening message on the Sanzaros’ garage door, telling them to get out of the neighborhood. The message also included a death threat against Angel and the Sanzaros. Phelps and the Board were informed about this spray painted message.

iv. On approximately June 22, 2009, the Sanzaros received by mail another letter which read in part: “We can tell by the message painted on your garage that [anonymous homeowner A Concerned Ardiente Resident] ACAR wants you more than gone…. Dogs are not allowed in the clubhouse unless it is a service animal. Laury [Phelps] and Jim [Marsh] have told us several times that your dog is not a service animal…. Why won’t you give Laury the documents that she wants and end your fight? We all know why. We know you cannot prove that Debbie [Sanzaro] is disabled and that her little dog is a service animal…. Stop bad mouthing Laury. You two are LIARS! You two are GARBAGE in the eyes of this community. Get the hell out of our community. We hate you for what you are doing to Laury.” The letter was signed by “The Ardiente Residents for Solidarity.”

v. On approximately August 18, 2009, the Sanzaros received by mail another letter from an anonymous individual, signed “A Concerned Ardiente Resident.” The letter stated in part: “YOU LOST THE FIGHT AND MUST NOW PAY $ 19,000. GREAT NEWS! LAURY PHELPS SAID THE ARBITRATOR RULED THAT YOUR DOG IS NOT A SERVICE ANIMAL. THIS IS THE SAME THING SHE HAS ALWAYS SAID. LAURY ALSO SAID THAT THE ARBITRATOR RULES THAT ALL OF THE BOARDS [sic] ACTIONS HAVE BEEN LEGAL. THE BOARD HAS NEVER DONE ANYTHING WRONG…. UNFORTUNATELY WE WERE TOLD THAT OUR ASSOCIATION MUST PAY THE ALMOST $ 19,000 IN LEGAL FEES UNTIL THEY GET PAY[M]ENT FROM YOU. YOUR LAWSUIT HAS COST OUR COMMUNITY A LOT OF MONEY. OUR MEMBERS FOR SOLIDARITY HAVE TRIED AND FAILED TO FORCE YOU TO LEAVE OUR COMMUNITY BY MAKING YOU TWO SOCIAL OUTCASTS. LAURY PHELPS SAID WE CAN FORCE YOU TO LEAVE BY FORECLOSING ON YOUR HOUSE FOR THE $ 19,000 YOU OWE US. WHY DON’T YOU PAY US NOW AND LEAVE. SAVE US THE TIME AND MONEY TO FORECLOSE ON YOU. AS A MEMBER OF THE ARDIENTE RESIDENTS FOR SOLIDARITY WE DO NOT WANT YOU LIVING IN OUR COMMUNITY.”

vi. Plaintiffs filed a police report regarding the anonymous letters and the graffiti on their garage, and although an investigation was commenced, Plaintiffs never discovered the identity of the individuals that took these actions.

1170*1170 i. On April 9, 2009, counsel for the HOA sent Plaintiffs a letter with the results of the March 30, 2009 hearing. According to the letter, the Board found that Mrs. Sanzaro’s entry into the clubhouse with Angel and subsequent failure to provide documentation about the dog’s abilities as a service animal, was a violation of the HOA Rules & Regulations.[2] The Board found a second violation, as Mrs. Sanzaro brought Angel into the clubhouse on March 13, 2009. Plaintiffs were assessed a $ 100 fine for the March 11, 2009 incident and a $ 100 fine for Mrs. Sanzaro’s entry into the clubhouse with Angel on March 13, 2009. Plaintiffs were also advised that they were required to pay the attorneys’ fees and costs incurred by the HOA for enforcing its governing documents, in the amount of $ 752. The letter stated that the $ 200 fine would be waived if there was no subsequent violation during the next six months, but that fines would be imposed for any further violation.

5. 2009 NRED Arbitration

a. Plaintiffs filed a complaint with the Nevada Real Estate Division (“NRED”) against (1) Corona; (2) Ardiente; (3) non-party Linda Kemper (“Kemper”), a member of the HOA Board at the time; (4) Marsh, as Board President; (5) Phelps, as Community Manager and an employee of RMI; and (6) RMI. The claim was submitted to a non-binding arbitrator.

b. On July 27, 2009, a non-binding arbitration was held before the NRED. Plaintiffs were in attendance, as well as a representative of Corona, a representative of Ardiente, Kemper, Marsh, Phelps, and a representative of RMI, as well as their counsel.

c. During the arbitration, Mrs. Sanzaro testified that Angel provided assistance by helping Mrs. Sanzaro manage acute pain attacks arising from her disability.

d. The same day, at the request of the arbitrator, Plaintiffs sent a fax to the arbitrator with the following documents: (1) a doctor’s statement requesting that Angel be registered as a service dog; (2) a notice of entitlement to disability benefits from the Social Security Administration; (3) a doctor’s statement regarding Mrs. Sanzaro’s disability; and (4) a statement from Mrs. Sanzaro explaining how Angel has been trained to assist her with her disabilities. Copies of the documents were also sent to counsel for the parties that attended the arbitration.

e. Representatives from Ardiente, Corona, and RMI, as well as Phelps, heard Mrs. Sanzaro explain how Angel assists her and received the information from the documents Plaintiffs submitted for the arbitration.

f. As a result of the faxed documentation being provided to Phelps and representatives of Ardiente, Corona, and RMI, Defendant Harris, as a member of the Board and representative of Corona during the time of the arbitration, became aware, at least as of this correspondence and testimony, of Mrs. Sanzaro’s disability which resulted in a physical impairment that significantly impaired her ability to walk and Angel’s assistance 1171*1171 to her as a service animal. This information was undisputed.

g. On August 6, 2009, NRED Arbitrator Ara Shirinian entered a non-binding arbitration award in favor of Ardiente. The arbitrator found in part that “Mrs. Sanzaro’s self-serving letter and a signed post-card to a private for-profit company without explanation of why the dog is needed by Mrs. Sanzaro [was] unpersuasive.” The arbitrator awarded fines related to the violations of the Ardiente governing documents as well as attorneys’ fees incurred in the course of the arbitration.

h. The arbitration was upheld by the Eighth Judicial District Court of Clark County, Nevada as well as by the Nevada Supreme Court.

6. July 2010 Incident and Interactions between Plaintiffs and Defendants

a. Incident 2 occurred at the clubhouse on July 26, 2010. On that date, the Sanzaros attempted to enter the clubhouse to purchase a gate transponder, accompanied by Angel. During this incident, the Sanzaros were told that they could not come into the clubhouse unless they provided more documentation about Mrs. Sanzaro’s disability and Angel’s services, despite the documentation the Sanzaros provided to Ardiente, Corona, RMI, and Phelps in July 2009 as part of the NRED arbitration.

b. Following Incident 2, Mr. Sanzaro sent a letter to Corona; Shea Homes, and Harris, as representatives of the Declarant; and Kemper, Smith, and non-party Sal Sirna (“Sirna”) as members of the Board. In the letter, Mr. Sanzaro stated that he was lodging a formal written complaint against Phelps for disability discrimination. He also accused the Board of failing to properly supervise Phelps in her role as Community Manager.

c. Mr. Sanzaro sent a similar letter directly to Phelps on August 1, 2010. In the letter, Mr. Sanzaro requested a response to his allegations.

d. On August 1, 2010, Phelps sent a response letter to Mr. Sanzaro, on behalf of the Ardiente Board. She stated in part: “[U]ntil you provide proof that the dog in question is a registered service dog, I will have to respectfully disagree with your opinion. Unless you have recently provided documentation that we are not aware of, the dog is not a registered service dog and, therefore, I did not violate any of your rights.”

e. On August 8, 2010, Mr. Sanzaro sent separate letters to Corona, Smith, and Harris, detailing his allegation of disability discrimination by Phelps, noting her disability and describing Mrs. Sanzaro’s need to access the Ardiente clubhouse. Mr. Sanzaro wrote that Mrs. Sanzaro required use of, amongst other things, the gym, sauna, pool, Jacuzzi, and library, but was being denied access to the clubhouse.

f. As a result of the letters from Mr. Sanzaro, at least by August 8, 2010, Smith was aware of Mrs. Sanzaro’s disability which resulted in a physical impairment that significantly impaired her ability to walk.

g. Between September 2010 and December 2010, Plaintiffs sent letters to Corona and to individual Board members, including Smith, requesting mitigation and use of the Ardiente clubhouse.

1172*1172 h. On January 20, 2011, counsel for Ardiente sent Plaintiffs a letter rejecting their requests to use the clubhouse. The letter stated in part: “[Y]ou still need to provide the Board with records and/or documents that demonstrate that Mrs. Sanzaro has such an impairment which affects one or more of her major life activities, and that the impairment is related to the need for her having the dog in question residing with her and accompanying her into the Common Areas [of the Ardiente community]…. [Ardiente’s] request that you provide the proper documentation evidencing a certificate of training as a service dog for the chihuahua is well founded in Federal law…. You still have failed to furnish the proper documentation that the Association has been requesting since March 2009. Until such time that you furnish such documentation you will not be allowed to bring the Chihuahua into the [Ardiente] clubhouse as it is a violation of the [Ardiente] Rules and Regulations.” The Ardiente Board was copied on this letter, which included Smith.

i. On January 22, 2011, Mr. Sanzaro sent a letter to Corona, Shea Homes, and Harris, as representatives of the Declarant, and non-party Margo Hughen (“Hughen”), Smith, and Sirna as members of the Board, responding to the January 20, 2011 letter. Mr. Sanzaro disputed that documentation or certification of Angel’s abilities was required by law, and stated that he and his wife, along with Angel, would appear at the clubhouse on January 29, 2011 at 4:00pm for the purpose of regaining access to the clubhouse. He requested that Board Members, representatives of Corona, and counsel for Ardiente be present on that date.

7. The January 2011 Incident

a. Incident 3 took place on January 29, 2011, when the Sanzaros appeared with Angel at the Ardiente clubhouse. Non-party Ron Winkel (“Winkel”) was the Community Manager at the time, and had replaced Phelps at some point in 2010. Winkel refused the Sanzaros’ entry into the clubhouse, and told them that the Board would not allow them to come into the Ardiente clubhouse with the dog until they provided documents that Angel was a service animal. Feeling intimidated by Winkel’s presence, the Sanzaros left the clubhouse with Angel.

8. Other Actions Taken Against the Sanzaros

a. Following the assessments of fines and attorneys’ fees and costs in conjunction with the incidents described above, Ardiente initiated foreclosure proceedings against the Sanzaros.

i. On August 28, 2009, a Lien for Delinquent Assessments in the amount of $ 2,590.80 was recorded against Plaintiffs.

ii. A Notice of Default and Election to Sell was recorded against Plaintiffs’ home on October 13, 2009. Pursuant to the Notice, Plaintiffs owed $ 3,608.80 in assessments to the HOA.

b. As a result of the foreclosure proceedings being initiated, the Sanzaros were forced to file for Chapter 11 bankruptcy in August 2010.

c. Plaintiffs’ debt was not discharged until October 28, 2013. Up to that date, they received notifications that their Ardiente home was in foreclosure. 1173*1173 Prior to the discharge, Plaintiffs made payments to non-party Red Rock Financial Services, the debt collector for Ardiente, in the amount of $ 4,011.40.

V. CONCLUSIONS OF LAW

A. Plaintiffs’ Claims Under the ADA

i. Legal Standard

Title III of the ADA prohibits discrimination in public accommodations, stating that “[n]o individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.” 42 U.S.C. § 12182(a) (2009); Kohler v. Bed Bath & Beyond of California, LLC, 780 F.3d 1260, 1263 (9th Cir. 2015) (quoting Molski v. M.J. Cable, Inc., 481 F.3d 724, 730 (9th Cir. 2007)). To prevail on a Title III discrimination claim, the plaintiff must show that (1) she is disabled within the meaning of the ADA; (2) the defendant is a private entity that owns, leases, or operates a place of public accommodation; and (3) the plaintiff was denied public accommodations by the defendant because of her disability. Molski, 481 F.3d at 730.

In the context of ADA discrimination claims pertaining to service animals in particular, discrimination is defined in part as “a failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities….” 42 U.S.C. § 12182(b)(2)(A)(ii) (2009). The Department of Justice issued ADA regulations which state in part: “[g]enerally, a public accommodation shall modify policies, practices, or procedures to permit the use of a service animal by an individual with a disability.” 28 C.F.R. § 36.302(c)(1) (2009). “By this regulation the Department of Justice intended that `the broadest feasible access be provided to service animals in all places of public accommodation[.]'” Lentini v. Cal. Ctr. for the Arts, Escondido, 370 F.3d 837, 843 (9th Cir. 2004) (citation omitted). However, failure to make such modifications does not automatically constitute discrimination where the entity “`can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, facilities, privileges, advantages, or accommodations….'” Id. at 844 (alteration in original) (quoting 42 U.S.C. § 12182(b)(2)(A)(ii)). The Supreme Court has articulated different inquiries to make this determination: “whether the requested modification is `reasonable,’ whether it is `necessary’ for the disabled individual, and whether it would `fundamentally alter the nature of the [goods, services, etc.].” Id. (quoting PGA Tour, Inc. v. Martin, 532 U.S. 661, 683 n.38, 121 S.Ct. 1879, 149 L.Ed.2d 904 (2001)).

ii. Discussion

1. Mrs. Sanzaro is Disabled Under the ADA

All Defendants concede that Mrs. Sanzaro is a disabled individual and has had a disability at all relevant times during the events described above. Therefore, in consideration of the facts presented at trial, the Court finds that Mrs. Sanzaro is disabled as a matter of law. The Court also finds that she provided sufficient documentation about her disability to all Defendants. HOA Defendant Ardiente and business entity Defendants Corona and RMI were aware of Mrs. Sanzaro’s disability at least as of July 27, 2009, the date of the NRED arbitration.

1174*1174 2. The Ardiente Clubhouse is Not a Place of Public Accommodation

42 U.S.C. § 12181(7) provides a list of private entities that are considered public accommodations for the purposes of the ADA, if those entities engage in operations that affect commerce. The majority of the listed examples — including movie theaters and other places of entertainment, convention centers and other places of public gathering, and elementary schools and other places of education — are not analogous to the community facilities within an HOA. However, the statute includes as a place of accommodation “an inn, hotel, motel, or other place of lodging, except for an establishment located within a building that contains not more than five rooms for rent or hire and that is actually occupied by the proprietor of such establishment as the residents of such proprietor ….” 42 U.S.C. § 12181(7)(A) (2009). Despite this broad list of examples, the ADA does not apply to “private clubs or establishments exempted from coverage under Title II of the Civil Rights Act of 1964 (42 U.S.C. 2000-a(e)) ….” 42 U.S.C. § 12187 (2009). The Court must therefore determine whether the Ardiente clubhouse can be considered a place of lodging, such that it qualifies as a public accommodation under the ADA, or whether the clubhouse is a private establishment exempted from the ADA.

The Court finds that the Ardiente clubhouse does not qualify as a place of public accommodation. The Court finds that the entire Ardiente community including the Ardiente clubhouse was a private establishment. Although members of the public were invited to stay overnight in an Ardiente model home and were permitted to use the clubhouse during their stay, the Court finds that the general public did not have unrestricted, general or even limited access to the clubhouse. See Jankey v. Twentieth Century Fox Film Corp., 212 F.3d 1159, 1161 (9th Cir. 2000) (“[Plaintiff’s] argument is premised on the assumption that if a facility falls within a § 12181 category, the [ADA] applies regardless of whether it is open to the public. This argument, for which we have found no support, ignores the plain language of § 12187 which … [like Title II] exempts from coverage any `private club or other establishment not in fact open to the public.‘”) (alteration in original) (citation omitted); see also Clegg v. Cult Awareness Network, 18 F.3d 752, 755 n.3 (9th Cir. 1994) (“Congress … has drawn a distinction between [an] organization—a private club—and the facilities the organization operates. Only when the facilities are open to the public at large does Title II govern.”).

As a general matter, the Ardiente clubhouse and the overall community were not open to the general public. Members of the community could only access entry by use of a transponder to open the gates. Non-resident access to the community including the clubhouse required either obtaining permission for limited access from the community office, being escorted by a member of the community or being provided access by a member of the community. For those members of the public that participated in the “Stay and Play” and “Taste of the Good Life” programs, there was a condition imposed on their stay — namely, those guests had to explicitly indicate an interest in writing in purchasing a home within the Ardiente community prior to staying in the model home and obtaining access to the Ardiente clubhouse. The homes used for this program and the Ardiente clubhouse access provided with the programs were not open to the public as they would be for a hotel. This access was never advertised to the general public as an accommodation where individuals could simply pay money to stay, as they would with a hotel. Any member of the public 1175*1175 interested in using these facilities had to explicitly indicate their interest in exploring the possibility of purchasing a home in the community. As interested guests could not access the clubhouse without first meeting this condition, the Ardiente clubhouse cannot be considered a place of lodging open to the public generally.

As the Ardiente clubhouse does not qualify as a place of public accommodation, Plaintiffs cannot establish a claim for disability discrimination under the ADA.

B. Plaintiffs’ Claims Under the FHA

i. Legal Standard

In the Ninth Circuit, a plaintiff can bring discrimination claims under the FHA and assert either a theory of disparate treatment or disparate impact. Gamble v. City of Escondido, 104 F.3d 300, 304-05 (9th Cir. 1997) (citations omitted). Additionally, a plaintiff may bring suit under the section 3604(f)(3)(B) of the Fair Housing Act Amendments (“FHAA”) for failure to make reasonable accommodations in handicapped housing. Id. at 305 (citation omitted). To advance a disparate treatment discrimination claim, Plaintiffs must first show: (1) Mrs. Sanzaro is a member of a protected class; (2) Mrs. Sanzaro applied for and was qualified for use of the clubhouse with Angel; (3) Mrs. Sanzaro was denied use of the clubhouse with Angel; and (4) Defendants allowed similarly situated parties to use the clubhouse. See Sanghvi v. City of Claremont, 328 F.3d 532, 536 (9th Cir. 2003) (citing Gamble, 104 F.3d at 305). Once Plaintiffs have established the prima facie case, the burden shifts to Defendants to “to articulate a legitimate, nondiscriminatory reason for its action.” Gamble, 104 F.3d at 305. Finally, Plaintiffs must show by a preponderance of evidence that Defendants’ proffered reason is pretextual. Id.

Regarding reasonable accommodation claims under the FHA, unlawful discrimination includes a housing provider’s “refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford [a handicapped] person equal opportunity to use and enjoy a dwelling.” 42 U.S.C. § 3604(f)(3)(B) (2009). A plaintiff must prove five elements to prevail on an FHA reasonable accommodation claim under § 3604(f)(3)(B): “(1) that the plaintiff or his associate is handicapped within the meaning of 42 U.S.C. § 3602(h); (2) that the defendant knew or should reasonably be expected to know of the handicap; (3) that accommodation of the handicap may be necessary to afford the handicapped person an equal opportunity to use and enjoy the dwelling; (4) that the accommodation is reasonable; and (5) that defendant refused to make the requested accommodation.” Dubois v. Ass’n of Apartment Owners of 2987 Kalakaua, 453 F.3d 1175, 1179 (9th Cir. 2006) (citations omitted), cert. denied, 549 U.S. 1216, 127 S.Ct. 1267, 167 L.Ed.2d 92 (2007). “The reasonable accommodation inquiry is highly fact-specific, requiring case-by-case determination.” Id. (quoting United States v. Cal. Mobile Home Park Mgmt. Co., 107 F.3d 1374, 1380 (9th Cir. 1997)).

Although the FHA does not explicitly allow plaintiffs to assert a theory of vicarious liability for individual and business entity agents or employees acting on behalf of principals or employers, the Supreme Court has held that “it is well established that the [Fair Housing] Act provides for vicarious liability.” Meyer v. Holley, 537 U.S. 280, 285, 123 S.Ct. 824, 154 L.Ed.2d 753 (2003). This is because “when Congress creates a tort action, it legislates against a legal background of ordinary tort-related vicarious liability rules and consequently intends its legislation to incorporate those rules.” Id. (citations omitted). Therefore, in determining 1176*1176 whether an employer or principal can be held liable for the acts of an agent or employee, the Court must apply traditional vicarious liability rules which permit a finding of liability where the employee or agent acted within the scope of employment or agency. Id. (citations omitted). However, absent special circumstances, an officer or owner of a business entity may not be held vicariously liable, as it is the business entity that is the principal or employer. Id. at 286, 123 S.Ct. 824 (citations omitted).

ii. Discussion[3]

1. Ardiente, Corona, and RMI qualify as Housing Providers under the FHA

The Court first finds that the FHA applies to the HOA Defendant and the business entity Defendants in this case. Although Defendants do not contest the applicability of the FHA, the Court briefly addresses its scope. In agency guidance regarding reasonable accommodations under the FHA, the Department of Housing and Urban Development (“HUD”) and the Department of Justice (“DOJ”) recognized that the statute applies broadly and covers “individuals, corporations, associations and others involved in the provision of housing and residential lending, including property owners, housing managers, homeowners and condominium associations, lenders, real estate agents, and brokerage services.” Joint Statement of the Dep’t of Housing and Urban Dev. and the Dep’t of Justice, Reasonable Accommodations Under the Fair Housing Act (May 17, 2004) (“HUD and DOJ Joint Statement”), at 3, https://www.hud.gov/sites/documents/DOC_7771.PDF.[4] As the HOA, Ardiente is a provider of private residential housing and is required to follow the FHA in the sale of housing and in the provision of reasonable modifications and accommodations for use and enjoyment of those properties. As Declarant and developer of the community, Corona was also bound by the FHA and can be held liable for violations of its provisions. As the former property management company, RMI is also may be held liable for engaging in activity prohibited by the FHA.

As discussed below, these entities are vicariously liable for the acts of their agents and employees.

2. Mrs. Sanzaro is Handicapped Under the FHA

As discussed above in the context of ADA disability discrimination, the parties no longer dispute that Mrs. Sanzaro qualifies as handicapped under the FHA.[5] Based upon the evidence presented at trial, 1177*1177 the Court concludes as a matter of law that Mrs. Sanzaro has been, at all relevant times, a handicapped individual as defined by the FHA.

3. Defendants Were Reasonably Expected to Know of Mrs. Sanzaro’s Handicap

The Court finds that all Defendants knew and could reasonably have been expected to know of Mrs. Sanzaro’s handicap. They knew that her handicap requires the use of a walker, and Defendants do not dispute that her impairment was a visible one. Ardiente, through the Board members involved in the Incidents as well as correspondence from the Sanzaros, knew that Mrs. Sanzaro had a permanent handicap. Corona, as Declarant, had members on the Board during the three Incidents, and also knew of Mrs. Sanzaro’s handicap. RMI, as employer of the Community Manager, knew of Mrs. Sanzaro’s handicap through its representation at the NRED arbitration and being named as a party in the Sanzaros’ agency actions. Phelps was present at the NRED arbitration, and testified at trial that she knew that Mrs. Sanzaro had a handicap which significantly impaired her mobility. The Court therefore finds that by the July 27, 2009 arbitration these Defendants knew Ms. Sanzaro was disabled and that Angel assisted her with her disability when she had acute pain attacks. The Court also finds that they did not have any information that disputed this.

Smith and Harris, serving on the Board at the behest of the Declarant, knew of Mrs. Sanzaro’s handicap due to their service on the Board and involvement in the decisions to exclude her and Mr. Sanzaro from the clubhouse with Angel. These Defendants thus knew that Mrs. Sanzaro had a qualifying impairment. However, Defendant Wallace did not attend the NRED arbitration and did not directly communicate with the Sanzaros. The Court does not find that he knew or could reasonably be expected to have known of Mrs. Sanzaro’s handicap.

4. An Accommodation was Necessary for Mrs. Sanzaro to Use and Enjoy the Clubhouse

The Court finds that Mrs. Sanzaro was unable to use and enjoy the clubhouse without an accommodation related to her disability. The Court further finds that access to the clubhouse was necessary for the Sanzaros’ enjoyment of their home or dwelling. First, the clubhouse provided various programming and a community meeting place for enjoyment by all homeowners in the community. Homeowners understood its programming, facilities, and meeting spaces to be an integral part of being a homeowner in the community. The Sanzaros purchased their home within the Ardiente community with the expectation that they would be able to use and enjoy the home with the shared amenities in the clubhouse. Indeed, the promotional materials published in the local newspaper advertising the Ardiente community specifically referred to the clubhouse amenities, for the purpose of enticing potential buyers. A buyer of a Shea Homes property not only purchases a home but also purchases access to community facilities that are only available to members of that community. Indeed, that is why clubhouse access and use was an explicit part of the marketing programs, such as “Stay and Play.” Second, the clubhouse was necessary for the enjoyment of the Sanzaros’ home because it contained the office for the community. The office supported homeowners enjoyment of and access to their actual homes by providing, for example, the gate transponder devices that homeowners needed to enter the community itself. Thus, without access to the clubhouse, there could be no access to the community itself by a homeowner. When members of the community 1178*1178 had issues within Ardiente the office in the clubhouse was the initial contact point for resolving issues under the jurisdiction or control of the HOA. The Court finds factually that Mrs. Sanzaro required regular and continuous access to the clubhouse to have full enjoyment of and access to her actual home.

The Court also separately finds that the Ardiente clubhouse qualifies as a dwelling under the FHA. A “dwelling” is defined as: “any building, structure, or portion thereof which is occupied as, or designed or intended for occupancy as, a residence by one or more families, and any vacant land which is offered for sale or lease for the construction or location thereon of any such building, structure, or portion thereof.” 42 U.S.C. § 3602(b) (2009). Departmental regulations include public spaces and common use areas in the definition of “dwelling.” 24 C.F.R. § 100.204 (2009). The FHA applies to property owners, housing managers, and homeowners and condominium associations. HUD and DOJ Joint Statement, at 3. The Court’s finding that the FHA applies to the Ardiente clubhouse thus naturally follows as a reasonable interpretation of HUD guidance.

For these reasons stated, Mrs. Sanzaro required an accommodation to realize her expectation to use and enjoy the Ardiente clubhouse.

5. Permitting Angel to Accompany Mrs. Sanzaro in the Clubhouse was a Reasonable Accommodation

The Court finds that Angel qualifies as a service animal under the FHA, and Angel’s entry into the clubhouse was a reasonable accommodation for Mrs. Sanzaro. In response to public comment, HUD provided guidance regarding the definition of “service animal.” Pursuant to the 2008 Final Rule on public housing regulations, a housing provider may verify that a disability exists, and inquire as to the need for accommodation such as a service animal, if neither the disability nor the need is “readily apparent.” Preamble to Final Rule, Pet Ownership for the Elderly and Persons With Disabilities, 73 Fed. Reg. 63,833, 63,835 (Oct. 27, 2008).[6] HUD further clarified that, so long as a person with a disability demonstrates a nexus between the disability and the service the animal provides, specialized training is not required, as “[s]ome animals perform tasks that require training, and others provide assistance that does not require training.” Id.

The Court finds that Angel assisted Mrs. Sanzaro with her acute pain attacks and with retrieving her walker. Except for Wallace, all Defendants knew that Angel provided this assistance to Mrs. Sanzaro, because she testified as such during the NRED arbitration and she provided documentation. The Court finds that these Defendants understood and knew that Angel provided these services. These Defendants also knew that Angel did not pose a risk or threat of harm to anyone in the clubhouse or in the community.

In this case, there is a clear nexus between Mrs. Sanzaro’s disability and the services that Angel provides. Mrs. Sanzaro’s disability involved difficulty walking and acute and debilitating pain attacks. Angel was trained and offered assistance with both of these aspects of her disability. Angel assisted Mr. Sanzaro with the alleviation of pain during an acute attack. Angel assisted Mrs. Sanzaro with having constant and easy access to her walker since she is unable to walk without her walker.

1179*1179 Moreover, Defendants have not identified why the accommodation would have been unreasonable. Angel was not disruptive, threatening or harmful to other residents in the community or in the clubhouse. She was so inconspicuous due to her small size and quiet disposition that individuals in the clubhouse entry often did not even notice her. The accommodation to allow Angel to accompany Mrs. Sanzaro into the clubhouse was clearly reasonable based upon the evidence introduced at trial.

6. Defendants Refused to Make the Requested Accommodation

There is no dispute that, on each of the three Incidents discussed above, Defendants Harris, Smith, and Phelps directly refused to accommodate the Sanzaros’ request to bring Angel into the clubhouse. The other Defendants were aware of the Sanzaros’ request for an accommodation and either approved of or ratified the denial of request for an accommodation. Ardiente as HOA directly refused the accommodation. Corona and RMI in addition to being directly contacted were vicariously liable for the acts of their agents or employees whom they oversaw and directed.

In addition to refusing the Sanzaros’ entry with Angel, the Court finds factually that these Defendants repeatedly asked Plaintiffs for more documentation regarding Angel’s services even when they knew the assistance she provided and had sufficient documentation of Angel’s assistance as a service animal. Defendants all insisted on this documentation, in violation of the FHA. These Defendants, as well as Ardiente, Corona, and RMI as principals, are liable for failure to provide a reasonable accommodation to the Sanzaros.

The Court further notes that at no point were the Sanzaros required to submit a written request for accommodation even though they did make such a written request. See HUD and DOJ Joint Statement, at 10 (“An applicant or resident is not entitled to receive a reasonable accommodation unless she requests one. However, the Fair Housing Act does not require that a request be made in a particular manner or at a particular time…. [T]he requester must make the request in a manner that a reasonable person would understand to be a request for an exception, change, or adjustment to a rule, policy, practice, or service because of a disability… [and] a reasonable accommodation request can be made orally or in writing ….”). All Defendants knew from the Sanzaros’ actions and communications, including correspondence, that they were seeking an accommodation to allow Mrs. Sanzaro to bring Angel into the clubhouse with her. Each time the Sanzaros entered or attempted to enter the clubhouse with Angel, it was clear that they were seeking an exception to the policy of animals being prohibited in the clubhouse. This request was reinforced by the Sanzaros’ communications and submission of documentation related to Angel. The Sanzaros also explicitly made a request for Angel to be allowed into the clubhouse. These Defendants’ refusal to allow the Sanzaros to enter the clubhouse with Angel therefore constitutes a failure to reasonably accommodate their request.

The Court therefore finds in favor of Plaintiffs against all of Defendants, except Defendant Wallace, on their FHA reasonable accommodation claim.

C. Plaintiffs’ Claims Under NRS § 651.075

i. Legal Standard

Under Nevada law, “public accommodation” has a similar definition as set forth in the ADA. NRS § 651.050 (2009). Nevada law provides that it “is unlawful for a place of public accommodation to: (a) Refuse admittance 1180*1180 or service to a person with a disability because the person is accompanied by a service animal” and “(f) Require proof that an animal is a service animal or service animal in training.” NRS § 651.075(1) (2009); See, e.g., Clark Cty. Sch. Dist. v. Buchanan, 112 Nev. 1146, 924 P.2d 716, 719 (1996) (applying NRS § 651.075(1) to a plaintiff training a service dog). However, “[a] place of public accommodation may: (a) Ask a person accompanied by an animal: (1) If the animal is a service animal or service animal in training; and (2) What tasks the animal is trained to perform or is being trained to perform.” NRS § 651.075(2) (2009). At the time of Incident 1, a service animal was defined under Nevada law as “an animal that has been trained to assist or accommodate a person with a disability.” NRS § 426.097 (2009).

ii. Discussion

Plaintiffs’ claim under NRS § 651.075 fails for the same reasons noted above regarding their ADA claim. The Ardiente community and clubhouse were part of a private establishment and cannot be considered public accommodations.

D. Damages

Based on its reasoning set forth above, the Court finds that damages are only available to Plaintiffs for violations of the FHA.

Under the FHA, a plaintiff may seek actual and punitive damages, as well as injunctive relief, if the court finds evidence of a discriminatory housing practice. 42 U.S.C. § 3613(c)(1). In an action under the FHA, if a plaintiff establishes actual damages, the Court is required to award compensatory damages. U.S. v. City of Hayward, 36 F.3d 832, 839 (9th Cir. 1994) (citations omitted). “Although compensatory damages need not be determined with certainty, they may not be based upon `mere speculation or guess.'” Silver Sage Partners, LTD v. City of Desert Hot Springs, 251 F.3d 814, 824 (9th Cir. 2001) (quoting Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563, 51 S.Ct. 248, 75 L.Ed. 544 (1931)). While a court may award lump sum damages, a damages award must be sufficiently detailed. See Simeonoff v. Hiner, 249 F.3d 883, 891-92 (9th Cir. 2001) (finding that lump sum awards of $ 6500 for past lost wages and $ 130,000 for future lost wages did not specify how the amounts were calculated but that “the district court’s findings of fact are adequately detailed to permit meaningful appellate review of any substantive challenge”). The Ninth Circuit will not reverse an award for damages “unless it is clearly unsupported by evidence, or it shocks the conscience.” Id. at 893 (citation and quotation marks omitted).

To obtain punitive damages under the FHA, a plaintiff must show that defendants acted with reckless indifference. Fair Hous. Council of San Diego, Joann Reed v. Penasquitos Casablanca Owner’s Ass’n, 381 Fed.Appx. 674, 676-77 (9th Cir. 2010) (citing Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002)). Reckless indifference is found where a defendant, at minimum, “discriminate[s] in the face of a perceived risk that its actions will violate federal law” but does not require that defendant “engage in conduct with some independent, egregious quality” to be subject to punitive damages. Id. (quoting Kolstad v. Am. Dental Ass’n, 527 U.S. 526, 535, 537, 119 S.Ct. 2118, 144 L.Ed.2d 494 (1999)).

i. Compensatory Damages

The Court finds that Plaintiffs have established actual damages resulting from the failure of a reasonable accommodation being provided. The Court finds that Plaintiffs have established non-economic 1181*1181 damages under the requisite legal standard. Plaintiffs incurred non-economic damages including pain and suffering, humiliation, and emotional distress due to being driven out of their Ardiente home, facing death threats and harassment from community members, being undermined publicly and privately by the Ardiente Board and Phelps, having to file bankruptcy, and being unable to use and enjoy the Ardiente clubhouse facilities with Angel for several years. The Court therefore imposes compensatory damages for these non-economic damages in the amount of $ 350,000 against Defendants Harris, Smith, Phelps, Ardiente, Corona, and RMI. These damages are joint and several. The Court’s award is based upon the findings in this case, and the Court emphasizes the salient findings as to each defendant below.

The Court awards compensatory damages against Harris as an agent of Ardiente and Corona during the time of the first Incident. The Court finds that Harris is liable for requiring the Sanzaros to provide documentation that the FHA did not require. Harris approved Phelps’s communications on behalf of the Board that prevented the Sanzaros from using the Ardiente clubhouse with Angel without providing the requested documentation. Harris is additionally liable for ratifying the assessment of fines against the Sanzaros for bringing Angel into the Ardiente clubhouse in March 2009. Further, Harris directed Phelps to exclude the Sanzaros from the Ardiente clubhouse with Angel between March 2009 and February 2010.

The Court similarly awards compensatory damages against Smith as an agent of Ardiente and Corona during the time of Incidents 2 and 3. The Court finds that Smith participated in the decisions to continue to exclude the Sanzaros and Angel from the Ardiente clubhouse and unlawfully require certification of Angel’s training between 2010 and 2013.

The Court imposes compensatory damages against Phelps as Community Manager and an agent of RMI. During Incident 1, Phelps initially excluded Mrs. Sanzaro from the Ardiente clubhouse and called HOA security because Angel was present in the facility despite Mrs. Sanzaro using Angel as an assistance animal at that time. Following the first Incident, Phelps sent multiple emails to other Ardiente homeowners with misleading information about the legal requirements for service animals, cultivating the atmosphere of open hostility toward the Sanzaros. Phelps attended the NRED arbitration and heard Mrs. Sanzaro testify about Angel’s assistance tasks, and nonetheless continued to prevent the Sanzaros from obtaining a reasonable accommodation to use the clubhouse. Phelps’s requests for documentation and certification were improper and her conduct was motivated by personal animus against the Sanzaros.

The Court imposes compensatory damages against Ardiente. The Court finds that Ardiente, through its Board of Directors, directed the exclusion of the Sanzaros and Angel from the clubhouse during all three Incidents. The Board, on behalf of Ardiente, also imposed fines upon the Sanzaros and required them to provide certification and other documentation related to Angel’s training, despite the Sanzaros providing sufficient information in July 2009 to allow the Board to evaluate the nexus between Mrs. Sanzaro’s disability and her need for Angel. The Board also took no action to address or mitigate the hostility and threats expressed by other members of the Ardiente community toward the Sanzaros, and in fact fomented this hostility. Additionally, Ardiente failed to train its Board members on the requirements of discrimination law.

1182*1182 The Court awards compensatory damages against Corona as a principal of Harris and Smith and for ratifying their actions. The Court finds that, pursuant to Ardiente’s governing documents, Corona, as Declarant, had the authority to appoint and did appoint and oversee voting members to the Ardiente Board during the Incidents at issue in this case. Corona exercised this authority and maintained majority representation on the Board until sometime in 2010. It retained representation during 2011, even though it no longer had majority control of the Board. Therefore, during all three Incidents, Corona had at least one voting member on the Ardiente Board. Corona is liable for actions described above, including the exclusion of the Sanzaros and Angel from the clubhouse and the failure to address at Board meetings or in correspondence with homeowners the threats against the Sanzaros. Corona also failed to train its Board representatives on the requirements of discrimination law.

The Court awards compensatory damages against RMI as a principal and employer of Phelps and for ratifying and directing her actions. The Court finds that RMI failed to properly train Phelps on the requirements of federal and state discrimination law. RMI received complaints from the Sanzaros in 2009 following the first Incident, and nevertheless failed to inform Phelps that the law did not require the Sanzaros to provide further documentation of Angel’s training. Neither federal nor state law operative in 2009 required any particular certification for a service animal. Furthermore, RMI sent a representative to the 2009 NRED arbitration, where Mrs. Sanzaro testified about how Angel assisted her. RMI received documentation from the Sanzaros about how Angel assisted Mrs. Sanzaro immediately after the NRED arbitration — that documentation was sufficient to establish that Mrs. Sanzaro was disabled and required assistance from Angel which included bringing Angel into the Ardiente clubhouse.

The Court declines to impose liability or damages against Wallace, CEO of RMI. The Court finds that vicarious liability cannot be imposed against Defendant Wallace, pursuant to Meyer v. Holley. Plaintiffs have produced no evidence that Wallace directly participated in the denial of the reasonable accommodation or ratified its denial. As Wallace cannot be held liable merely for being an owner or officer of RMI, the Court does not award any damages against this Defendant.

ii. Punitive Damages

The Court finds that certain Defendants acted with reckless indifference as to the rights of disabled individuals seeking reasonable accommodations. The Court therefore awards punitive damages to the Plaintiffs in the amount of $ 285,000 and finds that this amount appropriately “punish[es] unlawful conduct and deter[s] its repetition.” Philip Morris USA v. Williams, 549 U.S. 346, 352, 127 S.Ct. 1057, 166 L.Ed.2d 940 (2007) (citations and quotation marks omitted). The Court finds that the conduct of Defendants Ardiente, Harris, Smith, and Phelps in the violation of the Plaintiffs’ rights under the FHA warrants the imposition of punitive damages. This conduct includes, but is not limited to, (1) continuing to, in a harassing and malicious manner, request documentation about Mrs. Sanzaro’s need for Angel’s assistance even after sufficient documentation was provided to them regarding Mrs. Sanzaro’s disability and the ways in which Angel assisted her; (2) actively and wantonly preventing the Sanzaros from using the clubhouse once that documentation was provided; (3) sending or directing to be sent communications on behalf of the Board that portrayed the Sanzaros as litigious and untruthful and knowing that 1183*1183 such communications about the Sanzaros would contribute to a hostile, threatening and intimidating living environment; and (4) failing to discourage Ardiente residents from harassing and threatening the Sanzaros at open meetings and through anonymous letters. The Court further finds that these Defendants acted with personal animus toward the Sanzaros, which fueled the antagonism among the community.

Defendants Corona and RMI are vicariously liable for these reckless acts. At all times, these Defendants were aware of, oversaw and ratified the actions of their agents.

The Court, based upon the above findings, awards punitive damages as follows:

a. Defendant Ardiente: $ 150,000

b. Defendant Phelps: $ 25,000

c. Defendant Corona: $ 15,000

d. Defendant RMI: $ 75,000

e. Defendant Harris: $ 10,000

f. Defendant Smith: $ 10,000

iii. Injunctive Relief

In their Complaint, Plaintiffs make the following requests for injunctive relief: (1) Plaintiffs request that the Court enjoin Defendants from committing any further discriminatory acts; (2) Plaintiffs ask the Court to order Ardiente to incorporate policies and procedures for the disabled into their governing documents; and (3) Plaintiffs seek to enjoin Defendants from enforcing any future amendments to governing documents that have not been legally implemented by a majority vote of the HOA’s members, recorded with the Clark County Recorder, and mailed to all members of the HOA. The Court does not find it appropriate to order injunctive relief at this time. Plaintiffs have essentially asked this Court to order that Defendants follow the law. This is not a proper basis for injunctive relief in this case.

E. Attorneys’ fees and costs

The Court is authorized to award attorneys’ fees and costs to the prevailing party in an FHA action. 42 U.S.C. § 3613(c)(2). The Court awards Plaintiffs attorneys’ fees and costs to the extent available in an amount to be decided following the entry of Judgment.

VI. JUDGMENT

The Court finds in favor of Plaintiffs. The Court will award to Plaintiffs: $ 350,000 in compensatory damages, and $ 285,000 in punitive damages, pursuant to 42 U.S.C. § 3613(c)(1). The Court also awards attorneys’ fees to the extent available and costs of litigation to Plaintiffs, pursuant to 42 U.S.C. § 3613(c)(2). Plaintiffs are ordered to submit a Motion for Attorneys’ Fees and Costs and attached list of litigation costs to the Court within thirty days of entry of this order.

The Clerk of Court is instructed to enter judgment accordingly and to close this case.

VII. Outstanding Motion for Reconsideration

The Court now considers Plaintiffs’ pending Motion for Reconsideration [ECF No. 432] of the Court’s Order [ECF No. 403] taxing costs. The Court has reviewed the Court’s Order and finds that the Order taxing costs is appropriate and shall not be reconsidered. To the extent that Plaintiffs have raised concerns about service, the Court is not convinced that there was not service. In any event, Plaintiffs have now viewed the itemization of costs and have not raised substantive or persuasive arguments as to the actual costs themselves. Moreover, the Court has now entered judgment as to all parties so there is no further issue of the Order being premature. 1184*1184 The Order taxing costs shall remain in effect for the full amount.

IT IS SO ORDERED.

[1] All statutes cited herein refer to the operative versions in 2009, at the time of the first alleged incident of discrimination.

[2] The specific Rule & Regulation Plaintiffs were alleged to have violated was Article V, Section A.2, which provided: “Except for handicap assistance, animals are prohibited in the clubhouse.”

[3] To the extent that any factual statements in this “Discussion” section are not explicitly noted in the “Factual Findings” section, see supra, the Court incorporates them by reference into that section and makes such additional factual statements as factual findings based upon the record and in support of the order here.

[4] The Court finds it appropriate to rely upon this agency guidance where the FHA itself is unclear as to its scope. See National Cable & Telecomm. Ass’n v. Brand X Internet Serv., 545 U.S. 967, 980, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005) (“If a statute is ambiguous, and if the implementing agency’s construction is reasonable, Chevron requires a federal court to accept the agency’s construction of the statute ….”) (quoting Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843-44 & n.11, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)).

[5] The terms “disabled” and “handicapped” can be used interchangeably, as the Supreme Court has recognized that “the ADA’s definition of disability is drawn almost verbatim from the definition of “handicapped individual” included in the Rehabilitation Act of 1973… and the definition of “handicap” contained in the Fair Housing Amendments Act of 1988 …. Bragdon v. Abbott, 524 U.S. 624, 631, 118 S.Ct. 2196, 141 L.Ed.2d 540 (1998) (citations omitted).

[6] HUD also noted that there was no specific definition of the term “service animal,” and used the term interchangeably with “assistance animal” in accordance with reasonable accommodation law.

 

Auburn Woods I Homeowners Ass’n v. State Farm General Insurance Company

Auburn Woods I Homeowners Ass’n v. State Farm Ins. Co.,

2020 Cal. App. Unpub. LEXIS 6323

Court of Appeal of California, Third Appellate District

September 29, 2020, Opinion Filed

C085749

Summary by Jacquelyn E. Quinn, Esq.:

In Auburn Woods I, the Court found that, without an inquiry by the association or management, there is no duty that an insurance agent or broker provide advice regarding whether a policy covers or does not cover an association’s community manager and there is no obligation for an insurance agent or broker to make any such recommendations regard policy coverage. It is the association’s responsibility, as the insured, to inquire and confirm that management and any others intended to be covered under the policy are actually included as additional insureds or covered by the policy definition of “insured.” Associations should regularly confirm this information.

The court also affirmed the trial Court’s decision by finding an insurance carrier has no duty to defend when the policy states that the duty to defend is conditioned on a lawsuit seeking “damages” for a covered claim, but the plaintiff’s lawsuit does not seek any money damages. The policy did not define “damages” and the Court applied the statutory and dictionary definitions of “damages” to decide that a claim of money damages for loss suffered through the acts of the association is required to trigger the carrier’s duty to defend under the policy. The Court held that a duty to defend will not arise from speculation or inferences about unpled claims. The Court also held that a prayer for attorney’s fees will not be construed as seeking “damages.” It’s important for the board to understand what coverage is provided under the association’s policies, but also equally as important to understand what is excluded under a policy. Annual reviews of the association’s insurance policies is one of most important ways the board can serve the membership.

*** End Summary ***

APPEAL from a judgment of the Superior Court of Placer County, Super. Ct. No. SCV0036315, Charles D. Wachob, Judge. Affirmed.

Hirsch Closson, Clifford E. Hirsch and Barrett B. Braun, for Plaintiffs and Appellants.

Pacific Law Partners, Sandra E. Stone and Andrew P. Collier, for Defendants and Respondents.

CERTIFIED FOR PARTIAL PUBLICATION[*]

ORDER GRANTING REQUEST TO PUBLISH

THE COURT:

The opinion in the above-entitled matter filed on September 29, 2020, was not certified for publication in the Official Reports. For good cause it now appears that the opinion should be published in the Official Reports and it is so ordered.

MAURO, Acting P. J., DUARTE, J., RENNER, J.

[*] Pursuant to California Rules of Court, rules 8.1105 and 8.1110, this opinion is certified for publication with the exception of parts I through V of the Discussion.

Notice: NOT TO BE PUBLISHED IN 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 THE PURPOSES OF RULE 8.1115.

Judges: MAURO, Acting P. J.; DUARTE, J., RENNER, J. concurred.

Opinion by: MAURO, Acting P. J.

Opinion

Auburn Woods I Homeowners Association (HOA) and its property manager Frei Real Estate Services (FRES) tendered the defense of two lawsuits filed against them by a member of HOA under HOA’s condominium/association policy. HOA’s insurer, State Farm Insurance Company (State Farm), denied the tender for the first lawsuit. It accepted the defense of the second lawsuit as to HOA only. HOA and Al Frei, individually and doing business as FRES, sued State Farm and its agent Frank Lewis for, among other things, breach of contract and breach of the implied covenant of good faith and fair dealing. (We will refer to Al Frei and FRES collectively as Frei and to Al Frei as Mr. Frei.) The trial court entered judgment in favor of State Farm and Lewis and against HOA and Frei following a bench trial.

HOA and Frei now contend (1) the trial court erred in concluding that State Farm did not owe a duty to defend HOA and FRES against the first lawsuit; (2) HOA had a reasonable expectation that FRES would be covered under the directors and officers liability provision of its policy; (3) State Farm failed to reimburse HOA for post-tender expenses related to the second lawsuit; (4) Lewis breached his contract with HOA by failing to include FRES as an additional insured and failing to alert HOA and Frei that it was not possible to include FRES under the directors and officers liability provision; (5) State Farm breached the covenant of good faith and fair dealing implied in HOA’s policy; and (6) the trial court erred in denying HOA and Frei’s motion to tax the expert witness fees State Farm and Lewis sought to recover under Code of Civil Procedure section 998 (section 998).

We conclude (1) State Farm did not have a duty to defend HOA and FRES against the first lawsuit; (2) HOA and Frei fail to establish that FRES should be deemed an insured under the directors and officers liability provision; (3) substantial evidence supports the trial court’s finding that HOA did not present State Farm with a clear statement of the amount of attorney’s fees and costs HOA incurred in defending against the second lawsuit; (4) HOA and Frei do not establish the alleged contract between Lewis and HOA; (5) HOA and Frei fail to demonstrate error with regard to their breach of implied covenant cause of action; and (6) State Farm and Lewis’s pretrial offer to compromise was effective to trigger cost shifting under section 998.

We will affirm the judgment and the second amended judgment.

BACKGROUND

HOA is a nonprofit mutual benefit corporation organized to perform specified functions for a condominium development located in Auburn, California. FRES was the property manager for HOA from 2009 through 2014. FRES took over handling the day-to-day affairs of HOA in January 2009. Ashley Budelli and Vanessa Machen, employees of FRES, managed HOA. Al Frei owned FRES.

The association management agreement between HOA and FRES required HOA to defend and indemnify FRES against any claim, liability, judgment, cost or expense suffered as a result of FRES’s performance under the agreement, except for willful misconduct or gross negligence. The agreement required FRES to solicit proposals for all of HOA’s insurance needs and HOA to name FRES as an additional insured on HOA’s liability and directors and officers insurance policies.

From at least January 11, 2007 through 2015, HOA insured its condominium development under a condominium/association policy with State Farm, through State Farm agent Frank Lewis. Al Frei did not discuss any insurance issue with the previous property manager when management of HOA was transferred to FRES. Although he was unfamiliar with State Farm’s condominium/association policy, Mr. Frei did not speak with anyone at HOA about whether the State Farm policy met HOA’s insurance requirements. There was conflicting testimony about whether in 2009 Mr. Frei sent Lewis letters inquiring about whether HOA’s property manager was an additional insured under HOA’s policy. But Mr. Frei testified he did not call Lewis when he did not receive a response to his 2009 letters.

Budelli spoke to Marianne Bruns at Lewis’s office in about January 2009, but at trial, Budelli could not recall what they spoke about. Budelli did not recall whether she asked Bruns to include FRES as an additional insured on HOA’s policy. Bruns testified that Budelli did not ask Bruns to add FRES as an additional insured on HOA’s policy. FRES community association manager Machen was not aware of any request to add FRES to HOA’s insurance policy before 2014.

On July 15, 2013, Marva Beadle filed a complaint against HOA, FRES and Allied Trustee Services for declaratory relief, injunctive relief and an accounting. Beadle owned a condominium unit within HOA.  Her complaint alleged that Allied Trustee Services recorded a notice of default and election to sell her property based on unpaid HOA fees. Beadle alleged the amount purportedly owed was unreasonable and incorrect. There were “deliberately manufactured” discrepancies in Beadle’s “HOA account.” According to Beadle, the actual amount of money Beadle owed to FRES and Allied Trustee Services was in dispute and could not be determined without an accounting, and Allied Trustee Services did not comply with Civil Code section 2924, subdivision (f) in recording a notice of trustee’s sale.

Beadle’s complaint further alleged that Allied Trustee Services would sell Beadle’s property on July 17, 2013, unless restrained. Sale of the property would cause Beadle great and irreparable injury, Beadle had no other plain, speedy or adequate remedy, and injunctive relief was necessary to prevent the loss of Beadle’s property, which loss would result in a $50,000 profit for “opposing parties” as the actual HOA fees owed were less than $2,000. Beadle requested (1) a declaration that Allied Trustee Services had no right to conduct a trustee’s sale and Beadle did not breach the covenants, conditions and restrictions (CC&Rs) for HOA; (2) an injunction preventing the sale of Beadle’s property; (3) an accounting to determine the amount Beadle actually owed defendants; (4) attorney’s fees and costs; and (5) such other and further relief as the court may deem just and proper.

HOA and FRES tendered the defense of the Beadle action to State Farm under HOA’s condominium/association policy. The policy included a comprehensive business liability (Coverage L) provision and an optional directors and officers liability (Option DO) provision. Under Coverage L, State Farm agreed to “pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury, property damage, personal injury or advertising injury to which” the policy applied. Coverage L obligated State Farm “to defend any claim or suit seeking damages payable under [the] policy even though the allegations of the suit may be groundless, false, or fraudulent.” Under Option DO, State Farm agreed to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘wrongful acts’ committed by an insured solely in the conduct of their management responsibilities for the Condominium/Association.”

Mark Hattersley, a State Farm duty to defend claim representative, reviewed HOA and FRES’s claim. He reviewed the Beadle complaint and spoke with Machen and Natalie Vance, counsel for HOA, FRES and Allied Trustee Services. Vance informed Hattersley that Beadle’s property had been sold, but the trial court could set the sale aside. Hattersley shared his opinion that it was likely State Farm would deny the tender of defense by HOA and FRES, but he invited Vance to let him know of any new information. Hattersley prepared a coverage memo, summarizing Beadle’s allegations and concluding that there was no potential coverage under Coverage L and Option DO.

Hattersley was not aware of a dispute about whether FRES was an additional insured under HOA’s policy. State Farm did not offer a policy that included a property manager under Option DO of a condominium policy. Nevertheless, Hattersley testified it would not have made a difference in the first Beadle lawsuit if FRES was an insured under Option DO because there was no claim for damages that was covered under that provision.

State Farm denied HOA and FRES’s tender of defense. Its denial letter asked HOA and FRES to provide State Farm with any additional information regarding the lawsuit, but Hattersley did not receive any further information from HOA or FRES. The Beadle lawsuit concluded after the trial court sustained demurrers to the complaint without leave to amend.

Beadle filed a complaint against HOA, FRES, Allied Trustee Services and Sutter Capital Group, LP on May 5, 2014, to set aside a foreclosure sale, cancel the trustee’s deed and quiet title, and for an accounting and injunctive relief against an unlawful detainer action filed by Sutter Capital Group, LP against Beadle. The complaint alleged that Allied Trustee Services caused Beadle’s property to be sold at auction and that Sutter Capital Group, LP purchased the property and obtained a trustee’s deed upon sale. Beadle claimed the assessments against her were improper and the trustee’s deed upon sale was wrongfully executed. She sought an order restoring possession of her property and damages.

HOA and FRES tendered the defense of the second Beadle lawsuit to State Farm under HOA’s policy. Hattersley reviewed that claim. He spoke with HOA’s attorney Rod Baydaline regarding the matter. Hattersley told Baydaline it appeared the Beadle complaint did not seek bodily injury, property damage, personal injury or advertising injury damages under Coverage L, but there may be coverage under Option DO triggering a duty to defend. He also said it was unlikely FRES would qualify as an insured under Option DO. Hattersley prepared a detailed summary of the complaint and a coverage memoranda with his recommendations.

State Farm agreed to defend HOA against the second Beadle lawsuit, but denied the tender for FRES. The denial letter invited FRES to provide State Farm with any new or additional information affecting the coverage decision. Baydaline did not provide additional information regarding the claim.

On August 18, 2014, Beadle amended her complaint to add a cause of action for elder abuse. FRES’s business attorney Sharon Futerman notified State Farm of the amendment. Hattersley reviewed the amended pleading and prepared a coverage memo. He determined the new cause of action did not give rise to a potential for coverage under Coverage L and State Farm did not have a duty to defend FRES. Accordingly, State Farm denied FRES’s tender of defense for the first amended complaint. State Farm’s denial letter to FRES again solicited additional information relating to FRES’s claim.

State Farm continued to defend HOA against the second Beadle lawsuit. That lawsuit was eventually dismissed following successful demurrers.

On August 12, 2015, HOA and Frei filed an amended complaint against State Farm and Lewis for breach of contract, breach of the covenant of good faith and fair dealing, violation of Business and Professions Code section 17200, and declaratory relief, based on the tenders of defense for the first and second Beadle lawsuits.

The parties waived a jury trial. At the court trial they called witnesses including Frei, Lewis, Bruns, Budelli, Machen, Hattersley, Vance, and Baydaline, and presented expert testimony regarding insurance coverage and claims handling and the standard of care for an insurance agent. The trial court issued a statement of decision and entered judgment in favor of State Farm and Lewis and against HOA and Frei. HOA and Frei appeal from the judgment.

The trial court entered a second amended judgment following its ruling on State Farm and Lewis’s memorandum of costs and HOA and Frei’s motion to tax costs. (A first amended judgment mistakenly indicated that HOA and Frei were entitled to recover interest.) HOA appeals from the second amended judgment.

DISCUSSION

I

HOA and Frei challenge the trial court’s conclusion that State Farm did not owe a duty to defend against the first lawsuit because Beadle’s complaint did not seek a potential claim for covered damages.

An insurer must defend its insured against a claim which, at the time of tender, potentially seeks damages within the coverage of its policy. (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295, 24 Cal. Rptr. 2d 467, 861 P.2d 1153; Atlantic Mutual Ins. Co. v. J. Lamb, Inc. (2002) 100 Cal.App.4th 1017, 1038, 123 Cal. Rptr. 2d 256 (Atlantic Mutual) [the duty to provide a defense depends on the existence of a potential for coverage at the time of tender].) Because the defense obligation is measured by the kinds of risks covered by the policy, “[t]he determination whether [an] insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint [against the insured] with the terms of the policy.” (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 19, 44 Cal. Rptr. 2d 370, 900 P.2d 619 (Waller); see Montrose, at p. 295.) The focus is on whether facts alleged in the complaint against the insured or fairly inferable therefrom or facts extrinsic to the complaint which were known to the insurer at the time of tender reveal a possibility that the claims against the insured may be covered by the policy. (Albert v. Truck Ins. Exchange (2018) 23 Cal.App.5th 367, 377-378, 232 Cal. Rptr. 3d 774; Atlantic Mutual, at p. 1034; Gunderson v. Fire Ins. Exchange (1995) 37 Cal.App.4th 1106, 1114, 44 Cal. Rptr. 2d 272 (Gunderson).) The duty to defend applies even to claims that are groundless, false or fraudulent. (Waller, at pp. 19, 37; see Montrose, at p. 295 [the duty to defend may exist even where coverage is in doubt and ultimately [*12]  does not develop].) Any doubt as to whether the duty to defend exists is resolved in favor of the insured. (Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1081, 17 Cal. Rptr. 2d 210, 846 P.2d 792; CNA Casualty of California v. Seaboard Surety Co. (1986) 176 Cal.App.3d 598, 607, 222 Cal. Rptr. 276 (CNA).)

Whether an insurance policy provides a potential for coverage and, thus, a duty to defend is a question of law governed by the interpretation of the policy. (Waller, supra, 11 Cal.4th at p. 18.) We review the trial court’s interpretation of an insurance policy de novo. (Pulte Home Corp. v. American Safety Indemnity Co. (2017) 14 Cal.App.5th 1086, 1104, 1119, 223 Cal. Rptr. 3d 47 (Pulte); Vons Companies, Inc. v. United States Fire Ins. Co. (2000) 78 Cal.App.4th 52, 57-58, 92 Cal. Rptr. 2d 597 (Vons).) We apply rules governing the interpretation of contracts to construe insurance agreements. (Pulte, at p. 1105.) Our primary goal is to give effect to the mutual intention of the parties at the time the contract is formed. (Ibid.) We infer such intent solely from the written provisions of the contract, if possible. (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822, 274 Cal. Rptr. 820, 799 P.2d 1253 (AIU Ins. Co.).)

We look to the language of the policy and endorsements and interpret the words used according to their ordinary meaning, unless the terms are used in a technical sense or a special meaning is given to them by usage. (Palmer v. Truck Ins. Exchange (1999) 21 Cal.4th 1109, 1115, 90 Cal. Rptr. 2d 647, 988 P.2d 568; Waller, supra, 11 Cal.4th at p. 18.) We interpret the policy as a whole, reading its provisions in context and giving effect to every provision where possible. (Palmer, at p. 1115; Vons, supra, 78 Cal.App.4th at p. 58.)

The language of policy governs if it is clear and explicit. (Pulte, supra, 14 Cal.App.5th at p. 1105.) If there is ambiguity, we interpret the ambiguous provision in the sense the insurer believed the insured understood the provision at the time of formation. (AIU Ins. Co., supra, 51 Cal.3d at p. 822; Gray v. Zurich Ins. Co. (1966) 65 Cal.2d 263, 274, 54 Cal. Rptr. 104, 419 P.2d 168 [we interpret policy provisions according to a layperson’s reasonable expectations]; Pulte, at pp. 1105-1106 [when the insurer is responsible for ambiguous policy language, we construe the language in favor of the insured’s reasonable expectations].) This rule protects the objectively reasonable expectations of the insured. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1265, 10 Cal. Rptr. 2d 538, 833 P.2d 545 (Bank of the West).) Whether an insured’s expectation of a defense is objectively reasonable is a question of law we independently determine. (Cutler-Orosi Unified School Dist. v. Tulare County School etc. Authority (1994) 31 Cal.App.4th 617, 627, 37 Cal. Rptr. 2d 106 (Cutler-Orosi).)

A policy provision is ambiguous when it is capable of two or more constructions, both of which are reasonable. (Waller, supra, 11 Cal.4th at p. 18.) We interpret language in a policy as a whole and in context and in the circumstances of the case and will not strain to create an ambiguity where none exists. (Id. at pp. 18-19; First American Title Ins. Co. v. XWarehouse Lending Corp. (2009) 177 Cal.App.4th 106, 114-115, 98 Cal. Rptr. 3d 801 (First American Title Ins. Co.).) If we cannot resolve an ambiguity by interpreting the provision in the sense in which the insurer believed, at the time of making it, the insured understood it, we will resolve the ambiguity against the insurer and in favor of coverage. (Bank of the West, supra, 2 Cal.4th at pp. 1264-1265; AIU Ins. Co., supra, 51 Cal.3d at p. 822; Pulte, supra, 14 Cal.App.5th at pp. 1105-1106.)

There is no duty to defend when the insurance policy premises the duty on a lawsuit seeking “damages” but the third party plaintiff’s lawsuit does not seek compensatory damages. (San Miguel Community Assn. v. State Farm General Ins. Co. (2013) 220 Cal.App.4th 798, 801, 163 Cal. Rptr. 3d 358 (San Miguel); Cutler-Orosi, supra, 31 Cal.App.4th at pp. 629-633; Ulta Salon, Cosmetics & Fragrance, Inc. v. Travelers Property Casualty Co. of America (2011) 197 Cal.App.4th 424, 427, 432-433, 127 Cal. Rptr. 3d 444 [complaint seeking civil penalties and injunctive relief did not seek bodily injury damages under a policy]; Nationwide Ins. Co. v. King (S.D.Cal. 1987) 673 F.Supp. 384, 385 [policy expressly limiting coverage to damages did not cover complaint for injunction and declaratory relief]; see United Pacific Ins. Co. v. Hall (1988) 199 Cal.App.3d 551, 556, 245 Cal. Rptr. 99 [policy that obligated the insurer to defend an action for damages did not require the defense of a criminal or administrative proceeding where damages were not sought]; Jaffe v. Cranford Ins. Co. (1985) 168 Cal.App.3d 930, 934, 214 Cal. Rptr. 567 (Jaffe) [malpractice policy did not obligate insurer to defend a criminal prosecution because the case could not have resulted in damages payable under the policy].)

In San Miguel, members of the San Miguel Community Association sued the association and its board president for nuisance, breach of CC&Rs and breach of fiduciary duty. (San Miguel, supra, 220 Cal.App.4th at pp. 801-804.) The complaint and first amended complaint alleged that the plaintiffs had suffered irreparable injury which could not be compensated in damages and had no adequate remedy at law. (Id. at pp. 804-805.) The plaintiffs sought injunctive relief and punitive damages only, and did not seek any compensatory damages. (Id. at pp. 801, 804-805.) The association tendered the defense of the complaint and first amended complaint to its insurer, State Farm. (Id. at pp. 804-805.)

The business liability provision of the association’s policy said that State Farm would pay those sums that the insured became legally obligated to pay as damages because of bodily injury, property damage, personal injury or advertising injury caused by an occurrence. (San Miguel, supra, 220 Cal.App.4th at p. 802.) The directors and officers liability provision of the policy covered sums the insured became legally obligated to pay as damages because of wrongful acts committed by an insured in the conduct of management responsibilities for the association. (Ibid.) State Farm would defend any claim or suit seeking damages payable under the policy. (Ibid.)

State Farm denied the association’s claim. (San Miguel, supra, 220 Cal.App.4th at p. 805.) When the plaintiffs filed a second amended complaint alleging they had sustained damages, the association again tendered the defense to State Farm and State Farm ultimately agreed to provide a defense, but only for the second amended complaint. (Id. at pp. 805-806.) The association and its board president sued State Farm, alleging the latter breached the policy by refusing to reimburse defense costs incurred prior to the tender of the second amended complaint. (Id. at p. 801.)

The Court of Appeal affirmed the summary judgment in favor of State Farm, holding that when an insurance company issues a policy agreeing to indemnify its insured against third party claims for damages covered under the policy and to defend against claims seeking damages potentially payable under the policy, the insurer does not have a duty to defend the insured against a third party lawsuit seeking injunctive relief but no compensatory damages because such lawsuit is not a claim for damages under the policy. (San Miguel, supra, 220 Cal.App.4th at p. 800.) The appellate court said it was irrelevant that the third party plaintiffs might have suffered harm that could give rise to a claim for covered damages; what mattered was whether the third party plaintiffs sought to recover covered damages from the insured. (Id. at pp. 801, 807-808.) The appellate court rejected the claim that State Farm was required to infer additional claims that might have plausibly been included in the earlier pleadings when the allegations of the earlier pleadings were inconsistent with the implication that the plaintiffs sought money damages. (Id. at p. 809.) In particular, a request for punitive damages did not require an inference that the third party plaintiffs sought compensatory damages when the first two complaints clearly did not. (Id. at pp. 809-810.)

In Cutler-Orosi, supra, 31 Cal.App.4th 617, third party plaintiffs sued certain school districts for violating the federal Voting Rights Act. (Id. at p. 622.) The lawsuits sought declaratory and injunctive relief, attorney’s fees and costs and “such other additional relief at law or in equity as may be deem[ed] appropriate.” (Ibid.) The appellate court held that the costs of complying with an injunction under the Voting Rights Act and any award of attorney’s fees to the third party plaintiffs were not damages under the school districts’ policy, which obligated to insurer to pay “all sums which the Insured shall become obligated to pay as damages . . .” (Id. at p. 621, italics omitted.) With regard to the prayer for “such other additional relief at law or in equity as may be deem[ed] appropriate,” the appellate court said such prayer for relief did not impose a duty to defend because no form of damages was available in a Voting Rights Act lawsuit, the Eleventh Amendment prohibited actions in federal court for damages against a state agency, and the complaint did not allege any facts which, if proven, would entitle the third party plaintiffs to compensation for bodily injury or property damage. (Id. at p. 633.) A conjectural possibility of an award for damages based on the inherent power of a court of equity to award money damages did not give rise to a duty to defend. (Ibid.)

The parties here identified two provisions of HOA’s policy relevant to Beadle’s claims: Coverage L and Option DO. The language of those provisions is the same as the State Farm policy at issue in San Miguel. (San Miguel, supra, 220 Cal.App.4th at p. 802.) Under Coverage L, State Farm agreed to “pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury, property damage, personal injury or advertising injury to which” the policy applied. State Farm had a “duty to defend any claim or suit seeking damages payable under this policy. . . .” Under Option DO, State Farm agreed to “pay those sums that the insured becomes legally obligated to pay as damages because of ‘wrongful acts’ committed by an insured solely in the conduct of their management responsibilities for the Condominium/Association.”

Accordingly, HOA’s policy obligated State Farm to indemnify its insured for damages to which the policy applied and to defend any claim seeking damages payable under the policy. The policy did not define damages. But the fact that a term is not defined in the policy does not make it ambiguous. (First American Title Ins. Co., supra, 177 Cal.App.4th at pp. 114-115.) Statutory and dictionary definitions of damages “requires there to be ‘compensation,’ in ‘money,’ ‘recovered’ by a party for ‘loss’ or ‘detriment’ it has suffered through the acts of another.” (AIU Ins. Co., supra, 51 Cal.3d at pp. 826; see also Civ. Code, § 3281 [defining damages as compensation in money a person who suffers detriment from the unlawful act or omission of another may recover from the person in fault]; Jaffe, supra, 168 Cal.App.3d at p. 935 [“‘Damages’ describes a payment made to compensate a party for injuries suffered.”].) For Option DO, the policy also clearly stated there was no coverage for “damages other than money damages.” The first Beadle action did not seek monetary compensation from HOA and/or FRES.

HOA and Frei claim the complaint included allegations about restitution, usury, and an accounting which potentially gave rise to money damages. They say the facts alleged in the complaint clearly indicated to the parties that Beadle was seeking damages from a wrongful foreclosure. But the complaint in the first Beadle lawsuit sought a court declaration of rights and duties regarding the pending foreclosure sale and that Beadle did not breach the CC&Rs; an injunction stopping the foreclosure sale; and an order requiring FRES and Allied Trustee Services to make their records available for an accounting. HOA and Frei do not cite any portion of the record and we found nothing in the complaint alleging restitution. We will not consider claims made without citation to the record. (Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246, 19 Cal. Rptr. 3d 416.) The complaint did not seek damages for a wrongful foreclosure. In fact, the foreclosure sale had not occurred at the time the complaint was filed. Regardless of whether the relief Beadle sought was equitable or legal in nature or whether her complaint mentioned usury or an accounting, the complaint in the first Beadle action did not seek monetary compensation against HOA or FRES. And unlike AIU Ins. Co., cited at pages 29 to 30 of appellants’ opening brief, where the insured sought coverage for costs associated with complying with injunctions requiring the insured to clean up hazardous waste, there is no indication in this record that the first lawsuit would require HOA or FRES to incur compliance costs. (AIU Ins. Co., supra, 51 Cal.3d at pp. 837-842.)

Beadle’s prayer for attorney’s fees and costs also did not seek “damages.” First, the supplementary payments provision of HOA’s policy obligated State Farm to pay, with respect to any lawsuit it defends, “all costs taxed against the insured in the suit.” Attorney’s fees are an element of costs a prevailing party may be entitled to recover in a civil action. (Code Civ. Proc., §§ 1032, subd. (b), 1033.5, subd (a)(10).) Reading the term “damages” in the policy to include attorney’s fees and costs would render the supplementary payment provision superfluous. (Cutler-Orosi, supra, 31 Cal.App.4th at pp. 631-632.) We must read the insurance policy as a whole, so as to give effect to every part, if reasonably practicable and avoid a construction of one clause which would render another clause in the same contract surplusage. (Civ. Code, § 1641; Berg v. MTC Electronics Technologies Co. (1998) 61 Cal.App.4th 349, 361, 71 Cal. Rptr. 2d 523.) Further, “[a]n award of attorney fees does not compensate a plaintiff for the injury that brought the plaintiff into court; [for that reason,] attorney fees are inconsistent with the meaning of the word “Damages” in the ordinary and popular sense. . . . [I]f the entire action alleges no covered wrongful act under the policy, coverage cannot be bootstrapped based solely on a claim for attorney fees.” (Health Net, Inc. v. RLI Ins. Co. (2012) 206 Cal.App.4th 232, 256-257, 141 Cal. Rptr. 3d 649; see also Cutler-Orosi, supra, 31 Cal.App.4th at p. 632.)

HOA and Frei also argue that defense counsel Natalie Vance’s statements to State Farm representative Mark Hattersley triggered the duty to defend. Vance told Hattersley the foreclosure sale had already occurred, Vance thought Beadle would amend her complaint to allege damages because the property sold for significantly less than its value, and the potential damages claim could be the difference between the value of Beadle’s condominium and what the condominium was sold for. Vance testified that Beadle had alleged violations of the nonjudicial foreclosure statutes and Beadle could allege a wrongful foreclosure action and seek damages.

The duty to defend does not arise from speculation about unpled third party claims or how a third party plaintiff might amend her complaint against the insured. (Friedman Prof. Management Co., Inc. v. Norcal Mutual Ins. Co. (2004) 120 Cal.App.4th 17, 34-35, 15 Cal. Rptr. 3d 359 (Friedman); Low v. Golden Eagle Ins. Co. (2002) 99 Cal.App.4th 109, 113-114, 120 Cal. Rptr. 2d 827 (Low); Gunderson, supra, 37 Cal.App.4th at pp. 1114, 1116-1117; Hurley Construction Co. v. State Farm Fire & Casualty Co. (1992) 10 Cal.App.4th 533, 538-539, 12 Cal. Rptr. 2d 629 (Hurley).) While Vance testified she had spoken to Beadle one time, she did not testify that Beadle ever said she was seeking monetary compensation from the defendants. Neither the allegations in the complaint in the first Beadle lawsuit nor the facts that Machen or Vance made known to Hattersley indicated that Beadle was seeking monetary compensation for a loss allegedly caused by HOA or FRES.

HOA and Frei next assert that in opposing the demurrer in the first Beadle action, Beadle made clear she was claiming damages for wrongful foreclosure, potential eviction and displacement from her property. The opposition was filed on September 19, 2013, after State Farm had denied HOA and FRES’s tender of defense of the first Beadle lawsuit. HOA and Frei do not cite any portion of the record showing that State Farm had knowledge of any assertions Beadle made in her opposition to the demurrer. The duty to defend is determined from the facts and inferences known to the insurer at the time of the tender of defense. (Atlantic Mutual, supra, 100 Cal.App.4th at p. 1038; Hurley, supra, 10 Cal.App.4th at p. 538; CNA, supra, 176 Cal.App.3d at p. 610.) HOA and Frei fail to show that Beadle’s opposition to a demurrer required State Farm to defend the first Beadle action.

Moreover, while Coverage L applied to damages because of bodily injury, property damage, personal injury or advertising injury, the first Beadle lawsuit did not seek damages because of such injuries. The policy defined “bodily injury” as “bodily injury, sickness or disease sustained by a person.” “Property damage” was physical injury to or destruction of tangible property or loss of use of tangible property that was caused by physical injury to or destruction of other tangible property. “Advertising injury” was injury arising out of the publication of material which slandered or libeled a person or organization, disparaged a person’s or organization’s goods, products or services or violated a person’s right to privacy; misappropriation of advertising ideas or style of doing business; or infringement of copyright, title or slogan. The complaint in the first Beadle action did not allege bodily injury, property damage or advertising injury.

The complaint also did not allege “personal injury.” Of relevance, the policy defined “personal injury” as “the wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor.” The phrase “committed by or on behalf of its owner, landlord or lessor” means the wrongful act — eviction, entry or invasion of right — was done by or on behalf of an owner, landlord or lessor of the property. (Liberty Corporate Capital Ltd. v. Peacemaker National Training Ctr., LLC (N.D.W.Va. 2018) 348 F.Supp.3d 585, 593; Allstate Ins. Co. v. McColly Realtors, Inc. (N.D.Ind. 2017) 296 F.Supp.3d 947, 959; Camp Richardson Resort, Inc. v. Philadelphia Indem. Ins. Co. (E.D.Cal. 2015) 150 F.Supp.3d 1186, 1194; Westfield Ins. Co. v. Pinnacle Group, LLC (S.D.W.Va. 2015) 137 F.Supp.3d 912, 919 & fn. 4; Hartford Fire Ins. Co. v. Gandy Dancer, LLC (D.N.M. 2013) 981 F.Supp.2d 981, 1017-1018.)

Beadle alleged she was the owner of the subject condominium and had “full interest by Grant Deed.” HOA and Frei do not cite any portion of the record showing State Farm knew of facts indicating that HOA or FRES was the owner, landlord or lessor of Beadle’s condominium. The first Beadle lawsuit did not involve a possibly covered “personal injury” claim because facts known to State Farm at the time of tender did not show that alleged wrongdoers HOA and FRES were the owners, landlords or lessors of Beadle’s condominium.1 There is no objectively reasonable expectation of coverage where Beadle did not seek damages for “personal injury” as defined in HOA’s policy. (Lyons v. Fire Ins. Exchange (2008) 161 Cal.App.4th 880, 885, 74 Cal. Rptr. 3d 649 [an insured could not reasonably expect a defense of claims that were based on risks clearly not covered under the policy]; Hurley, supra, 10 Cal.App.4th at p. 539.)

In sum, the complaint in the first Beadle lawsuit and the facts made known to State Farm at the time of tender did not show that Beadle sought damages because of bodily injury, property damage, personal injury or advertising injury within the meaning of HOA’s policy. Accordingly, State Farm had no duty to defend HOA and/or FRES against the first Beadle complaint.

II

HOA and Frei also urge that FRES should be deemed an insured under Option DO because HOA had a reasonable expectation that FRES would be covered under that provision based on the following: (1) the declarations page for HOA’s policy listed “Additional Insured” and “Dir. & Officers” under “Forms, Options, and Endorsements;” (2) State Farm, through Lewis, had a contractual duty to provide Option DO coverage to FRES; (3) the implied covenant of good faith and fair dealing required including FRES on HOA’s Option DO coverage; and (4) the representations on the declarations page of HOA’s policy justify the application of promissory estoppel against State Farm. Under Option DO, State Farm agreed to pay those sums the insured becomes legally obligated to pay as damages because of wrongful acts committed by an “insured” in the conduct of management responsibilities for HOA. HOA’s policy limited the term “insured” to (a) the named insured’s directors or officers, provided the individual (1) was duly elected by the unit owners to serve on the managing body of HOA and (2) acted within the scope of his or her duties on behalf of the named insured; (b) the named insured’s members, with respect to activities they performed on the named insured’s behalf as a member of a committee appointed by the administrative or managing body of HOA; or (c) the named insured shown on the declarations page. The copies of declarations pages which are in the record identified HOA and not FRES as the named insured. Counsel for HOA and FRES informed State Farm that the property manager was not a member of HOA’s board of directors or any committee for HOA. HOA and Frei do not cite any portion of the record showing FRES was an insured within the meaning of the Option DO provision or that at the time of tender State Farm knew of any facts indicating FRES was an insured under that provision.

HOA and Frei argue the declarations page for HOA’s policy clearly showed FRES was an additional insured under Option DO. We disagree. The “Forms, Options, and Endorsements” section of the copies of the declarations pages which are in the record listed “Additional Insured” and “Dir and Officers,” among other things. But the declarations pages did not mention FRES. Those pages also did not indicate that “Additional Insured” related to “Dir and Officers” or Option DO.

HOA and Frei also argue that State Farm, through its agent Lewis, had a contractual duty to provide FRES Option DO coverage because Lewis admitted he had a duty to suggest that FRES be added as an additional insured on HOA’s policy when he became aware of FRES’s status as HOA’s new property manager. While Lewis testified he would have recommended FRES be added to HOA’s policy as an additional insured, Lewis did not say he had an obligation to make that recommendation or that he had a duty to recommend Option DO coverage for FRES. And contrary to the assertion in HOA and Frei’s appellate opening brief that insurance expert Jeffrey McKinley agreed Lewis had a duty to add FRES as an insured, McKinley testified that Lewis did not owe FRES any duty and Lewis had no duty to initiate contact with HOA to advise how its policy covered the property managers.

HOA and Frei further assert that State Farm had a duty to provide FRES coverage under Option DO because Bruns from Lewis’s office promised to include FRES as an additional insured without any restrictions. But the alleged promise by Bruns was made in June 2014, long after State Farm had denied the tender of defense for the first Beadle action and after HOA and FRES had tendered the defense of the second Beadle action to State Farm. Therefore, it cannot be the basis of any contractual duty with regard to the Beadle lawsuits. Moreover, Bruns’ June 2014 statement that she would submit a request to State Farm’s underwriters to add FRES as an additional insured on HOA’s policy did not reference Option DO. Machen testified that Bruns agreed in her June 2014 e-mail that Bruns would add FRES to HOA’s policy as an additional insured. State Farm included FRES as an additional insured on HOA’s policy effective June 3, 2014. Machen did not testify that Bruns promised to add FRES to the Option DO provision. There is no evidence that State Farm or its agents promised to provide Option DO coverage to FRES.

Moreover, HOA and Frei argue State Farm breached an implied covenant of good faith and fair dealing by not providing Option DO coverage to FRES. The law implies in every contract a covenant of good faith and fair dealing. (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 818.) “[T]he covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct that frustrates the other party’s rights to the benefits of the agreement.” (Waller, supra, 11 Cal.4th at p. 36.) “Absent [a] contractual right, however, the implied covenant has nothing upon which to act as a supplement, and ‘should not be endowed with an existence independent of its contractual underpinnings.'” (Ibid.) As we have explained, FRES was not an insured under the Option DO definition of that term. HOA and Frei fail to show the existence of a contract requiring State Farm or Lewis to include FRES as an insured under the Option DO provision of HOA’s policy. Consequently, we reject their implied covenant claim. (See ibid. [there can be no action for breach of the implied covenant of good faith and fair dealing when there is no potential for coverage]; Baldwin v. AAA Northern California, Nevada & Utah Ins. Exchange (2016) 1 Cal.App.5th 545, 557, 204 Cal. Rptr. 3d 433 [insurer did not breach the implied covenant of good faith and fair dealing where its conduct was consistent with the express provisions of the contract]; Behnke v. State Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, 1469-1470, 127 Cal. Rptr. 3d 372 [bad faith claim fails as a matter of law where the plaintiff had no viable breach of contract claim]; 1231 Euclid Homeowners Assn. v. State Farm Fire & Casualty Co. (2006) 135 Cal.App.4th 1008, 1021, 37 Cal. Rptr. 3d 795 [insurer’s failure to pay benefits under its policy cannot serve as a basis for a bad faith claim where it did not owe policy benefits to the insured].)

Citing Cicone v. URS Corp. (1986) 183 Cal.App.3d 194, 227 Cal. Rptr. 887, HOA and Frei contend that Lewis had a duty to bring up problems with the Option DO coverage because Lewis’s agency was communicating with Frei. Cicone is not an insurance coverage case. In Cicone, the attorney for the seller of a business sued the buyer, its president and the attorney of the buyer, alleging that the latter made a promise without disclosing they did not intend to perform. (Id. at pp. 198-199, 201.) In the context of a fraud cause of action, the appellate court held that an attorney may not engage in fraudulent conduct toward another attorney, even if the two were negotiating at arms’ length for their clients. (Id. at pp. 201-202.)

There is no fraud cause of action in this case. Nothing in the record shows that Mr. Frei ever discussed Option DO coverage with Lewis. Mr. Frei testified he never called Lewis prior to the Beadle actions. Lewis testified that Mr. Frei and his employees never called Lewis to ask questions about coverage.

Citing Eddy v. Sharp (1988) 199 Cal.App.3d 858, 245 Cal. Rptr. 211, HOA and Frei say State Farm’s position that FRES was not covered under Option DO deprived HOA of the protection for which it had paid premiums. Eddy is inapposite because that case involved an express representation about coverage. (Id. at pp. 862-863.) In the context of a negligent misrepresentation cause of action, the appellate court in Eddy said the insurance agent had a duty to accurately inform the insureds of the policy’s provisions, and representations in the agent’s cover letter to the insureds raised a triable issue of material fact about whether the agent had misrepresented the terms of the policy. (Id. at pp. 863-866.) HOA and Frei do not point to any portion of the record containing any representations by State Farm or Lewis that Option DO coverage applied to FRES.

HOA and Frei further claim the doctrine of promissory estoppel requires State Farm to provide Option DO coverage to FRES. The elements of promissory estoppel include the following: (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) reliance that is reasonable and foreseeable; and (4) injury to the party asserting estoppel arising from the reliance. (Granadino v. Wells Fargo Bank, N.A. (2015) 236 Cal.App.4th 411, 416, 186 Cal. Rptr. 3d 408; Cooper v. State Farm Mutual Automobile Ins. Co. (2009) 177 Cal.App.4th 876, 892, fn. 3, 99 Cal. Rptr. 3d 870.) Estoppel cannot be established without a promise upon which the plaintiff relied to his or her prejudice. (Granadino, at p. 417.) HOA and Frei claim the declarations page listing “Additional Insured” and “Dir & Officers” under “Forms, Options, and Endorsements” constituted a promise that FRES had Option DO coverage. We disagree. Unlike the certificates of insurance in Santana Row Hotel Partners, L.P. v. Zurich America Ins. Co. (N.D.Cal. 2006) 446 F.Supp.2d 1108, 1109-1110, 1113-1114, a case HOA and Frei cite, the declarations pages for HOA’s policy do not mention FRES nor make any promises or representations in clear and unambiguous terms that FRES was covered under Option DO.

To the extent HOA and Frei rely on testimony that there were 2009 letters by Mr. Frei addressed to Lewis requesting that FRES be included as an additional insured on HOA’s policy, the trial court did not believe Mr. Frei’s testimony that he sent the letters in 2009 and instead credited Lewis and Bruns’ testimony that they did not receive the letters. On appeal, we do not resolve conflicts in the evidence, weigh the evidence, or consider the credibility of witnesses. (Phillips v. Standard Accident Ins. Co. (1960) 180 Cal.App.2d 474, 480, 4 Cal. Rptr. 277.) We only determine whether there is any substantial evidence to support the trial court’s findings. (Ibid.) The testimony of Lewis and Bruns support the trial court’s findings with regard to the 2009 letters. The fact that contrary evidence was presented in the trial court does not help HOA and Frei on appeal. (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 922-923, 148 Cal. Rptr. 389, 582 P.2d 980.) Based on the trial court’s findings, Westrick v. State Farm Insurance (1982) 137 Cal.App.3d 685, 187 Cal. Rptr. 214, another case HOA and Frei cite, is factually distinguishable. There is no evidence that, prior to the Beadle lawsuits, HOA or Frei asked Lewis about coverage for FRES under HOA’s policy and that Lewis failed to explain the terms and limits of coverage under the policy.

HOA and Frei also argue that Lewis and Bruns could not rule out the possibility that Pam Philips, another person who worked for Lewis, received the 2009 letters from Frei. But the trial court did not credit Mr. Frei’s testimony that he sent the letters. Lewis testified Philips did not mention letters from Frei in 2009 and he was confident that if his office had received such letters, they would have been presented to him.

HOA and Frei fail to establish that FRES should be deemed an insured under the Option DO provision of HOA’s policy for purposes of the first and/or second Beadle lawsuit.

III

HOA and Frei next claim State Farm failed to reimburse HOA for post-tender expenses it incurred in defending against the second Beadle lawsuit.

Contrary to HOA and Frei’s claim on appeal, the trial court addressed whether State Farm failed to pay the post-tender expenses. The trial court found HOA and Frei failed to prove that HOA had presented State Farm with a clear statement of what must be reimbursed. The trial court said the billing records presented at trial included charges for different clients, matters, time periods and purposes. Accordingly, it concluded HOA and Frei failed to prove by a preponderance of the evidence that State Farm had unreasonably delayed in reimbursing HOA for attorney’s fees and costs it had incurred in the second Beadle lawsuit.

We review the trial court’s factual findings for substantial supporting evidence. (Pulte, supra, 14 Cal.App.5th at p. 1119.) Substantial evidence supports the trial court’s finding. HOA and Frei claim on appeal that they incurred $5,765 in fees and costs after they tendered the defense of the second Beadle action and before State Farm picked up HOA’s defense. That total appears to be derived from the page marked Auburn 0285 in Exhibit 39. But the page marked Auburn 0285 bears a different statement number than the page marked Auburn 0284, and there is no explanation for the charges shown on Auburn 0285. Additionally, some of the trial exhibits cited in the appellate opening brief do not relate to costs incurred in defending HOA against the second Beadle lawsuit. As plaintiffs, HOA and Frei bore the burden of establishing the elements of their cause of action against State Farm. (Evid. Code, § 500; Cassady v. Morgan, Lewis & Bockius LLP (2006) 145 Cal.App.4th 220, 234, 51 Cal. Rptr. 3d 527.) HOA and Frei failed to prove what attorney’s fees and costs HOA had incurred in the second Beadle lawsuit.

In a different section of their appellate opening brief, HOA and Frei cite Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2008) 163 Cal.App.4th 550, 77 Cal. Rptr. 3d 695 for the proposition that State Farm bore the burden of showing that any entries in Baydaline’s billing statement were unrelated to the defense of HOA in the second Beadle lawsuit. But Premier is factually distinguishable. The defendants who obtained an award of attorney’s fees in Premier submitted declarations explaining the different tasks performed by attorneys for members of a joint defense group and billing records in support of the defendants’ fees request. (Id. at pp. 555, 559-560, 562-564.) The plaintiffs did not file any declarations in opposition to the fees request nor challenge the evidence presented by the defendants. (Id. at p. 560.) Here, Exhibit 39 did not establish HOA and Frei’s claim of $5,765 in post-tender fees and costs, and State Farm challenged the evidence supporting HOA’s claim of fees. The argument advanced by HOA and Frei lacks merit.

IV

HOA and Frei maintain that Lewis breached a contract with HOA by failing to place FRES as an additional insured on all liability coverages for HOA’s policy and by failing to alert HOA and Frei that it was not possible to include FRES under the Option DO coverage.

A cause of action for breach of contract requires proof of (1) the existence of a contract, (2) the plaintiff’s performance or excuse for nonperformance, (3) the defendant’s breach, and (4) resulting damage to the plaintiff. (Abdelhamid v. Fire Ins. Exchange (2010) 182 Cal.App.4th 990, 999, 106 Cal. Rptr. 3d 26.) HOA and Frei suggest Lewis had a contractual obligation to add FRES to HOA’s policy in 2009, but they do not cite any portion of the record showing the existence of a contract between Lewis and HOA requiring Lewis to add FRES to all coverages on HOA’s policy or to alert HOA’s property manager about lack of Option DO coverage. Lewis did not agree that he had a duty to add FRES as an additional insured on HOA’s policy in the portion of the reporter’s transcript HOA and Frei cite. HOA and Frei fail to demonstrate that they established an essential element of their breach of contract claim.

V

HOA and Frei further assert that State Farm breached the covenant of good faith and fair dealing in making its coverage determinations.

Breach of the covenant of good faith and fair dealing involves something beyond breach of the terms of the insurance contract. (Chateau Chamberay Homeowners Assn. v. Associated International Ins. Co. (2001) 90 Cal.App.4th 335, 345, 108 Cal. Rptr. 2d 776.) It requires a showing that the insurer acted unreasonably or without proper cause. (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 724, fn. 7, 68 Cal. Rptr. 3d 746, 171 P.3d 1082; Chateau Chamberay, at pp. 347-348 & fn. 7; Dalrymple v. United Services Auto. Assn. (1995) 40 Cal.App.4th 497, 512, 520, 46 Cal. Rptr. 2d 845 (Dalrymple); Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151, 271 Cal. Rptr. 246.) But there is no breach of the implied covenant of good faith and fair dealing if there is no obligation to defend or indemnify. (Waller, supra, 11 Cal.4th at p. 36; Love, at p. 1152; Pulte, supra, 14 Cal.App.5th at p. 1119 [“‘[N]othing obligates insurance companies to pay “noncovered” claims . . . .'”]; Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1078, 56 Cal. Rptr. 3d 312.) This is because the implied covenant is based on the contractual relationship between the insured and the insurer. (Waller, at p. 36.) In the absence of a contractual right, “the implied covenant has nothing upon which to act as a supplement,” and there is no implied covenant. (Ibid.)

Whether the insurer breached the implied covenant of good faith and fair dealing is ordinarily a question of fact. (Nieto v. Blue Shield of California Life & Health Ins. Co. (2010) 181 Cal.App.4th 60, 86, 103 Cal. Rptr. 3d 906; Dalrymple, supra, 40 Cal.App.4th at p. 511.) Where bad faith is resolved as a factual issue, we review the judgment under the substantial evidence standard. (Dalrymple, at p. 511.)

HOA and Frei claim State Farm breached the covenant of good faith and fair dealing by reading the complaint in Beadle’s first lawsuit in a restrictive and unreasonable manner, refusing to include facts gleaned from its investigation in its coverage analysis and mischaracterizing Vance’s comments to Hattersley as confirming that Beadle did not allege damages. The trial court rejected those claims. It found that Hattersley thoroughly and correctly analyzed Beadle’s complaint. Substantial evidence supports that finding.

In evaluating the tender of the first Beadle action, Hattersley spoke with Machen and Vance. Hattersley described those conversations in his case notes and coverage memo. Hattersley and Vance testified about their single conversation. Hattersley’s contemporaneous notes of that conversation supported his trial testimony. His testimony and notes are substantial evidence supporting the trial court’s rejection of HOA and Frei’s claim that Hattersley mischaracterized Vance’s comments to him. Additionally, as we have explained, Beadle’s complaint in the first lawsuit did not seek money damages from HOA or FRES, and State Farm was not required to speculate about how Beadle might amend her complaint. (See Friedman, supra, 120 Cal.App.4th at pp. 34-35; Low, supra, 99 Cal.App.4th at pp. 113-114; Gunderson, supra, 37 Cal.App.4th at pp. 1114, 1116-1117; Hurley, supra, 10 Cal.App.4th at p. 538-539.) HOA and Frei fail to demonstrate error with regard to their breach of the implied covenant claim.

HOA and Frei also claim that State Farm breached the implied covenant of good faith and fair dealing by failing to reimburse HOA for post-tender attorney’s fees and costs in the second Beadle lawsuit. As discussed in part III, HOA and Frei failed to prove their claim relating to unpaid post-tender attorney’s fees and costs. HOA and Frei have not demonstrated that State Farm acted unreasonably or without good cause where HOA and Frei did not prove they presented State Farm with a clear claim for reimbursement.

VI

In addition, HOA and Frei contend the trial court erred in denying their motion to tax the expert witness fees State Farm and Lewis sought to recover under section 998.

To encourage the settlement of lawsuits prior to trial, section 998 authorizes a party to serve a written offer to compromise on another party and to allow judgment to be taken in accordance with the terms and conditions stated in the offer. (§ 998, subds. (a)-(c); Prince v. Invensure Ins. Brokers, Inc. (2018) 23 Cal.App.5th 614, 621-622, 232 Cal. Rptr. 3d 887 (Prince).) The statute provides disincentives for rejecting a reasonable pretrial offer of settlement. The trial court may require a plaintiff, who does not accept a valid section 998 offer and then fails to obtain a more favorable judgment, to pay a defendant’s reasonable postoffer expert witness costs. (§ 998, subd. (c)(1).)

Prior to the trial, State Farm and Lewis made a written settlement offer under section 998 to HOA. The offer explained how HOA may accept State Farm and Lewis’s offer: “If you accept this offer, please: [¶] a) Date and sign the Agreement attached hereto as Exhibit A; [¶] b) Have your legal counsel execute a Request for Dismissal in a form identical to that attached hereto as Exhibit B; [¶] c) Send the signed Agreement and signed Request for Dismissal to counsel for defendants, who will then file the Request for Dismissal with the Court; and [¶] d) Execute, by and through your counsel, the statement of acceptance of this offer that appears below and return the same to attorneys for defendants indicating that the Offer to Compromise is accepted pursuant to the terms and conditions outlined above.” The offer included a document which read, “STATEMENT OF ACCEPTANCE OF OFFER TO COMPROMISE [¶] In accordance with Code of Civil Procedure section 998, subdivision (b), plaintiff Auburn Woods I HOA hereby accepts Defendants’ Offer to Compromise pursuant to the terms and conditions set forth in that offer.” The statement concluded with a signature block for counsel for HOA.

HOA and Frei claim State Farm and Lewis’s section 998 offer to HOA was defective because it did not identify the accepting party in the signature line. We independently review whether a section 998 offer is valid. (Prince, supra, 23 Cal.App.5th at p. 622; Rouland v. Pacific Specialty Ins. Co. (2013) 220 Cal.App.4th 280, 285, 162 Cal. Rptr. 3d 887 (Rouland).) We apply general contract principles in interpreting a section 998 offer when doing so does not conflict with the statute’s purpose of encouraging the pretrial settlement of lawsuits. (Rouland, at p. 285.) We interpret any ambiguity in the offer against the offeror and strictly construe the offer in favor of the party against whom section 998 is sought to be enforced. (Sanford v. Rasnick (2016) 246 Cal.App.4th 1121, 1129-1130, 201 Cal. Rptr. 3d 614 (Sanford).)

A section 998 offer must include a provision that allows the recipient to indicate acceptance of the offer by signing a statement that the offer is accepted. (§ 998, subd. (b).) Acceptance must be in writing and signed by counsel for the accepting party or, if not represented by counsel, by the accepting party. (§ 998, subd. (b).) State Farm and Lewis’s section 998 offer satisfies the statute’s requirement that an offer specify the manner in which it is to be accepted and provide for a written acceptance to be signed by the offeree or its counsel. (Rouland, supra, 220 Cal.App.4th at p. 288 [section 998 does not require an offer to include a line for the party to sign]; Whatley-Miller v. Cooper (2013) 212 Cal.App.4th 1103, 1107, 1111, 151 Cal. Rptr. 3d 517 [approving acceptance that included a place for the attorney’s signature].) Even if section 998 requires an offer to identify the accepting party in the signature line, the signature block in the Statement of Acceptance identified HOA.

HOA and Frei next contend the section 998 offer was defective because it included an overbroad and ambiguous settlement agreement and release. A section 998 offer must be sufficiently specific and certain to allow the offeree to evaluate the value of the offer and make a reasoned decision whether to accept it, and allow the trial court to determine whether a judgment is more favorable than the offer. (Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 764-765, 60 Cal. Rptr. 3d 375 (Fassberg); Barella v. Exchange Bank (2000) 84 Cal.App.4th 793, 801-802, 101 Cal. Rptr. 2d 167.) However, the inclusion of a release of claims does not necessarily render it ineffective under section 998. (Ignacio v. Caracciolo (2016) 2 Cal.App.5th 81, 88-90, 206 Cal. Rptr. 3d 76; McKenzie v. Ford Motor Co. (2015) 238 Cal.App.4th 695, 698-699, 706-707, 189 Cal. Rptr. 3d 560; Valentino v. Elliott Sav-On Gas, Inc. (1988) 201 Cal.App.3d 692, 694-695, 697-701, 247 Cal. Rptr. 483; see Chen v. Interinsurance Exchange of the Automobile Club (2008) 164 Cal.App.4th 117, 120, 122, 78 Cal. Rptr. 3d 755.) An offer that requires the offeree to release all claims between the parties in the current action is effective under section 998. (Linthicum v. Butterfield (2009) 175 Cal.App.4th 259, 270-273, 95 Cal. Rptr. 3d 538 (Linthicum); Goodstein v. Bank of San Pedro (1994) 27 Cal.App.4th 899, 905, 907-908, 32 Cal. Rptr. 2d 740 (Goodstein).)

State Farm and Lewis’s section 998 offer to HOA read, “[I]n full settlement of all claims . . . asserted by [HOA] in this action against [State Farm] or Frank Lewis or both . . . , defendants jointly offer to pay [HOA] the sum of Thirty-Five Thousand Dollars ($35,000) in exchange for the following:  [¶] 1. Entry of a Request for Dismissal with Prejudice of [HOA’s] entire action; and [¶] 2. Signing of the attached Settlement Agreement and Release (“Agreement”) by [HOA’s] authorized representative, which will forever end this case and the underlying disputes between [HOA] and each defendant.” The settlement agreement attached to the section 998 offer includes a release which read, “[HOA] releases and forever discharges State Farm and Lewis . . . from any and all claims . . . arising out of the subject of the ACTION.” “ACTION” was defined as HOA and Frei’s lawsuit against State Farm and Lewis in Placer County Superior Court case No. SCV0036315, which is the subject of this appeal. The Civil Code section 1542 waiver in the proposed settlement agreement read, HOA “expressly waives and assumes the risk of any and all claims for damages related to the subject of the ACTION, which exists as of this date, but of which it is unaware, . . . and which, if known, would materially affect its decision to enter into this settlement, and further assumes the risk that it may suffer damages in the future which it does not now anticipate or suspect may occur as a result of any matter referred to herein, and therefore waives all rights under California Civil Code section 1542 . . . .”

The release language in this case is similar to that approved in Fassberg, supra, 152 Cal.App.4th 720. The plaintiff in Fassberg agreed to “fully release” the defendant “from all claims, disputes and liabilities arising from, relating or in any way pertaining to the subject matter of the Action including . . . any actual or potential claim and all disputes arising from or relating to . . . the Action.” (Id. at p. 765.) The appellate court in that case held the proposed release was not overbroad. (Id. at p. 766.) It noted that the release identified only two parties to the proposed settlement and was limited to that action. (Id. at p. 767.) Like in Fassberg, here the proposed release provided that HOA “releases and forever discharges State Farm and Lewis . . . from any and all claims . . . arising out of the subject of the ACTION.”

Read in context and as a whole, State Farm and Lewis’s section 998 offer and proposed settlement agreement were clearly limited to claims in the underlying lawsuit. The “Disclaimer of Liability” section of the proposed settlement agreement confirm this conclusion, stating that HOA “accepts payment of the sums specified in ¶ 2 of this Agreement as a full and complete compromise of matters involving disputed facts and issues related to the ACTION filed by [HOA] against Defendants . . . .” Because it was limited to the present action, the proposed release did not invalidate State Farm and Lewis’s offer for purposes of section 998. (Linthicum, supra, 175 Cal.App.4th at pp. 270-273; Goodstein, supra, 27 Cal.App.4th at pp. 907-908; Fassberg, supra, 152 Cal.App.4th at pp. 766-767.)

HOA and Frei assert the section 998 offer was also invalid because it referred to an extraneous agreement that was not part of the offer. The contention is meritless. State Farm and Lewis offered to pay HOA $35,000 in exchange for, among other things, HOA’s acceptance of the settlement agreement that was actually attached to the offer to compromise. Unlike in the Sanford case, here the proposed settlement agreement was attached to State Farm and Lewis’s section 998 offer, and thus HOA was not required to guess about the terms and conditions. (Sanford, supra, 246 Cal.App.4th at pp. 1125, 1130.)

HOA and Frei further argue that even if the section 998 offer was valid, the trial court should have apportioned the expert witness fees between HOA and FRES. We agree with State Farm and Lewis that the claim is forfeited because HOA and FRES did not raise the argument in the trial court. (Mepco Services, Inc. v. Saddleback Valley Unified School Dist. (2010) 189 Cal.App.4th 1027, 1049, fn. 29, 117 Cal. Rptr. 3d 494; Staples v. Hoefke (1987) 189 Cal.App.3d 1397, 1409, 235 Cal. Rptr. 165.)

DISPOSITION

The judgment is affirmed. State Farm and Lewis shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)

/s/ MAURO, Acting P. J.

We concur:

/s/ DUARTE, J.

/s/ RENNER, J.

We reach the same conclusion with regard to the second Beadle lawsuit and FRES’s tender of the defense of that lawsuit because the complaint in the second lawsuit alleged that Beadle was the sole owner of the condominium and in May 2014, Baydaline informed Hattersley HOA was never the owner, landlord or lessor of Beadle’s condominium. Inasmuch as there was no wrongful act with regard to Beadle’s condominium “committed by or on behalf of its owner, landlord or lessor” and, thus, no potential “personal injury” coverage for the second Beadle lawsuit, we need not consider HOA and Frei’s further claim that facts alleged in the complaint in the second Beadle lawsuit potentially involved an “invasion of the right of private occupancy” and “wrongful eviction.”