Brown v. Montage at Mission Hills

NANCIE BROWN, Plaintiff and Appellant, v. MONTAGE AT MISSION HILLS, INC., Defendant and Respondent

Summary by Jillian M. Wright, Esq.:

In the case of Brown v. Montage at Mission Hills (Aug. 20, 2021, Nos. E074341, E075762) ___Cal.App.5th___ [2021 Cal. App. LEXIS 694].), the California Court of Appeal, Fourth District found that a CID cannot require a rental to be for a minimum term for homeowners who owned prior to the CID adopting that requirement pursuant to Civil Code section 4740. In this case, Brown purchased a unit for the express purpose of renting it out as a short-term rental. Montage at Mission Hills later adopted a 30-day minimum rental period. Brown sued on the basis that she was exempt from that requirement because Civil Code section 4740 provides that homeowners are not subject to governing document provisions that “prohibit[ ] the rental or leasing of any of the separate interests … unless that governing document, or amendment thereto, was effective prior to the date the owner acquired title to their separate interest.”

The appellate court sided with Brown and found that minimum rental terms are rental prohibitions and not rental restrictions. Therefore, a short-term rental ban would not apply to homeowners who purchased prior to the ban’s adoption. The appellate court noted that “[t]he legislative history indicates that the Legislature’s intention was to ensure that owners maintained all rental and leasing rights they had at the time of purchase.”

What does this mean for your association?

If you have a minimum rental term in your governing documents it may not be enforceable against all homeowners, depending on the language of the provision and when it was adopted. If you have questions about the enforceability of your association’s minimum rental term, please contact us or your association’s legal counsel for further guidance.

*** End Summary **

 

Nos. E074341, E075762.
Court of Appeals of California, Fourth District, Division Two.
Filed August 20, 2021.
APPEAL from the Superior Court of Riverside County, Super. Ct. No. PSC1801783, Kira L. Klatchko, Judge. Reversed.

Slovak Baron Empey Murphy & Pinkney, Shaun M. Murphy and David A. Smith for Plaintiff and Appellant.

Fiore, Racobs & Powers and Julie R. Balbini for Defendant and Respondent.

 

CERTIFIED FOR PUBLICATION

OPINION

RAPHAEL, J.

An individual bought a condominium, which she consistently rented for short terms. Sixteen years after her purchase, the owner’s association amended its governing documents to prohibit renting properties for less than 30 days. We agree with the owner that she was exempt from this prohibition under Civil Code section 4740, subdivision (a) (section 4740). That provision provides that an owner of a property in a common interest development “shall not be subject to a provision in a governing document or an amendment to a governing document that prohibits the rental or leasing of” the owner’s property unless that document or amendment “was effective prior to the date the owner acquired title” to the property. The trial court held that she was not exempt, so we reverse.

I. FACTUAL AND PROCEDURAL BACKGROUND

Defendant and respondent Montage at Mission Hills, Inc. is a common interest development (CID) located in Cathedral City.[1] Plaintiff and appellant Nancie Brown purchased and acquired title to a property in Montage in 2002. At the time, Montage’s CC&Rs—Montage’s governing documents—did not prohibit any form of renting. Although the governing documents imposed some recordkeeping requirements for rentals, they did not ban short-term rentals (STRs) or require rentals to be for a minimum duration. This was important to Brown because she planned to use the property as an investment rental property and expected to be able to rent it for any length of time.

Brown consistently rented the property for short terms (that is, less than 30 days) from 2002 until the fall of 2017. In January 2018, Montage amended its governing documents to prohibit its members, including Brown, from renting or leasing their properties for periods shorter than 30 days. Montage notified Brown that it would enforce the new prohibition against STRs if she continued to rent her property for short terms.

Brown thereafter sued Montage, seeking declaratory relief among other claims, all of which turned on her assertion that she is exempt from Montage’s prohibition against STRs under section 4740. Brown sought summary adjudication on her declaratory relief claim, requesting that the trial court declare that section 4740 exempts her from the prohibition.

Montage responded with a motion for summary judgment. It argued that Brown’s claims failed because (1) section 4740 precludes CIDs from imposing complete bans on renting, but Montage’s prohibition on STRs is only a restriction on renting, and (2) Brown’s use of her property for STRs violated the governing documents’ prohibition on using the property for commercial purposes.

The trial court sided with Montage, finding that section 4740 does not apply because Montage’s governing documents do not “prohibit the rental or leasing” of Brown’s property but instead only restrict its rental. Because all of Brown’s claims turn on her assertion that section 4740 exempts her from the prohibition on STRs in Montage’s governing documents, the trial court granted Montage’s motion for summary judgment and denied Brown’s motion for summary adjudication. Brown timely appealed.

II. DISCUSSION

Section 4740, subdivision (a) states that an owner of a property in a CID shall not be subject to a provision in its regulations “that prohibits the rental or leasing of any of the separate interests in that common interest development” unless that provision “was effective prior to the date the owner acquired title to their separate interest.” The sole issue in this appeal is whether section 4740 exempts Brown from the restriction on rentals added to Montage’s governing documents after she had acquired title to her condominium. We conclude that it does.

Because this case comes to us on an appeal from the grant of a motion for summary judgment (to Montage) and denial of a motion for summary adjudication (to Brown) that turn on the same issue, we review the matter de novo based on facts that are undisputed. (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463; Hypertouch, Inc. v. ValueClick, Inc. (2011) 192 Cal.App.4th 806, 817 fn. 3.)

When Brown purchased her property in 2002, Montage’s governing documents did not preclude her from renting her property for short terms. Now, however, the governing documents would prohibit her from doing so. The question in this appeal is whether Montage’s amendments to its governing documents in 2018 prohibiting STRs constitute “amendment[s] to a governing document that prohibit[] the rental” of Brown’s property under section 4740. If so, section 4740 exempts Brown from the amendments because she acquired title before they took effect.

We must interpret a statute to effectuate the law’s purpose. (Green v. State of California (2007) 42 Cal.4th 254, 260.) To do so, we first look to the usual and ordinary meaning of the statute’s words. (Ibid.) If the ordinary meaning of the words is clear and unambiguous, “the statute’s plain meaning controls.” (Ibid.)

With regard to STRs, the plain meaning of section 4740 is not clear and unambiguous. On the one hand, if a regulation forbids any category of rental, such as a short-term lease, that regulation “prohibits” that type of rental, even if it does not prohibit all rentals. On the other hand, the section’s language could be read to bar only complete “prohibitions” on leasing but not “restrictions” on leasing that fall short of outright bans on all leasing. A treatise Montage cites accordingly reads it as “address[ing] only `prohibitions’ on leasing, not `restrictions’ on leasing. To the extent leasing is not totally prohibited, it is unclear what rental restrictions a [CID] might adopt and enforce retroactively.” (Sproul, Howell & Rosenberry, Advising California Common Interest Communities (CEB 2017), § 6.49.) Another treatise identified the same ambiguity: “The express language of [section] 4740, which uses the wording `prohibition,’ raises the question about `restrictions’ or `limitations’ on rentals as distinguished from `prohibitions’ against rentals. The question is: `When does a restriction become a prohibition,’ or `when is a restriction not a prohibition’?” (Cal. Common Interest Developments Law & Prac. (2020 ed.) § 22:15.) These treatises both (a) conclude that there are some “restrictions” on leasing that are not “prohibitions” and (b) note that it is unclear what makes a regulation a restriction rather than a prohibition.

The parties dispute how to deal with these questions. Montage argues that its ban on STRs is a “restriction” on the rental of Brown’s property, not a “prohibition.” On the other hand, Brown argues that Montage “prohibits the rental” of her property because it prohibits her from renting her property for terms of less than 30 days. We do not think this dispute can be resolved by contemplating the text alone. Because both interpretations of section 4740 are plausible constructions of its plain language, the text of the statute is ambiguous as it relates to STRs. (See Hoechst Celanese Corp. v. Franchise Tax Bd. (2001) 25 Cal.4th 508, 519 [statute is ambiguous if it is “susceptible to more than one reasonable interpretation”].)

Montage suggests that any ambiguity as to whether section 4740 allows “limitations” and “restrictions” on rentals as opposed to “outright prohibitions” can be resolved by reference to other provisions of the Davis-Sterling Act. Montage notes that other statutes in the Davis-Sterling Act provide that CIDs cannot “limit or prohibit . . . the display of the flag of the United States” (Civ. Code, § 4705, subd.), “may not prohibit posting or displaying of noncommercial signs, posters, flags, or banners” and may not “effectively prohibit[] or unreasonably restrict[]” various things within a CID. (E.g., Civ. Code, §§ 4745, subd. (a) 4745.1, 4750, 4754, subd. (c).) In Montage’s view, the waythat other Sterling-Davis Act statutes use the terms “limit” and “restrict” in addition to the term “prohibit” means that “prohibits” in section 4740 does not encompass “limitations” or “restrictions” on “the rental or leasing” of CID properties, but rather contemplates only complete bans on “the rental or leasing” of CID properties. Thus, Montage argues bans on STRs are permissible under section 4740 because they are a “limitation” or “restriction” on the rental of CID properties.

Although we may consider other provisions in “the statutory scheme of which the statute is a part” to interpret an ambiguous statutory provision, we may consider “a variety of extrinsic aids, including . . . the legislative history.” (Wilcox v. Birtwhistle (1999) 21 Cal.4th 973, 997.) In doing so, we must “choose the construction that comports most closely with the Legislature’s apparent intent.” (Smith v. Superior Court (2006) 39 Cal.4th 77, 88.) We do not think the other Davis-Stirling provisions clearly settle the matter of interpreting the text of section 4740 because they also leave interpretive issues about what they prohibit and restrict. For the reasons explained below, we conclude the Legislature’s intent underlying section 4740 is best articulated in the statute’s legislative history. We therefore reject Montage’s argument that we need not consider section 4740’s legislative history, and we turn to that history to aid in determining the statute’s meaning. (Uber Technologies Pricing Cases (2020) 46 Cal.App.5th 963, 973.)

That history indicates that the Legislature intended broad protection for owners against restrictions on renting, including the sort of restriction at issue in this case. When enacting section 4740, the Senate’s originating committee recognized that “[s]ome CIDs have restrictions on renting out units,” such as “requiring a minimum amount of time for leases.” (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 150 (2011-2012 Reg. Sess.) as amended Apr. 25, 2011.) Section 4740 was proposed to “respond to those restrictions.” The corresponding Assembly committee stated that section 4740 was necessary because “only express legislative language will protect an owner’s right to lease his or her property from leasing restrictions that may be adopted by CID members subsequent to purchase.” (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 150 (2011-2012 Reg. Sess.) as amended June 9, 2011.) In these reports, then, the committees not only used the word “restrictions” (rather than “prohibitions”) but also made at least one reference to minimum-time restrictions.

Further, the legislative history indicates that the Legislature’s intention was to ensure that owners maintained all the rental and leasing rights they had at the time of purchase. By enacting section 4740, the Legislature sought to “preserv[e] the CID’s right to adopt leasing restrictions, while at the same time ensuring that the owner can only be so limited if the restrictions were in place at the time the interest was acquired.” The Legislature thus intended section 4740 to ensure that “[i]f members of a [homeowners association] vote to pass a restriction on rentals the restriction would not apply to an owner that had the right to rent or lease when they purchased unless they agree to waive that right.” (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 150 (2011-2012 Reg. Sess.) as amended June 9, 2011.)

Put another way, in enacting section 4740, the Legislature “declare[d] that the rights of CID owners to rent or lease their properties, as the rights existed at the time they acquired them, should be protected.” (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 150 (2011-2012 Reg. Sess.) as amended Apr. 25, 2011.) That is, the Legislature passed the statute to “[p]rovide[] that the right of an owner to rent or lease his or her separate interest [in a CID] shall be the same as when the owner purchased his or her separate interest throughout the life of ownership.” (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 150 (2011-2012 Reg. Sess.) as amended June 9, 2011.)

In both its language and its substance, then, section 4740’s legislative history shows that the Legislature sought for it to broadly address both rental “restrictions” and rental “prohibitions” in CIDs. In our view, the statute’s legislative history demonstrates that the statute’s goal is to exempt CID property owners from any kind of rental prohibition or restriction that did not exist when the owner acquired title to the property. The exemption must include at least the type of restriction at issue here, where a category of rentals (STRs) is barred. We do not address whether an association could enact a generally applicable limitation on occupants (such as a noise restriction) or impose certain generally applicable requirements (such as a fee for using a common facility, or housekeeping rules) that affect renting but do not directly prohibit “the rental or leasing” of the property itself. That is, we need not decide whether a CID association may pass generally applicable rules that may negatively affect a CID property owner’s ability to rent or lease her property yet do not “prohibit” its renting or leasing. We need not deal with that question in this case, where the regulation bars all STRs. That is a prohibition on renting or leasing, not a prohibition on something else that happens to affect it.

We note that the Legislative Counsel, whose opinions we must “give due deference” (Grupe Development Co. v. Superior Court (1993) 4 Cal.4th 911, 922), reached the same conclusion. In its opinion, “the legislative history [of section 4740] demonstrates that the Legislature sought to address both rental restrictions and outright prohibitions,” and that the statute’s purpose “was to exempt [CID property] owners from any rental prohibition, regardless of its nature, that took effect on or after January 1, 2012, unless the prohibition took effect before the owner acquired title.”

The Legislative Counsel thus summarized its opinion about section 4740’s effect on rental prohibitions in CIDs, including prohibitions on STRs, as follows: “[U]nder Civil Code section 4740, an owner of a separate interest in a [CID] is subject to a provision of a governing document or an amendment to a governing document that became effective on or after January 1, 2012, and that prohibits an owner from renting out the owner’s interest in the property under certain conditions, such as a short-term lease, only if either (1) the prohibition took effect before the owner acquired title to his or her separate interest in that development, or (2) the owner consented to the governing document or amendment containing that provision.” (Italics added.) Given section 4740’s legislative history, we agree.

In briefing, Montage dismisses section 4740’s legislative history as “irrelevant”—an assertion we reject—and offers the following three arguments why Brown is not exempt from its ban on STRs.

Montage first argues an STR is a “limited license” to use the property, and thus Brown’s guests who rent her property on a short-term basis are licensees, not “tenants” who rent the property under section 4740. Montage failed to preserve this line of argument for consideration on appeal. (See Karlsson v. Ford Motor Co. (2006) 140 Cal.App.4th 1202, 1216-1217.)[2]

Regardless, we reject the argument. In analogous contexts, courts have routinely used the term “rent” and its variants to refer to short-term occupancies. (See City of San Bernardino Hotel/Motel Assn. v. City of San Bernardino (1997) 59 Cal.App.4th 237, 246 [“The ordinance defines `rent’ as `the consideration charged, whether or not received for the occupancy of space in a hotel . . . .'”]; Batt v. City and County of San Francisco (2010) 184 Cal.App.4th 163, 167 [“[T]he Hotel Tax imposes a levy of 14 percent `on the rent for every occupancy of a guest room in a hotel in the City and County.'”]; In re Transient Occupancy Tax Cases (2016) 2 Cal.5th 131, 135 [discussing ordinance that defined “rent” as “`the total consideration charged to a Transient'”].) The same conclusion is supported by the common, dictionary definition of the terms: The rental of a property is “a usually fixed periodical return made by a tenant or occupant of property to the owner for the possession and use thereof.” (https://www.merriam-webster.com/dictionary/rent, italics added.) A STR is a “rental” under section 4740, even if it could be described as a “license” as well.

Montage next argues that Brown is effectively running a hotel out of her property. Montage thus contends Brown’s use of her property for STRs violates regulations in the governing documents added in 2018 that allow her to use her property for “residential” use only and prohibit her from using it for “business or commercial activities.” This argument is curious in that a lease exceeding 30 days also is a “business or commercial” activity in the sense that Montage is construing that phrase, particularly when that lease is for profit. Because the association does not purport to ban renting or leasing in general, the prohibition on business or commercial activity must refer to operating a business at the property, not renting or leasing the property itself. Indeed, the governing documents’ prohibition is for such activities “in” any residence or “on” any portion of the property. We cannot see how the prohibition on “business or commercial” activity can be read to prohibit short term rentals but not longer term ones. Regardless, as we explained above, section 4740 exempts Brown from any regulation, whatever its label, that restricts her rights to rent her property if the regulation did not exist at the time she acquired title to the property and she does not agree to the regulation. Montage’s prohibition on “business or commercial” activities, if interpreted the way Montage does as a prohibition on STRs, is another such regulation that would contravene section 4740.[3]

Montage nonetheless argues its STR prohibition is permissible due to “public policy considerations.” Montage observes that individual property owner’s rights must sometimes give way to the public interest and the right of CIDs to decide their rules and restrictions. We must give effect, however, to the public policy considerations that were given priority by the Legislature when it adopted section 4740. (See Palmer v. Agee (1978) 87 Cal.App.3d 377, 384 [statutory interpretation that “will promote legislative intent, purpose and policy will override a construction that would defeat it”].) Section 4740 was enacted to protect “the rights of CID owners to rent or lease their properties, as the rights existed at the time they acquired them.” (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 150 (2011-2012 Reg. Sess.) as amended Apr. 25, 2011.) (Italics added.) Its goal is to ensure that “the right of an owner to rent or lease his or her separate interest [in a CID] shall be the same as when the owner purchased his or her separate interest throughout the life of ownership.” (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 150 (2011-2012 Reg. Sess.) as amended June 9, 2011.) Our task is to ensure that goal is met. (Palmer v. Agee, supra, at p. 384; Bernard v. City of Oakland (2012) 202 Cal.App.4th 1553, 1560-1561.)

Finally, we note that the Legislature enacted Civil Code section 4741 while this appeal was pending. That statute provides, among other things, that a CID may “adopt[] and enforce[] a provision in a governing document that prohibits transient or short-term rental of a separate property interest for a period of 30 days or less.” (Civ. Code, § 4741, subd. (c).) But Civil Code section 4741 also provides that, “[i]n accordance with [s]ection 4740, [Civil Code section 4741] does not change the right of an owner of a separate interest who acquired title to their separate interest before the effective date of this section to rent or lease their property.” (Civ. Code, § 4741, subd. (h).) Even recently, the Legislature sought to protect the short-term rental rights of CID property owners who took title to their properties before sections 4740 and 4741 went into effect, much like section 4740’s general protection for the rental rights of owners who took title before a change to rental prohibitions in governing documents, even though in section 4741 the Legislature permitted CIDs to regulate STRs going forward.

Because Montage’s prohibition on STRs did not exist when Brown acquired title to her property, she is exempt from the prohibition under section 4740. We therefore reverse the trial court’s orders granting Montage’s motion for summary judgment and denying Brown’s motion for summary adjudication.

III. DISPOSITION

The judgment granted to Montage is reversed. The trial court is directed to enter a new order denying Montage’s motion for summary judgment and granting Brown’s motion for summary adjudication. Brown is awarded costs on appeal.

MILLER, Acting P. J. and MENETREZ, J., concurs.

[1] The Davis-Sterling Act defines a common interest development as including a community apartment project, a condominium project, a planned development, or a stock cooperative. (Civ. Code, § 4100.) Any of these is managed by an association that is called either an owner’s association or a community association. (Civ. Code, § 4800.) An association’s governing document is called a “Declaration” (Civ. Code, § 4250), or more fully a “Declaration of Covenants, Conditions and Restrictions,” which is commonly called the association’s “CC&Rs.” (See generally Nahrstedt v. Lakeside Village Condominium Association (1994) 8 Cal.4th 361, 369.)

[2] Montage’s one-line argument on the issue made in its summary judgment reply brief without any supporting authority or analysis is insufficient to preserve the argument on appeal. (See Bently Reserve LP v. Papaliolios (2013) 218 Cal.App.4th 418, 437.)

[3] We do not address whether Montage and other CIDs can enforce a new generally applicable prohibition on operating a business at the property, even if that new rule burdens renters. That issue is not presented here however because Brown uses her property only for STRs.

Enforcement of Short-term Rental Bans: Brown v. Montage at Mission Hills

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By Jillian M. Wright, Esq.

Enforcement of short-term rental bans for common interest developments (“CID”) just got more complicated thanks to a recent California Court of Appeals decision.

In the recent case of Brown v. Montage at Mission Hills (Aug. 20, 2021, Nos. E074341, E075762) ___Cal.App.5th___ [2021 Cal. App. LEXIS 694].), the California Court of Appeal, Fourth District found that a CID cannot require a rental to be for a minimum term for homeowners who owned prior to the CID adopting that requirement pursuant to Civil Code section 4740. In this case, Brown purchased a unit for the express purpose of renting it out as a short-term rental. Montage at Mission Hills later adopted a 30-day minimum rental period. Brown sued on the basis that she was exempt from that requirement because Civil Code section 4740 provides that homeowners are not subject to governing document provisions that “prohibit[ ] the rental or leasing of any of the separate interests … unless that governing document, or amendment thereto, was effective prior to the date the owner acquired title to their separate interest.”

The appellate court sided with Brown and found that minimum rental terms are rental prohibitions and not rental restrictions. Therefore, a short-term rental ban would not apply to homeowners who purchased prior to the ban’s adoption. The appellate court noted that “[t]he legislative history indicates that the Legislature’s intention was to ensure that owners maintained all rental and leasing rights they had at the time of purchase.”

What does this mean for your association?

If you have a minimum rental term in your governing documents it may not be enforceable against all homeowners, depending on the language of the provision and when it was adopted. If you have questions about the enforceability of your association’s minimum rental term, please contact us or your association’s legal counsel for further guidance.

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.

Summary by Dea C. Franck, Esq.:

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.

Summary by Dea C. Franck, Esq.:

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 was 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.

Summary by Dea C. Franck, Esq.:

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.”

 

Highland Greens Homeowners Assn. v. de Guillen (In re de Guillen)

Highland Greens Homeowners Assn. v. de Guillen (In re de Guillen)

Summary by Dea C. Franck, Esq.:

Community association assessment liens only secure the amounts actually itemized on the lien. Under this Federal Bankruptcy Court decision, liens may no longer secure charges which accrue after the lien is recorded. Liens are limited to their face value for bankruptcy purposes and possibly for other foreclosure matters.

***End Summary***

(Bankr.9th Cir. Aug. 26, 2019, Nos. CC-18-1248-LSTa, CC-18-1242-LSTa), 2019 Bankr. LEXIS 2734.

INTRODUCTION

Highland Greens Homeowners Association (“Highland Greens”) appeals the bankruptcy court’s order sustaining in part Debtor Maria Basave de Guillen’s objection to Highland Greens’ proof of claim. The bankruptcy court found that, under California law, Highland Greens’ recorded notice of lien for delinquent homeowners assessments on Debtor’s condominium did not secure amounts accruing after the recordation of the lien. Accordingly, the bankruptcy court limited Highland Greens’ secured claim to the amount of its recorded pre-petition state court judgment, classifying the remainder of the claim as unsecured.

We AFFIRM.

FACTUAL BACKGROUND

Pre-petition, Debtor fell behind on the homeowners association (“HOA”) dues on her condominium in Buena Park, California (the “Property”). As a consequence, Highland Greens recorded a Notice of

Delinquent Assessment Lien (the “Notice”) against the Property on December 1, 2008.1 Highland Greens recorded an amendment to the Notice in April 2011 (the “2011 Amendment”). Both the Notice and the 2011 Amendment purported to include, in the amount subject to the lien, unpaid assessments and charges accruing after the date of the notice.

In August 2011, Highland Greens sued Debtor in state court to enforce its lien and, in April 2012, obtained a default judgment for foreclosure and a money judgment of $21,398.02 (consisting of $10,140 principal, attorney’s fees of $10,273.12, and collection costs of $2,885, minus a $1,900.10 payment). The money judgment was subsequently recorded, and Highland Greens began the foreclosure process, but no sale was ever conducted.

Debtor filed a chapter 132 case on February 28, 2018.3 On Schedule D, she listed two debts to Highland Greens secured by the Property, one for $8,000, described as “interest on claim,” and another for $40,000, described as “assessments and attorney’s fees.” Her proposed plan provided for payment of both claims in full, with interest at ten percent on the $40,000 claim.

Highland Greens then filed a proof of claim for $64,137.20, purportedly secured by the Property, with interest at twelve percent. The itemization attached to the proof of claim indicated that it consisted of:

(1) the April 2012 money judgment of $21,398.02; (2) $8,572.63 in interest on the judgment; (3) post-judgment assessments through February 1, 2018 of

$14,060; (4) late charges of $690; (5) post-judgment interest of $7,207.44;

(6) post-judgment attorney’s fees and costs of $13,729.11; less (7) a payment credit of $1,520. The attachment to the proof of claim explained that the post-judgment assessments were secured by the Property pursuant to the Declaration of Covenants, Conditions and Restrictions (“CC&Rs”) recorded in 1964 against the Property. Highland Greens also asserted that it was entitled to twelve percent interest on any delinquent amounts pursuant to California Civil Code § 5650(b)(3).

Highland Greens attached eight pages of the CC&Rs to its proof of claim. The relevant provision (paragraph 12(b)) provides, among other things, that if a delinquency in assessments is not paid within ten days after delivery of a notice of default, the Board of Governors may file a claim of lien; the provision then lists the information that must be included in such claim of lien. The paragraph continues, “[u]pon recordation of a duly executed original or duly executed copy of such claim of lien by the Recorder of the County of Orange the lien claimed therein shall immediately attach and become effective, subject only to the limitations hereinafter set forth. Each default shall constitute a separate basis for a claim of lien or a lien.”

Debtor filed an objection to Highland Greens’ claim. She argued: (1) the claim should be disallowed in its entirety for lack of supporting documentation; (2) most of the claim should be reclassified as unsecured because Highland Greens did not comply with the procedures set forth in the Davis-Stirling Common Interest Development Act (“Davis-Stirling Act” or the “Act”), specifically, California Civil Code §§ 5660 and 5676, and there was no basis to find an equitable lien; (3) only the portion of the debt representing the amount owing under the judgment may be classified as secured; (4) the attorney’s fee portion of the claim should be disallowed as unreasonable and unsupported; and (5) the claim should not include future assessments because Debtor was current postpetition on those obligations.

Highland Greens filed an opposition in which it asserted: (1) the Notice recorded in 2008 complied with all procedural requirements and in any event had been adjudicated valid by the state court in the foreclosure lawsuit; (2) Debtor was barred by issue preclusion from challenging the validity of the lien; (3) Highland Greens was entitled under California Civil Code § 5650(b)(3) to twelve percent interest on the post-judgment assessments and related fees and costs; (4) Highland Greens was entitled to submit cost bills for its judgment enforcement activities, which increased the judgment amount; and (5) the assessment lien was a “continuing lien”; thus, assessments that became delinquent after the recordation of the lien were appropriately included in the amount secured by the lien, citing Bear Creek Master Ass’n v. Edwards, 130 Cal. App. 4th 1470, 1489 (2005).

Debtor filed a reply in which she argued that the Davis-Stirling Act prohibited Highland Greens from asserting a continuing lien. She contended that Bear Creek was not binding on the bankruptcy court and that federal courts in California had held to the contrary, citing In re Warren, No. 15-CV-03655-YGR, 2016 WL 1460844 (N.D. Cal. Apr. 13, 2016), and In re Guajardo, No. 15-31452 DM, 2016 WL 943613 (Bankr. N.D. Cal. Mar. 11, 2016).

At the initial hearing on Debtor’s objection, counsel for Highland Greens stated that the HOA was relying on the assessment lien rather than the judgment lien as the basis for its security interest. The bankruptcy court requested further detail as to how the different components of the claim amount were calculated and continued the matter for further briefing, which the parties submitted.

At the final hearing on the claim objection, the bankruptcy court did not rule on the reasonableness of the attorney’s fees or any of the other arguments raised by Debtor. But it ruled that under applicable law there was no continuing lien based on the Notice. As such, the only basis for Highland Greens’ security interest was its judgment lien.4 Accordingly, the court sustained Debtor’s objection in part, allowing Highland Greens’ claim in full but reclassifying it as $29,970.65 secured (principal of $21,398.02 plus pre-petition interest of $8,572.63) and the $34,166.55 balance as unsecured. Shortly thereafter, the court entered its order on the Debtor’s claim objection, and Highland Greens timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.

ISSUE

Did the bankruptcy court err in sustaining in part Debtor’s objection to Highland Greens’ claim?

STANDARD OF REVIEW

This appeal involves issues of statutory and contract interpretation, which we review de novo. See Veal v. Am. Home Mortg. Serv., Inc. (In re Veal), 450 B.R. 897, 918 (9th Cir. BAP 2011) (citations omitted) (an order sustaining or overruling a claim objection “can raise legal issues (such as the proper construction of statutes and rules) which we review de novo. . . .”); Renwick v. Bennett (In re Bennett), 298 F.3d 1059, 1064 (9th Cir. 2002) (“Under California law, the interpretation of a contract is a question of law which the court reviews de novo.”).

DISCUSSION

This appeal requires us to determine whether, under California law, Highland Greens’ assessment lien was a continuing lien on the Property such that it secured amounts that became delinquent after Highland Greens recorded its Notice. This is a question of first impression for this Panel, and it presents some challenges. First, the statute in question does not expressly address the issue of an HOA’s right to a continuing lien.

Second, the statute references the governing documents (the CC&Rs), which may or may not create a contractual basis for a continuing lien. Third, California Courts of Appeal have differed significantly in their assessment of the policy to be enhanced by the Davis-Stirling Act, i.e., is the purpose of the Act to facilitate the expeditious collection of HOA assessments or to safeguard the notice rights of homeowners?

These variables and complexities notwithstanding, we do not write on a blank judicial slate: as discussed below, two federal courts have opined that the Davis-Stirling Act does not provide for the continuing lien that Highland Greens seeks. Highland Greens relies principally on Bear Creek, an older California Court of Appeal decision to the contrary. But that decision, as discussed below, did not address the matter of continuing liens as the primary issue on appeal nor did it consider the Act’s notice provisions. The court of appeal instead focused on what it plausibly believed to be the policy underlying the Act–to facilitate HOAs’ collection of delinquent assessments. But its view is not supported by the legislative history or other California cases. The decision’s rationale was, at least indirectly, called into question by a more recent California Court of Appeal decision, Diamond v. Superior Court, 217 Cal. App. 4th 1172, as modified on denial of reh’g (July 12, 2013), confirming that the most fundamental and important purpose of the statute is to protect homeowners (not associations), and that the statutory requirements for precision in the notice of lien provided to homeowners must override any goals of expedition or convenience to associations.

As discussed below, we conclude that there are two independent bases on which to affirm the bankruptcy court’s order sustaining Debtor’s objection in part. First, the language of the Notice and 2011 Amendment conflicts with the applicable CC&Rs, which do not authorize a continuing lien. Second, the Davis-Stirling Act does not authorize a continuing lien. In reaching this latter conclusion, we agree with the reasoning of the other federal courts to consider this issue that a continuing lien is inconsistent with the Act’s notice provisions and the expressed legislative purpose of the Act.

A. The Davis-Stirling Act

We begin, as we must, with the language of the relevant statutes. See United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989); Lee v. Hanley, 61 Cal. 4th 1225, 1232-33 (2015). The Davis-Stirling Act, enacted in 1985, authorizes condominium homeowners associations to levy assessments.

Subject to certain limitations, a homeowners association “shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this act.” Cal. Civ. Code § 5600.6 The Act also sets forth procedures for collecting delinquent assessments:

(a) A regular or special assessment and any late charges, reasonable fees and costs of collection, reasonable attorney’s fees, if any, and interest, if any, as determined in accordance with subdivision (b), shall be a debt of the owner of the separate interest at the time the assessment or other sums are levied.

(b) Regular and special assessments levied pursuant to the governing documents are delinquent 15 days after they become due, unless the declaration provides a longer time period, in which case the longer time period shall

Cal. Civ. Code § 5650. In addition, it authorizes HOAs to recover reasonable collection costs, including attorney’s fees, late charges, and interest not to exceed twelve percent. Id. at § 5650(b)(1)-(3).

California Civil Code § 5675 provides for the placing of a lien on the owner’s interest in the condominium to secure delinquent assessments:

(a) The amount of the assessment, plus any costs of collection, late charges, and interest assessed in accordance with subdivision (b) of Section 5650, shall be a lien on the owner’s separate interest in the common interest development from and after the time the association causes to be recorded with the county recorder of the county in which the separate interest is located, a notice of delinquent assessment, which shall state the amount of the assessment and other sums imposed in accordance with subdivision (b) of Section 5650, a legal description of the owner’s separate interest in the common interest development against which the assessment and other sums are levied, and the name of the record owner of the separate interest in the common interest development against which the lien is imposed.

Cal. Civ. Code § 5675. This section further requires that the notice of delinquent assessment must be signed by a designated person and include an itemized statement of charges; it also requires a copy of the notice to be mailed by certified mail to the record owner(s). Cal. Civ. Code § 5675(b)-(e). These notice requirements are to be strictly construed. Diamond, 217 Cal.

App. 4th at 1189.

In applying these statutes, we are guided by (1) the plain language of the Davis-Stirling Act as interpreted by California federal and state courts; (2) the public policy behind the Act; and (3) principles of statutory construction. And, given that the Act references the “governing documents,” we also consider the terms of the applicable CC&Rs.

B. California Federal Cases Interpreting the Davis-Stirling Act

The Davis-Stirling Act itself does not provide for a continuing lien, and case law is scant regarding whether the Act may be fairly interpreted as so providing. Two federal courts in the Northern District of California have held that adding future assessments to a recorded lien securing delinquent assessments without recording a new lien is impermissible under the Davis-Stirling Act. In re Warren, 2016 WL 1460844; In re Guajardo, 2016 WL 943613.

In Guajardo, the bankruptcy court was tasked with determining the priorities between an HOA’s assessment lien and a federal tax lien for purposes of distributing the proceeds of a sale of property of the estate. The notice of delinquent assessment at issue in that case provided, “Additional monies shall accrue under this claim at the rate of the claimant’s regular monthly or special assessments, plus permissible late charges, costs of collection and interest, accruing subsequent to the date of this notice.” 2016 WL 943613, at *1. The court held that this language was ineffective under both California contract law and the Davis-Stirling Act, for two reasons.

First, the CC&Rs at issue in that case provided that each “lienable default shall constitute a separate basis for a lien.” Id. at *3. The court found that the language of the notice that provided for the lien to include subsequent assessments and related charges was inconsistent with this provision. Id. at *3.7

Second, and importantly, the court interpreted the language of California Civil Code § 5675 as limiting an assessment lien to the amount stated in the notice of delinquent assessment. Specifically, the statute provides that the amount of the assessment (plus costs, late charges, and interest) shall be a lien on the owner’s separate interest. The statute further requires that the notice state the amount of the delinquent assessment and other sums. As such, the court found that adding future assessments to an existing lien would be “inconsistent with the portions of the Davis-Stirling Act requiring the unpaid amounts to be specifically set forth in the notice and in an attached accounting.” Id. at *3.

The bankruptcy court distinguished Bear Creek. As discussed below, in that case, the California Court of Appeal held that homeowners assessments that became due after the recordation of a lien notice were properly included in a judgment for lien foreclosure and breach of contract, based on the applicable CC&Rs and the provisions of the Davis-Stirling Act that, in turn, referenced the HOA’s governing documents. The Guajardo court noted that the CC&Rs in Bear Creek were much more specific as to future accruals than those at issue in the case before it, but the court also held that “the general imposition of a ‘present’ lien at the time of and by operation of the CCRs with respect to all future and potentially unknown assessments does not satisfy the notice and lien provisions of the Civil Code.” Id.

In Warren, the district court affirmed the bankruptcy court’s order sustaining a debtor’s objection to the secured claim of an HOA on grounds that the HOA’s lien was limited to the amounts stated in its notice of lien assessment. 2016 WL 1460844 at *1. As in Guajardo, the lien notice in that case contained language that purported to constitute a prospective charge for future assessments and related costs. And like the bankruptcy court in Guajardo, the district court held that this language was impermissible under the Davis-Stirling Act. The court noted that the procedural notice requirements of the Davis-Stirling Act are to be strictly construed, citing Diamond, 217 Cal. App. 4th at 1191, and found that “[t]he Davis-Stirling Act limits the lien to the amount specified in the notice…… ” Id. at *3-*4. The

court went on: “Claimant should have filed additional liens to secure its interest in future unpaid assessments. To hold otherwise would offend the comprehensive notice scheme and homeowners’ rights to contest delinquent assessments as established in the Davis-Stirling Act.” Id. at *4.

C. California State Cases Interpreting the Davis-Stirling Act

In Bear Creek, the California Fourth District Court of Appeal affirmed a judgment for lien foreclosure and breach of contract based on a condominium owner’s failure to pay assessments. 130 Cal. App. 4th at 1472. The primary issue before the court of appeal was whether an HOA may charge an owner assessments for lots on which condominium units were planned but had not yet been built. Id. In affirming the trial court’s foreclosure judgment, the court of appeal held that the definition of “condominium” in the Davis-Stirling Act included unbuilt lots in a qualifying condominium plan. Id. at 1481-82. The court of appeal also affirmed the trial court’s finding that the HOA had properly served lien notices on the owner. Id. at 1488. Finally, the court of appeal considered the appellant’s argument that the trial court had improperly determined the amount of the lien assessments because it included amounts that came due after the recordation of the lien notice; it found that those amounts were properly included. Id. at 1489.

The court of appeal rejected the owner’s argument that no “recurring liens” were authorized under the relevant statutes such that the amount of the assessments secured by the lien was limited to the amount initially stated in the lien notice. The court noted that former California Civil Code § 1367 (recodified at § 5675), in describing the amounts to be secured by the lien, referenced former California Civil Code § 1366 (recodified at § 5600), which in turn referenced the homeowners association’s “governing documents.” Id. at 1488.

Specifically, California Civil Code § 1367(b) provided: “[t]he amount of the assessment, plus any costs of collection, late charges, and interest assessed in accordance with Section 1366, shall be a lien on the owner’s interest in the common interest development from and after the time the association causes to be recorded with the county recorder of the county in which the separate interest is located, a notice of delinquent assessment. . .” Id. at 1488. The cross-referenced statute, former California Civil Code § 1366, provided, in relevant part: “the association shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this title.”

The court next looked to the governing documents, specifically, the CC&R’s. The CC&Rs provided that “any demand or claim of lien or lien on account of prior delinquencies shall be deemed to include subsequent delinquencies and amounts due on account thereof.” Id. Further, the recorded lien notices provided that “[a]dditional monies shall accrue under this claim at the rate of the claimants’ regular monthly or special assessments, plus permissible late charges, costs of collection and interest, accruing subsequent to the date of this notice.” Id. Based on this language, the court of appeal held that “all of the sums included on the liens and lien notices are authorized by the CC & R’s and statutory law. The amounts here determined by the court to be owing as liens are no more than the amounts authorized by the governing documents and statutes.” Id.

The court of appeal opined that its holding was consistent with the legislative purpose of providing homeowners associations a quick and efficient means of seeking relief against a nonpaying owner:

Were the relevant provisions to be construed as [the owner] suggests, the described statutory purpose of providing for a quick and efficient means of enforcing the CC & R’s would be seriously undermined; each month, or at such other intervals as the assessments are charged under a given set of CC & R’s, the association would be required to record successive liens. A successive recordation requirement would impose a heavy— and needless—burden upon homeowners’ associations, fraught with risk to the association, and undue windfall to the delinquent homeowner, should any installment be overlooked. We are unwilling to construe Civil Code section 1367 to require such an oppressive burden. Both delinquent homeowners and the public at large are placed on notice, with the recordation of the initial assessment lien, that subsequent regularly and specially levied assessments, if they continue unpaid, will accrue in due course. The purpose of the lien notice and recordation will have been served, and the association’s remedy justly preserved, by the initial recordation of lien.

Id. at 1489.

Two years after the decision in Bear Creek, the California Sixth District Court of Appeal held that the notice provisions of the Davis-Stirling Act are to be strictly construed. Diamond, 217 Cal. App. 4th at 1189. The issue in Diamond was whether “substantial compliance” with the pre-lien and pre- foreclosure notice requirements of the Davis-Stirling Act was sufficient to permit an HOA to proceed with foreclosure. The court of appeal held that it was not. In its opinion, the court of appeal examined the legislative history of the Act and concluded that it was intended to “protect the interest of a homeowner who has failed to timely pay an assessment levied by a homeowners association.” Id. at 1190-91. As such, the notice requirements were intended to be mandatory. Id.

The court of appeal noted that its conclusion was supported by California Supreme Court precedent, including Li v. Yellow Cab Co., 13 Cal. 3d 804, 815 (1975) (“If a provision of the [Civil] [C]ode is plain and unambiguous, it is the duty of the court to enforce it as it is written.”); Chase v. Putnam, 117 Cal. 364, 367–368 (1897) (“a lien which is the creature of statute can be enforced only in the manner prescribed by the statute.”). Diamond, 217 Cal. App. 4th at 1192-93.

D. Bear Creek does not control the outcome of this appeal.

Highland Greens argues that we must follow Bear Creek because there are no other California state court decisions on point. It points out that in the absence of a state supreme court decision on the issue, a federal court is obligated to follow a decision of an intermediate court of appeal unless there is convincing evidence that the highest court of the state would decide differently. Sec. Pac. Nat’l Bank v. Kirkland (In re Kirkland), 915 F.2d 1236, 1238-39 (9th Cir. 1990) (citing American Triticale, Inc. v. Nytco Services, Inc., 664 F.2d 1136, 1143 (9th Cir. 1981); Stoner v. New York Life Ins. Co., 311 U.S. 464, 467 (1940)).

In predicting how the state’s highest court would decide the issue, we look to “intermediate appellate court decisions, decisions from other jurisdictions, statutes, treatises, and restatements as guidance.” In re Kirkland, 915 F.2d at 1239 (citations omitted). Bear Creek appears to be the only California intermediate appellate decision addressing the propriety of continuing liens under the Davis Stirling Act. Nevertheless, for the reasons discussed below, we conclude that Bear Creek is factually distinguishable and that the California Supreme Court would not likely decide the issue in accord with Bear Creek.

In determining that delinquent HOA assessments which came due after the recordation of the lien notices were properly included in the amount secured by the lien, the court of appeal in Bear Creek relied primarily on the language of the CC&Rs and the lien notices, all of which provided that any lien for delinquent HOA assessments would be deemed to include subsequent delinquencies. Because certain provisions of the Act referred to the HOA’s governing documents, and those documents provided for a continuing lien, the Bear Creek court concluded that the continuing lien was consistent with the Act.

Here, however, the CC&Rs do not provide for a continuing lien; as such, Bear Creek is factually distinguishable in a critical respect, and we may ignore it. Further and importantly, relevant to our anticipation of the California Supreme Court’s eventual view, the Bear Creek court of appeal did not take into account the Act’s notice provisions as they pertained to the issue of a continuing lien and failed to consider that, although one purpose of the Act may be to facilitate an HOA’s collection of delinquent assessments, see Bear Creek, 130 Cal. App. 4th at at 1489,9 the cases citing directly to legislative history emphasize that the purpose of the Davis- Stirling Act is to protect homeowners. See Diamond, 217 Cal. App. 4th at 1190 (“This bill goes to the heart of home owner rights, touching upon the key issue of when, if ever, a homeowners’ association should have the right to force the sale of a member’s home when the home owner falls behind on paying overdue assessments or dues.”) (quoting Assem. Com. on Judiciary, Analysis of Sen. Bill No. 137 (2005–2006 Reg. Sess.) as amended Apr. 5, 2005, pp. 1–2); Huntington Continental Townhouse Ass’n, Inc. v. Miner, 230 Cal. App. 4th 590, 603-04 (2014) (same).

Although Diamond did not involve the identical issue raised here, the opinion’s thorough analysis of the legislative history and citations to precedent all supported its determination that the requirements of the Davis-Stirling Act must be strictly construed, and support the conclusion that the California Supreme Court would not follow Bear Creek. This conclusion is bolstered by the analysis in Guajardo and Warren. As noted by the District Court for the Northern District of California:

The Davis-Stirling Act reflects the legislature’s intent to impose and rigorously enforce its procedural requirements to protect the interest of the homeowner. See Diamond v. Superior Court, 217 Cal. App. 4th 1172, 1191 (2013) (the procedural notice requirements prescribed in the Davis-Stirling Act must be “strictly construed” such that “substantial compliance is insufficient”). Accordingly, the Court finds that the language of the 2008 Lien purporting to secure future assessments is not permissible under the Davis-Stirling Act.

In re Warren, 2016 WL 1460844, at *4.

Applying these principles to the matter before us, we conclude that here, the Notice and 2011 Amendment, which purported to secure future assessments, were (1) inconsistent with the applicable CC&Rs; and (2) impermissible under the Davis-Stirling Act, which limits the lien to the amount specified in the notice, see Cal. Civ. Code § 5675(a); in turn, the notice must include an itemized statement showing the delinquent assessments (and related fees and costs) owing at the time of the notice. See Cal. Civ. Code § 5660(b); See also In re Guajardo, 2016 WL 943613, at *2-*3.

E. Highland Greens’ arguments in support of its interpretation of the Davis Stirling Act are inconsistent with established principles of statutory construction.

In the absence of evidence of contrary legislative intent, courts are to follow the principle of statutory construction, expressio unius est exclusio alterius, or “the expression of one thing in a statute ordinarily implies the exclusion of other things.” In re J.W., 29 Cal. 4th 200, 209 (2002). See also People v. Guzman, 35 Cal. 4th 577, 587 (2005) (“[I]nsert[ing] additional language into a statute violate[s] the cardinal rule of statutory construction that courts must not add provisions to statutes.”)(second and third alterations in original)(quoting Sec. Pac. Nat’l Bank v. Wozab, 51 Cal. 3d 991, 998 (1990)); Cal. Civ. Proc. Code § 1858 (“In the construction of a statute or instrument, the office of the Judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, or to omit what has been inserted; and where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all.”).

Highland Greens argues that certain provisions of the Davis-Stirling Act support its contention that a continuing lien is permitted under that Act. First, it notes that California Civil Code § 5650 permits collection costs to be added to the amount secured by the lien, when those costs are generally incurred after the lien is recorded.10 But this provision does not support Highland Greens’ position. To the contrary, the legislature’s omission of subsequent delinquent assessments from the list of charges authorized strongly indicates that it did not intend those amounts to be added.

Despite the above argument, Highland Greens also contends that, if we affirm the bankruptcy court’s ruling, it would mean that a delinquent owner would be able to stop a foreclosure sale by paying only the face amount of the lien without paying the costs of enforcing the lien, apparently assuming an HOA would need to record separate liens to secure collection costs. But, as Highland Greens points out, the statute explicitly provides that the lien may include collection costs.

Second, Highland Greens cites California Civil Code § 5720(b)(2), which permits an HOA to record a lien for less than $1,800 but requires the HOA to wait to foreclose until the amount of delinquent assessments exceeds that amount (or the assessments secured by the lien become more than twelve months delinquent).Highland Greens argues that, because this provision apparently allows for the addition of subsequent delinquent assessments to the lien amount, any lien may include such assessments without requiring a new notice. But the fact that this provision applies only to liens securing amounts less than $1,800 supports the conclusion that it excludes liens securing higher amounts. In other words, the provision may fairly be interpreted as an exception to the general rule prohibiting addition of delinquencies without specific notice. Additionally, this provision, as written, promotes the purpose of protecting “owners’ equity in their homes when they fail to pay relatively small assessments to their common interest development associations.” Diamond, 217 Cal. App. 4th at 1190 (quoting Sen. Com. on Judiciary, Analysis of Sen. Bill No. 137 (2005–2006 Reg. Sess.) Mar. 29, 2005, p. 1.). As stated by the district court in Warren:

Section 5720(b)(2) simply provides an association with the option to wait to record the lien until delinquent assessments exceed $1,800. Alternatively, the association may record the lien and wait a year to foreclose thereon………………….. Section 5720(b)(2) does not allow an association to bypass the notice and recording requirements in Sections 5660, 5670, and [5675] merely because the initial lien secures an amount below the $1,800 threshold to initiate foreclosure proceedings.

In re Warren, 2016 WL 1460844, at *4 (footnote omitted).

F. Highland Greens’ policy arguments are contradicted by the California Court of Appeal’s holding in Diamond.

Finally, Highland Greens, (joined by amicus curiae Community Associations Institute), urges us to follow Bear Creek and reverse the bankruptcy court because to do otherwise would negatively impact all California HOAs and their members. Highland Greens contends that HOAs would have to record liens for delinquent assessments on a monthly basis to secure all amounts owed, and that doing so would result in higher collection costs that would then be passed on to the delinquent owner.

This argument is certainly consistent with the court of appeal’s comments in Bear Creek, 130 Cal. App. 4th at 1489. But it ignores the fact that the Davis-Stirling Act “reflects the legislature’s intent to impose and rigorously enforce its procedural requirements to protect the interest of the homeowner.” In re Warren, 2016 WL 1460844, at *4 (citing Diamond, 217 Cal. App. 4th at 1191). While we acknowledge that requiring HOAs to file “successive liens” imposes a burden, that is an issue for the legislature to address.

CONCLUSION

Because we find no error in the bankruptcy court’s interpretation of California law, we AFFIRM.

Eisen v. Tavangarian

GLENN EISEN et al., Plaintiffs and Appellants, v. ARDESHIR TAVANGARIAN et al., Defendants and Appellants.

Summary by Dea C. Franck, Esq.:

Under California law, a landowner does not have a right to an unobstructed view. CC&Rs can create such a right, but such CC&R provisions should be strictly interpreted in order to favor the free use of land.

***End Summary***

No. B278271.
Court of Appeals of California, Second District, Division Seven.

Filed June 20, 2019.
APPEAL from a judgment of the Superior Court of Los Angeles County, Super. Ct. No. SC121338, Craig D. Karlan, Judge. Reversed and remanded with directions.

Rosario Perry Law Corp., Rosario Perry, Hiroko Ushimaru; Law Offices of Richard B. Miller and Ricahrd B. Miller for Plaintiffs and Appellants Glenn Eisen and Alison Eisen.

Judith A. Gelfand for Marquez Knolls Homeowners Judith A. Gelfand, Wayne Marcus, Bernard Hathaway, William R. Fado, H. Peter Grassl, Kathleen A. Kerrigan, Silgia Grassl, Emil Kadrnka, Simon T. Halff, Brian Faris, Peter J. Zomber, Sabrina Diaz and Renate Hecht as Amici Curiae on behalf of Plaintiffs and Appellants Glenn Eisen and Alison Eisen.

Horvitz & Levy, Barry R. Levy, John A. Taylor, Jr., Andrea M. Gauthier; Afifi Law Group and Faryan Andrew Afifi for Defendants and Appellants Ardeshir Tavangarian, Tania Tavangarian and 619 Properties, LLC.

CERTIFIED FOR PUBLICATION

PERLUSS, P. J.

Following a bench trial the court entered judgment and granted an injunction in favor of Glenn Eisen and Alison Eisen, finding that Ardeshir Tavangarian, Tania Tavangarian and 619 Properties, LLC had violated the view protection provisions of paragraphs 1 and 11 of the covenants, conditions and restrictions (CC&R’s) applicable to the parties’ neighboring properties in the Marquez Knolls section of the Pacific Palisades. The court ordered removal of certain alterations and improvements made by the Tavangarians to their home, now owned by 619 Properties, and awarded the Eisens $39,000 in “interim damages” for their loss of view.

On appeal the Tavangarians and 619 Properties argue neither paragraph 1 nor paragraph 11 of the CC&R’s restricts alterations to an existing residence; the Eisens waived or are estopped from seeking relief with respect to several claims in their lawsuit; injunctive relief was improperly awarded in view of the adequacy of the Eisens’ legal remedy and the balance of equities; and the court erred in excluding relevant evidence and denying a request for leave to amend their answer. In a limited cross-appeal the Eisens contend the trial court erred in ruling paragraph 1 of the CC&R’s prohibits only alterations of a residence’s second story that detract from a neighbor’s view and not all expansions of the contour or silhouette of a previously approved second story.

We reverse the judgment with directions.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Parties
The Eisens purchased the real property located at 1145 Lachman Lane in the Marquez Knolls area of Pacific Palisades in August 2009. The Tavangarians, as trustees of the Tavangarian Revocable Trust dated 2002, purchased the real property at 1134 Lachman Lane in October 2012 for the purpose of remodel and resale.[1] The Tavangarians never lived at 1134 Lachman Lane and sold the property to 619 Properties in April 2014 during the pendency of this litigation.

Lachman Lane generally runs north-south. The Tavangarian property is across the street, to the southeast of the Eisen property. Both homes have ocean views to the south. However, based on two site inspections, the trial court found the Eisens’ primary view is out their east-facing windows across Lachman Lane and over the roof of the Tavangarians’ home.

2. The CC&R’s Governing Lots in Marquez Knolls Tract 20305
Homes in the Marquez Knolls area were originally constructed as 2,200-to-2,500-square-foot tract houses with common architectural and design features. The Eisen and Tavangarian properties are located in tract 20305 and are subject to CC&R’s recorded for that tract on May 4, 1962. Four of the CC&R’s—paragraphs 1, 2, 3 and 11—are particularly significant to the case at bar.

Paragraph 1 of the CC&R’s provides:

“All said lots shall be known and described as residential lots, no structure shall be erected, altered, placed or permitted to remain on any building plot other than one detached single-family dwelling not to exceed one story in height and a private garage, for not more than three cars; except; where, in the judgement [sic] of the Declarant [(Marquez Knolls Inc.)[2]] and approved by the Architectural Committee, one two story single-family dwelling may be erected where said dwelling will not detract from the view of any other lot.”
Paragraph 2 provides in part:

“No building shall be erected, placed or altered on any building plot in this subdivision until the building plans, specifications, and plot plan showing the location of such building have been approved in writing as to the conformity and harmony of exterior design with existing structures in the subdivision, and as to location of the building with respect to topography and finished ground elevation by an Architectural Committee . . . . In the event the said committee fails to approve or disapprove a design and location within thirty (30) days after said plans and specifications have been submitted to it, or in any event, if no suit to enjoin the erection of said such building or making of any alterations have [sic] been commenced prior to the completion thereof, such approval will not be required and this covenant will be deemed to have been fully complied with. . . . The power and duties of such committee shall cease on or after December 31, 1966. Thereafter, the power and duties described in this covenant shall pass to the Marquez Knolls Property Owner’s Association, Inc., a California corporation, who shall thereafter exercise the same powers previously exercised by said committee until December 31, 1980 at such time the powers and duties exercised by said Association shall cease and determine.”
Paragraph 3 provides:

“No building shall be located on any lot nearer than fifteen (15) feet to the front lot line. No building, except a detached garage or other outbuilding located sixty (60) feet from the front lot line, shall be located nearer than five (5) feet to any side line. No residence or attached appurtenance shall be erected on any lot nearer than fifteen (15) feet from the front lot line except where the county or city permits and with specific authority of the architectural committee.”
Paragraph 11 provides:

“No fences or hedges exceeding three feet in height shall be erected or permitted to remain between the street and the front set-back line nor shall any tree, shrub or other landscaping be planted or any structures erected that may at present or in the future obstruct the view from any other lot, and the right of entry is reserved by the Declarants to trim any tree obstructing the view of any lot.”
3. The Tavangarians’ Remodel of Their Home
When the Tavangarians purchased 1134 Lachman Lane, the house had an L-shaped design. The rectangular portion lying east-west had two stories and was located at the north end of, and perpendicular to, the one-story portion of the house that ran north-south at the western end of the east-west segment. The Eisens and the Tavangarians agree the architectural committee had approved the two-story residence at the time it was built, as required by paragraphs 1 and 2 of the CC&R’s.

Starting in approximately April 2013 Mr. Tavangarian began remodeling the residence. He replaced an old rooftop air-conditioning unit with new air-conditioning units, ducts, fences and related modifications on the first- and second-story roofs. The second story’s western wall was extended to the south by more than five feet (referred to as a “privacy wall”), and its south-facing wall was extended to the south by more than four feet. In addition, the original roof of the second story was extended by cantilevering it out to the south by eight feet, so that it was coextensive with the new privacy wall. Tavangarian also built a three-sided glass wall enclosure that extended a second-floor bathroom several feet to the south; and he extended the east-facing side of the second story by approximately two feet, from which he built a deck with a cantilevered roof covering it. Finally, existing hedges along the border of the property at Lachman Lane were removed and replaced. The new hedges were permitted to grow more than three feet above the ground.

By the end of September 2013 the project was nearing completion, and the air-conditioning equipment was in place.

4. The Eisens’ Lawsuit
The Eisens sued the Tavangarians on September 13, 2013, alleging the remodeling being done at the Tavangarians’ property violated paragraphs 1 and 11 of the CC&R’s, which the Eisens alleged “prohibit the erection of any `structures’ that would unreasonably obstruct or detract from” the view from their property. More precisely, the Eisens alleged paragraph 1 prohibits a property owner from making any alterations to an existing two-story structure and paragraph 11 prohibits a property owner from erecting a structure that unreasonably obstructs the view from any other lot. The complaint specifically identified the new “Multi-Ton Air Conditioner” and related ducting and equipment on the first- and second-story roofs and alleged the Eisens were concerned the Tavangarians “may be planning to construct other or additional structures, in addition to the air-conditioner and ducting that would obstruct their views in violation of the CC&Rs.” The Eisens’ complaint sought damages and injunctive relief, including an injunction preventing the Tavangarians from making any additions or alterations that raised or increased their house’s original roof height.

The Eisens filed a first amended complaint in February 2014 and a second amended complaint in June 2014, which added 1134 Lachman Lane’s new owner, 619 Properties, as a defendant. Neither amended version of the pleading specifically addressed the privacy wall, the cantilevered roof or the glass enclosure that was being constructed at the property. However, in a trial brief filed in August 2015 and subsequent papers filed by the Eisens during the bench trial, these items were raised as additional violations of paragraphs 1 and 11 of the CC&R’s.

5. Trial and the Trial Court’s Decision
The Eisens’ lawsuit was tried to the court in late 2015 and early 2016. In addition to oral and documentary evidence, the court made two site visits to the Eisens’ and Tavangarians’ properties in February 2016. The court filed its statement of decision on June 23, 2016.[3]

After finding that the tract 20305 CC&R’s were binding and sufficiently certain to allow specific performance and damages, the court explained that all parties had agreed for purposes of trial that this court’s decision in Zabrucky v. McAdams (2005) 129 Cal.App.4th 618 (Zabrucky) applied to the alterations to the one-story section of the home on the Tavangarians’ property. Zabrucky, examining the CC&R’s of a neighboring tract in Marquez Knolls that were essentially identical to the CC&R’s at issue here, held paragraph 11 applied not only to construction of a new, free-standing structure on the property but also to any alteration or remodeling of an existing dwelling (or, at least, to one-story residences) and, with respect to both categories, prohibited any structure that “may at present or in the future unreasonably obstruct the view from any other lot.” But, the trial court emphasized, the parties disagreed as to the applicable standard for modifications to the two-story section of the Tavangarians’ house.

Quoting from paragraph 1 of the CC&R’s, which permitted erection of a two-story residence if approved by Marquez Knolls Inc. and the architectural committee “where said dwelling will not detract from the view of any other lot,” the court identified four possible interpretations of the CC&R’s impact on two-story residences in light of the fact the architectural committee no longer existed and the delegation of its power to the property owners association had terminated as of December 31, 1980: (1) the exterior of a previously approved two-story residence cannot be altered; (2) a home can be rebuilt or its exterior remodeled, but any changes must conform exactly to the footprint of the previously approved structure; (3) a home can be rebuilt or its exterior remodeled only if the changes do not detract from the view of any other lot; and (4) a home can be rebuilt or its exterior remodeled if the changes do not unreasonably obstruct the view from any other lot (that is, applying the Zabrucky majority’s interpretation of paragraph 11 to both first- and second-story alterations). The court stated the Eisens urged adoption of interpretation 2 and the Tavangarians argued for interpretation 4; however, the Tavangarians proposed, if the court were to adopt interpretation 3, it added the word “unreasonably” in front of the word “detract” for the same reasons the Zabrucky majority had inserted the word “unreasonably” in paragraph 11.

The court adopted interpretation 3 without adding “unreasonably”: “[T]he Court finds as to the legal significance of Paragraph 1 that it only prohibits expansion of the Declarant and Architectural Committee’s approved envelope of the second story structure where said expansion would not detract from the view from any other lot.” The court explained that interpretation 2, advocated by the Eisens, while reasonable, would preclude any construction of a two-story home where a one-story residence currently existed, even if the construction or remodeling would not detract from the view from any other lot. The policy favoring free use of land weighed against that restrictive interpretation. To adopt interpretation 4, the court reasoned, would require it to find that paragraph 1 no longer applied to homes in tract 20305 in the absence of an architectural review committee. The court concluded the intent of the drafters of the CC&R’s was to provide greater view protection from two-story homes than from one-story residences, as evidenced by the use of “detract” in paragraph 1 but “obstruct” in paragraph 11; and it “sees no reason to grant less protection today with respect to views impacted by two story dwellings now that all lots have been built and the reviewing committee disbanded.” The court declined to include “unreasonably” in front of “detract” because that word was not in paragraph 1 as drafted “and to add it now would only create greater confusion in interpreting and applying this standard.”

Applying its interpretation of the CC&R’s to the questions whether the Tavangarians’ first-story improvements “unreasonably obstruct” the views from the Eisens’ property and whether the second-story improvements “detract” from the Eisens’ views, the court found most of the remodeling violated the CC&R’s. Specifically, the court found the privacy wall and the cantilevered roof on the south-facing side of the residence detracted from the Eisens’ view in violation of paragraph 1 and also unreasonably obstructed their view in violation of paragraph 11. Both were ordered removed. The court retained jurisdiction to address the removal or modification of the second-floor bathroom glass wall extension; it explained that extension might detract from the Eisens’ view once the privacy wall and cantilevered roof were removed, but the court was not yet able to make that determination.[4]

With respect to the air-conditioning ducts and related equipment, the court found the items on the first-story roof unreasonably obstructed the Eisens’ views and those on the second-story roof detracted from their views. They were ordered replaced with significantly less obtrusive equipment.

Finally, the court found the hedges planted by the Tavangarians violated paragraph 11 of the CC&R’s, rejecting the contention the Eisens had agreed to allow the hedges to grow to the roof line of the property or had waived their right to enforce the three-foot height limit on hedges in paragraph 11. The court also awarded $39,000 as interim damages for loss of view for the period from the filing of the lawsuit until the last day of trial.

In finding in favor of the Eisens, the court rejected the Tavangarians’ affirmative defenses of waiver and estoppel, predicated on the Eisens’ delay in objecting to anything other than the new air-conditioning units and related equipment, noting that the Eisens had filed their lawsuit challenging the remodeling of the Tavangarians’ home within a matter of months of the beginning of construction. Because the Tavangarians had not discussed their remodeling plans with the Eisens, the court found it reasonable that the Eisens were unable to determine from wooden framing placed during the summer of 2013 how extensive the view intrusion would be. In addition, with respect to the Tavangarians’ assertion the Eisens had not objected to the height of the new hedges on the Tavangarians’ property, the court found that the Eisens had asked the prior owners, “on several occasions, to trim the hedges and . . . the hedges were trimmed from time to time.” Thus, the court found the Tavangarians had not carried their burden of proving the Eisens had agreed to any height above the three-foot limit in the CC&R’s.[5]

On August 9, 2016 the court entered its judgment and injunction after bench trial, retaining its jurisdiction, as described in the statement of decision, to enforce the injunction, including resolution of any disputes that might arise under it.

DISCUSSION

1. Standard of Review
“CC&R’s are interpreted according to the usual rules of interpretation of contracts generally, with a view toward enforcing the reasonable intent of the parties. [Citations.] Where, as here, the trial court’s interpretation of the CC&R’s does not turn on the credibility of extrinsic evidence, we independently interpret the meaning of the written instrument.” (Harvey v. The Landing Homeowners Assn. (2008) 162 Cal.App.4th 809, 817; accord, Bear Creek Master Assn. v. Southern California Investors, Inc. (2018) 28 Cal.App.5th 809, 818; see Ekstrom v. Marquesa at Monarch Beach Homeowners Assn. (2008) 168 Cal.App.4th 1111, 1123 [“[w]e review the interpretation of the CC&R’s de novo”].)

Under California law a landowner has no right to an unobstructed view over adjoining property, and “`the law is reluctant to imply such a right.'” (Boxer v. City of Beverly Hills (2016) 246 Cal.App.4th 1212, 1219; accord, Pacifica Homeowners’ Assn. v. Wesley Palms Retirement Community (1986) 178 Cal.App.3d 1147, 1152.) Although such a right may be created through adoption of enforceable CC&R’s (see, e.g., Posey v. Leavitt (1991) 229 Cal.App.3d 1236, 1250), “[i]t is a general rule that restrictive covenants are construed strictly against the person seeking to enforce them, and any doubt will be resolved in favor of the free use of land.” (White v. Dorfman (1981) 116 Cal.App.3d 892, 897 (White); accord, Chee v. Amanda Goldt Property Management (2006) 143 Cal.App.4th 1360, 1377; see generally 6 Miller & Starr, Cal. Real Estate (4th ed. 2018) § 16:17, p. 16-73 [“restrictive covenants are to be construed strictly against limitations upon the free use of property, and where a provision is subject to more than one interpretation, the construction that is consonant with the unencumbered use of the property will be adopted”].) That said, it is also “our duty to interpret the deed restriction `in a way that is both reasonable and carries out the intended purpose of the contract.'” (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1378; see Ezer v. Fuchsloch (1979) 99 Cal.App.3d 849, 861; see also 6 Miller & Starr, supra, § 16:17 at p. 16-75 [“[i]n the absence of ambiguity, the fair intent of the parties is enforced”].)

2. The Propriety of Revisiting Zabrucky
The trial court grounded its interpretation of the CC&R’s potentially applicable to the Tavangarians’ renovations of the house at 1134 Lachman Lane on this court’s divided decision in Zabrucky, supra, 129 Cal.App.4th 618, which, as discussed, held paragraph 11 of the Marquez Knolls CC&R’s prohibited any remodeling or alteration of an existing residence that “may at present or in the future unreasonably obstruct the view from any other lot.” (Id. at p. 629 [adding, with underlining, the word “unreasonably” to the text of the CC&R’s].)[6] Based on that interpretation of the view protection provided by paragraph 11, the trial court ruled that paragraph 1 afforded even greater protection to improvements that enlarged the existing second story of a residence.

The Tavangarians agreed Zabrucky’s interpretation of paragraph 11 was binding on the trial court, but argue on appeal we should adopt the reasoning of the Zabrucky dissent and hold that, unlike paragraph 2 of the CC&R’s, paragraph 11 does not restrict renovating or altering existing residences. (See Zabrucky, supra, 129 Cal.App.4th at pp. 630-634 (dis. opn. of Perluss, P. J.).) With that interpretation of paragraph 11 as their premise, the Tavangarians argue paragraph 1 similarly does not restrict improvements to the second story of a residence previously approved by the architectural committee.

The Eisens insist the Tavangarians have waived any right to argue on appeal that Zabrucky was incorrectly decided through their “judicial admission” in the trial court that the term “structure” in paragraph 11 of the CC&R’s included the homeowner’s existing residence, as held by the Zabrucky majority. No judicial admission was made: To be considered a binding judicial admission, “the declaration or utterance must be one of fact and not a legal conclusion, contention, or argument.” (Stroud v. Tunzi (2008) 160 Cal.App.4th 377, 384 [“judicial admissions involve fact, not legal theories or conclusions”]; Fibreboard Paper Products Corp. v. East Bay Union of Machinists (1964) 227 Cal.App.2d 675, 709 [same].)

Moreover, as the Tavangarians emphasize, it would have been pointless to challenge that interpretation at trial. (See Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 6 [“here the trial court was bound by prior appellate decisions . . . [,] and it would therefore have been pointless to raise the issue there”]; Redfearn v. Trader Joe’s Co. (2018) 20 Cal.App.5th 989, 1001 [trial court must follow controlling precedent from a court of appeal]; see generally Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455.) We, however, are free to reconsider one of our prior decisions and conclude it was mistaken. (See, e.g., Barnett v. First National Ins. Co. of America (2010) 184 Cal.App.4th 1454, 1460 [holding this court’s decision six years earlier regarding the validity of a joint settlement offer to a husband and wife under Code of Civil Procedure section 998 “was mistaken”]; see also Tourgeman v. Nelson & Kennard (2014) 222 Cal.App.4th 1447, 1456, fn. 7 [a court of appeal panel is free both to disagree with decisions by other panels and to reconsider its own prior decisions]; see generally Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1180 [“[w]e respect the principle of stare decisis, but reconsideration of a poorly reasoned opinion is nevertheless appropriate”]; Cianci v. Superior Court (1985) 40 Cal.3d 903, 924 [although the doctrine of stare decisis serves important values, “it nevertheless should not shield court-created error from correction”].) While it would have been better practice for the Tavangarians to advise the trial court they might challenge the Zabrucky majority’s interpretation of paragraph 11 on appeal, their failure to do so does not preclude this court from revisiting the issue. (See Ward v. Taggart (1959) 51 Cal.2d 736, 742 [“it is settled that a change in theory is permitted on appeal when `a question of law only is presented on the facts appearing in the record'”]; Sea & Sage Audubon Society, Inc. v. Planning Com. (1983) 34 Cal.3d 412, 417 [same]; Panopulos v. Maderis (1956) 47 Cal.2d 337, 341; see also Sheller v. Superior Court (2008) 158 Cal.App.4th 1697, 1709 [parties are permitted to raise new issues on appeal involving questions of law; “application of the forfeiture rule is not automatic; appellate courts have discretion to excuse such forfeiture”].)[7]

3. Neither Paragraph 1 Nor Paragraph 11 of the CC&R’s Restricts Renovations or Alterations to a Previously Approved Residence; Paragraph 2, Which Did Apply to Residential Alterations, Has Long Since Expired
In light of the principle that, if possible, we must read the CC&R’s as a whole and adopt the construction that gives effect to every part of the CC&R’s (see Bear Creek Planning Committee v. Ferwerda (2011) 193 Cal.App.4th 1178, 1183; Ezer v. Fuchsloch, supra, 99 Cal.App.3d at p. 861), the plain language of paragraph 1 is properly interpreted as defining the character of the development (residential, limited to detached single-family dwellings) and establishing basic limitations on the types of homes permitted (not to exceed one story in height, except where a two-story residence was authorized by Marquez Knolls Inc. and the architectural committee, with a private garage for not more than three cars); paragraph 2 as regulating the initial construction and subsequent alterations of a permitted single-family residence (by requiring approval of building plans by the architectural committee and, when that committee ceased to exist at the end of 1966, until December 31, 1980 by the Marquez Knolls Property Owner’s Association); and paragraph 11 as controlling the height of fences, hedges, other landscaping and outbuildings other than a detached garage. This interpretation of the CC&R’s not only comports with their apparent intent but also furthers the public policy in favor of the free use of land.

a. Paragraph 1 of the CC&R’s controlled the basic size of homes in tract 20305 and did not regulate renovations or remodeling
Paragraph 1 restricted development in tract 20305 to single-family homes and specified that all such homes were to be one story in height except, with the approval of Marquez Knolls Inc. and the architectural committee, “one two story single-family dwelling may be erected where said dwelling will not detract from the view of any other lot.” While the paragraph’s basic one-story limit applied whether a residence was “erected, altered, placed or permitted to remain on any building plot,” it did not otherwise restrict the initial construction or renovation of a single-story residence.[8] The mechanism for determining what construction would actually be permitted within that general parameter, including renovations to, or remodeling of, a residence, was provided in paragraph 2, which required approval by the architectural committee, and then by the property owners association, for a stated period of years, of all building plans and specifications for both initial construction and any alterations to a residence. (See Zabrucky, supra, 129 Cal.App.4th at pp. 620, 624; id. at pp. 631, 634 (dis. opn. of Perluss, P. J.).)

As stated, initial construction of a two-story residence could only be approved if, in the judgment of Marquez Knolls Inc. and the architectural committee, it would “not detract from the view of any other lot.”[9] But once a second story was approved and erected as part of the original construction of a home—construction that, pursuant to paragraph 16,[10] had to begin within two years of the individual property owner’s acquisition of title from the developer—paragraph 1 played no further role. As the Eisens emphasize in their briefing in this court, unlike the first part of that paragraph, the portion of paragraph 1 dealing with two-story dwellings did not refer to subsequent alterations to the residence. That matter was also covered by paragraph 2, which did not distinguish between the approvals required for the building plans for one-story and two-story residences.

The Eisens, however, argue that paragraph 1’s reference to erecting a second-story residence, but not to altering it, means, once approved, the second story of a home may not thereafter be modified in any way that enlarges its contour or silhouette. That contention contravenes two fundamental principles of construction that guide our resolution of this case. First, as discussed, if there is more than one reasonable interpretation of a restrictive covenant, it is to be construed against the individual seeking to enforce it and in favor of the free use of land. (See Chee v. Amanda Goldt Property Management, supra, 143 Cal.App.4th at p. 1377; White, supra, 116 Cal.App.3d at p. 897.) Second, because paragraph 2 by its express terms applied to any proposed alteration or renovation of a home in tract 20305, whether initially constructed as a one-story or as an approved two-story residence, to read into paragraph 1 an absolute prohibition of any modifications to a second story would fail to give full effect to paragraph 2. (See Bear Creek Planning Committee v. Ferwerda, supra, 193 Cal.App.4th at p. 1183; Ezer v. Fuchsloch, supra, 99 Cal.App.3d at p. 861.) We decline to adopt such a restrictive interpretation of paragraph 1.[11]

We reject for similar reasons the trial court’s interpretation of paragraph 1 as prohibiting any remodeling of the previously approved second story of a residence unless the alterations did not detract from the view of any other lot. Whether or not paragraph 1 prohibits a homeowner from adding a story to a one-story home or to a previously approved two-story home, an issue the parties agree we need not decide, that paragraph does not address the permissible scope of other renovations or improvements to one-story or previously approved two-story residences. Whatever restrictions might apply to remodeling those homes after they had been approved and constructed were to be found, if at all, elsewhere in the CC&R’s.

b. Approval for renovations and alterations specified in paragraph 2 was no longer required after December 31, 1980
There can be no question that the plan-approval requirements of paragraph 2, which regulates both initial construction and renovations of residential dwellings in tract 20305 (that is, both “the erection of said such building” and “making of any alterations” to them) would apply to the Tavangarians’ remodeling project if that provision were still in effect. All parties agree, as did the trial court, that paragraph 2’s December 31, 1980 sunset provision means that covenant is no longer enforceable. But they disagree as to the consequences of the elimination of the architectural committee as of December 31, 1966, as set forth in paragraph 2.

The Eisens, who elsewhere insist paragraph 1 strictly prohibits any alterations to an originally approved second story, when attempting to reconcile the limited tenure of the architectural committee with their absolutist position on view protection, paradoxically contend that Marquez Knolls Inc. and the architectural committee could authorize renovations or alterations to a second story—what they term an exception to paragraph 1’s prohibition. Once those entities ceased to exist, they assert, there was no longer any possibility of obtaining such an exception. Hence, no alterations of the Tavangarians’ second story was permissible.

But it was paragraph 2, not paragraph 1, that required review and approval of building plans and specifications by the architectural committee as a condition for making alterations to an existing residence. Paragraph 2 transferred that authority to the property owners association following elimination of the architectural committee as of December 31, 1966. After another 14 years the responsibility of the association for approving building plans ceased. Contrary to the Eisens’ claim, what was eliminated as of that date was not the power to grant an exception to a prohibition on renovations, but the requirement for plan approval as a precondition for going forward with them.

Both the majority and dissenting opinions in Zabrucky, supra, 129 Cal.App.4th 618 interpreted the Marquez Knolls CC&R’s to permit improvements to existing residences without preconstruction plan approval by the architectural committee or the property owners association once the sunset date in paragraph 2 had passed. (Id. at pp. 624, 629 [maj. opn. of Woods, J.); id. at p. 631 [dis. opn. of Perluss, P. J.].) That interpretation is supported not only by the general policy of strictly construing restrictions on the free use of land but also by language in paragraph 2 itself, which deems the condition satisfied if the committee or association failed to approve or disapprove plans within 30 days of submission. Just as the failure of the responsible entity to act would be deemed satisfaction of the condition, the absence of an entity with the authority to review and approve building plans nullifies that requirement as a precondition to proceeding with renovations and remodeling.

This interpretation of the effect of the sunset provision in paragraph 2 is reinforced by a review of the CC&R’s for two neighboring tracts in Marquez Knolls, which the Eisens have provided this court and invited us to use as interpretative aids.[12] In 1957 paragraph 2 of the CC&R’s for tract 20179, which is otherwise substantially identical to paragraph 2 of the CC&R’s for tract 20305, provided that the powers and duties of the architectural committee would cease on December 31, 1960, not quite four years later. Thereafter, the paragraph continued, “the approval described in this covenant shall not be required” unless a majority of the record owners in the subdivision appointed a representative or representatives to continue to exercise the committee’s powers.

Apparently deciding it was worthwhile to continue for a longer period the plan-approval precondition to alterations or renovations to existing residences, Marquez Knolls Inc. revised paragraph 2 in the 1962 tract 20305 CC&R’s at issue in this case by extending the life of the architectural committee by one year and providing for transfer of the committee’s authority to the property owners association for a period of 14 years, rather than leaving to the subdivision’s homeowners the decision whether to create a new entity with approval authority. By the following year, in the CC&R’s for tract 26065 (the Zabrucky CC&R’s), the life of the architectural committee was extended by more than a dozen years (to December 31, 1980), and the transfer of authority to the association lasted an additional 15 years. Nowhere do these revised CC&R’s, with extended periods for approval of plans and specifications for alterations and renovations to existing residences, indicate an intent to prohibit remodeling a residence’s first or second story after the applicable sunset period. No such reading of the CC&R’s before us would be reasonable. (See Costa Serena Owners Coalition v. Costa Serena Architectural Com. (2009) 175 Cal.App.4th 1175, 1199 [deed restrictions are to be construed in a way that is reasonable and carries out their intended purpose]; Alfaro v. Community Housing Improvement System & Planning Assn., Inc., supra, 171 Cal.App.4th at p. 1378 [same].)

c. Paragraph 11 does not restrict renovating or altering existing residences
The foregoing analysis leads directly to the question we previously considered in Zabrucky, supra, 129 Cal.App.4th 618: Does paragraph 11 of the CC&R’s, which, after limiting the height of fences and hedges between the street and the front setback line, provides, “nor shall any tree, shrub or other landscaping be planted or any structures erected that may at present or in the future obstruct the view from any other lot,” apply to alterations or renovations to existing homes? The majority opinion, although conceding the issue presented a “`true conundrum'” and describing its conclusion as only “marginally more logical and supportable” than the opposing view (id. at p. 624), reversed the trial court and answered with a modified “yes.” Giving the words “any structures” what it termed their ordinary meaning and mindful of the desire of most existing Marquez Knolls homeowners to protect their views and property values (id. at p. 628), the majority held paragraph 11’s restrictions applied to additions to, or renovations of, an existing residence. (Ibid.)[13] The majority added, however, that “it is not reasonable to interpret the CC&R’s as prohibiting any obstruction of existing views,” even though that is exactly what paragraph 11 states. (Id. at p. 629.) Instead, the majority concluded “it would be in keeping with the intent of the drafters of the CC&R’s to read into paragraph 11 a provision that the view may not be unreasonably obstructed. . . .” (Ibid.)

The Zabrucky majority misread paragraph 11. It is certainly true that the common meaning of the word “structure,” considered without regard to context, includes a house and that adding rooms to a residence or expanding existing ones could be described as erecting a structure. But context and usage matter. (See White, supra, 116 Cal.App.3d at p. 898 [cautioning, while interpreting a view protection provision in CC&R’s governing a portion of the Trousdale Estates section of Beverly Hills, “[t]he word `structure’ as used in the CC & Rs has various meanings depending upon the context in which it is used”].)

For purposes of properly understanding the scope of the view protections in paragraph 11, paragraph 3, mentioned only in passing in Zabrucky, provides a necessary backdrop. That paragraph established a general front setback limit minimumfor any “building” and then separately specified front and side setback limits for the “residence” and for “a detached garage or other outbuilding.” That is, paragraph 3 expressly contemplated homeowners in Marquez Knolls might construct not only their residence with a detached garage, as authorized by paragraph 1, but also “outbuildings”: “`[a] small building appurtenant to a main building and generally separated from it; e.g. outhouse, storage shed.'” (People v. Smith (1994) 21 Cal.App.4th 942, 951, quoting Black’s Law Dict. (5th ed. 1979) p. 993, col. 1.) Paragraph 6 similarly anticipated outbuildings might be erected on lots within the tract and prohibited their use as a residence.[14]

Recognizing that outbuildings, as well as residences, might be built on lots within tract 20305 gives meaning to the word choices reflected in paragraphs 1, 2 and 11 of the CC&R’s. As discussed, when mandating a general one-story height limit, paragraph 1 refers to dwellings that are both “erected” and “altered.” Similarly, paragraph 2 in requiring architectural committee approval of building plans expressly applies to “erection of said building or making any alterations.” Yet paragraph 11 restricts only erecting a structure, not making alterations to one. While that language would unquestionably apply to construction of a greenhouse, storage shed or other form of outbuilding, omission in this paragraph of the word “alter” indicates that covenant does not apply to renovations or remodeling of the homeowner’s residence.

Indeed, when advocating for their restrictive interpretation of paragraph 1, the Eisens have recognized the significance of Marquez Knolls Inc.’s decision to use only the verb “erect” and not also “alter” when drafting a covenant. The Eisens emphasize that the second portion of paragraph 1, which addresses approval for the construction of a two-story residence, does not use the verb “alter”; that omission, they argue, means no remodeling is permissible: “Under Paragraph 1 of the CC&Rs, Defendants are prohibited from altering the second story of an existing two-story dwelling, as the word `alter’ is specifically omitted from the reference to two-story dwellings to indicate that a two-story dwelling may not be altered. . . . Pursuant to Paragraph 1 of the CC&Rs, only a one-story home may be altered.” By a parity of reasoning, because the word “alter” was “specifically omitted” from the reference to structures in paragraph 11, the restrictions in that covenant do not apply to plans to remodel an existing residence.

This more limited reading of “structures” in paragraph 11 is supported by the rule of construction known by its Latin name noscitur a sociis: “Under the rule of noscitur a sociis, `”the meaning of a word may be enlarged or restrained by reference to the object of the whole clause in which it is used.”‘” (Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1391, fn. 14.) In accordance with this principle, “a court will adopt a restrictive meaning of a listed item if acceptance of a more expansive meaning would make other items in the list unnecessary or redundant, or would otherwise make the item markedly dissimilar to the other items in the list.” (Moore v. California State Bd. of Accountancy (1992) 2 Cal.4th 999, 1012; see In re J.G. (2019) 6 Cal.5th 867, 880; Grafton Partners v. Superior Court (2005) 36 Cal.4th 944, 960.) Although in other contexts the word “structure” may include the residence itself, given the apparent object of paragraph 11 and the items listed—restricting the height of fences, hedges, trees, shrubs and other types of landscaping—”structures” in this paragraph is properly limited to outbuildings or similar objects surrounding the dwelling house, rather than improvements to the residence itself.

Additionally, any interpretation of the scope of paragraph 11’s restrictions on “structures” must necessarily be influenced by the paragraph’s relationship to the document as a whole. (See Ezer v. Fuchsloch, supra, 99 Cal.App.3d at pp. 861-862 [disapproving “disjointed, single-paragraph, strict construction approach to a restrictive-covenant-document interpretation” and holding CC&R’s must be construed as a whole to give effect to every paragraph and to the general intent of the covenanting parties].) Alterations to an existing residence are expressly regulated by paragraph 2. If the architectural committee, empowered by that provision to approve plans for remodeling a residence, were obligated to reject a proposal that obstructed the view from another lot, surely that restriction would also have been included in paragraph 2 or an immediately succeeding provision of the CC&R’s.[15]

A similar question of the relationship of a paragraph in the CC&R’s that governed construction, erection or alteration of a “building, structure or improvement” (paragraph III), and thus unambiguously applied to the residence, and a separate paragraph that prohibited planting or erecting any “hedge or hedgerow, or wall or fence or other structure . . . in such location or in such height as to unreasonably obstruct the view from any other lot” (paragraph IV) was at issue in White, supra, 116 Cal.App.3d at page 895. In holding that a new single-family residence that satisfied the requirements of paragraph III was not a “structure” subject to paragraph IV, the White court emphasized that “the interpretation of paragraph IV was made with reference to the CC & Rs as a whole, and specifically in conjunction with paragraph III” and explained that paragraph III had detailed provisions applicable to the construction of the residence. (Id. at pp. 898-899.) Given that organization of the CC&R’s, the court concluded, “It is not logical to further restrict buildings by the catchall phrase `other structures’ in a paragraph devoted to hedges, walls and fences.” (Id. at p. 898.) It is equally illogical here to read paragraph 11, which immediately follows a paragraph prohibiting raising poultry on a Marquez Knolls lot, as containing a significant limitation on a homeowner’s ability to remodel and improve his or her home, a topic dealt with extensively in paragraph 2.[16]

The original 1957 CC&R’s for Marquez Knoll tract 20179 and the subsequent amendment to paragraph 12, submitted by the Eisens as interpretative aids, do not suggest a different result. Originally paragraph 12 read, “No fences or hedges exceeding three feet in height shall be erected or permitted to remain between the street and the front set-back line.” That paragraph was amended eight weeks later to read, “No fences or hedges exceeding three feet in height shall be erected or permitted to remain between the street and the front set-back line nor shall any tree, shrub, or other landscaping be planted or constructed that may at present or in the future obstruct the view from any other lot in this tract.” The Eisens point out that the language “or other landscaping be planted or constructed that may . . .” in the amended tract 20179 CC&R’s was modified by 1962 in paragraph 11 of the tract 20305 CC&R’s at issue in this case to read, “or other landscaping be planted or any structures erected that may . . . .”[17] This evolution of the wording in the paragraph, they assert, makes it clear that the term “structures” in paragraph 11 “is intended to be different from landscaping and plantings” and “stood separately from the references to tree, shrub, or other landscaping.” True as that may be, nothing in this language change indicates “structures” as used in paragraph 11 was intended to apply to the homeowner’s residence, rather than to include all forms of outbuildings other than a private three-car garage.

4. The Portion of the Judgment Requiring the Street-facing Hedges To Be Trimmed to a Height of Three Feet or Under Is Affirmed
The Tavangarians neither dispute that paragraph 11 limits to a height of three feet any hedges growing between the street and the front setback line of properties in tract 20305 nor contend the new hedges they installed at 1134 Lachman Lane do not violate that restriction. Instead, they argued in the trial court the Eisens had waived or were estopped from enforcing this provision because the hedges had in the past, even prior to the Tavangarians’ purchase of the property, been permitted to exceed three feet and even to grow above the residence’s roofline.

In support of their argument the Tavangarians introduced a photograph taken in August 2013 and Google images from 2012 showing the height of hedges above the house’s roofline, arguing the Eisens’ inaction constituted a waiver. Alternatively, the Tavangarians contend they detrimentally relied on the fact that the hedges had historically exceeded three feet when they replaced the existing hedges with new ones.

Mr. Eisen, on the other hand, testified he could see over the hedges (that is, they had not grown past the roofline) when he and his wife purchased their home in 2009. He also testified that, before the Tavangarians purchased their home in October 2012, the hedges had been trimmed periodically, so they did not grow as high as those in a photograph depicting the new hedges planted by the Tavangarians, and did not block the Eisens’ view.

The party seeking to establish an affirmative defense of waiver or estoppel bears the burden of proof. (See Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 33-34.) Because the trial court found Mr. Eisen’s testimony credible, we cannot say the Tavangarians’ uncontradicted and unimpeached evidence compelled a finding in their favor on this issue. (See In re R.V. (2015) 61 Cal.4th 181, 201 [where a trial court has determined a party has failed to meet its burden on an issue, “the inquiry on appeal is whether the weight and character of the evidence . . . was such that the . . . court could not reasonably reject it”]; Almanor Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th 761, 769 [“[o]n appeal from a determination of failure of proof at trial, the question for the reviewing court is `”whether the evidence compels a finding in favor of the appellant as a matter of law”‘”]; Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 466 [same].) Accordingly, that portion of the judgment and injunction ordering the hedges between the street and the front setback line to be trimmed and maintained at a height of no more than three feet is affirmed.

To be sure, as the Tavangarians argue, and the trial court observed, hedges at roof height could not obstruct the Eisens’ view and would likely enhance, rather than detract from, the overall appearance of the remodeled residence at 1134 Lachman Lane. Nonetheless, for whatever reason, the Eisens have insisted on strict compliance with paragraph 11 of the CC&R’s, which sets an absolute height limit for hedges. They are entitled to do so.

5. The Interim Damage Award Must Be Redetermined
Based on the testimony of the Eisens’ appraisal expert, Kenneth Kirschner, the trial court awarded the Eisens $39,000 for the reduction in the monthly rental value of their own home between September 13, 2013 (the date the Eisens filed their lawsuit) and February 23, 2016 (the last day of trial) “caused by Defendants’ structures and hedges, which unreasonably obstructed and or unreasonably detracted from Plaintiffs’ view.” Neither Kirschner nor the trial court attempted to apportion the impact on monthly rental value caused by the various sources of view blockage (that is, to allocate damages among the first-story improvements, second-story renovations and overgrown hedges). Because only the challenge to the height of the front hedges at 1134 Lachman Lane is actionable, if on remand the Eisens still seek damages for any loss of view caused by that violation of paragraph 11, the court must hold a new trial limited to damages resulting from that claim. (See, e.g., Gillan v. City of San Marino (2007) 147 Cal.App.4th 1033, 1052 [remanding case for new trial on compensatory damages limited to plaintiff’s cognizable claims].)

DISPOSITION

The judgment and injunction after bench trial is reversed except as to the order requiring hedges located between the street and the front setback line of 1134 Lachman Lane to be trimmed and maintained at a height of three feet or under. The case is remanded with directions to the trial court to conduct a new trial on damages, consistent with this opinion, and thereafter to enter a new judgment finding in favor of the Tavangarians and 619 Properties on all claims for damages and injunctive relief except with respect to their failure to trim and maintain those hedges as required by the CC&R’s. The parties are to bear their own costs on appeal.

ZELON, J. and FEUER, J., concurs.

[1] Mr. Tavangarian owns a firm that designs and constructs higher-end single-family homes and hotels.

[2] The CC&R’s were signed by Melvin Lachman, president, and Earl Lachman, secretary, on behalf of the developer and declarant, Marquez Knolls Inc. In places the CC&R’s refer to “Declarants” in the plural.

[3] The court explained that 619 Properties, joined as a defendant after it had purchased the Tavangarians’ property, did not participate in the trial but agreed to be bound by the court’s ruling.

[4] The court found the Eisens did not prove the eastern extension of the cantilevered roof unreasonably obstructed or detracted from their view.

[5] At trial the Tavangarians also raised an in pari delicto defense and attempted to introduce evidence the Eisens’ property violated the CC&R’s. Although the defense had been asserted in their answer to the second amended complaint, it was omitted in a later-filed amendment to that answer. The court ruled the defense was untimely and excluded the evidence.

[6] The CC&R’s for Marquez Knolls tract 26065, recorded on June 20, 1963, at issue in Zabrucky, and those for tract 20305, at issue in the case at bar, are identical, save only that the requirement for approval of all building and remodeling plans by the architectural committee and thereafter by the Marquez Knolls Property Owner’s Association, as set forth in paragraph 2, expired on December 31, 1980 in tract 20305, but not until December 31, 1995 in tract 26065.

[7] “The general rule confining the parties upon appeal to the theory advanced below is based on the rationale that the opposing party should not be required to defend for the first time on appeal against a new theory that `contemplates a factual situation the consequences of which are open to controversy and were not put in issue or presented at trial.'” (Ward v. Taggart, supra, 51 Cal.2d at p. 742.) This rule does not apply here because the trial court was obligated to follow Zabrucky, supra, 129 Cal.App.4th 618 whether or not the Tavangarians indicated their disagreement with its holding.

[8] Paragraph 3 established front- and side-yard setback lines for placement of the residence, as well as outbuildings; and paragraph 7 stated a minimum size (2,000 square feet) for the “main structure.”

[9] The CC&R’s named Melvin Lachman, Marquez Knolls Inc.’s president, and Earl Lachman, its secretary, as two of the three members of the architectural committee, effectively delegating to the Lachmans in the first instance the authority to decide where two-story homes would be built in their development.

[10] Paragraph 16 provided, “Construction of a residence as provided by said Declaration of Restrictions on any of said lots must be commenced within two (2) years from the date of the recording of the deed transferring title to said lot from Declarants herein unless specifically extended in writing by the Architectural Committee.”

[11] As the parties acknowledge, it is unnecessary for us to decide in this case whether a single-story residence could now be remodeled to add a second story.

[12] We grant the Eisens’ motion to take judicial notice of items 1, 2 and 3 submitted with their motion: the CC&R’s for tract 20179, recorded February 7, 1957; the amendment to that tract’s CC&R’s, recorded March 29, 1957; and the CC&R’s for tract 26065, recorded June 20, 1963, the CC&R’s at issue in Zabrucky, supra, 129 Cal.App.4th 618. (See Evid. Code, §§ 452, subd. (c), 459, subd. (a); Cal-American Income Property Fund II v. County of Los Angeles (1989) 208 Cal.App.3d 109, 112, fn. 2.) We deny the balance of the motion to take judicial notice and the alternative motion to augment the record. Items 5, 6, 7 and 8 are not subject to judicial notice. Item 4 is irrelevant. None of these eight documents was filed or lodged in the case in superior court; accordingly, none is properly added to the record through a motion to augment.

[13] In reaching its conclusion the majority opinion relied on Seligman v. Tucker (1970) 6 Cal.App.3d 691, in which Division Five of this court affirmed an injunction requiring the defendants to remove or lower the roof of a rumpus room, which they had added to their home in a hillside portion of Sherman Oaks and which obstructed the adjoining owner’s “panoramic views” of the lower San Fernando Valley. (Id. at p. 693.) As explained in Zabrucky, the restriction at issue in Seligman provided, “`No hedge or hedgerow or wall or fence or building or other structure shall be planted, erected, located or maintained upon any lot in such location or in such height as to unreasonably obstruct the view from any other lot or lots on said Tract.'” (Zabrucky, supra, 129 Cal.App.4th at p. 625.) But there was no dispute in Seligman that the rumpus room was a “building or other structure” that was “erected, located or maintained” on defendants’ lot. The question was whether “unreasonably obstruct” was too vague or uncertain a term to be enforced by a mandatory injunction. (Seligman, at p. 696.) The court’s analysis on that point has no bearing on the proper interpretation of paragraph 11 in the Marquez Knolls CC&R’s.

[14] Paragraph 6 provides in full: “No structure of a temporary character, trailer, basement, tent, shack, garage, barn or other outbuilding erected on any lot, shall be at any time used as a residence, either temporarily or permanently.”

[15] The Zabrucky majority gave a nod toward this reasoning, conceding “it would have been preferable for the drafters of paragraph 11 to have located the prohibition against erection of `any structure’ that obstructs the view of an adjoining homeowner in its own paragraph or subparagraph.” (Zabrucky, supra, 129 Cal.App.4th at p. 628.)

[16] The incongruity of reading paragraph 11 to apply to renovations to a homeowner’s residence was implicitly recognized by the Zabrucky majority when it softened that provision’s absolute prohibition of any obstruction of a neighbor’s view by structures within its ambit to preclude only “unreasonable obstructions” of view, notwithstanding the general principle that “implied terms should never be read to vary express terms.” (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 374; accord, 21st Century Ins. Co. v. Superior Court (2009) 47 Cal.4th 511, 527.)

[17] The Eisens explain they did not present this history of the change in language to the trial court because they and the Tavangarians had agreed the Zabrucky majority’s interpretation of paragraph 11 controlled the court’s decision.

Orchard Estate Homes, Inc. v. Orchard Homeowner Alliance

ORCHARD ESTATE HOMES, INC., Petitioner and Respondent, v. THE ORCHARD HOMEOWNER ALLIANCE, Objector and Appellant.

Summary by Dea C. Franck, Esq.:

Voter apathy does not need to be proven when petitioning a court to amend CC&Rs pursuant to Civil Code section 4275.  (This case is currently under review with the Supreme Court of California.)

No. E068064.
Court of Appeals of California, Fourth District, Division Two.

Filed January 29, 2019.
APPEAL from the Superior Court of Riverside County, Super. Ct. No. PSC1700644, David M. Chapman, Judge. Affirmed.

Parlow Law Office, Daniel M. Parlow; Slovack Baron Empey Murphy & Pickney LLP and Wendy S. Dowse for Objector and Appellant.

Green Bryant & French LLP, Jeffrey A. French; Berding & Weil LLP and Timothy P. Flanagan for Petitioner and Respondent.

Adams Stirling PLC, Laurie S. Poole as Amicus Curiae on behalf of Petitioner and Respondent.

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.

OPINION

RAMIREZ, P.J.

Orchard Estate Homes, Inc., is a 93-unit planned residential development, governed by covenants, conditions, and restrictions (CC&R’s), supplemented by rules and regulations prohibiting short term rentals of units for durations of less than 30 days. When Orchard’s homeowners association attempted to enforce this rule against an owner who used a unit for such purpose, a lower court ruled the rule was unenforceable because it was not contained in the CC&R’s. Orchard put the issue to a vote to amend the CC&R’s. After balloting was completed, approximately 62 percent of the owner-members of the homeowners association voted to prohibit short term rentals, but the percentage was less than the super-majority required to accomplish the amendment.

Orchard then filed a petition pursuant to Civil Code section 4275 seeking authorization to reduce the percentage of affirmative votes to adopt the amendment, which was opposed by the Orchard Homeowner Alliance (Alliance), an unincorporated association of owner members, who purchased units for short term rental purposes. The trial court granted the petition and the Alliance appeals, arguing that the trial court erred in ruling that voter apathy was not an element of Civil Code section 4275. We affirm.

BACKGROUND

Orchard Estate Homes, Inc., (Orchard) is a homeowners association established in 2004 to manage a 93-unit development located east of Indio, California. The homeowners association and all member-owned lots are encumbered by CC&R’s, which may be amended by approval of owners representing 67 percent of the total members and 51 percent of eligible first mortgagees of the association.

In 2011, Orchard adopted rules and regulations prohibiting short term rentals, to supplement the CC&R’s. However, a vacation rental provider that owned one unit, successfully defended against enforcement of the rules, by arguing that the rules, adopted by Orchard’s Board of Directors and not by a vote of the owners, were not a valid amendment to the CCRs. Orchard therefore conducted an election to adopt an amendment to the CC&R’s to prohibit short term rentals of less than 30 days.

On November 10, 2016, Orchard sent notices of the election, along with ballots and other materials, to all owner-members of the homeowners association, and on December 13, 2016, when balloting was closed, 85 of the 93 members had cast votes, with the proposed amendment garnering 58 votes in favor, or 62 percent. On February 2, 2017, Orchard filed a petition pursuant to Civil Code section 4275, seeking judicial approval to reduce the percentage of affirmative votes required to amend the CC&R’s. The Alliance, a group of owners who purchased units for short term vacation rentals, opposed the petition, arguing that voter apathy had not been alleged or proven, precluding relief. After a hearing, the trial court granted Orchard’s petition. The Alliance appeals.

DISCUSSION

The Alliance argues that the trial court abused its discretion in granting Orchard’s petition by ruling that voter apathy was not a prerequisite to an order authorizing relief under Civil Code section 4275. We disagree.

Civil Code section 4275 (formerly section 1356) provides in pertinent part: “If in order to amend a declaration, the declaration requires members having more than 50 percent of the votes in the association, [. . .] to vote in favor of the amendment, the association, or any member, may petition the superior court of the county in which the common interest development is located for an order reducing the percentage of the affirmative votes necessary for such an amendment.” (Civ. Code § 4275, subd. (a).) “The purpose of [the statute] is to provide homeowners associations with the `ability to amend [their] governing documents when, because of voter apathy or other reasons, important amendments cannot be approved by the normal procedures authorized by the declaration. [Citation.] . . .’ [Citation.]” (Mission Shores Assn. v. Pheil (2008) 166 Cal.App.4th 789, 794-795.)

The statute gives the trial court broad discretion in ruling on such a petition. (Mission Shores, supra, 166 Cal.App.4th at p. 795.) Accordingly, we review for abuse of discretion. (Quail Lakes Owners Assn. v. Kozina (2012) 204 Cal.App.4th 1132, 1139, citing Mission Shores, supra, 166 Cal.App.4th 789; Fourth La Costa Condominium Owners Assn. v. Seith (2008) 159 Cal.App.4th 563, 570.) The trial court is not required to make any particular findings when considering such a petition; instead, it is sufficient if the record shows that the court considered the requisite factors in making its ruling. (Quail Lakes Owners Assn., supra, 204 Cal.App.4th at p. 1140.)

The court may grant the petition if it finds all of the following: “`Notice was properly given; the balloting was properly conducted; reasonable efforts were made to permit eligible members to vote; “[o]wners having more than 50 percent of the votes . . . voted in favor of the amendment”; and “[t]he amendment is reasonable.”‘” (Quail Lakes Owners Assn. v. Kozina, supra, 204 Cal.App.4th at p. 1135, quoting Peak Investments v. South Peak Homeowners Assn., Inc. (2006) 140 Cal.App.4th 1363, 1366-1367; see also Civ. Code, § 4275, subd. (c).)

The Alliance does not complain that the evidence presented to the trial court fails to satisfy the above-described elements of subdivision (c) of Civil Code section 4275, nor does it claim the amendment would be improper for any of the reasons set forth in Civil Code section 4275, subdivision (e). Instead, the Alliance argues that voter apathy is an element of Civil Code section 4275, and that relief is not proper unless voter apathy has been established.

After reviewing the decisions on which Alliance relies for the assertion that voter apathy is an element of a Civil Code section 4275 petition, we conclude Alliance has incorrectly construed statements made in dicta in some authorities regarding the purpose of the statutory procedure. In Blue Lagoon Cmty. Ass’n v. Mitchell, the court stated, “Viewed objectively, the purpose of [former] Civil Code section 1356 [now 4275] is to give a property owners’ association the ability to amend its governing documents when, because of voter apathy or other reasons, important amendments cannot be approved by the normal procedures authorized by the declaration.” (Blue Lagoon Cmty. Ass’n v. Mitchell, supra, 55 Cal.App.4th at p. 477; see also, Quail Lakes Owners Assn., supra, 204 Cal.App.4th at pp. 1134-1135.)

Similar statements of legislative purpose are found in Fourth La Costa Condominium Owners Assn. v. Seith and Peak Investments v. South Peak Homeowners Assn., Inc. However, none of the cases hold that voter apathy is an element that must be alleged or proven. It is well settled that an appellate decision is not authority for everything said in the opinion, but only for points actually involved and decided. (People v. Knoller (2007) 41 Cal.4th 139, 154-155; Santisas v. Goodin (1998) 17 Cal.4th 599, 620, citing Childers v. Childers (1946) 74 Cal.App.2d 56, 61.)

The doctrine of precedent, or stare decisis, extends only to the ratio decidendi of a decision, not to supplementary or explanatory comments which might be included in an opinion. (People v. Superior Court (2016) 1 Cal.App.5th 892, 903, citing Gogri v. Jack in the Box, Inc. (2008) 166 Cal.App.4th 255, 272.) Only the ratio decidendi of an appellate opinion has precedential effect. (Trope v. Katz (1995) 11 Cal.4th 274, 287.) The decisions relied upon by the Alliance refer to a supposed legislative purpose, but none of these authorities held that voter apathy is a requisite element of the statutory procedure, nor do any of them require proof of voter apathy as a precondition to relief from the supermajority provisions of the CCRs.

Looking at the statutory language of Civil Code section 4275, we observe five elements required to be established to authorize a reduction in the required voting percentage to amend a provision of the governing CCRs. Those elements require the trial court to find that adequate notice was given; that balloting on the proposed amendment was conducted in accordance with the governing documents as well as the provisions of the Davis-Stirling Common Interest Development Act; a reasonably diligent effort was made to permit all eligible members to vote on the proposed amendment; members having more than 50 percent of the votes voted in favor of the amendment; the amendment is reasonable; and granting the petition is not improper. (Civ. Code, § 4275, subd. (c).) The statute does not include voter apathy among the list of elements that must be established.

Applying the rules of statutory construction, in the absence of an ambiguity, the plain meaning of the statute controls. (Tract 19051 Homeowners Assn. v. Kemp (2015) 60 Cal.4th 1135, 1143; Anderson Union High School Dist. v. Shasta Secondary Home School (2016) 4 Cal.App.5th 262, 283.) Orchard was not required to plead and prove voter apathy under the plain language of Civil Code section 4275, and we are not empowered to insert what a legislative body has omitted from its enactments. (Williams v. Superior Court (1993) 5 Cal.4th 337, 357; Wells Fargo Bank v. Superior Court (1991) 53 Cal.3d 1082, 1099.) We therefore decline to imply an element that was not expressed by the Legislature.

The trial court did not abuse its discretion in granting the petition.

Disposition

The judgment is affirmed. Respondent is entitled to costs on appeal.

McKINSTER, J. and FIELDS, J., concurs.

Ranch at the Falls LLC v. O’Neal

RANCH AT THE FALLS LLC et al., Plaintiffs, Cross-defendants and Respondents, v. KEITH O’NEAL et al., Defendants, Cross-complainants and Appellants; EAGLE KNIGHT SECURITY SYSTEMS, INC., Defendant and Appellant; MURAD M. SIAM, as Trustee, etc., et al., Movants and Appellants.

Summary by Dea C. Franck, Esq.:

If individual owners have title to their lots to the center of a private street, then those owners must be named as defendants in a quiet title action as to that street because those owners have an interest in the property at issue.

***End Summary***

No. B283986.
Court of Appeals of California, Second District, Division Eight.

38 Cal.App.5th 155 (2019)

July 31, 2019.
APPEALS from a judgment and orders of the Superior Court of Los Angeles County, Super. Ct. No. PC055790, Melvin Sandvig, Judge. Reversed and remanded with directions.

Berding & Weil, Nicholas A. Rogers and Aaron A. Hayes for Defendant and Appellant Indian Springs Homeowners Association, Inc.

Beaumont Tashjian, Lisa A. Tashjian and Tara M. Radley for Defendant and Appellant Eagle Knight Security Systems, Inc., and for Cross-complainant and Appellant Indian Springs Homeowners Association, Inc.

Ferguson Case Orr Paterson, Wendy C. Lascher and John A. Hribar for Defendants, Cross-complainants and Appellants Keith O’Neal and Gladys Maniago.

Garrett & Tully, Ryan C. Squire, Zi C. Lin and Adjoa M. Anim-Appiah for Movants and Appellants.

Cozen O’Connor and Frank Gooch III for Plaintiffs, Cross-defendants and Respondents.

159*159 OPINION

GRIMES, Acting P. J.—

SUMMARY

The trial court entered a judgment in favor of a plaintiff who sought to quiet title to two claimed easements within residential gated communities in which plaintiff has no ownership interest. The judgment found plaintiff was entitled to an express easement (or in the alternative a prescriptive easement) and an equitable easement over all the private streets in a gated community (Indian Springs) in Chatsworth, and likewise was entitled to express (or in the alternative, prescriptive) and equitable easements over a homeowner’s lot (the Lenope property) in an adjacent gated community (Indian Oaks). Together, the two claimed easements provided access, from the west, to plaintiff’s 160*160 ranch, which she or her lessee used to stable horses owned by them and by members of the public. Ranch operations required deliveries of supplies in large trucks, removal of manure, visits by veterinarians, access by members of the public to ride or visit their horses, and so on.

Plaintiff also had access to her ranch by a different route (from the east) that included an undisputed right to travel over one now-private street (Iverson Road) in Indian Springs and other now-private streets in a third gated community (Indian Falls). Plaintiff finds this route to her ranch unacceptable because, after passing through Indian Springs and Indian Falls, the route requires use of an old and narrow bridge on Fern Ann Falls Road that she considers dangerous. This bridge is on private property, but not on property that is part of any of the three gated communities.

We conclude the trial court erred on several points.

First, the court found the individual homeowners in Indian Springs, who owned the private streets abutting their lots to the midline (subject to reciprocal easements with other homeowners), were not indispensable parties to plaintiff’s lawsuit, but nonetheless were bound by the judgment. This was clear error.

Second, the court erred when it found an express easement over all the private streets of Indian Springs. The declaration of easement plainly shows on its appended map the exact route of the easement, over only one private street (Iverson Road) in Indian Springs, and then over the private streets of Indian Falls. (There is no controversy over the use of the private streets in Indian Falls.)

Third, the judgment provides an express easement “or, alternatively, a prescriptive easement,” but the court’s statement of decision did not mention or discuss a prescriptive easement. Plaintiff did not establish the requirements for a prescriptive easement over the private streets of Indian Springs, or over the Lenope property.

Fourth, the court failed to make the necessary findings to support an equitable easement, and the record does not contain evidence to support the factors that are necessary to impose an equitable easement over the private streets of Indian Springs, or over the Lenope property.

Fifth, while a recorded easement exists over the Lenope property (granted by plaintiff when she owned the Lenope property), the easement by its terms does not benefit plaintiff’s ranch, and instead benefits a third property that plaintiff no longer owns. In any event, plaintiff cannot use that easement 161*161 because it cannot be reached except through the private streets of Indian Springs, to which plaintiff has no right of access.

Accordingly, the judgment must be reversed.

FACTS

1. The Parties and the Properties[1]

This case may be most readily understood by a chronological narration of the background facts. This narration begins in 1982, when development of the gated communities of Indian Springs and adjacent Indian Falls began (the latter is not involved in this litigation).

In 1982, the developer of Indian Springs filed a declaration establishing the covenants, conditions and restrictions (CC&R’s) governing Indian Springs. The CC&R’s established the Indian Springs Homeowners Association, Inc., a defendant in this case (Indian Springs HOA). There were 57 lots in the tract (Tract No. 33622), and “private streets” were identified as Zaltana Street, Avenita Court, Serafina Drive (now La Quilla Drive) and Taima Avenue. The common area was defined as the security gate and “the reciprocal easements held by and against each owner for use and maintenance of the Private Streets installed over portions of each Lot, as shown on the Map.”[2] The tract map of Indian Springs shows ownership lines to the center of the private streets.

In 1996, plaintiff, April Hart, purchased a ranch at 22575 Fern Ann Falls Road in Chatsworth. (The ranch has been owned at various times by Ms. Hart; Ranch at the Falls LLC; and another entity. The parties have stipulated that these are alter egos of Ms. Hart, so we will refer to her as plaintiff.) The Fern Ann Falls area is not a part of any of the three gated communities that are relevant to this case (Indian Springs, Indian Oaks, and Indian Falls). Indian Falls lies to the east of plaintiff’s ranch; Indian Oaks (which did not exist in 1996) lies to the west of the ranch; and Indian Springs lies to the south of Indian Oaks and the ranch. Public access to plaintiff’s ranch from the east was available over a route including Iverson Road.

162*162 That year (1996), plaintiff built a “horse ring,” and to do so brought in ten truck- and trailerloads of sand to the ranch from the west, coming “[a]cross what is now known as Indian Oaks, and south, what is now known as Indian Springs,” and “the tractor had to obviously make some roads in there.”

On June 1, 1998, the Indian Springs HOA recorded a declaration of easement in favor of abutting landowners, including plaintiff’s ranch (the 1998 easement declaration). The declaration recited that Indian Springs HOA was “the owner of certain common areas within Indian Springs Estates, including the private streets through the project (hereafter `Servient Tenement’), pursuant to” the 1982 CC&R’s. The recitals also stated that Los Angeles County was vacating the county’s easement for public streets over the servient tenement. The only public street in Indian Springs was Iverson Road. This privatization of public streets was “conditioned upon the conveyance of a non-exclusive easement for ingress and egress throughout the Servient Tenement” to owners of the dominant tenement (including plaintiff’s ranch). The declaration further recited the Indian Springs HOA’s desire to comply with the conditions established by the county “by conveying to the owners of lots in the Dominant Tenement an appropriate easement.”

The body of the declaration then conveyed “an easement for ingress and egress and related purposes over the private streets in the Servient Tenement as depicted on the Map attached hereto as Exhibit `B’.” The map identified the “streets involved in grant of easement” by means of dotted hatching over those streets. The only street in Indian Springs so identified is Iverson Road. The other private streets on the easement route were in the neighboring community of Indian Falls. (On April 1, 1998, the Indian Falls homeowners association (Indian Falls HOA) executed a similar declaration of easement in favor of plaintiff and other abutting landowners, over “the private streets in the Servient Tenement as depicted on the Map attached hereto as Exhibit `B’.” This was the same map as that attached to the Indian Springs easement declaration, showing Iverson Road in Indian Springs and the private streets in Indian Falls as “streets involved in grant of easement.”)

On March 23, 1999, the Board of Supervisors of Los Angeles County adopted a resolution privatizing the same streets depicted on the maps just described: “Iverson Road & Streets Within Tract No. 42353.” (Tract No. 42353 is Indian Falls.)

The effect of the Indian Springs declaration of easement, which was accepted by the county, was to grant an easement to abutting landowners over Iverson Road, and no other private streets within Indian Springs.

163*163 Contemporaneously with their declarations of easement, the Indian Springs and Indian Falls HOAs also made “Easement and Maintenance Agreement[s]” with each other. (These are substantively identical; the parties refer to them as the “maintenance agreements.”) Each homeowners association gave the other and abutting property owners “right of way easements over and across those portions of the private streets as depicted on Exhibit `3′ hereto within Indian Falls Estates and Indian Springs Estates. The easements are granted only to create a direct path through the respective projects for ingress and egress.” Exhibit 3 showed the same streets as shown on the maps attached to the two easement declarations.[3]

In 2002, grading began for the development of Indian Oaks.

In November 2002, plaintiff and her then-husband bought property in Indian Springs, at 22545 La Quilla Drive, and moved there from the ranch (where plaintiff had lived since 2000). Her move to Indian Springs gave her the right to use the private streets of Indian Springs. She lived in Indian Springs until 2008.

On October 31, 2005, plaintiff purchased property in Indian Oaks, at 22602 Lenope Drive (the Lenope property), for $1.7 million. (She testified that she had been trying to buy that parcel of land “that butted up to Fern Ann Falls, because I wanted to have an appropriate access to [the ranch].”) She built a 15-foot-wide roadway over the Lenope property (the Lenope roadway) that connected it with Fern Ann Falls Road. Together with the private streets of Indian Springs and Indian Oaks that, as a homeowner, she was entitled to use, the Lenope roadway gave plaintiff access to her ranch from the west.

In 2005, plaintiff (through her alter ego, Ranch at the Falls) also purchased a property at 22590 Fern Ann Falls Road. (The parties refer to this as the Friese property, as plaintiff sold it to Donald Friese in September 2013.) The Friese property is across the road and south of plaintiff’s ranch, and adjoins the east side of the Lenope property.

In May 2007, the Indian Oaks Homeowners Association (Indian Oaks HOA) wrote to plaintiff, telling her that her hay delivery vehicles and other 164*164 uses of the streets at Indian Oaks “could be considered running a business from your home even though the horse ranch is not actually located at the Oaks,” and asked plaintiff to correct the problem. A notice on January 17, 2008, told plaintiff she was in violation of the Indian Oaks CC&R’s.

In August 2008, the Indian Springs HOA wrote to plaintiff about hay trucks and horse trailers using the interior streets of Indian Springs for access to the ranch, advising her that such traffic was “only allowed to use Iverson.”

By 2008, plaintiff had rented the ranch to about seven different persons or entities. From 2008 to 2011, only plaintiff used the ranch, for “my horses.” (Plaintiff testified that when she moved onto the ranch property in 2000, she had five or six horses.)

In 2010, plaintiff granted a permanent easement over the Lenope roadway to Ranch at the Falls (her alter ego that owned the Friese property). The grant states that plaintiff “hereby grants to Ranch at the Falls LLC permanent easement for the benefit of the property known as 22590 Fern Ann Falls [the Friese property], over/under/on/across the land located as described in Exhibits A and B [the Lenope roadway] for ingress and egress purpose(s).”

In December 2012, plaintiff sold the Lenope property to defendants Keith O’Neal and Gladys Maniago (collectively, O’Neal). The purchase price was $775,000. (The property had been listed at $849,999, as a short sale subject to the lender’s approval.)[4] Plaintiff told O’Neal about the easement, and testified she “wouldn’t have signed their offer if they didn’t assure me that they would never try and overturn that easement.” However, there is no evidence of any deed reserving for plaintiff’s ranch property any right to use the easement after she sold the Lenope property to O’Neal.

In September 2013, plaintiff sold the Friese property to Donald Friese. There is also no evidence of any deed involved in this transaction that granted plaintiff or Ranch at the Falls LLC any right to use the easement after the sale to Mr. Friese.

In 2013, plaintiff leased the ranch to Randy Cano Training Stables, Inc. The rent was $4,000 a month, and the term of the lease was two years. The 165*165 lease began in August 2013. The number of horses Mr. Cano had on the property was “somewhere in the 30’s.” During his tenancy, there were hay deliveries on “big semi trucks,” “like a tractor/trailer,” “[a] minimum of probably every ten days.” There were shavings deliveries on semi-trucks (“the big ton trucks”) “one to two times a month,” and manure removal “[t]wice a month.” Blacksmiths came to the ranch at least once a week, sometimes more, using “a large one-ton pickup truck with very heavy blacksmith equipment.” A veterinarian service came to the property “maybe once a week.” Most of the owners of the horses stabled at the ranch (about 25) came to the ranch on a daily basis to ride or see their horses. Plaintiff told Mr. Cano “that [he] could use the bridge [from the east], or the Lenope roadway [from the west].”

In mid-June 2014, O’Neal erected a gate on the Lenope property that blocked access to the Lenope roadway. Mr. Friese, who now owned the Friese property (the dominant tenement in the 2010 Lenope roadway easement), gave O’Neal permission to do so.

On June 30, 2014, plaintiff filed a complaint against O’Neal, alleging causes of action for quiet title, nuisance and declaratory relief. Plaintiff obtained a temporary restraining order, and on July 22, 2014, a preliminary injunction restraining O’Neal from maintaining a gate or otherwise interfering with plaintiff’s use of the Lenope roadway, pending trial.

A few months later, on October 23, 2014, plaintiff filed a first amended complaint, adding causes of action against Indian Springs HOA and Indian Oaks HOA for quiet title, nuisance and declaratory relief, and against Lantz Security Systems, Inc. (now Eagle Knight Security Systems, Inc.), for declaratory relief. She alleged that public use of the private streets in Indian Springs and Indian Oaks had been a condition of their development (in fact this was not the case), and as a result, plaintiffs, as members of the public, had easement rights over those streets. Plaintiff alleged that after she obtained the preliminary injunction against O’Neal, the homeowners associations refused to allow access to the private streets of Indian Springs and Indian Oaks leading to the Lenope roadway. Instead, defendants required plaintiff and her vendors and invitees to wait for a guard from Eagle Knight to escort their vehicles, and the guard then forced the vehicles to use the Iverson Road route to the ranch, “over a dangerous, narrow bridge on Fern Ann Falls Road.”

The court granted a temporary restraining order, and on November 14, 2014, granted a preliminary injunction, restraining defendants from delaying, escorting and redirecting vehicles or otherwise interfering with plaintiff’s use of the private streets of Indian Springs and Indian Oaks to access the Lenope roadway.

166*166 Meanwhile, on October 1, 2014, Mr. Cano had written to plaintiff about the problems he and his clients and vendors were encountering, including vendors in semi-trucks and large vans being escorted over “what appears to be a very unsafe and narrow bridge,” and who were “now refusing to deliver.” Mr. Cano doubted he could “continue to conduct business at this location much longer,” and intended “to consider other options.”

On November 1, 2014, Mr. Cano informed plaintiff that “as of December 1, 2014, I will have to give up my monthly tenancy on your property.” He stated the “problem with the HOA’s has become unbearable,” he had lost several clients because of the harassment, and “I can no longer afford the up keep here.”

2. The Litigation

The litigation continued. O’Neal and the Indian Springs HOA filed a cross-complaint against plaintiff, among other things seeking to quiet title based on the Indian Springs HOA’s 1998 easement declaration.[5] In May 2015, plaintiff filed a second amended complaint (the operative pleading), adding a cause of action for intentional interference with contractual relations. Various answers were filed, including an amended answer by the Indian Springs HOA asserting an affirmative defense of failure to name the homeowners in Indian Springs as indispensable parties.[6]

In October 2016, both O’Neal and the Indian Springs HOA filed motions for judgment on the pleadings. O’Neal’s motion contended plaintiff did not have standing to enforce the Lenope roadway easement because the easement benefited the Friese property, which plaintiff no longer owned. In addition, O’Neal asserted the easement was unenforceable under the doctrine of merger, as plaintiff and her alter ego owned both properties when she granted the easement. The Indian Springs HOA argued the private streets were owned by the homeowners, not the association, and they were indispensable parties to the litigation. Further, Indian Springs asserted the facts pleaded were insufficient to sustain an express or prescriptive or equitable easement. The trial court denied both motions.

The Indian Springs HOA filed a petition for writ of mandate which we summarily denied.

167*167 Plaintiff filed an ex parte motion to amend her complaint to assert a claim for attorney fees based on the 1998 maintenance agreements between the Indian Falls and Indian Springs HOAs. (See pp. 162-163 & fn. 3, ante.) The trial court denied the ex parte motion, but apparently ruled plaintiff could amend according to proof.[7] At the close of plaintiff’s evidence, the parties revisited the subject, and after argument, the trial court granted the motion to amend the complaint.

The trial court visited the site on February 14, 2017, before testimony began. Nineteen witnesses testified at a trial that lasted for seven days. At the close of plaintiff’s evidence, defendants made an oral motion for judgment (Code Civ. Proc., § 631.8) based on failure to join indispensable parties; the court denied the motion.[8]

In a footnote in their closing brief on April 3, 2017, defendants requested a statement of decision explaining the factual and legal basis for decisions on 13 specified issues. Defense counsel had also requested a statement of decision during his opening statement at trial.

3. The Trial Court’s Ruling

On April 10, 2017, the trial court issued its written and signed “ruling and statement of decision,” finding in favor of plaintiff on all her causes of action. We quote extensively from pertinent parts of the court’s description of the evidence on which its decision was based. In footnotes and in a parenthetical explanation in the text, we note errors in the court’s factfinding.

“To access Fern [Ann] Falls Road [where the ranch is located] from the East, it is necessary for vehicles to travel around a blind curve, descend down a grade, and cross an 11 foot wide bridge, located at the East end of Fern [Ann] Falls Road.” The only record of the bridge “was from approximately fifty (50) years ago …. There is no record of when the bridge was constructed or to what standard, if any. The Expert testimony of Donald Khalighi, a Civil Engineer, indicated that the bridge was too narrow, had no guard rails, lighting, or proper drainage under the bridge.” The trial court also cited the testimony of Nina Johnson, a fire protection engineer assistant with the Los Angeles County Fire Department. Ms. Johnson had seen the bridge some years ago, and was familiar with fire codes and their applicability to the bridge. Under the current fire code, bridges were required to be 20 feet wide 168*168 and able to support 75,000 pounds.[9] (Ms. Johnson also testified about plaintiff’s current efforts to correct fire code violations and obtain permits for five nonpermitted structures on her ranch.)

The trial court described the route from the west through Indian Springs and Indian Oaks to the Lenope roadway, stating it was “the preferred route to avoid [the] narrow, unsafe bridge at the East access …. There was also testimony that large trucks which service the ranches, trash companies, and the US Post Office, will not use the East entrance because of the unsafe conditions of the road and bridge, as mentioned above.”

The trial court cited plaintiff’s testimony “that she has been to her ranch property on a daily basis since 1996…. She boards her own horses and also leases out space for boarding and training of horses for private individuals. The ranch has had as many as thirty (30) to fifty (50) horses for boarding and training.”[10] The court found that “equity bars the application of the merger doctrine to prevent the granting of an express easement to the Plaintiff. There was no testimony that Plaintiff intended a merger.” (This refers to the Lenope roadway easement plaintiff granted to her alter ego as owner of the Friese property.)

“Plaintiff testified that because of the unsafe condition of the bridge for the past twenty (20) years, she has primarily accessed her ranch from the West by way of dirt roads prior to the development of Indian Oaks [which began in 2002]. The access to her ranch became more defined with the development of Indian Oaks and the Lenope Place access to Fern Ann Falls Road…. This was especially necessary for access of large trucks and equipment to access her ranch. [Citing aerial photo exhibits.]”

The trial court cited the testimony of David Ruiz, an expert in aerial imagery analysis. Mr. Ruiz testified “that his review of the historical photographs taken in the 1900s [the earliest of these was 1994] established Plaintiff’s use of the easement over the streets in Indian Springs and Indian Oaks developments, as well as over the L[e]nope Place property now owned by Defendants Keith O’Neal and Gladys Maniago.[[11]] A recorded easement 169*169 exists over the property to use the streets of Indian Oaks.[[12]] A conditional tract map of the Indian Oaks development was to `grant to the general public a non-exclusive easement for ingress and egress and road purposes over the private and future streets of this land division ….'” (This refers to conditions imposed by the Department of Regional Planning in 2001 for filing a final vesting tentative tract map for the development of Indian Oaks. However, as the Indian Springs HOA points out without contradiction, the county did not accept the offer for public dedication, so the Indian Oaks streets remained private streets.)

The trial court then described evidence concerning plaintiff’s lease of the ranch in 2013 to Mr. Cano, for the boarding and training of approximately 35 horses. Plaintiff, Mr. Cano and one of his employees “testified that … Indian Springs [HOA], the security company, [defendant Eagle Knight], and [O’Neal], were interfering with the access to Fern [Ann] Falls Road. The Plaintiff and Mr. Cano further testified that security personnel, at the direction of Indian Springs, [were] to delay entry of any of the clients and/or service going to the Plaintiff’s ranch. The security personnel [were] directed to do this by requiring an escort to the ranch, and at times, there would be no escort available, so there would be long delays before people could proceed to the ranch.”

The trial court described defendant O’Neal’s property at Lenope Place. O’Neal “had installed a gate to block all traffic entering from L[e]nope Place. There was further testimony that Mr. Cano’s clients were harassed and chased off the street and were being denied entrance by the security company and by [O’Neal]. There was testimony that Mr. O’Neal had met with directors of the Indian Oaks Homeowners Association and Indian Springs Homeowners Association and there was a joint effort between all defendants … to restrict and/or stop all use of the West entrance to anyone traveling to Fern [Ann] Falls Road or the Plaintiff’s property. Mr. Cano, as a result of the above impediment to his business, wherein he lost several clients, was forced to break the lease and relocate all of the horses on or about December 1, 2014, or eight months prior to the expiration of the two year agreement. Mr. Cano 170*170 further testified that he planned continuing business with [plaintiff] for at least five years had the Defendants not impacted his livelihood.”[13]

The court described the short sale of the Lenope property to O’Neal, observing the price was one million dollars less than plaintiff’s purchase price. The court observed that O’Neal “stated and acknowledged the existing easement, which was included in the title to the property, and was one of the primary reasons they received a substantial reduction in the sale of the property from the bank.”

Other relevant evidence adduced at trial but not mentioned in the trial court’s ruling will be described in connection with our discussion of the legal issues the parties raise on appeal.

After reciting the facts we have described, the court rejected defendants’ contention that the individual homeowners in Indian Springs were indispensable parties.

The court then ruled that judgment was to be entered in favor of plaintiff on each of her nine causes of action (although the court made no mention of the prescriptive easement plaintiff sought as an alternative to an express easement). The court awarded $4,000 per month from December 1, 2013, until entry of judgment against all defendants; gave judgment to plaintiff on defendants’ cross-complaint; and stated attorney fees and costs would be awarded to plaintiff. Plaintiff was ordered to pay the Indian Springs HOA $100 per month “for the use and maintenance of the streets and security of Indian Springs and Indian Oaks,” and the November 13, 2014 preliminary injunction was made permanent.

4. Proceedings After the Statement of Decision

Defendants applied ex parte to vacate the statement of decision and issue a proposed statement of decision. Defendants contended the statute and rules required issuance of a tentative decision and an opportunity to file objections, and asserted numerous “ambiguous, omitted or defective findings.” The trial court denied the motion.

Plaintiff submitted a proposed judgment on April 27, 2017. The proposed judgment, unlike the statement of decision, found in favor of plaintiff on her quiet title claims based on an express easement “or, alternatively, a prescriptive easement” against both O’Neal and the Indian Springs HOA. The 171*171 proposed judgment against Indian Springs also expressly stated that “any third party individual homeowners who are affiliated in any way with Defendants [Indian Springs and Indian Oaks HOAs], including as … members, … are bound by this judgment.” The following day, plaintiff filed a motion for attorney fees and costs.

Defendants filed objections to the proposed judgment on May 3, 2017. On May 10, 2017, the trial court entered judgment, without ruling on the objections or altering the proposed judgment.

On May 22, 2017, the trial court awarded plaintiff attorney fees of $199,459, based on plaintiff’s claimed status as a third party beneficiary of the 1998 maintenance agreements (see fn. 3, ante) between the Indian Springs and Indian Falls HOAs.[14]

Defendants filed motions for a new trial and motions to set aside the judgment, which were denied.

Eighteen homeowners who were not joined as defendants in plaintiff’s quiet title causes of action (third party movants) filed a motion to vacate the judgment that was also denied.

The Indian Springs HOA, O’Neal, Eagle Knight, and third party movants filed timely notices of appeal.

DISCUSSION

We note several preliminary points.

First, in her respondent’s brief, plaintiff concedes that defendant Eagle Knight (the security company) is not liable for damages, and that she seeks only declaratory relief and a permanent injunction against Eagle Knight. Our conclusions in the case as to the other defendants make it unnecessary to separately consider those claims as to Eagle Knight.

Second, plaintiff filed a motion with her respondent’s briefs requesting judicial notice of a 43-page document prepared by the Chatsworth Historical Society. She tells us it was not presented to the trial court, and “gives appropriate context” to certain exhibits. We find the document is irrelevant and deny the motion.

172*172 Third, we grant defendant Indian Springs HOA’s unopposed motion for judicial notice of a grant deed and of higher resolution copies of four other documents admitted into evidence in the trial court.

1. Indispensable Parties and the Express Easement

As we observed at the outset, we agree with defendants that the Indian Springs homeowners were indispensable parties to the litigation, and that the express easement granted by the Indian Springs HOA was confined to Iverson Road. As it happens, these two points are related, because the rationale for the trial court’s ruling on the indispensable party issue was centered on an erroneous construction of the 1998 easement declaration. Plaintiff makes the same arguments on appeal, asserting, for example, that third party movants’ claim to be indispensable parties “is premised on an erroneous position that they are fee simple owners of the streets of the Indian Springs HOA.” But they are indeed owners of the private streets, as we now explain.

a. Indispensable parties

The Indian Springs homeowners should have been joined as parties, as required under the quiet title statutes. (§§ 762.010 [“The plaintiff shall name as defendants in the action the persons having adverse claims to the title of the plaintiff against which a determination is sought.”], 762.060, subd. (b) [“the plaintiff shall name as defendants the persons having adverse claims that are of record or known to the plaintiff or reasonably apparent from an inspection of the property”]; see also § 389 [governing indispensable or conditionally necessary parties].)[15]

Our conclusion necessarily flows from the undisputed evidence that the individual homeowners in Indian Springs have title to their lots to the center of the private streets they abut. Thus, testifying about the tract map for Indian Springs (Tract No. 33622), Robert D. Hennon, a licensed land surveyor and expert witness for defendants, pointed out that “[y]ou can see how the ownership lines of the adjoining parcels all go to the center of the streets.” (See also Safwenberg v. Marquez (1975) 50 Cal.App.3d 301, 308 [123 Cal.Rptr. 405] [referring to the presumption that where property is sold by 173*173 reference to a recorded map, the grantee takes to the center of the street shown on the map; the presumption “`continues to apply in the absence of a clear expression in the deed not to convey title to the center line'” (italics omitted)]; Civ. Code, § 1112 [“A transfer of land, bounded by a highway, passes the title of the person whose estate is transferred to the soil of the highway in front to the center thereof, unless a different intent appears from the grant.”].) Mr. Hennon’s evidence was not disputed.

A quiet title judgment cannot be entered in the absence of all parties with an interest in the property at issue. (See Washington Mutual Bank v. Blechman (2007) 157 Cal.App.4th 662, 667 [69 Cal.Rptr.3d 87] [“A person is an indispensable party to litigation `”if his or her rights must necessarily be affected by the judgment.”‘”].) The judgment entered by the trial court states that “any third party individual homeowners who are affiliated in any way with Defendants [the Indian Springs and Indian Oaks HOAs] are bound by this judgment.” That cannot be the case unless the owners of the private streets were parties, or unless, as a matter of law, the Indian Springs HOA had the authority to bind its members to the grant of an easement over the streets owned by the members. While the Indian Springs HOA had the authority to grant nonexclusive easements “over that portion of each Lot designated as the Private Streets,” this was only to the extent necessary for maintenance, trash pickup and similar services.[16]

The trial court nonetheless concluded that the Indian Springs HOA, “which alone executed and granted the easement at issue, was the proper party,” and the individual homeowners “were not indispensable parties.” The trial court based its conclusion on the CC&R’s and the 1998 easement declaration, stating that the latter “expressly states (and was executed on behalf of all individual homeowners) that under the [CC&R’s], the Indian Springs Homeowners Association is the owner of the Private Streets through the project.” This was a mistaken interpretation of those documents.

174*174

b. The declaration of easement and the CC&R’s

i. The CC&R’s

The court cited various definitions in the CC&R’s, observing that the definition of “`Owner'” referred to “the record owners of the fee simple title to any Lot,” and the term “`Lot(s)'” does not mention the Private Streets. (That is incorrect because the CC&R’s define “`Lot(s)'” to “mean and refer to any plot(s) of land numbered 1 to 57, inclusive, of Tract 33622 as shown on the Map.” As noted above, the undisputed testimony was that the tract map showed ownership lines to the center of the street.) The court also observed that the definition of “`Private Streets'” did not include “any reference to fee ownership by individual owners.”[17] Further, the court cited the definition of “`Common Area'” (“the security gate and appurtenances thereto, and the reciprocal easements held by and against each owner for use and maintenance of the Private Streets installed over portions of each Lot, as shown on the Map”).

The court concluded from those definitions, “combined with the Declaration of Easement,” that Indian Springs HOA owns all the private streets. We see nothing in those definitions (or the declaration of easement, as explained below) that supports the trial court’s view, or that contradicts the individual homeowner’s ownership of the private streets to the midline, as established by the tract map (and confirmed by the limited scope of the easements the CC&R’s specifically grant to the HOA). To the contrary, the CC&R’s nowhere suggest the HOA “owns” the private streets. The fact that all the owners have reciprocal easements for use and maintenance of “the Private Streets installed over portions of each Lot” is entirely consistent with each owner’s title to the portion of the private street installed over his or her lot.

ii. The declaration of easement

The declaration of easement is the only other source the trial court cited (incorrectly) as demonstrating the HOA’s ownership of the private streets. The declaration, in its first recital, stated the Indian Springs HOA was “the owner of certain common areas within Indian Springs Estates, including the private streets through the project (hereafter `Servient Tenement’), pursuant to” the 1982 CC&R’s. It is this language the trial court, and plaintiff, point to 175*175 as establishing the Indian Springs HOA owns the private streets (and therefore had authority to grant an easement over all of them, not just Iverson Road). In addition, plaintiff points to the language by which the Indian Springs HOA granted the easement, which uses the plural (private streets, not “street”), granting “an easement for ingress and egress and related purposes over the private streets in the Servient Tenement as depicted on the Map attached hereto as Exhibit `B’.”

To the extent the quoted language in the recital is ambiguous, any ambiguity is resolved by the remainder of the document; by related documents in the record that were recorded contemporaneously; and by testimony from the authorized member of the board of directors who executed the easement declaration for the Indian Springs HOA and from the attorney who prepared the easement declaration.

The easement declaration unambiguously states it is confined to the private streets depicted on the map attached to the declaration. There is no getting around the fact that the private streets depicted on the map are only Iverson Road and the private streets in Indian Falls. So, even if Indian Springs HOA were the owner of all the private streets in Indian Springs (and it is not), it did not grant plaintiff an easement over all those streets.

Plaintiff cannot explain away the map. Plaintiff merely asserts— incorrectly, and therefore without any citation to authority—that the contention that the map controls “over the written language of the easement” is “simply not the law in California.” But here, the “written language of the easement” specifically uses the map to show the easement route. Plaintiff cites no legal authority that supports her contrary view of “the law in California.” It has long been the law in California that plat maps may be used to precisely define an easement, and when an easement is defined by a map, it is decisive. (Wilson v. Abrams (1969) 1 Cal.App.3d 1030, 1035 [82 Cal.Rptr. 272] [absence of language does not “infect[] the instrument with the lack of specificity urged. The easement was granted pursuant to a plat map attached to the instrument, and it is settled that easements may be conveyed in such manner”].)

Other contemporaneous events and documentation make it clear that the map, and not the use of the plural (private “streets”) specifies the limits of the easement.

As mentioned earlier, both the Indian Springs and Indian Falls HOAs recorded their easement declarations in favor of plaintiff and other abutting 176*176 landowners in 1999, at the same time.[18] (To repeat, Indian Falls is the gated community to the east of plaintiff’s ranch. The Indian Falls CC&R’s were first recorded in 1997.) The easement declarations are virtually identical, and use the same map showing the “streets involved in grant of easement.”

In Indian Falls (unlike Indian Springs), all the streets had been public streets, and Indian Falls sought to have those streets privatized. At the same time, Indian Springs sought to privatize portions of Iverson Road, the only public street in Indian Springs. The county treated the applications of Indian Falls and Indian Springs to privatize their streets as a single transaction. The county’s conditions for privatization included, as stated in the easement declarations, “the conveyance of a non-exclusive easement for ingress and egress throughout the Servient Tenement” to abutting property owners. Both the Indian Springs and Indian Falls HOAs complied with that condition by conveying an easement “for ingress and egress and related purposes over the private streets in the Servient Tenement as depicted on the Map attached hereto as Exhibit `B’.”

The report to the board of supervisors from the Department of Public Works described why it was recommended the county vacate its rights of way to these streets: “The Indian Falls Homeowners’ Association and Indian Springs Homeowners Association requested the vacation to restrict public access, privatize existing streets and establish a gated community.” The report further stated: “All the streets proposed to be vacated have been built to County standards and, except for the portion of Iverson Road which is a County highway, have been maintained by the Homeowners’ Associations. Maintenance of the vacated streets, including that portion of Iverson Road discussed above, will continue to be the responsibility of the Homeowners’ Associations, should your Board approve the vacation. These streets will remain private streets for use by the adjoining property owners and the owners of properties dependent on these streets for access. This requirement is provided for in the Homeowners’ Association [CC&R’s], and in the agreements and the declaration of easement.” (Italics added.) An attached map showed the streets being privatized, and they are the same streets shown on the two easement declarations. In March 1999, the board of supervisors adopted a resolution as recommended, privatizing “Iverson Road & Streets Within Tract No. 42353 [Indian Falls].”

These documents clearly establish the scope of the Indian Springs declaration of easement, but there is more. As noted earlier (see pp. 162-163 & fn. 3, ante), simultaneously with their easement declarations, the Indian Springs and Indian Falls HOAs recorded the two maintenance agreements they made 177*177 with each other.[19] Each homeowners association gave the other and abutting property owners “right of way easements over and across those portions of the private streets as depicted on Exhibit `3′ hereto”—again, the same map as the one attached to the easement declarations. The maintenance agreements stated the owners of abutting properties were to “use the Iverson Road entrance exclusively.” (There was to be another access gate on Poema Street in Indian Falls.) These agreements, too, referred to the easement declarations each association had recorded in favor of the abutting property owners as a condition imposed by the county.

In sum, all the references in the county’s documents to the “streets” are to the streets in which the county vacated its rights of public access, and those are only the streets in Indian Falls and the portion of Iverson Road in Indian Springs. The other contemporaneous documents—the maintenance agreements and the Indian Falls declaration of easement—are to the same effect.

We digress briefly to address plaintiff’s contention, and her counsel’s repeated assertions at oral argument, that the easement declaration requires “an appropriate easement,” and that the easement route depicted on the map is not “appropriate” because it forces plaintiff to use the unsafe bridge on Fern Ann Falls Road. (The “appropriate easement” language appears in one of the recitals in the easement declaration, stating the declarant’s “desire[] to perform the conditions established by the County of Los Angeles by conveying to the owners of lots in the Dominant Tenement an appropriate easement.”) Plaintiff claims this recital required Indian Springs “to make the Fern Ann Falls bridge safe and drivable when seeking vacation of the public streets from the County.”

Plaintiff cites no authority for that proposition, and we can imagine none. For one thing, a descriptive term in a recital does not change the clear language of the easement grant. For another, the bridge is on private property owned by residents on Fern Ann Falls Road, and it is their obligation to maintain the bridge. Indian Springs has no obligation—indeed it has no right—to maintain a bridge on property owned by others, and nothing in any county or other document suggests otherwise.

The documentation of the easement route was further supported by trial testimony. Neil Eberhard, the then-member of the board of directors who signed the declaration of easement on behalf of the Indian Springs HOA, confirmed that “both associations worked together to come up with a way to satisfy the county to get the streets—to get Iverson privatized and the Fall 178*178 streets privatized.”[20] He “very definitely” recalled “what the route was that this easement created that [abutting landowners] were to use,” and it was the route on Exhibit B: “on the exhibit it is plainly marked by hash lines that allow egress and ingress to Fern Ann Falls.”

Robert D. Hillshafer, who was general counsel for both the Indian Springs and Indian Falls HOAs at the time and participated in the preparation of both easement declarations, testified at length and in detail to the same effect—that it was never the intent of Indian Springs to provide the abutting landowners the right to drive over Indian Springs private streets; “[t]he limitation was Iverson Road.” As to the use of the plural “streets,” Mr. Hillshafer testified that “the only thing that the Springs was really granting was Iverson,” and “[s]o the plural of street is probably more—creates a misimpression that shouldn’t be there.”

c. Conclusions

In the face of the language confining the easement to the private streets “depicted on the Map attached,” the contemporaneous documents to the same effect, and the testimony, the only reasonable construction of the words in the Indian Springs easement declaration is that it is confined to Iverson Road. In other words, returning to plaintiff’s contentions, we find the plural reference to private “streets” in the easement grant to be of no significance. No other conclusion is reasonably sustainable. Plaintiff has an express easement of ingress to and egress from her ranch property through Indian Springs, but the easement route is confined to Iverson Road.

That returns us to the third party movants’ status as indispensable parties to plaintiff’s quiet title action. As we have said, the trial court relied for its contrary conclusion, as does plaintiff, on the recital in the easement declaration that the Indian Springs HOA was “the owner of certain common areas within Indian Springs Estates, including the private streets through the project … pursuant to” the CC&R’s. The court reasoned that the third party movants did not have a property interest in the private streets that was injuriously affected, because they had only “a non-exclusive, reciprocal right of access regarding the Private Streets.” As we have seen, that is not the case; third party movants (and other individual homeowners) own their lots to the midpoint of the private street; there is no evidence to the contrary.[21] As for 179*179 the quoted recital language, it may be an infelicitous turn of phrase, but in fact, nothing in the CC&R’s or other documents in the record suggests that the Indian Springs HOA “owns” the private streets.[22]

In addition to the ownership issue, the trial court reasoned (and plaintiff argues) that the Indian Springs HOA was the only necessary party because of its authority to enforce all provisions of the CC&R’s “by appropriate means, including without limitation, … the commencement of actions.”[23] The court also cited Civil Code section 5980, which gives a homeowners association standing “to institute, defend, settle, or intervene in litigation … in its own name as the real party in interest and without joining with it the members,” in specified matters, including “[e]nforcement of the governing documents” and to repair property damage (id., subd. (a)). But this is a quiet title case, not a suit to enforce any provision of the governing documents or to repair property damage, and section 5980 is irrelevant to an owner’s right to be joined as an indispensable party to a quiet title claim affecting his property.[24]

180*180 In sum, because the third party movants were, as they contended, necessary parties to plaintiff’s quiet title action, the judgment against the individual homeowners cannot stand. And even if it could, the trial court’s grant of an express easement over the private streets of Indian Springs was erroneous, as the express easement is confined to the portions of Iverson Road depicted on the map.

2. Other Claims on Appeal

Even if it were proper to quiet title in the absence of individual homeowners, we would reverse the judgment, as we find no merit in plaintiff’s claims of prescriptive and equitable easements over the private streets of Indian Springs and the Lenope roadway.

a. The prescriptive easement claim
As has been mentioned, plaintiff alleged a prescriptive easement “in the alternative” to her claims of an express easement. In its statement of decision, the trial court did not address that claim, finding only express easements. But the trial court entered the judgment drafted by plaintiff “[r]egarding plaintiffs’ first cause of action for quiet title based upon an express easement, or, alternatively, a prescriptive easement.” (Some capitalization omitted.) Plaintiff contends that “a quiet title judgment based on a prescriptive easement was awarded by the Trial Court.” We think not.

The statement of decision has no findings by the trial court supporting a prescriptive easement. A prescriptive easement requires “use of the property which has been open, notorious, continuous and adverse for an uninterrupted period of five years.” (Warsaw v. Chicago Metallic Ceilings, Inc. (1984) 35 Cal.3d 564, 570 [199 Cal.Rptr. 773, 676 P.2d 584] (Warsaw).) The statement of decision does not discuss the elements of a prescriptive easement, or even mention the term “prescriptive easement.”

The trial court’s ruling on third party movants’ motion to vacate the judgment states the court found express and equitable easements in plaintiff’s favor over certain private streets located within Indian Springs but says nothing about a prescriptive easement.

In short, it is clear the court did not find a prescriptive easement, despite plaintiff’s closing trial brief contending she had established a prescriptive easement. “Whether the elements of prescription are established is a question of fact for the trial court.” (Warsaw, supra, 35 Cal.3d at p. 570.) Here, the trial court made no factfindings on those elements. Nor do the 181*181 circumstances of this case permit us to infer the existence of any such findings—indeed, plaintiff says nothing in her brief about implied findings. Nor could she.

Defendants requested a statement of decision, but plaintiff did not. Plaintiff did not object to the statement of decision, and opposed defendants’ application to vacate the statement of decision. Plaintiff’s opposition argued the statement of decision “included a detailed discussion of facts and conclusions of law in support of its decision.” Under these circumstances, the doctrine of implied findings (requiring an appellate court “to infer the trial court made all factual findings necessary to support the judgment” (Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 58 [58 Cal.Rptr.3d 225])) plainly does not allow us to infer the court awarded a prescriptive easement. (Cf. id. at p. 59 [“Litigants must also bring ambiguities and omissions in the statement of decision’s factual findings to the trial court’s attention—or suffer the consequences.”].)

Finally, we would in any event conclude there was insufficient evidence of a prescriptive easement over the private streets of Indian Springs. Plaintiff contends her use was “open, notorious and hostile for a continuous period of five years commencing no later than 1999.” She relies on her testimony that she traveled to the ranch property daily since 1996,[25] and on the testimony of her expert witness in aerial photography analysis (David Ruiz), who testified to the existence in 1999 of “well-defined, well-traveled” roadways and “evidence of vehicular traffic” over those roadways in what would later be developed as Indian Oaks. (These roadways then connect with Taimi Avenue in Indian Springs.)

The cited evidence does not establish continuous hostile use since 1999. The period from 1999 to 2002 is not a five-year period, even assuming other elements of a prescriptive easement were met. (There is no evidence the then-owner of the area that was later developed as Indian Oaks had actual or constructive notice of plaintiff’s daily trips over the dirt roads and trails Mr. Ruiz identified. (See 6 Miller & Starr, Cal. Real Estate (4th ed. 2019) Easements, § 15:35 [“The fact that a user claims a right to use the property adversely to the rights of the owner of the servient tenement must be communicated to the property owner, or the use of a claimed easement must be so obviously exercised as to constitute implied notice of the adverse 182*182 claim”; the owner “must have notice that unless some action is taken to prevent the use it may ripen into a prescriptive easement”].))

From late 2002 until 2012, plaintiff owned property and lived in Indian Springs and Indian Oaks, and so was entitled to use the private streets of both communities. “Prescription cannot be gained if the use is permissive.” (12 Witkin, Summary of Cal. Law (11th ed. 2018) Real Property, § 418, p. 483.) And the period from 2012 to the filing of this litigation in 2014 is not a five-year period.

Plaintiff argues her residency does not negate her “hostile use” of the streets, because both Indian Springs and Indian Oaks HOAs raised objections about her use. We disagree. As to Indian Springs, plaintiff cites her receipt of a letter from the Indian Springs HOA dated August 11, 2008. The letter stated that hay trucks and horse trailers were using the interior streets of Indian Springs for access to her ranch, and stated that “Fern Ann Falls traffic is only allowed to use Iverson for ingress and egress and not the internal streets of Indian Springs. Please direct this traffic accordingly.” That is the only evidence plaintiff cites to support “hostile use” of Indian Springs private streets while she resided in Indian Springs and then Indian Oaks between 2002 and 2013.[26] Plaintiff testified that when she received that letter, she was “not sure” if she called the Indian Springs HOA “to challenge what this letter said,” instead saying, “I honestly don’t know.” This is not substantial evidence of continuous hostile use of the private streets of Indian Springs during the ensuing five years.

The same is true of the Lenope roadway. The trial court made no findings of or reference to a prescriptive easement in its statement of decision. Plaintiff claims to have continuously used what is now the Lenope roadway since she bought the ranch in 1996. But she was unable to identify her route from the photographs her expert, Mr. Ruiz, used, and Mr. Ruiz himself testified (see fn. 11, ante) that his October 21, 1999 aerial photograph, and earlier photographs, showed no evidence of vehicle use over what would become the Lenope property. (See Warsaw, supra, 35 Cal.3d at p. 571 [“the existence of a prescriptive easement must be shown by a definite and certain line of travel for the statutory period”].) And, as we have seen, as of November 2002, when she moved to Indian Springs, plaintiff was entitled to use the roadways in Indian Oaks and Indian Springs, so her use was not 183*183 hostile. Moreover, she owned the Lenope property as of October 2005, so her use of the Lenope roadway that she built over it cannot have been adverse while she owned the property, which she did until she sold it to O’Neal in 2012. The record does not support a prescriptive easement.

b. The equitable easement claim

That brings us to the trial court’s award of an equitable easement. The statement of decision does not discuss or state any findings concerning the requirements for granting an equitable easement. Defendants objected to the lack of any explanation of the factual or legal basis for finding an equitable easement, but the trial court denied defendants’ application to vacate the statement of decision.

We begin with the legal authorities on equitable easements.

“While the resolution of factual disputes is left to the trial court, appellate courts may determine whether the elements of an equitable easement have been established by the facts as a matter of law.” (Hansen v. Sandridge Partners, L.P. (2018) 22 Cal.App.5th 1020, 1028 [232 Cal.Rptr.3d 247] (Hansen).)

The law on equitable easements is well explained in Shoen v. Zacarias (2015) 237 Cal.App.4th 16 [187 Cal.Rptr.3d 560] (Shoen). There are three requirements, described in terms of the landowner and the trespasser. Judicial creation of an easement over a landowner’s property is permissible “provided that the trespasser shows that (1) her trespass was `”innocent”‘ rather than `”willful or negligent,”‘ (2) the public or the property owner will not be `”`irreparabl[y] injur[ed]'”‘ by the easement, and (3) the hardship to the trespasser from having to cease the trespass is `”`greatly disproportionate to the hardship caused [the owner] by the continuance of the encroachment.'”‘ [Citations.] Unless all three prerequisites are established, a court lacks the discretion to grant an equitable easement.” (Id. at p. 19; see id. at p. 21 [courts “resolve all doubts against their issuance”].)

Further, “the equitable nature of this doctrine does not give a court license to grant easements on the basis of `whatever [a court] deems important,’ even when [the three] prerequisites are absent.” (Shoen, supra, 237 Cal.App.4th at p. 19.) Shoen also explains that “[a]lthough the equitable easement doctrine is sometimes called the doctrine of `balancing of conveniences’ or the doctrine of `relative hardships’ [citation], these labels are somewhat misleading. These labels suggest that an equitable easement may issue if the conveniences or hardships merely favor the trespasser, when the 184*184 doctrine actually requires that they tip disproportionately in favor of the trespasser. These labels also suggest that the conveniences or hardships between the trespasser and property owner start out in equipoise, when the doctrine actually requires that they begin tipped in favor of the property owner due to the owner’s substantial interest in exclusive use of her property arising solely from her ownership of her land.” (Ibid.)

Shoen discusses at length the reasons for requiring the seeker of an equitable easement “to prove that she will suffer a greatly disproportionate hardship from denial of the easement than the presumptively heavy hardship the owner will suffer from its grant.” (Shoen, supra, 237 Cal.App.4th at p. 20; see id. at p. 21 [“additional weight is given to the owner’s loss of the exclusive use of the property arising from her ownership, independent of any hardship caused by the owner’s loss of specific uses in a given case”; “[t]o allow a court to reassign property rights on a lesser showing is to dilute the sanctity of property rights enshrined in our Constitutions”].)

And finally, the authorities state that the first factor—showing the trespass is innocent rather than willful or negligent—”is the most important.” (Hansen, supra, 22 Cal.App.5th at p. 1028; id. at p. 1029 [“`If the [encroaching] party is willful, deliberate, or even negligent in his or her trespass, the court will enjoin the encroachment.'”].)

In this case, the court discussed none of these points in its statement of decision. Several months later, in its ruling denying third party movants’ motion to vacate the judgment, the trial court stated that its finding of an equitable easement was proper, “as the parties’ relative hardships were balanced.” The court stated that plaintiff “ha[d] shown that due to the condition of a certain bridge in the project, it would have been inequitable to Plaintiffs to not find an easement.” The court said that the homeowners associations did not demonstrate “any comparable hardship” at trial, “given that their right to use the Private Streets has not been diminished.”

The trial court erred, abusing its discretion by failing to apply the principles necessary to the award of an equitable easement. As Shoen tells us, unless all three prerequisites are met, a court does not have license to grant easements “on the basis of `whatever [a court] deems important.'” (Shoen, supra, 237 Cal.App.4th at p. 19.) Here, the trial court omitted from its postjudgment analysis any consideration of the fact that plaintiff bought the ranch property knowing the condition of the bridge, for which property owners in Fern Ann Falls—not defendants—are responsible. In addition, the court’s conclusion that the right of Indian Springs homeowners to use the private streets “has not been diminished” completely disregarded the homeowners’ substantial interest in the exclusive use of their property (presumably 185*185 because the court had erroneously concluded they had no ownership interest). The trial court likewise disregarded the adverse impact on homeowners of opening their private streets to commercial traffic by the 40-foot semi-trucks servicing plaintiff’s ranch during Mr. Cano’s tenancy. The trial court focused only on the condition of a bridge for which Indian Springs has no responsibility.

Thus the trial court failed entirely to consider a critical point: whether plaintiff’s conduct was innocent, rather than willful or negligent. It seems clear plaintiff did not establish innocent use of the private streets of Indian Springs. Her claim to innocence is that, beginning in April 1996, she “worked two years and sought to expand the Fern Ann Falls bridge by seeking to have a bond measure passed so that money could be raised in order to allow for the bridge to be improved.” (Her petition described “the street commonly referred to as West Fern Ann Falls Road,” and requested “the entire road and bridge be upgraded.”) Thus, she contends, she “attempted to do equity,” but was prevented from doing so, because after she had collected enough signatures, the county told her that “it’s no longer eligible, because the community has been privatized.”[27]

The evidence cited does not establish plaintiff’s innocent use of the private streets of Indian Springs. Indeed, it shows she knew when she purchased the ranch that her access involved use of the bridge on Fern Ann Falls Road. Plaintiff testified that “[w]hen I bought the property in 1996, the realtor told me that everybody wanted to chip in to fix that bridge. Because I wasn’t 186*186 going to buy it because of the bridge. But then he assured me, we have two accesses and everyone wants to fix that bridge. And I quickly found out that nobody wanted to fix the bridge.” Plaintiff testified at trial that she “started using a back route as soon as [she] purchased the ranch property,” but she testified at her deposition that, when she bought the ranch property, she “didn’t realize there was another way [other than over the bridge]. So once I found the other way to go, I stopped using the bridge.” She testified it was “only when [she] discovered the back route that delivery companies stopped using the bridge.” When asked at her deposition, “And how did you discover that you could go the back way?” plaintiff responded, “As they started developing the neighborhood and they made streets that emptied out the dirt that connected to Fern Ann Falls.” (Grading began in Indian Oaks in 2002.)[28]

In short, we conclude plaintiff did not establish the innocence factor. Plaintiff insists that the unsafe condition of the Fern Ann Falls bridge makes it “inequitable that this access way be the sole access route of travel” to her ranch. But her evidence does not show the necessary element of innocent use. The cases plaintiff cites all involve innocent parties, and most of them involve completely landlocked properties.[29] We conclude that plaintiff knew from the day she purchased the ranch in 1996—at a time when Indian Oaks (over which she must pass to reach the ranch over her preferred route) was completely undeveloped—about the nature of the Iverson Road access and the shortcomings of the bridge. There can be no equitable easement in these circumstances.

187*187 Again, the same principles apply to the Lenope roadway. The trial court awarded an equitable easement based on the bridge it found to be unsafe, without regard to the requirements for judicial creation of an equitable easement. Moreover, because we have concluded plaintiff cannot use the private streets of Indian Springs, she has no access to the Lenope roadway in any event.

c. The remaining issues

That leaves us with the recorded easement over the Lenope roadway. The question would ordinarily be moot, since plaintiff cannot reach the Lenope roadway without using the private streets of Indian Springs. But O’Neal’s cross-complaint, on which the trial court granted judgment against O’Neal, sought to quiet title “against all adverse claims of [plaintiff].”

O’Neal contends the trial court erred, among other reasons because the easement recorded in 2010 over the Lenope property (the servient tenement) is expressly for the benefit of the Friese property (the dominant tenement), and makes no reference to plaintiff’s ranch property. The grant states: “April Hart, the owner of the property known as 22602 Lenope Place, hereby grants to Ranch at the Falls LLC [her alter ego and then-owner of the Friese property] permanent easement for the benefit of the property known as 22590 Fern Ann Falls [the Friese property] over/under/on/across the land located as described in Exhibits A and B for ingress and egress purpose(s). [¶] This easement shall be covenant running with the land and shall be binding on the successors, heirs and assigns of both parties hereto.”

Plaintiff’s answer to this is that when she sold the Lenope property to Mr. O’Neal and Ms. Maniago in 2012, they assured her “that they would never try and overturn that easement,” and when she sold the Friese property to Mr. Friese in 2013, she “meant to reserve a right to use the Lenope Roadway Easement.” But she did not do so. (Plaintiff then explains that when she recorded the easement over the Lenope property (in 2010), she “wanted to put all three of my addresses in,” but the clerk’s office “told me I can only use one address, and so I wanted to use the address that was associated with Ranch at the Falls because my intent was to give—the easement was for the ranch.”) She then says that “she did not intend to merge the Lenope Roadway Easement when she sold 22590 Fern Ann Falls Road to Mr. Friese.”

It appears to us that plaintiff’s argument about the merger doctrine misses the critical point, and that the merger doctrine is not relevant in this case. To explain: The merger doctrine refers to the principle that “an easement usually is extinguished when the same person acquires the fee title to both the dominant and servient tenements.” (6 Miller & Starr, Cal. Real 188*188 Estate, supra, Easements, § 15:75.) Here, when plaintiff recorded the Lenope roadway easement, she (or her alter ego) owned both the dominant tenement (the Friese property) and the servient tenement (the Lenope property), so she was effectively granting an easement to herself. However, “[e]ven in circumstances where there might otherwise be a merger, whether or not there has been a merger depends on the actual or presumed intention of the person who holds both interests, and there will be no merger if it would be inequitable.” (Ibid.)

In this case, the merger doctrine does not come into play. Plaintiff is really saying that in 2010, she intended to grant an easement over the Lenope roadway to her ranch property, not to the Friese property. If she had done so, the applicability of the merger doctrine, and her intent not to merge the “the fee title to both the dominant and servient tenements” (6 Miller & Starr, Cal. Real Estate, supra, Easements, § 15:75) would be relevant. But she did not grant the easement to her ranch property. The easement she granted is quite clear. Plaintiff, then owner of the servient tenement (the Lenope property) granted an easement “running with the land” for the benefit of the Friese property at 22590 Fern Ann Falls (the dominant tenement). She now says she intended to do something else—to grant an easement to her ranch property as the dominant tenement.[30] But her intent does not matter if the easement grant was not ambiguous.

“`It is fundamental that the language of a grant of an easement determines the scope of the easement.'” (Schmidt v. Bank of America, N.A. (2014) 223 Cal.App.4th 1489, 1499 [168 Cal.Rptr.3d 240].) Grants are to be interpreted like contracts in general. (Ibid.) “A document that is clear and unambiguous is interpreted by an examination of the document itself and by a comparison and analysis of all of its provisions. When there is an uncertainty or ambiguity in the instrument conveying the easement, the court can examine the surrounding circumstances and the relationship between the parties and their respective properties.” (6 Miller & Starr, supra, § 15:16, fns. omitted.)

In short, while plaintiff may have intended to do something other than what she did, there is no uncertainty or ambiguity in the instrument conveying the easement, which makes no reference at all to the ranch property. We do not see any legal basis on which a court may revise the written instrument.

189*189 CONCLUSION

Because there are no enforceable easements over the private streets of Indian Springs (except over Iverson Road), or over the Lenope roadway (except in favor of the Friese property), there is no basis for an award of damages or an injunction against any of defendants, and no basis for the award of attorney fees. Plaintiff’s claims for nuisance, declaratory relief, and intentional interference with contractual relations fail along with her easement claims. Our conclusions make it unnecessary to address other points raised by defendants.

DISPOSITION

The judgment on plaintiff’s complaint is reversed and the cause is remanded to the trial court with directions to vacate the injunctions and the award of attorney fees, and to enter a new judgment in favor of defendants. Indian Springs Homeowners Association, Keith O’Neal and Gladys Maniago are entitled to judgment on their cross-complaint declaring there are no enforceable easements over the private streets of Indian Springs (except over Iverson Road) or over the Lenope roadway (except in favor of the Friese property). Appellants shall recover their costs on appeal.

Stratton, J., and Wiley, J., concurred.

190*190 APPENDIX A

[1] To assist in understanding this opinion, we append an illustration with colored legends created by one of the parties. (See appen. A, post, p. 190.) The illustration is not in evidence, and is included only for demonstrative purposes. Note that the “Declaration of Easement Route” shown (in green) is the easement route as this court finds it. Plaintiff contends to the contrary that the easement route includes some of the private streets in Indian Springs (all of which are shown in red).

[2] The 1982 CC&R’s were restated on March 13, 2002, consolidating various amendments made between 1984 and 2002. There are no changes pertinent to this appeal.

[3] In the maintenance agreements, each homeowners association agreed to “administer and manage the operation, maintenance and repair of the Private Streets and Access Gate located within the boundaries of its respective project.” The agreement stated that, as a condition imposed by the county, each homeowners association had recorded the easement declarations (described in the text, ante) in favor of abutting property owners. The agreement contained a clause entitling the prevailing party to attorney fees, “[i]f any action at law or in equity is necessary to enforce or interpret the terms of this Agreement and if either party files any action or brings any proceeding against the other party arising out of this Agreement ….”

[4] Plaintiff asserts the lender agreed to the short sale “based upon representations made by [O’Neal] that the Lenope Roadway Easement significantly impacted and devalued their property.” The authority cited for this statement is an addendum to the purchase agreement describing “impediments regarding the Property that should be taken into consideration regarding the `Short Sale’.” One of the impediments (there were four others) listed was the easement, described as “a MAJOR HUGE problem,” running “DIRECTLY through the front yard of the Property” that was “being accessed CONSTANTLY” by the ranch. (The Lenope property was appraised, as of Oct. 4, 2012, at $775,000.)

[5] The cross-complaint alleged causes of action for abandonment and extinguishment of easement, quiet title, trespass, nuisance, unjust enrichment and declaratory relief.

[6] In May 2015, plaintiff and the Indian Oaks HOA agreed to a settlement. Indian Oaks agreed not to oppose plaintiff’s claims, so long as there were no damages or costs assessed against it, and so long as no additional burdens beyond access to the ranch through the Lenope roadway were placed on Indian Oaks. Indian Oaks agreed to abide by any determination made by the court or any settlement between the parties in connection with plaintiff’s easement claims.

[7] In his opening statement, discussing the 1998 maintenance agreements, defense counsel stated that “I know your order from last week was plaintiffs can amend according to proof.”

[8] Further statutory references are to the Code of Civil Procedure unless otherwise specified.

[9] The trial court stated Ms. Johnson “testified that the bridge was not safe for use by the fire department,” but she did not make that statement.

[10] The evidence only showed the number of horses at the property (30 to 35) during the time Mr. Cano leased the ranch, beginning in 2013.

[11] Mr. Ruiz’s testimony addressed the Indian Oaks area, and he used later photographs (mostly from 2002 and 2003) in identifying a dirt road that he said went through what is now the Lenope roadway. A 2003 photograph shows a graded area where the Lenope roadway now exists. As to the earlier photographs, Mr. Ruiz testified that an October 13, 1997 photograph showed “no evidence of vehicle use over the area in which the Lenope property was eventually constructed.” A trail directly east of it was a horse trail. An October 21, 1999 photograph, evidencing vehicle use of dirt trails, likewise showed no evidence of vehicle use over what would become the Lenope property. Mr. Ruiz also testified about a 1994 photograph evidencing vehicle use over a trail, which he said was “a thin trail,” that would require four-wheel drive and would not support a vehicle pulling a trailer. It, too, did not traverse the area where the Lenope property was later built.

[12] This apparently refers to the 1996 deed to plaintiff’s ranch. The deed grants plaintiff parcels 1 and 2 (the ranch), and parcel 3, “[a]n easement for ingress and egress to be used in common with others over that portion of Fern Ann Falls Road, which road has been in use for more than twenty years in the past, and as it now exists, as of the date of this conveyance [January 24, 1996],” followed by a metes and bounds description. There is no evidence this easement is recorded in the chain of title to any property in Indian Oaks.

[13] Actually, Mr. Cano testified he had leased property at his previous location for six years, and assumed he would extend his lease for the ranch beyond its two-year term.

[14] The trial court stated its belief all the causes of action were intertwined, and “the evidence was clear. Basically, the people are landlocked, forcing them to go over that bridge which, in the court’s finding, is unsafe.”

[15] “A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. If he has not been so joined, the court shall order that he be made a party.” (§ 389, subd. (a).)

[16] The CC&R’s state, concerning “Easements for the Benefit of the Project,” that “[t]he Association shall have, and shall have to further grant, nonexclusive rights, easements and licenses over that portion of each Lot designated as the Private Streets, to the extent necessary for trash pick-up, mail delivery, street light maintenance, median strip maintenance, or other similar services for the benefit of the Owners and the Project.” Further, as to “Private Streets,” the CC&R’s state: “The Developer hereby grants an easement to the Association and hereby declares an easement for the benefit of and appurtenant to each Lot for ingress and egress and underground utility service over that portion of each Lot designated as the Private Streets and for the construction and operation of the gate over that portion of [specified Lots] designated as the Private Streets subject to [specified] provisions.”

[17] The CC&R’s define “`Private Streets'” to “mean and refer to the Property shown as Private Streets designated Zaltana Street, Avenita Court, Serafina Drive and Taima Avenue of the Map of Tract 33622 and shall include all improvements located on or within the Private Streets.” (“`Property'” is defined in the recitals of the 1982 CC&R’s as “Lots 1 through 57 of tract 33622 as shown on map (the `Map’) recorded in Book 993, Pages 66 through 75, inclusive, of Maps, Records of Los Angeles County, California.”)

[18] The two easement declarations have consecutive filing numbers: XX-XXXXXXX (Indian Falls) and XX-XXXXXXX (Indian Springs).

[19] The recorded numbers of these documents are XX-XXXXXXX and XX-XXXXXXX, the numbers immediately preceding the two easement declarations.

[20] Mr. Eberhard explained: “Indian Springs had a set of streets that were private per se. And Iverson was not.”

[21] In addition to the undisputed evidence that the Indian Springs tract map showed the lots extended to the midline of the street, several owners testified to their understanding that this was so. For example, Mr. Eberhard, who resided in Indian Springs until 2000, testified that his understanding was that, as a member of Indian Springs, he “owned to the middle of the road” and that “all the members owned likewise to the middle of the street.” Mr. Hillshafer, who had been counsel for the HOAs, likewise testified that the interior streets within Indian Springs, other than Iverson Road, were “owned by the individual lot owners,” and were “[s]ubject to reciprocal easements granting certain duties and obligations to the Association for maintenance and repair and replacement.” Iverson Road, by contrast, at the time of the easement declaration and privatization, was not owned by individual lot owners, and when Mr. Eberhard signed the declaration of easement, he did not “encumber the fee interest of any member of the association.” Mr. Hillshafer also testified it was his understanding that, “once the public interest on Iverson Road was vacated, that Indian Springs, as a successor in interest, was to step into the shoes as the owner and undertake control of Iverson.”

[22] Mr. Hillshafer, who was responsible for preparation of the easement declarations, was questioned about the quoted language and said this: “Well, I don’t think it was really intended to indicate that the association owned the private streets, but it sort of implies that in here, so it could have been worded more accurately.”

[23] Plaintiff also points to a 1996 grant of easement executed by Mr. Eberhard on behalf of the Indian Springs HOA, granting an easement to the owner of what is now Indian Oaks (Tract No. 44327) over the private streets in Indian Springs. Plaintiff says this shows Mr. Eberhard was authorized to bind Indian Springs homeowners on other occasions “without needing individual signatures of each homeowner.” We do not see how this proves anything with respect to the easement declaration at issue in this case. Indeed, when questioned about the 1996 easement, Mr. Eberhard testified he believed he had authority to bind the Indian Springs HOA without all 57 lot owners’ signatures, “[u]nderstanding that [the grantee/owner of Indian Oaks] at that time controlled a major part of the 57 lots [in Indian Springs] and having had discussions and meetings with the rest of the homeowners, yes, I felt I was authorized.”

[24] The trial court also pointed to the provision of the maintenance agreements between Indian Springs and Indian Falls stating the agreements were binding on the parties, “including the members of the Associations, and each of their successors and assigns.” Of course that is so, but the easements referred to in that agreement, as we have found, do not affect the private streets of Indian Springs other than Iverson Road.

[25] Specifically, plaintiff cites her testimony that, during the time she lived in Indian Springs (from 2003 to 2007) and in Indian Oaks (from 2008 to 2012), she continuously traveled to the ranch property “on a daily basis” because her “horses live[d] there” and she “checked on them on a daily basis.” Since 1996 when she purchased the ranch, her usual method of accessing the ranch was over roads now known as La Quilla and Taima (Indian Springs) and Peak and Lenope (Indian Oaks). She estimated the number of times she used “the trails, streets and roadways over Indian Springs and Indian Oaks,” from 1996 to 2014, as “thousands.”

[26] Plaintiff cites other exhibits dated between 2005 and 2008, but these show objections from the Indian Oaks HOA to the use of her property in Indian Oaks. These exhibits included lawyers’ letters and a request for alternative dispute resolution by the Indian Oaks HOA; they alleged breach of the Indian Oaks CC&R’s by operating a business out of plaintiff’s residence, nuisance and other claims. Plaintiff does not tell us how this was resolved, but she testified that Indian Oaks did not take any additional formal enforcement actions against her.

[27] Plaintiff also states, without explanation or discussion, that “she is innocent as her Parcel 3 Easement set forth in her Deed [to the ranch] and the Indian Springs Easement Declaration establish her right to use the Indian Springs streets and the Lenope Roadway Easement.” As we have seen, the easement declaration does not establish any such right (and plaintiff appears to have been unaware of the existence of the easement declaration until defendants filed their cross-complaint in this case).

As to the “Parcel 3 Easement set forth in her Deed [to the ranch]” (see fn. 12, ante), we do not see (and plaintiff does not explain) how the deed to her ranch can establish her innocent use of the streets of Indian Springs or the Lenope roadway. As noted earlier, the ranch deed’s parcel 3 is “[a]n easement for ingress and egress to be used in common with others over that portion of Fern Ann Falls Road, which road has been in use for more than twenty years in the past, and as it now exists, as of the date of this conveyance [January 24, 1996],” followed by a metes and bounds description. Randall Smith, a licensed land surveyor and expert witness for plaintiff, testified that “Parcel 3” in the deed to plaintiff’s ranch “describes a roadway located within Parcel 3,” and (referring to an exhibit) testified Parcel 3 was “highlighted in yellow.” The highlighted area encompassed the private streets in Indian Oaks and Indian Springs, and Mr. Smith testified that “the Parcel 3 description of the Fern Ann Falls Road exists somewhere within this yellow area.” We do not see how reference to a Fern Ann Falls Road that does not now exist anywhere in Indian Springs or Indian Oaks, but formerly existed “somewhere within this yellow area,” can establish plaintiff’s innocent belief she was entitled to use the Indian Springs private streets or the Lenope roadway, particularly in light of her own testimony (see text, post).

[28] When she was asked why she purchased the Lenope property in 2005, plaintiff testified that, “[e]ver since I bought the property on Fern Ann Falls [the ranch], I was always trying to get that parcel of land that butted up to Fern Ann Falls [the Lenope property], because I wanted to have an appropriate access to [the ranch].”

[29] In Hinrichs v. Melton (2017) 11 Cal.App.5th 516 [218 Cal.Rptr.3d 13], the trial court found the plaintiff was innocent and his parcel would be landlocked without an easement, while the defendants seldom visited that portion of their property, which had little or no development potential. (Id. at pp. 523, 524.) In Tashakori v. Lakis (2011) 196 Cal.App.4th 1003 [126 Cal.Rptr.3d 838], the plaintiffs purchased the property “with the innocent belief that an easement to the public road existed” and the easement was “the sole means of accessing their property,” while the defendants “would suffer virtually no harm at all” from use of the shared driveway, which they had never used and was in an area completely separated and not accessible from the main portion of their property without scaling a fence. (Id. at p. 1010; see id. at p. 1007.) In Linthicum v. Butterfield (2009) 175 Cal.App.4th 259 [95 Cal.Rptr.3d 538], the court affirmed grant of an equitable easement to the defendants where the roadway in question was “the only access” to the defendants’ parcels, the defendants would suffer a “catastrophic loss” as balanced against “no or insignificant loss” to the plaintiff, and the plaintiff “purchased [his property] with full knowledge of the historical use of the roadway,” also stating that “this is not a doubtful case.” (Id. at p. 266.) And in Miller v. Johnston (1969) 270 Cal.App.2d 289 [75 Cal.Rptr. 699], “[t]he required encroachment was not the result of any act or omission on [the plaintiffs’] part,” and if they were “denied the right to continue the use of the defendants’ property they cannot secure practical access to their property without affecting the existing property rights of their other neighbors ….” (Id. at p. 307.)

[30] Mr. Friese testified that plaintiff offered to purchase the property back from him. He stated that, when this dispute over the Lenope easement came up, and he told plaintiff that he (as owner of the dominant tenement) had control of the Lenope easement, plaintiff “offered to buy back the property,” and he refused that offer. (In an e-mail exchange on May 13, 2014, plaintiff wrote Mr. Friese stating, “I begged for you to sell the property to the trainer at my ranch and you would have been made `whole’.”)