Lake Lindero HOA v. Barone

Summary by Mary M. Howell Esq.,CCAL, & Pejman D. Kharrazian, Esq.

The case of Lake Lindero HOA v. Barone (2023) 89 Cal.App.5th 834, concerned a recall vote. Defendant was a former director of the association, who had resigned his position in order to take a paid position as the chief executive officer of the association.

Homeowners sought to recall the entire board pursuant to a petition by 5% of the members. Corporations Code Section 7511 requires an association, within 20 days of receipt of such a petition, to notice a member meeting to vote on the issue of recall. The board failed to do so, so the petitioning members sent out their own notice of meeting, and duly conducted the meeting. When this meeting failed to achieve quorum, as prescribed by the association’s bylaws, an adjourned meeting was convened by the same homeowners, resulting in a diminished quorum. The recall was successful, and a new board elected.

Unfortunately, the recalled board refused to leave, contesting the right of the new board to govern, including instructing management to disregard instructions from the new board. The new board and association then filed this suit, asking the court to declare the validity of the recall, and to validate the new board’s termination of Defendant’s contract.

Held: new board 1, old board 0. The trial court’s decision was affirmed on appeal.

The old board made the following arguments: (1) the bylaws required a majority of owners to vote for removal, despite a statute that allowed removal by a majority of a quorum,

(2) the statutes do not permit a reduced quorum, even if the bylaws do, and (3) the Corporations Code only allows a court to determine the validity of “elections”, not “recalls.” The court properly rejected all of these arguments. First, the statute which discusses the percentage vote required for recall (§ 7222) specifically states that it will override any contrary language in bylaws. Second, even though the recall statute doesn’t specifically authorize a lower quorum for adjourned meeting, another statute (§ 7512) specifically provides that bylaws may set a lower quorum for meetings. As to the third point, the court found that Corporations Code Section 7616, which allows a court to validate election results, should be read broadly to permit a court to review recall votes as well.

***End of Summary*

89 Cal.App.5th 834 (2023)

LAKE LINDERO HOMEOWNERS ASSOCIATION, INC., et al., Plaintiffs and Respondents,
v.
CHRISTOPHER T. BARONE, Defendant and Appellant.

No. B306164.Court of Appeals of California, Second District, Division Three.February 28, 2023.APPEAL from an order of the Superior Court of Super. Ct. No. 20VECP00041. Los Angeles County, Shirley K. Watkins, Judge. Affirmed.

Christopher T. Barone, in pro. per., for Defendant and Appellant.

Kulik Gottesman Siegel & Ware, Thomas M. Ware II and Justin Nash for Plaintiffs and Respondents.

OPINION

EGERTON, J.—

Defendant Christopher T. Barone appeals an order under Corporations Code section 7616 confirming the validity of an election removing the former board of the Lake Lindero Homeowners Association, Inc. (the Association), and electing a new board of directors.^[1] Barone makes two principal contentions: (1) the election was not valid because it contravened the Association’s bylaws and statutory provision governing board recall elections, and (2) section 7616 did not authorize plaintiffs’ action or the trial court’s order validating the recall election.^[2] We reject both contentions and affirm.

FACTS AND PROCEDURAL HISTORY

Consistent with our standard of review for factual questions, we state the evidence in the light most favorable to the trial court’s factual findings, indulging all reasonable inferences in support of the court’s order.^[3] (Ryland Mews Homeowners Assn. v. Munoz (2015) 234 Cal.App.4th 705, 712 [184 Cal.Rptr.3d 163].)

1. The Recall and Full Board Election

The Association is a California nonprofit corporation charged with operating the Lake Lindero development—a 459-lot common interest development and golf community located in Agoura Hills. The Association common areas include a golf course, driving range, tennis courts, pool, restaurant, pro shop, and a lake.

Membership in the Association is appurtenant to ownership of a lot within the development. The Association is governed by a five-member uncompensated board of directors. Since 2018, Lordon Management Company has provided professional management services to the Association.

Barone is a member of the Association and former member of its board of directors. In December 2018, he resigned his board position and accepted paid employment as the Association’s chief executive officer (CEO).

On September 5, 2019, board member Michael Allan was served with a petition signed by more than 5 percent of the Association’s members calling for a special meeting to recall the entire board of directors and elect a new board if the recall was successful. At the time, the other board members, including Allan, were Michael Umann, Dave DiNapoli, Paul Bromley, and Hal Siegel. Allan advised all the board members and Lordon Management of the petition. He hand-delivered the original petition to Lordon Management the next day.

The board did not fix a time for the special meeting or give notice of the meeting to the Association’s members within 20 days of receiving the petition, as is required under section 7511, subdivision (c).^[4] When the 20-day statutory period expired, Allan, in his capacity as one of the petitioners, sent notice of the special meeting to the Association’s 459 members.

The notice stated the purpose of the special meeting was to hold a vote on the removal of the entire board and, in the event of a recall, an election of the new board. Due to an error on the e-mail address listed for candidacy submissions, Allan sent a new notice listing the date of the meeting as December 19, 2019.

Due to the full board’s inaction, the petitioners also took it upon themselves to conduct the election.^[5] As part of that process, Allan, on behalf of the petitioners, contracted with the League of Women Voters (LWV), a non-partisan entity with no stake in the outcome of the election, to retain an inspector of elections. Judy Murphy of the LWV was ultimately appointed inspector of elections for the December 2019 recall.

In its customary role as an inspector of elections, the LWV receives and tallies ballots, but does not mail out election materials. Accordingly, the petitioners prepared the election materials, stuffed the ballot envelopes, and mailed ballots out to the homeowners at the petitioners’ individual expense.

The LWV conducted the election meeting on December 19, 2019. Murphy, in her role as inspector of elections, announced a quorum was not present, as the LWV had not received in excess of 50 percent of the votes of the membership (the minimum participation required to constitute a quorum under the Association’s bylaws).^[6] Following Murphy’s announcement, a majority of the members present at the meeting voted to adjourn the meeting to December 23, 2019.^[7]

At the December 23, 2019 meeting, Murphy determined the required quorum of 25 percent of the membership (115 of the 459 members) had been met. (See fn. 7, ante.) Of the 190 ballots received, Murphy counted 156 votes in favor of recalling the entire board.

Having determined the recall passed, the LWV proceeded to certify the election of the new board: Allan; Harriet Cohen; Siegel; Umann; and Bromley. Lordon Management mailed notice of the election results to the membership.

On December 31, 2019, the new board of directors eliminated Barone’s CEO position.

2. The Complaint

On January 21, 2020, plaintiffs (the Association, Allan, and Cohen) filed this action against Barone and current and former board members Umann, Bromley, and DiNapoli, asserting two causes of action for declaratory relief under section 7616 and common law nuisance.

The complaint alleged defendants had refused to “recognize the validity of the recall” and continued to assert that “the prior Board remains in power and that Defendant Barone remains the putative `CEO’ of the Association.” It further alleged defendants were “engaged in extensive efforts to hinder the new Board of Directors from conducting the affairs of the Association.”

As relevant to this appeal, plaintiffs prayed for a declaration under section 7616 that the December 2019 election recalling the Association’s board of directors was valid; that the Association’s board of directors consists of Allan, Bromley, Cohen, Siegel, and Umann; and that “Barone is not the CEO of the Association and not its authorized agent.”

3. The Statement of Decision

On May 4, 2020, after an 11-day bench trial, the court filed a final statement of decision and order declaring, among other things: The December 23, 2019 full board recall election was valid; Allan, Bromley, Cohen, Siegel, and Umann “are (and have been since [December 23, 2019])” the Association’s directors; and the “former CEO Christopher Barone has no authority (and has had no authority since the date of his termination) to act on behalf of the [Association] … unless granted by the current board.”

The court found: The petitioners properly presented the petition for full board recall to the former board; the former board unreasonably violated its duties under the Association’s bylaws and governing statutory law to set a special meeting on the recall election after receipt of the petition; the petitioners properly conducted the recall election when the former board failed to do so; the LWV properly executed its duties as inspector of elections and did not prejudice or demonstrate bias against any interested party; and the election was conducted in accordance with the Association’s bylaws and governing statutory law, including provisions prescribing a majority vote and quorum requirements. In making these findings, the court determined defense witnesses testifying to alleged bias or improprieties in the petition and voting process were “not credible.”

As relevant to this appeal, the trial court determined, as a legal matter, that a provision in the Association’s bylaws requiring a “vote of the majority of the votes held by the entire membership” to remove the entire board or an individual director was legally invalid and “unenforceable.” The court concluded this provision conflicted with and was displaced by statutes specifying that, for a nonprofit mutual benefit corporation of 50 or more members (like the Association), only the majority of the votes represented and voting at a duly held meeting at which a quorum is present was needed to remove a director. (See §§ 7222, subd. (a)(2), 5034, 7151, subd. (e).)

On May 22, 2020, plaintiffs voluntarily dismissed their remaining cause of action for nuisance. On May 28, 2020, Barone filed this appeal.^[8]

DISCUSSION

1. The Appeal Is Not Moot: Material Questions Remain Regarding the Construction of the Bylaws and Statutes Governing the Vote Required To Remove the Association’s Board of Directors

As a threshold matter, plaintiffs contend this appeal should be dismissed as moot because reversal of the challenged order will not grant Barone effective relief now that subsequent board elections have taken place since the trial court’s order. We disagree.

Because the duty of every judicial tribunal is “`”`to decide actual controversies by a judgment which can be carried into effect, and not to give opinions upon moot questions … [,] [i]t necessarily follows that when … an event occurs which renders it impossible for [the] court, if it should decide the case in favor of [the appellant], to grant him any effectual relief whatever, the court will not proceed to a formal judgment….’ [Citations.]” [Citation.] The pivotal question in determining if a case is moot is therefore whether the court can grant the [appellant] any effectual relief. [Citations.] If events have made such relief impracticable, the controversy has become “overripe” and is therefore moot. [Citations.] [¶] … When events render a case moot, the court, whether trial or appellate, should generally dismiss it.'” (Parkford Owners for a Better Community v. County of Placer (2020) 54 Cal.App.5th 714, 722 [268 Cal.Rptr.3d 653].)

Plaintiffs did not file a written motion to dismiss with supporting affidavits and evidence establishing subsequent elections have in fact occurred that render this appeal moot. (See, e.g., American Alternative Energy Partners II v. Windridge, Inc. (1996) 42 Cal.App.4th 551, 557 [49 Cal.Rptr.2d 686] [respondent should “have made a formal, written motion for dismissal of the appeal, which, because it would have been based on matters not appearing in the appellate record, would have required the submission of affidavits or other supporting evidence”].)^[9] Be that as it may, even if we assume there have been subsequent board elections since December 2019—as seems practically certain given the requirement for annual elections in the Association’s bylaws—we still cannot consider this appeal moot. The challenged order grants declaratory relief embracing a disputed judicial construction of the bylaws and statutes governing the vote required to remove a director from the Association’s board. Under these circumstances, “the general rule governing mootness becomes subject to the case-recognized qualification that an appeal will not be dismissed where, despite the happening of the subsequent event, there remain material questions for the court’s determination.” (Eye Dog Foundation v. State Board of Guide Dogs for the Blind (1967) 67 Cal.2d 536, 541 [63 Cal.Rptr. 21, 432 P.2d 717] (Eye Dog Foundation).)

Eye Dog Foundation is instructive. In that case, the plaintiff sought injunctive relief and a declaratory judgment to invalidate provisions of the Business and Professions Code covering “the subject `Guide Dogs for the Blind,'” the enforcement of which had led to the suspension of the plaintiff’s business license to train seeing eye dogs. (Eye Dog Foundation, supra, 67 Cal.2d at p. 540.) Several months after the trial court entered a judgment upholding all but one section of the challenged provisions, the regulatory state board formally reinstated the plaintiff’s license after the plaintiff took action to comply with the challenged statutes. (Id. at pp. 540-541.) Recognizing that the pending appeal could no longer result in effective relief enjoining enforcement of the challenged statutes, our Supreme Court nonetheless held the appeal was not moot because the plaintiff “not only sought injunctive but declaratory relief, to wit, a declaratory judgment that the subject legislation is unconstitutional on its face and as applied to plaintiff’s operation,” such that there “remain[ed] material questions for the court’s determination” on appeal. (Id. at p. 541.) As our high court explained, an exception to the general mootness doctrine “has been applied to actions for declaratory relief” in such circumstances “upon the ground that the court must do complete justice once jurisdiction has been assumed [citation], and the relief thus granted may encompass future and contingent legal rights.” (Ibid.)

Even if we accept plaintiffs’ contention that we can neither reinstate the former board, nor restore Barone to his CEO position, this does not render the appeal moot. Regardless of the board’s current composition, Barone’s appeal presents a material question for this court’s determination encompassing his future and contingent legal rights under the Association’s bylaws and the statutes governing the recall of its board of directors. As in Eye Dog Foundation, our reversal of the trial court’s declaratory relief order would grant Barone effective relief by embracing his construction of the relevant bylaws and statutory provisions, which remain enforceable against him and the rest of the Association’s current membership for future recall elections. (Eye Dog Foundation, supra, 67 Cal.2d at p. 541, fn. 2 [“`while it has been said that the declaratory judgment acts necessarily deal with the present rights, the “present right” contemplated is the right to have immediate judicial assurance that advantages will be enjoyed or liabilities escaped in the future'”].) This material question warrants disposition on the merits.

2. The Trial Court Correctly Determined the Former Board Was Validly Recalled Under the Association’s Bylaws and Statutory Law

Barone contends the trial court improperly disregarded a provision of the Association’s bylaws requiring a majority vote of the “entire membership” to remove the board or an individual director from office. In the alternative, he argues the recall was not valid because the relevant special meeting did not achieve a quorum. We conclude the trial court correctly construed the bylaws and governing statutes.

Barone’s contentions challenge the trial court’s application of the bylaws and statutes to essentially undisputed facts. The contentions are therefore subject to our de novo review. (Roybal v. Governing Bd. of Salinas City Elementary School Dist. (2008) 159 Cal.App.4th 1143, 1148 [72 Cal.Rptr.3d 146].) Likewise, insofar as the contentions concern the trial court’s construction of the Association’s bylaws and our state’s governing statutes, these issues too are subject to our de novo review. (See ibid.; PV Little Italy, supra, 210 Cal.App.4th at pp. 144-145.)

It is undisputed that the recall election was approved by a vote of 156 in favor of recalling the entire board, with 190 ballots received out of 459 total membership votes. Barone contends this was insufficient to approve the recall under article VI, section 3 of the Association’s bylaws, which provides: “The entire Board of Directors or any individual Director may be removed from office with or without cause at any time by a vote of the majority of the votes held by the entire membership of record at any regular or special meeting of members.” (Italics added.) Because a majority of the 459 votes held by the entire membership of record is 230 votes, Barone contends the trial court erred in declaring the recall election valid.

The trial court rejected this contention based on a collection of interconnected statutes that effectively prohibit a nonprofit mutual benefit corporation with 50 or more members from requiring more than “a majority of the votes represented and voting at a duly held meeting at which a quorum is present” to remove a director from the corporation’s board. (§ 5034; see §§ 7222, subd. (a)(2), 7151, subd. (e).)

Section 7222 expressly governs the recall of directors serving on the board of a nonprofit mutual benefit corporation. The statute provides, in relevant part: “[A]ny or all directors may be removed without cause if: [¶] (1) In a corporation with fewer than 50 members, the removal is approved by a majority of all members (Section 5033). [¶] (2) In a corporation with 50 or more members, the removal is approved by the members (Section 5034).” (§ 7222, subd. (a).) Under its plain terms, the statute permits a corporation with fewer than 50 members to require the approval of “a majority of all members” (as specified in the Association’s bylaws); however, for a corporation with 50 or more members (like the Association), the statute dictates that the removal need only be “approved by the members” as that phrase is defined in section 5034.

Section 5034 provides: “`Approval by (or approval of) the members’ means approved or ratified by the affirmative vote of a majority of the votes represented and voting at a duly held meeting at which a quorum is present (which affirmative votes also constitute a majority of the required quorum) or written ballot … or by the affirmative vote or written ballot of such greater proportion, including all of the votes of the memberships of any class, unit, or grouping of members as may be provided in the bylaws (subdivision (e) of Section 5151, subdivision (e) of Section 7151, or subdivision (e) of Section 9151) or in Part 2, Part 3, Part 4 or Part 5 for all or any specified member action.” (Italics added.) The statute’s reference to subdivision (e) of section 7151 is critical because, while section 5034 permits a nonprofit mutual benefit corporation to require a greater proportion of votes in its bylaws, section 7151, subdivision (e) expressly withdraws this authorization for a vote to remove a director from the corporation’s board.

Section 7151, subdivision (e) provides: “The bylaws may require, for any or all corporate actions (except as provided in paragraphs (1) and (2) of subdivision (a) of Section 7222 …) the vote of a larger proportion of, or all of, the members or the members of any class, unit, or grouping of members or the vote of a larger proportion of, or all of, the directors, than is otherwise required by this part.”

Because section 7151, subdivision (e) expressly prohibits a nonprofit mutual benefit corporation with 50 or more members (like the Association) from requiring a greater proportion of votes than is specified in section 7222, subdivision (a)(2) for the removal of a director, the trial court correctly concluded article VI, section 3 of the Association’s bylaws could not be enforced to invalidate the recall election. And, because section 7222, subdivision (a)(2) requires only “approv[al] by the members” as defined in section 5034 to remove a director (§ 7222, subd. (a)(2)), the trial court correctly concluded the recall was valid if approved “by the affirmative vote of a majority of the votes represented and voting at a duly held meeting at which a quorum is present.” (§ 5034.)

Notwithstanding the foregoing, Barone contends there were insufficient votes cast in the recall election to represent a quorum under the Association’s bylaws. The relevant bylaws provision states: “The presence at any meeting, in person or by proxy, of members entitled to cast in excess of 50 percent (50%) of the votes of the membership, shall constitute a quorum for any action …. If, however, such quorum shall not be present or represented at any meeting, the members present either in person or by proxy, may without notice other than announcement at the meeting, adjourn the meeting to a time not less than forty-eight (48) hours nor more than thirty (30) days from the time the original meeting was called, at which meeting twenty-five percent (25%) of the votes of the membership shall constitute a quorum.”

The evidence at trial proved that, following the inspector of election’s announcement that a quorum was not present at the December 19, 2019 meeting, a majority of the members present voted to adjourn the meeting to December 23, 2019, in accordance with the foregoing provision of the bylaws. The evidence further proved that, at the December 23, 2019 meeting, the inspector of elections had received 190 ballots, exceeding the required 25 percent of the votes of the membership (115 of the total 459 votes) needed to constitute a quorum at that meeting.

Barone does not dispute the foregoing facts. Rather, he argues the 25 percent quorum provision in the Association’s bylaws “conflict[s]” with sections 7222 and 5034, which, he emphasizes, “contain[] no language about a `reduced quorum.'” Contrary to Barone’s premise, neither section 5034 nor section 7222 governs minimum quorum requirements for a nonprofit mutual benefit corporation. The relevant statute is section 7512.

Section 7512, subdivision (a) provides: “One-third of the voting power, represented in person or by proxy, shall constitute a quorum at a meeting of members, but, subject to subdivisions (b) and (c), a bylaw may set a different quorum.” (Italics added.) Subdivision (b) stipulates that “[w]here a bylaw authorizes a corporation to conduct a meeting with a quorum of less than one-third of the voting power, then the only matters that may be voted upon … by less than one-third of the voting power are matters notice of the general nature of which was given.”^[10]

Consistent with section 7512, the Association’s bylaws authorized a quorum of 25 percent of the voting power after an adjournment. (See § 7512, subd. (a).)^[11] And, the record proves the matter voted upon at the meeting— the recall of the board and election of a new board in the event the recall was successful—was disclosed in the original meeting notice. (§ 7512, subd. (b).) The trial court correctly determined the December 2019 vote validly recalled the former board under the Association’s bylaws and governing statutory law.

3. Section 7616 Authorized the Order Validating the December 2019 Recall Election

Barone contends section 7616 authorizes a claim to validate an election only—”not a recall.” He emphasizes there is “nothing” in the statute expressly addressing “a recall or removal of directors,” and he argues it is a “decisive issue” that “there cannot be an election absent a successful recall” under the Association’s bylaws. Additionally, Barone argues he is not a proper defendant under the statute.

Barone’s arguments raise questions of statutory interpretation subject to our independent de novo review. (Committee to Save the Beverly Highlands Homes Assn. v. Beverly Highlands Homes Assn. (2001) 92 Cal.App.4th 1247, 1261 [112 Cal.Rptr.2d 732].) “In the construction of statutes, the primary goal of the court is to ascertain and give effect to the intent of the Legislature. [Citations.] The court looks first to the language of the statute; if clear and unambiguous, the court will give effect to its plain meaning.” (Id. at p. 1265.) “The words used should be given their usual, ordinary meanings and, if possible, each word and phrase should be given significance. [Citations.] The words used `must be construed in context, and statutes must be harmonized, both internally and with each other, to the extent possible.'” (Ibid.)

Contrary to Barone’s narrow reading of section 7616, we find the statutory text evidences a clear legislative intent to confer broad authority on the trial court in determining the validity of a board election. Under section 7616, subdivision (a), “[u]pon the filing of an action therefor by any director or member or by any person who had the right to vote in the election at issue, the superior court of the proper county shall determine the validity of any election or appointment of any director of any corporation.” Critically, while this directive does not expressly refer to a recall election (as Barone emphasizes), subdivision (d) of the statute authorizes “[t]he court, consistent with the provisions of [the statutes governing nonprofit mutual benefit corporations] and in conformity with the articles and bylaws to the extent feasible, [to] determine the person entitled to the office of director … and [to] direct such other relief as may be just and proper.” (§ 7616, subd. (d), italics added.)

In Kaplan v. Fairway Oaks Homeowners Assn. (2002) 98 Cal.App.4th 715 [120 Cal.Rptr.2d 158] (Kaplan), the reviewing court considered whether an action under section 7616 properly encompassed the plaintiffs’ claim that the challenged election violated their right to vote by proxy, such that the plaintiffs were entitled to prevailing party attorney fees under Civil Code former section 1354 for enforcing the association’s bylaws.^[12] (Kaplan, at pp. 717-718.) The Kaplan court acknowledged that section 7616 “does not create any substantive rights … to vote by proxy,” but recognized the statute was nonetheless broad enough to provide a “procedural vehicle” to adjudicate an action “to enforce the members’ proxy and cumulative voting rights under the bylaws.” (Kaplan, at pp. 719, 720.)

We similarly conclude the language of section 7616 is broad enough to provide a procedural vehicle for vindicating plaintiffs’ recall rights under the Association’s bylaws, even absent an express reference to recall elections in the statute’s text. Article VI, section 3 of the bylaws authorizes a recall of the entire board of directors and makes the election of a new board part and parcel of the recall process: “The entire Board of Directors or any individual Director may be removed from office with or without cause at any time by a vote … at any regular or special meeting of members duly called, and a successor or successors may then and there be elected to fill the vacancy or vacancies thus created.“^[13] (Italics added.) In adjudicating plaintiffs’ claim under section 7616 to enforce this provision of the bylaws, the statute not only unambiguously directed the trial court to “determine the validity of [the new board’s] election” (§ 7616, subd. (a)), but also authorized the court, “in conformity with the [recall provision of the] bylaws …, [to] determine the person entitled to the office of director … and [to] direct such other relief as may be just and proper” (id., subd. (d)). Because the trial court could not determine the validity of the election or “the person entitled to the office of director” without adjudicating the validity of the underlying recall election, it was “just and proper” for the court to enter an order under section 7616 confirming the recall election was valid. (§ 7616, subd. (d); see Kaplan, supra, 98 Cal.App.4th at p. 721.)

For much the same reason, we reject Barone’s argument that he was not a proper defendant in this action. Section 7616, subdivision (c) directs the superior court, “[u]pon the filing of the complaint, and before any further proceedings are had” to “enter an order fixing a date for the hearing … and requiring notice of the date for the hearing and a copy of the complaint to be served upon the corporation and upon the person whose purported election or appointment is questioned and upon any person (other than the plaintiff) whom the plaintiff alleges to have been elected or appointed.” (Italics added.) Barone contends this provision establishes the parties who may be named as defendants under section 7616, and, because he was neither elected nor appointed in the December 2019 election, he argues he could not be sued under the statute.^[14] We disagree.

As we have said and as the trial court correctly recognized, section 7616, subdivision (d) authorizes the court to “direct such other relief as may be just and proper” in connection with confirming the validity of a board election. Here, the complaint alleged Barone, in his role as CEO and with the sanction of a majority of the former board, was engaged in frustrating the new board’s efforts to fulfill its duties under the Association’s bylaws. Having confirmed the validity of the new board’s election, the statute plainly authorized the trial court to enter an order confirming Barone had no authority to act on behalf of the Association, as was “just and proper” under the Association’s bylaws. (§ 7616, subd. (d).) Plaintiffs properly named Barone as a defendant in their section 7616 claim.^[15]

DISPOSITION

The order is affirmed. Plaintiffs the Lake Lindero Homeowners Association, Inc., Michael Allan, and Harriet Cohen are entitled to their costs.

Edmon, P. J., and Lavin, J., concurred.

[1] Statutory references are to the Corporations Code, unless otherwise designated.

Barone noticed an appeal from a “Judgment after court trial” entered on May 4, 2020. The record, including the register of actions, does not reflect the entry of a judgment on May 4, 2020, or any other date. Rather, on May 4, 2020, the trial court entered an order and final statement of decision confirming the validity of the board election under section 7616. Although that order disposed of only one of plaintiffs’ two causes of action, plaintiffs subsequently dismissed their remaining claim on May 22, 2020. Because the court’s May 4, 2020 order and plaintiffs’ voluntary dismissal collectively have “all the earmarks of a final judgment,” Barone properly took this appeal on May 28, 2020. (Estate of Miramontes-Najera (2004) 118 Cal.App.4th 750, 755 [13 Cal.Rptr.3d 240]; see Sullivan v. Delta Air Lines, Inc. (1997) 15 Cal.4th 288, 304 [63 Cal.Rptr.2d 74, 935 P.2d 781] [a judgment is final “`”when it terminates the litigation between the parties on the merits of the case and leaves nothing to be done but to enforce by execution what has been determined”‘”]; PV Little Italy, LLC v. MetroWork Condominium Assn. (2012) 210 Cal.App.4th 132, 144 [148 Cal.Rptr.3d 168] (PV Little Italy) [order invalidating corporate election under § 7616 appealable where “order appealed from accomplished that goal, and neither party has indicated that anything more of substance remains to be done in the litigation, except entry of judgment”].)

[2] Barone commits several pages of his opening brief to challenging the trial court’s credibility determinations. It is settled that “`”[c]onflicts and even testimony [that] is subject to justifiable suspicion do not justify the reversal of a judgment, for it is the exclusive province of the trial judge or jury to determine the credibility of a witness and the truth or falsity of the facts upon which a determination depends.”‘” (People v. Penunuri (2018) 5 Cal.5th 126, 142 [233 Cal.Rptr.3d 324, 418 P.3d 263], italics added, quoting People v. Zamudio (2008) 43 Cal.4th 327, 357 [75 Cal.Rptr.3d 289, 181 P.3d 105].) We thus disregard all contentions challenging the trial court’s credibility determinations as insufficient to support reversal of the order.

Barone makes other contentions that do not warrant meaningful discussion. These include that the trial court refused to consider an earlier ruling in an unrelated case involving an Association recall election; that the board election violated procedures pertaining to the election of public officials under the Elections Code; that the court refused to admit 500 pages of exhibits submitted after the pretrial deadline and after plaintiffs rested their case; that the court refused to compel testimony from the Association’s attorney after Barone failed to make an offer of proof; that the Association’s attorney violated the Rules of Professional Conduct by his presence at the election; that the court disregarded conflicting evidence about which parties sent and received election materials; and that several procedural violations (such as the failure to sign a case management form) occurred during pretrial proceedings. Among other shortcomings, Barone fails to support these scattershot claims with a reasoned argument or citation to relevant legal authorities, and he categorically fails to address, let alone satisfy, his burden to demonstrate a miscarriage of justice occurred. (See Pool v. City of Oakland (1986) 42 Cal.3d 1051, 1069 [232 Cal.Rptr. 528, 728 P.2d 1163] [An appellant “must also show that the error was prejudicial [citation] and resulted in a `miscarriage of justice'”—i.e., that “`”it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of the error.”‘”].) Because the opening brief fails to fulfill these fundamental requirements of appellate process, we deem all these contentions waived. (People v. Stanley (1995) 10 Cal.4th 764, 793 [42 Cal.Rptr.2d 543, 897 P.2d 481] [“`[E]very brief should contain a legal argument with citation of authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration.'”].)

We likewise deem forfeited arguments Barone makes for the first time in his reply brief, including his claim (without citation to the record) that the trial court purportedly interfered with a contract Barone had with his legal counsel. (Varjabedian v. City of Madera (1977) 20 Cal.3d 285, 295, fn. 11 [142 Cal.Rptr. 429, 572 P.2d 43] [“Obvious reasons of fairness militate against consideration of an issue raised initially in the reply brief of an appellant.”].)

[3] Barone filed a motion to augment the record with documents that were not filed or lodged in the trial court. The motion is denied. (See Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3 [58 Cal.Rptr.2d 899, 926 P.2d 1085] [“Augmentation does not function to supplement the record with materials not before the trial court.”]; Cal. Rules of Court, rule 8.155(a)(1).)

[4] Section 7511, subdivision (c) provides, “Upon request in writing to the corporation … by any person (other than the board) entitled to call a special meeting of members, the officer forthwith shall cause notice to be given to the members entitled to vote that a meeting will be held at a time fixed by the board not less than 35 nor more than 90 days after the receipt of the request…. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or the superior court of the proper county shall summarily order the giving of the notice, after notice to the corporation giving it an opportunity to be heard.”

[5] Evidence elicited at trial showed Barone, ostensibly speaking for a majority of the board, had instructed Lordon Management, which normally would have assisted with an Association election, to “do nothing until legal counsel and/or the board advises differently.”

[6] As of December 19, 2019, the LWV had received a total of 182 sealed ballot envelopes of a possible 459 (39.6 percent).

[7] As we will discuss, the Association’s bylaws provide that if a quorum is not present, “the members present either in person or by proxy, may without notice other than announcement at the meeting, adjourn the meeting to a time not less than forty-eight (48) hours nor more than thirty (30) days from the time the original meeting was called, at which meeting twenty-five percent (25%) of the votes of the membership shall constitute a quorum.”

[8] The other defendants did not appeal and are not parties to this appeal.

[9] Plaintiffs filed a request for judicial notice of a grant deed showing Umann conveyed his interest in one lot in the development on July 30, 2020. (Evid. Code, §§ 452, subd. (c), 459, subd. (a); see Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 194 [147 Cal.Rptr.3d 41].) While we grant that request, we cannot accept, as plaintiffs assert, that the grant deed proves Umann could not have maintained his position on the board after the conveyance. Significantly, the Association’s bylaws contemplate that a member may own multiple lots, such that a member is “entitled to one vote for each Lot in which they hold the interest required for membership.” (Italics added.) Because we have no evidence to establish how many lots Umann owned when he conveyed the subject lot, the grant deed is insufficient to prove he is no longer a member of the Association entitled to serve on its board of directors.

[10] Section 7512, subdivision (c) authorizes members to “continue to transact business until adjournment notwithstanding the withdrawal of enough members to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the members required to constitute a quorum.”

[11] The Association’s bylaws also comply with regulations pertaining to quorum requirements promulgated by the Department of Real Estate for common interest developments like Lake Lindero. In particular, section 2792.17, subdivision (e)(2) of title 10 of the California Code of Regulations provides: “In the absence of a quorum at a members’ meeting a majority of those present in person or by proxy may adjourn the meeting to another time, but may not transact any other business…. The quorum for an adjourned meeting may be set by the governing instruments at a percentage less than that prescribed for the regular meeting, but it shall not be less than 25 percent of the total voting power of the Association.” (Italics added.)

[12] Civil Code former section 1354, subdivision (f) then provided for an award of prevailing party attorney fees in an action “`to enforce the governing documents.'” (Kaplan, supra, 98 Cal.App.4th at p. 718, italics omitted.)

[13] As discussed in part 2, ante, while this provision of the bylaws requires “a vote of the majority of the votes held by the entire membership of record,” that part of the provision violates section 7151, subdivision (e) and thus is displaced by the vote requirement in section 7222, subdivision (a)(2) for the removal of directors from a nonprofit mutual benefit corporation with 50 or more members.

[14] Barone also suggests the Association is not a proper plaintiff in this action, emphasizing that section 7616, subdivision (c) requires service of the complaint upon “the corporation.” However, as plaintiffs correctly argue, Barone fails to demonstrate how this purported error resulted in prejudice, given that Cohen and Allan (each a “member” and “person who had the right to vote in the election”) undisputedly had standing under the statute. (§ 7616, subd. (a).)

[15] Barone has moved for sanctions against plaintiffs’ counsel and the trial court. With respect to the lower court, he appears to argue the court reporter failed to provide him with electronic transcripts of the reported proceedings. (See Cal. Rules of Court, rule 8.23 [authorizing sanctions for failure of a court reporter to perform a duty imposed by statute or these rules].) Barone relies upon rule 8.144, which specifies the format requirements that apply “to clerks’ and reporters’ transcripts delivered in electronic form and in paper form.” (Id., rule 8.144(b)(1), italics added.) As the rule’s reference to “paper form” suggests, there is no mandate that the reporter deliver an electronic transcript—a paper form is also acceptable. (Ibid.; see also id., rule 8.130 [specifying general requirements for delivery of reporter’s transcript].) Thus, Barone has not demonstrated sanctions are warranted under rule 8.23.

Barone’s motion for sanctions against plaintiffs’ counsel appears to relate largely to events that occurred before the underlying action or in connection with plaintiffs’ efforts to enforce the terms of the challenged order, neither of which is properly before this court on a motion for appellate sanctions. (See Cal. Rules of Court, rule 8.276(a) [specifying grounds for appellate sanctions].) To the extent his motion raises issues relevant to the appeal, it simply repeats arguments that Barone made in his principal briefs, which we have rejected. Moreover, as plaintiffs correctly argue, nothing in the relevant rule authorizes appellate sanctions against a respondent for defending an appeal. (See ibid.) The motion for sanctions is denied.

VICTOR VALLEY UNION HIGH SCHOOL DISTRICT v. THE SUPERIOR COURT OF SAN BERNARDINO COUNTY

VICTOR VALLEY UNION HIGH SCHOOL DISTRICT, Petitioner,
v.
THE SUPERIOR COURT OF SAN BERNARDINO COUNTY, Respondent;
JOHN DOE, Real Party in Interest.

No. E078673.
(2022) 86 Cal. App. 5^th940.

Filed December 22, 2022.
Appeal from the Super.Ct.No. CIVDS1908673.

ORIGINAL PROCEEDINGS; petition for extraordinary writ. Wilfred J. Schneider, Jr., Judge. Granted.

Cummings, McClorey, Davis, Acho & Associates and Ryan D. Miller for Petitioner.

No appearance for Respondent.

Carrillo Law Firm, Luis A. Carrillo, Michael S. Carrillo, J. Miguel Flores; The Senators (Ret.) Firm, Ronald T. Labriola; Esner, Chang & Boyer, Holly N. Boyer, Shea S. Murphy and Kathleen J. Becket for Real Party in Interest.

CERTIFIED FOR PUBLICATION

OPINION

McKINSTER, J.

John MM. Doe, by and through his guardian ad litem, C.M. (Doe’s mother), and B.S. (Doe’s father) (collectively real parties in interest), sued petitioner Victor Valley Union High School District (the district) for negligence and other causes of action arising from an alleged sexual assault on Doe while he was a high school student. During discovery, real parties in interest learned video that captured some of the events surrounding the alleged sexual assault had been erased.

Real parties in interest moved the superior court for terminating sanctions or, in the alternative, evidentiary and issue sanctions against the district under Code of Civil Procedure section 2023.030.[1] The trial court concluded the erasure of the video was the result of negligence, and not intentional wrongdoing, and denied the request for terminating sanctions. However, the court granted the request for evidentiary, issue, and monetary sanctions because it concluded that, even before the lawsuit was filed, the district should have reasonably anticipated the alleged sexual assault would result in litigation and, therefore, the district was under a duty to preserve all relevant evidence including the video.

In this original proceeding, the district argues the trial court applied the wrong legal standard when it ruled the district had the duty to preserve the video before it was erased and, therefore, that the district was not shielded from sanctions by the safe-harbor provision of section 2023.030, subdivision (f) (hereafter § 2023.030(f)). We stayed the proceedings in the trial court and subsequently issued an order to show cause. After considering real parties in interest’s opposition to the petition and the district’s reply, we now grant the petition and direct the trial court to vacate its sanctions order and reconsider its ruling.

As explained post, we hold the safe-harbor provision of section 2023.030(f) shields a party from sanctions for the spoliation of electronic evidence only if the evidence was altered or destroyed when the party was not under a duty to preserve the evidence, and the duty to preserve relevant evidence is triggered when the party is objectively on notice that litigation is reasonably foreseeable, meaning litigation is probable and likely to arise from an incident or dispute and not a mere possibility. Although the trial court used some language in its order that seems to indicate the court believed the duty to preserve evidence arises when litigation is a mere possibility, the court nonetheless appears to have applied the reasonably foreseeable standard advanced by the district in its opposition to the sanctions motion. However, we conclude the extant record does not support the trial court’s ruling that, at the time the video was erased, the district was on notice that litigation about Doe’s alleged sexual assault was reasonably foreseeable.

I.
FACTS AND PROCEDURAL BACKGROUND

In their complaint, real parties in interest alleged Doe was a minor and a student enrolled in classes at one of the district’s high schools. Doe required constant adult supervision in or outside the classroom. School personnel had reassured Doe’s father that Doe would not be allowed to move freely around the campus unsupervised “because of his susceptibility to suggestion and [because he] might wander anywhere with anyone.”

Real parties in interest alleged that, on or about March 8, 2019, two male students took Doe, who was not supervised by an adult at the time, to a bathroom where they sexually assaulted him. Real parties in interest alleged the same two students had sexually assaulted Doe on five or six prior occasions, and they threatened Doe that if he told anyone what had happened or if he resisted inappropriate sexual advances “something bad would happen to him.” They also alleged, “the incident of the boys entering into the bathroom to abuse [Doe] was video-recorded.” Real parties in interest alleged the sexual assault was the result of the district’s breach of its duty to protect and supervise Doe while on school grounds. The complaint stated causes of action for negligence and sexual harassment by Doe and a cause of action for negligent infliction of emotional distress by Doe’s mother and father.[2]

When the high school’s assistant principal was informed of the alleged incident, he and a security officer reviewed video footage for March 5, 6, and 7, 2018, from cameras positioned in the lunchroom. According to the assistant principal, the video footage for March 7 showed Doe seated next to another student in the lunchroom. The other student made a gesture with his hand, Doe nodded, and the two got up from the lunch table and walked toward the locked bathroom. When a third student walked out of the bathroom, Doe and the other student entered the bathroom. They were inside the bathroom for about four minutes. A classroom aid, who did not know the boys were inside the bathroom, escorted another student to the bathroom. Doe and the other student then exited the bathroom and lined up with the rest of the class for physical education.

On March 21, 2018, the assistant principal wrote a half-page narrative report about the incident and forwarded it to the district’s risk manager. The assistant principal did not save the March 7 video footage from the lunchroom because he assumed the school security officer had done so or would do so. The video was automatically erased 14 days after the alleged assault.

On September 5, 2018, real parties in interest submitted a government claim for damages to the district.

In their sanctions motion, real parties in interest argued that, because witnesses no longer remembered details of the incident or precisely what the video depicted, real parties in interest were “left with only a limited account” of what had taken place and they were “severely prejudiced” in their ability to develop their case. They argued the trial court should impose a terminating sanction under section 2023.030 by striking the district’s answer and entering a default judgment because: (1) the district knew the importance of preserving the video; (2) the district’s failure to preserve the video proved they had intentionally destroyed evidence; and (3) real parties in interest were prejudiced by the loss of crucial evidence. In the alternative, real parties in interest requested the trial court impose issue and evidence sanctions that essentially precluded the district from proving it did not act negligently and/or that Doe was contributorily negligent. In addition, they requested monetary sanctions in the amount of $7,060.

In its opposition, the district argued the trial court should deny the motion in its entirety. According to the district, it was shielded from any sanctions for the routine and good faith erasure of the video, under the safe-harbor provision of section 2023.030(f), because it was not under a duty to preserve evidence at the time of the erasure. Relying primarily on federal caselaw on the spoliation of evidence, the district argued a duty to preserve evidence that might be relevant in future litigation does not arise until litigation is reasonably foreseeable, meaning it is probable and not merely a possibility. The district argued that, when the video was erased, a lawsuit from Doe was a mere possibility.

In reply, real parties in interest argued the district did reasonably anticipate that litigation would arise from the incident, that the safe-harbor provision of section 2023.303(f) did not apply, and that the district’s intentional destruction of crucial evidence warranted imposition of discovery sanctions.

At the hearing on the motion, counsel for the district argued the motion should be denied because Doe’s lawsuit was not probable when the video was erased. Counsel argued there was no evidence the district had “any notice there was going to be litigation,” and the record did not show the district “had actual knowledge that it was probable litigation would be pending.” Counsel for real parties in interest argued that, based on its practice of saving video footage for law enforcement investigations, the district was on notice of potential litigation. In addition, they argued the district was under a statutory duty to preserve the video.

In its written order dated February 23, 2022, the trial court ruled that the assistant principal (and, therefore, the district) knew the video would be important evidence “if any further investigation, or eventual investigation, arose from the incident.” Based solely on the district’s special relationship with Doe and its attendant duty of care toward him, the court ruled the district “had a duty to preserve the video footage.” The court found that, as early as March 9, 2018, the day Doe’s father was informed of the alleged sexual assault, “it was reasonably foreseeable the incident might result in litigation because of School’s special duty to Doe.” Therefore, the court implicitly rejected the district’s assertion that it was shielded from sanctions by the safe-harbor provision of section 2023.030(f).

However, the court ruled the erasure of the video was “a negligent act due to a lack of due diligence” and not an “intentional act,” so the court denied real parties in interest’s request for terminating sanctions. Instead, the trial court imposed on the district issue and evidence sanctions (set forth in toto in the margin) that essentially precluded the district from defending against the remaining cause of action for negligence.[3] Finally, the court imposed monetary sanctions in the amount of $4,260.

On March 14, 2022, the district filed, in this court, a petition for writ of mandate and/or prohibition and requested an immediate stay of the proceedings in the trial court. On March 25, we issued a stay of the proceedings and invited real parties in interest to file a response. Real parties in interest filed their response on April 21, and on May 2 we issued an order to show cause why the petition should not be granted. The district filed its traverse on May 12, 2022.

II.
DISCUSSION

A. Standard of Review.

Orders imposing discovery sanctions are reviewed for abuse of discretion. (Cornerstone Realty Advisors, LLC v. Summit Healthcare REIT, Inc. (2020) 56 Cal.App.5th 771, 789.) “`We view the entire record in the light most favorable to the court’s ruling, and draw all reasonable inferences in support of it. [Citation.] . . . . The trial court’s decision will be reversed only “for manifest abuse exceeding the bounds of reason.”‘” (Sabetian v. Exxon Mobile Corp. (2020) 57 Cal.App.5th 1054, 1084.) A sanctions order exceeds the bounds of reason when the trial court acted in an “arbitrary, capricious, or whimsical” fashion. (Van v. LanguageLine Solutions (2017) 8 Cal.App.5th 73, 80.)

The trial court’s findings of fact that underlie a discovery sanction are reviewed for substantial evidence. (Los Defensores, Inc. v. Gomez (2014) 223 Cal.App.4th 377, 390-391.) “In this regard, `the power of an appellate court begins and ends with the determination as to whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the determination [of the trier of fact].'” (Ibid.) And, “[t]o the extent that reviewing the sanction order requires us to construe the applicable discovery statutes, we do so de novo, without regard to the trial court’s ruling or reasoning.” (Sinaiko Healthcare Consulting, Inc. v. Pacific Healthcare Consultants (2007) 148 Cal.App.4th 390, 401.)

B. A Trial Court May Impose Sanctions for the Spoliation of Electronically Stored Information If It Was Lost or Destroyed After the Party To Be Sanctioned Was Under a Duty To Preserve the Evidence Because It Was Relevant To Reasonably Foreseeable Future Litigation, Meaning Litigation That Was Probable or Likely To Arise.
Determining whether the trial court abused its discretion when it imposed the discovery sanctions in this case requires us to interpret the safe-harbor provision of section 2023.030(f). “`”The fundamental purpose of statutory construction is to ascertain the intent of the lawmakers so as to effectuate the purpose of the law. [Citation.] `We begin by examining the statutory language, giving the words their usual and ordinary meaning. [Citation.] If there is no ambiguity, then we presume the lawmakers meant what they said, and the plain meaning of the language governs. [Citation.] If, however, the statutory terms are ambiguous, then we may resort to extrinsic sources, including the ostensible objects to be achieved and the legislative history. [Citation.] In such circumstances, we “`select the construction that comports most closely with the apparent intent of the Legislature, with a view to promoting rather than defeating the general purpose of the statute, and avoid an interpretation that would lead to absurd consequences.'”‘”‘” (Carrasco v. State Personnel Board (2021) 70 Cal.App.5th 117, 139.)

For the following reasons, we hold the safe-harbor provision of section 2023.030(f) insulates a party from discovery sanctions for the material alteration or destruction of electronically stored information if the evidence was lost before the party had a duty to preserve it. The duty to preserve evidence arises when the party in possession and/or control of the electronically stored information was objectively aware the evidence was relevant to reasonably foreseeable future litigation, meaning the future litigation was probable or likely to arise from an event, and not merely when litigation was a remote possibility.

1. The plain language of section 2023.030(f) tethers the application of the safe-harbor provision to the loss of evidence before the party to be sanctioned had a duty to preserve it.

Section 2023.030 provides that a trial court may impose monetary and/or nonmonetary sanctions on a party or the party’s attorney for “misuse of the discovery process.”[4] “Among other forms of sanctions, the court may `impose an issue sanction by an order prohibiting any party engaging in the misuse of the discovery process from supporting or opposing designated claims or defenses.’ ([§ 2023.030], subd. (b).) The court may also prohibit the party from introducing designated matters in evidence. (Id., subd. (c).)” (Aghaian v. Minassian (2021) 64 Cal.App.5th 603, 618; see New Albertson’s, Inc. v. Superior Court (2008) 168 Cal.App.4th 1403, 1422.) And, in extreme cases, the trial court may issue terminating or contempt sanctions. (§ 2023.030, subds. (d), (e).)

One serious form of discovery abuse is the spoliation of evidence, which is defined as the destruction or alteration of relevant evidence or the failure to preserve evidence for another party’s use in pending or future litigation. (Strong v. State of California (2011) 201 Cal.App.4th 1439, 1458; Reeves v. MV Transportation, Inc. (2010) 186 Cal.App.4th 666, 681; Williams v. Russ (2008) 167 Cal.App.4th 1215, 1223.) “No one doubts that the intentional destruction of evidence should be condemned. Destroying evidence can destroy fairness and justice, for it increases the risk of an erroneous decision on the merits of the underlying cause of action. Destroying evidence can also increase the costs of litigation as parties attempt to reconstruct the destroyed evidence or to develop other evidence, which may be less accessible, less persuasive, or both.” (Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 8 [holding Cal. does not recognize a common law cause of action for the spoliation of evidence].)

“Chief among” the nontort remedies for the spoliation of evidence “is the evidentiary inference that evidence which one party has destroyed or rendered unavailable was unfavorable to that party.” (Cedars-Sinai Medical Center v. Superior Court, supra, 18 Cal.4th at p. 11.) In addition, “[d]estroying evidence in response to a discovery request after litigation has commenced would surely be a misuse of discovery within the meaning of [former] section 2023, as would such destruction in anticipation of a discovery request,” and the available sanctions to remedy that abuse include such “potent” measures as “monetary sanctions, contempt sanctions, issue sanctions ordering that designated facts be taken as established or precluding the offending party from supporting or opposing designated claims or defenses, evidence sanctions prohibiting the offending party from introducing designated matters into evidence, and terminating sanctions that include striking part or all of the pleadings, dismissing part or all of the action, or granting a default judgment against the offending party.” (Cedars-Sinai, at p. 12.)

The safe-harbor provision of section 2023.030(f) specifically addresses when a trial court is authorized to impose sanctions for the spoliation of “electronically stored information”[5] (ESI). “Notwithstanding subdivision (a), or any other section of this title, absent exceptional circumstances, the court shall not impose sanctions on a party or any attorney of a party for failure to provide electronically stored information that has been lost, damaged, altered, or overwritten as the result of the routine, good faith operation of an electronic information system.” (§ 2023.030(f)(1).) Finally, section 2023.030(f)(2) provides: “This subdivision shall not be construed to alter any obligation to preserve discoverable information.”

What constitutes alteration or destruction of ESI during the “routine, good faith” operation of an electronic storage system is clearly tethered to whether the party in possession of and/or control of the information was under an “obligation to preserve discoverable information” at the time the information was altered or destroyed. (§ 2023.030(f)(1), (2).) However, the statute does not define when a party is under such an obligation to preserve information and, instead, expresses an intent not to “alter” such an obligation that may independently exist. (Ibid.)

2. The relevant legislative history demonstrates the safe-harbor provision of section 2023.030(f) was not intended to relieve a party of its duty to preserve evidence when future litigation is reasonably anticipated.

Although section 2023.030(f) is silent about when a duty to preserve ESI arises, its legislative history provides some guidance.[6] Section 2023.030 was enacted in 2004 as part of the Civil Discovery Act. (§ 2016.010 et seq., as added by Stats. 2004, ch. 182, § 23.) The Civil Discovery Act did not, however, “expressly address issues relating to the discovery of electronically stored information.” (Jud. Council of Cal., Rep. on Electronic Discovery: Proposed Legislation (Apr. 16, 2008) p. 1.)[7] In a report submitted to the Legislature, the Judicial Council of California proposed legislation to “modernize the Code of Civil Procedure to reflect the growing importance of discovery of electronically stored information.” (Id. at p. 3.)

Relevant here, the Judicial Council’s report addressed the “important issue . . . of whether sanctions should be imposed on a party that fails to produce electronically stored information that has been lost, damaged, altered, or overwritten because of the routine, good faith operation of an electronic information system.” (Jud. Council of Cal., Rep. on Electronic Discovery: Proposed Legislation, supra, at p. 8.) It recommended the Legislature “add new `safe harbor’ provisions to several sanctions statutes, stating: `absent exceptional circumstances, the court shall not impose sanctions on a party or its attorneys for failure to provide electronically stored information lost, damaged, altered, or overwritten as a result of the routine, good-faith operation of an electronic information system.'” (Ibid.) In addition, the report recommended that, “after each of the new `safe harbor” provisions described above, the following sentence would be added: `This subdivision shall not be construed to alter any obligation to preserve discoverable information.'” (Ibid.)

In 2009, the Legislature enacted the Electronic Discovery Act, which “largely implement[ed]” the Judicial Council’s recommendations. (Sen. Com. on Judiciary, Analysis of Assem. Bill No. 5 (2009-2010 Reg. Sess.) June 9, 2009, p. 1.)[8] The act was designed to “`eliminate uncertainty and confusion regarding the discovery of electronically stored information, and thereby minimize unnecessary and costly litigation that adversely impacts access to the courts.’ (Stats 2009, ch. 5, § 23.) The act added several provisions to the Code of Civil Procedure to integrate . . . (ESI) into the discovery law . . . .” (Park v. Law Offices of Tracey Buck-Walsh (2021) 73 Cal.App.5th 179, 188.) Like the Judicial Council, the Legislature was concerned with a “distinctive feature of electronic information systems,” to wit, “the routine modification, overwriting, and deletion of information which accompanies normal use.” (Sen. Com. on Judiciary, Analysis of Assem. Bill No. 5, supra, June 9, 2009, p. 10.) To address that specific concern, the Electronic Discovery Act enacted the recommended safe-harbor provision. (Ibid.)

The legislative history of the Electronic Discovery Act demonstrates the safe-harbor provisions were not intended to “relieve parties of their obligations to preserve discoverable information. When a party is under a duty to preserve information because of pending or reasonably anticipated litigation, a party would still be required to modify or suspend features of the routine operation of a computer system to prevent loss of information.” (Sen. Com. on Judiciary, Analysis of Assem. Bill No. 5, supra, June 9, 2009, p. 10, italics added.)

The Electronic Discovery Act did not amend section 2023.030, but the Legislature addressed that and other apparent oversights in 2012 when it enacted Senate Bill No. 1574 (2011-2012 Reg. Sess.). (See Vasquez v. California School of Culinary Arts, Inc. (2014) 230 Cal.App.4th 35, 41 [the Electronic Discovery Act “was amended in 2012 to expand the provisions regarding electronic discovery”].) Inter alia, Senate Bill No. 1574 amended section 2023.030 to add the safe-harbor provision for ESI and the accompanying language that the section “shall not be construed to alter any obligation to preserve discoverable information.” (§ 2023.030(f)(2), as amend. by Stats 2012, ch. 72, § 19.) As with the Electronic Discovery Act, the legislative history of Senate Bill No. 1574 demonstrates the Legislature expressly intended that the safe-harbor provision of section 2023.030(f) “would not otherwise relieve parties of their obligations to preserve discoverable information,” and that, “[w]hen a party is under a duty to preserve information because of pending or reasonably anticipated litigation, a party would still be required to modify or suspend features of the routine operation of a computer system to prevent loss of information.” (Sen. Com. on Judiciary, Analysis of Sen. Bill. No. 1574 (2011-2012 Reg. Sess.) as amend. Apr. 19, 2012, p. 10, italics added.)[9]

In short, the legislative history demonstrates the safe-harbor provision of section 2023.030(f) is intended to shield a party or a party’s attorney from sanctions for the alteration or destruction of ESI only if the evidence was lost before the party was under a duty to preserve that evidence “because of pending or reasonably anticipated litigation.” (Sen. Com. on Judiciary, Analysis of Sen. Bill. No. 1574, supra, as amend. Apr. 19, 2012, p. 10, italics added.) However, the legislative history does not answer the question: what constitutes reasonably anticipated litigation? Nor does the extant California caselaw provide an answer.[10] (See Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2022) ¶ 8:19.16, pp. 8A-12 to 8A-13 [noting “there is no known California authority in point” regarding a party’s duty to preserve ESI].)

3. Under persuasive federal caselaw about the spoliation of evidence, a duty to preserve evidence arises when the party to be sanctioned was objectively aware that future litigation was reasonably foreseeable, meaning the litigation was probable or likely to arise from an incident.

“There is little California case law regarding discovery of electronically stored information . . . . We look, therefore, to federal case law on the discovery of electronically stored information under the Federal Rules of Civil Procedure for guidance on the subject.” (Vasquez v. California School of Culinary Arts, Inc., supra, 230 Cal.App.4th at pp. 42-43; see Reeves v. MV Transportation, Inc., supra, 186 Cal.App.4th at pp. 681-682 [discussing federal case law on the spoliation of evidence].) “`Because of the similarity of California and federal discovery law, federal decisions have historically been considered persuasive absent contrary California decisions.'” (Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, 861, fn. 6, quoting Liberty Mutual Ins. Co. v. Superior Court (1992) 10 Cal.App.4th 1282, 1288; accord, Nagle v. Superior Court (1994) 28 Cal.App.4th 1465, 1468.)

The federal courts have held that “`a party can only be sanctioned for destroying evidence if it had a duty to preserve it.'” (Micron Technology, Inc. v. Rambus Inc. (Fed. Cir. 2011) 645 F.3d 1311, 1320 (Micron).) “Spoliation refers to the destruction or material alteration of evidence or to the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” (Silvestri v. General Motors Corp. (4th Cir. 2001) 271 F.3d 583, 590, citing West v. Goodyear Tire & Rubber Co. (2d Cir. 1999) 167 F.3d 776, 779, italics added.) “The duty to preserve material evidence arises not only during litigation but also extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation.” (Silvestri, at p. 591; see Gerlich v. U.S. Department of Justice (D.C. Cir. 2013) 711 F.3d 161, 170-171 [“Other circuit courts of appeals have held that a duty of preservation exists where litigation is reasonably foreseeable. . . . We now do likewise.”].)

Whether litigation is “`reasonably foreseeable'” “is an objective standard, asking not whether the party in fact reasonably foresaw litigation, but whether a reasonable party in the same factual circumstances would have reasonably foreseen litigation. [¶] When litigation is `reasonably foreseeable’ is a flexible fact-specific standard that allows a district court to exercise the discretion necessary to confront the myriad factual situations inherent in the spoliation inquiry. [Citation.] This standard does not trigger the duty to preserve documents from the mere existence of a potential claim or the distant possibility of litigation. [Citation.] However, it is not so inflexible as to require that litigation be `imminent, or probable without significant contingencies . . . .'” (Micron, supra, 645 F.3d at p. 1320.)

The parties agree that the reasonably foreseeable standard is the correct test for determining when a party is under a duty to preserve evidence for purposes of the safe-harbor provision of section 2023.030(f), but they disagree about the meaning of the standard. The district argues future litigation is reasonably foreseeable if it is probable or likely to arise from an incident, but litigation is not foreseeable if it is a mere possibility. Real parties in interest reject the suggestion that future litigation must be probable or likely for it to be reasonably foreseeable. We agree with the district.

Many federal district courts have ruled that the duty to preserve evidence arises when future litigation is “probable” or “likely.” (E.g., Freidig v. Target Corp. (W.D. Wisc. 2018) 329 F.R.D. 199, 207 [“When a party is aware of an accident that it knows is likely to cause litigation, it triggers the party’s duty to preserve evidence.”]; In re Napster Inc. Copyright Litigation (N.D. Cal. 2006) 462 F.Supp.2d 1060, 1068 [“The future litigation must be `probable,’ which has been held to mean `more than a possibility.'”]; Realnetworks, Inc. v. DVD Copy Control Ass’n (N.D. Cal. 2009) 264 F.R.D. 517, 524 [same].)[11] Relying on Hynix Semiconductor Inc. v. Rambus Inc. (Fed. Cir. 2011) 645 F.3d 1336 (Hynix II), real parties in interest argue those decisions are not good law. We are not persuaded.

In Hynix Semiconductor Inc. v. Rambus, Inc. (N.D. Cal. 2006) 591 F.Supp.2d 1038 (Hynix I), vacated in part by Hynix II, supra, 645 F.3d 1336, the district court addressed a motion to dismiss the defendant’s patent counterclaims based on unclean hands because it “adopted a document retention plan in order to destroy documents in advance of a planned litigation campaign . . . .” (Hynix I, at pp. 1041-1042.) The court noted that “the primary question” was whether the defendant adopted its document retention policy “in advance of reasonably foreseeable litigation.” (Id. at p. 1060.) “[T]he obligation to preserve evidence arises when `the party has notice that the evidence is relevant to litigation—most commonly when suit has already been filed, providing the party responsible for the destruction with express notice, but also on occasion in other circumstances, as for example when a party should have known that the evidence may be relevant to future litigation.'” (Hynix I, supra, 591 F.Supp.2d at p. 1061, quoting Kronisch v. U.S. (2d Cir. 1998) 150 F.3d 112, 126.) “`When a lawyer who has been retained to handle a matter learns that litigation is probable or has been commenced, the lawyer should inform the client of its duty to preserve potentially relevant documents . . . .'” (Hynix I, at p. 1061, quoting American Bar Association Section of Litigation, Civil Discovery Standards (Aug. 1999) Standard 10.) “`[P]robable’ . . . means that litigation must be more than a possibility [citations]. Litigation `is an ever-present possibility in American life.'” (Hynix I, at p. 1061.)

The court in Hynix I agreed with the plaintiff that whether litigation is “`probable’ must be viewed from the perspective of a plaintiff, who is in control of when the litigation is to be commenced,” and “that litigation is probable when litigation is contemplated.” (Hynix I, supra, 591 F.Supp.2d at p. 1061.) The court ruled, however, that the litigation in that case was not “`probable'” when the defendant adopted its document retention policy because “the path to litigation was neither clear nor immediate” and “several contingencies had to occur before [the defendant] would engage in litigation . . . .” (Id. at p. 1062.) Therefore, the court ruled the defendant had not engaged in the spoliation of evidence. (Id. at p. 1065.)

On appeal, the U.S. Court of Appeals for the Federal Circuit vacated that portion of the decision in Hynix I. (Hynix II, supra, 645 F.3d at p. 1341.) “`[S]poliation refers to the destruction or material alteration of evidence or to the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.’ [Citation.] Most relevant in this case is the point when the duty to preserve evidence begins. This determination is informed by a number of policy considerations, including `the need to preserve the integrity of the judicial process in order to retain confidence that the process works to uncover the truth,’ [citation], and must balance the reality that `litigation is an ever-present possibility in American life,’ [citation], with the legitimate business interest of eliminating unnecessary documents and data.” (Hynix II, at pp. 1344-1345.)

As in our case, the parties to Hynix II agreed that the “reasonably foreseeable” test was the correct standard but disagreed on what it meant. (Id. at pp. 1345-1347.) The plaintiff argued “that reasonable foreseeability incorporates no requirement of imminence of litigation, while [the defendant] argue[d] that `to be reasonably foreseeable, litigation must be “imminent,” at least in the sense that it is probable and free of significant contingencies.'” (Hynix II, supra, 645 F.3d at p. 1345.) The federal circuit disagreed with the district court (and with the defendant) that the “reasonably foreseeable” standard is only met when the litigation is “`”imminent.”‘” (Ibid.) “In Micron, supra, 645 F.3d 1311], this court held that that standard does not carry a gloss requiring that litigation be `imminent, or probable without significant contingencies.'” [Citation]. The district court here applied just such a standard.” (Hynix II, at p. 1345.)

“The narrow standard applied by the district court in this case vitiates the reasonable foreseeability test, and gives free reign to destroy documents to the party with the most control over, and potentially the most to gain from, their destruction. This fails to protect opposing parties’ and the courts’ interests in uncovering potentially damaging documents, and undermines the level evidentiary playing field created by discovery that lies at the heart of our adversarial system. [Citation.] [¶] Applying the correct standard of reasonable foreseeability, without the immediacy gloss, these considerations compel a finding that litigation was reasonably foreseeable prior to [the defendant’s] Second Shred Day.” (Hynix II, supra, 645 F.3d at pp. 1346-1347.) Therefore, the federal circuit held “the district court erred in applying too narrow a standard of reasonable foreseeability as requiring that litigation be immediate or certain, which was legal error,” vacated the ruling on the plaintiff’s motion to dismiss, and remanded for the district court to apply the correct standard of reasonable foreseeability set forth in Micron, supra, 645 F.3d 1311. (Hynix II, at p. 1347.)

Real parties in interest read Hynix II as expressly disapproving of Hynix I (and, implicitly, the other decisions cited, ante) to the extent it read the reasonably foreseeable standard as requiring that litigation be probable before a party has a duty to preserve evidence. But, this reflects too broad a reading of Hynix II. The federal circuit patently did not hold that the district court had erred by concluding litigation must be probable for it to be reasonably foreseeable. The same appellate court had already ruled in an earlier appeal involving the same defendant that the “`reasonably foreseeable'” test “does not trigger the duty to preserve documents from the mere existence of a potential claim or the distant possibility of litigation” (Micron, supra, 645 F.3d at p. 1320, italics added), which is consistent with saying the litigation must be “probable.” Instead, Hynix II held the district court had erred when it ruled the future litigation must be “`imminent, or probable without significant contingencies.'” (Hynix II, supra, 645 F.3d at p. 1345, italics added; see PacifiCorp v. Northwest Pipeline GP (D. Or. 2012) 879 F.Supp.2d 1171, 1190 [noting Hynix II rejected a “hyper-technical reliance on terms like `probable,'” italics added].) It was the “immediacy” and “certain[ty]” glosses on the reasonable foreseeability standard that the federal circuit disapproved.[12] (Hynix II, at p. 1347.)

Moreover, the requirement that future litigation be probable or likely for it to have been reasonably foreseeable is consistent with the federal analog to Code of Civil Procedure section 2023.030(f). Rule 37(e) of the Federal Rules of Civil Procedure (28 U.S.C.) provides for sanctions “[i]f electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery . . . .”[13] “The . . . rule applies only if the lost information should have been preserved in the anticipation or conduct of litigation and the party failed to take reasonable steps to preserve it. Many court decisions hold that potential litigants have a duty to preserve relevant information when litigation is reasonably foreseeable. Rule 37(e) is based on this common-law duty; it does not attempt to create a new duty to preserve. The rule does not apply when information is lost before a duty to preserve arises.” (Fed. Rules Civ.Proc., rule 37(e), Advisory Com. notes on 2015 amendments.) “In applying the rule, a court may need to decide whether and when a duty to preserve arose. Courts should consider the extent to which a party was on notice that litigation was likely and that the information would be relevant.” (Ibid., italics added.)

Finally, we note that a probable or likely gloss on the reasonably foreseeable standard is consistent with other tests for foreseeability. For example, in the context of a claim of negligence, one of the major considerations in determining whether the defendant owed the plaintiff a duty of care is “the foreseeability of harm to the plaintiff.” (Roland v. Christian (1968) 69 Cal.2d 108, 113.) “`”[F]oreseeability is not to be measured by what is more probable than not, but includes whatever is likely enough in the setting of modern life that a reasonably thoughtful [person] would take account of it in guiding practical conduct.”‘” (Kesner v. Superior Court (2016) 1 Cal.5th 1132, 1145, quoting Bigbee v. Pac. Tel. & Tel. Co. (1983) 34 Cal.3d 49, 57.) “Foreseeability lies on a `continuum from a mere possibility to a reasonable probability.'” (Tan v. Arnel Management Co. (2009) 170 Cal.App.4th 1087, 1101, quoting Castaneda v. Olsher (2007) 41 Cal.4th 1205, 1214.)

We find federal law on the spoliation of evidence to be persuasive and conclude the safe-harbor provision of section 2023.030(f) applies when ESI was altered or destroyed before the party in possession and/or control of the information was objectively aware that the ESI would be relevant to anticipated future litigation, meaning the litigation was “reasonably foreseeable.” (Silvestri v. General Motors Corp., supra, 271 F.3d at p. 590.) Litigation is reasonably foreseeable when it is “probable” or “likely” to arise from a dispute or incident (e.g., Macneil Automotive Products, Ltd. v. Cannon Automotive, Ltd., supra, 715 F.Supp.2d at p. 801), but not when there is no more than the “mere existence of a potential claim or the distant possibility of litigation.” (Micron, supra, 645 F.3d at p. 1320.) However, the “reasonable foreseeability” standard does not require that the future litigation be “`imminent [or] probable without significant contingencies,'” or even “certain.” (Hynix II, supra, 645 F.3d at pp. 1345, 1347, italics added.)

4. A breach of the district’s statutory duty to preserve evidence, assuming such a breach occurred, does not support the trial court’s sanctions order.

Notwithstanding the foregoing, real parties in interest argue Government Code section 53160 required the district to preserve the video and that its failure to comply with that statutory duty gives rise to an inference of the spoliation of evidence. They argue, at least implicitly, that even if this litigation was not “`reasonably foreseeable'” when the video was erased, because it was not “`probable'” or “`likely,'” the sanctions order was still correct because the district breached that statutory duty.[14]

In principle, we agree that a party may be under a statutory or regulatory duty to preserve evidence, and that, in an appropriate case, breach of that duty may result in some form of sanction. (Cf. Temple Community Hospital v. Superior Court (1999) 20 Cal.4th 464, 477 [“[T]o the extent a duty to preserve evidence is imposed by statute or regulation upon the third party, the Legislature or the regulatory body that has imposed this duty generally will possess the authority to devise an effective sanction for violations of that duty.”]; see Nelson v. Superior Court (2001) 89 Cal.App.4th 565, 572-576 [holding government claim placed a county and its sheriff’s department on notice to preserve audio recordings pursuant to Gov. Code, § 26202.6—the city and county analog to § 53160—and remanding for the trial court to decide whether destruction of the recordings was in bad faith and what, if any, sanctions were appropriate].) However, we are not persuaded that a breach of the district’s statutory duty to preserve evidence, assuming there was such a breach, is controlling here or independently supports the trial court’s sanctions order.

Government Code section 53160, subdivision (a), provides: “The head of a special district, after one year, may destroy recordings of routine video monitoring, and after 100 days may destroy recordings of telephone and radio communications maintained by the special district. This destruction shall be approved by the legislative body and the written consent of the agency attorney shall be obtained. In the event that the recordings are evidence in any claim filed or any pending litigation, they shall be preserved until pending litigation is resolved.”[15]

As real parties in interest contend, “several [federal] courts have held that destruction of evidence in violation of a regulation that requires its retention can give rise to an inference of spoliation.” (Byrnie v. Town of Cromwell Bd. of Educ. (2d Cir. 2001) 243 F.3d 93, 108-109, superseded in part by Fed. Rules Civ.Proc., rule 37(e), as stated in Mazzei v. Money Store (2d Cir. 2016) 656 Fed.Appx. 558, 560.) But those courts have only approved the application of an adverse evidentiary presumption about the content of the destroyed evidence, and they do not support the imposition of more drastic sanctions. For example, the U.S. Court of Appeals for the District of Columbia has held that entry of a default judgment as a sanction for the destruction of evidence that should have been maintained under a regulatory duty “is a `drastic’ sanction [that] is merited only when `less onerous methods . . . will be ineffective or obviously futile,'” and an “evidentiary presumption that the destroyed documents contained favorable evidence for the party prejudiced by their destruction [is] a lesser, more common sanction.” (Talavera v. Shah (D.C. Cir. 2011) 638 F.3d 303, 311.)

In addition, the main decision cited by real parties in interest held that a breach of a regulatory duty to preserve evidence will support an adverse evidentiary presumption only when “the party seeking the inference [is] a member of the general class of persons” that the duty was designed to protect. (Byrnie v. Town of Cromwell Bd. of Educ., supra, 243 F.3d at p. 109.) And the committee notes to the 2015 amendments to rule 37(e) of the Federal Rules of Civil Procedure caution against knee-jerk reliance on a statutory or regulatory duty to preserve evidence when determining whether sanctions for the spoliation of evidence are warranted. “Although the rule focuses on the common-law obligation to preserve in the anticipation or conduct of litigation, courts may sometimes consider whether there was an independent requirement that the lost information be preserved. Such requirements arise from many sources—statutes, administrative regulations, an order in another case, or a party’s own information-retention protocols. The court should be sensitive, however, to the fact that such independent preservation requirements may be addressed to a wide variety of concerns unrelated to the current litigation. The fact that a party had an independent obligation to preserve information does not necessarily mean that it had such a duty with respect to the litigation, and the fact that the party failed to observe some other preservation obligation does not itself prove that its efforts to preserve were not reasonable with respect to a particular case.” (Fed. Rules Civ.Proc., rule 37(e), Advisory Com. notes on 2015 amendments, italics added.)

Finally, under both federal and California law an adverse evidentiary presumption, as a sanction for failure to comply with a statutory or regulatory duty to preserve evidence, is only appropriate if the trier of fact concludes the evidence was intentionally destroyed. (Fed. Rules of Civ.Proc., rule 37(e)(2)(A), (B) [inference permissible if court finds “the party acted with the intent to deprive another party of the information’s use in the litigation.”]; Evid. Code, § 413 [trier of fact may draw adverse evidentiary presumption from a party’s “willful suppression of evidence”]; CACI No. 204 [“You may consider whether one party intentionally concealed or destroyed evidence. If you decide that a party did so, you may decide that the evidence would have been unfavorable to that party.”]; see New Albertson’s, Inc. v. Superior Court, supra, 168 Cal.App.4th at p. 1434.)

Real parties in interest cite no authority for the proposition that they are members of the general class of persons the Legislature intended to protect when it enacted Government Code section 53160, and we have found none. And, even assuming they are members of that general class, they would not be entitled to an adverse evidentiary presumption because the trial court expressly ruled the erasure of the video was negligent and not intentional.

Therefore, we decline to find that a breach of the district’s statutory duty to preserve evidence, assuming there was such a breach, gives rise to a presumption of the spoilation of evidence and independently supports the sanctions order.

C. The Trial Court Appears To Have Applied the Correct Legal Standard of Reasonable Foreseeability, but the Record Does Not Support its Ruling That the District Was Under a Duty To Preserve Evidence When the Video Was Erased.

The district argues the trial court applied the wrong legal standard when it ruled the district had a duty to preserve evidence before the video was erased. Although we conclude the trial court appears to have applied the correct legal standard, we conclude the record does not support its ruling.

“Normally, we must presume the trial court was aware of and understood the scope of its authority and discretion under the applicable law. [Citations.] `This rule derives in part from the presumption of Evidence Code section 664 “that official duty has been regularly performed.”‘ [Citation.] The rebuttable presumption under section 664 `”`affect[s] the burden of proof’ (Evid. Code, § 660), meaning that the party against whom it operates . . . has `the burden of proof’ as to the nonexistence of the presumed fact. (Evid. Code, § 606 . . . .)”‘” (Barriga, supra, 51 Cal.App.5th at pp. 333-334.)

“If the record demonstrates the trial court was unaware of its discretion or that it misunderstood the scope of its discretion under the applicable law, the presumption has been rebutted, and the order must be reversed. [Citation.] `”[A]ll exercises of legal discretion must be grounded in reasoned judgment and guided by legal principles and policies appropriate to the particular matter at issue.” [Citations.] Therefore, a discretionary decision may be reversed if improper criteria were applied or incorrect legal assumptions were made. [Citation.] Alternatively stated, if a trial court’s decision is influenced by an erroneous understanding of applicable law or reflects an unawareness of the full scope of its discretion, it cannot be said the court has properly exercised its discretion under the law. [Citations.] Therefore, a discretionary order based on the application of improper criteria or incorrect legal assumptions is not an exercise of informed discretion and is subject to reversal even though there may be substantial evidence to support that order. [Citations.] If the record affirmatively shows the trial court misunderstood the proper scope of its discretion, remand to the trial court is required to permit that court to exercise informed discretion with awareness of the full scope of its discretion and applicable law.'” (Barriga, supra, 51 Cal.App.5th at p. 334.)

The district contends the trial court did not apply the correct “reasonably foreseeable” standard as we have articulated, post. According to the district, the court applied too speculative a standard when it ruled the district already had a duty to preserve evidence when the video was erased because “`it was reasonably foreseeable the incident might result in litigation.'” We decline to place too much weight on the trial court’s use of the word “might.” As the trial court noted, the district itself had argued in its written opposition to the sanctions motion that it “had no reason to even suspect, let alone reasonably expect, that any litigation might arise from the alleged incident.” (Italics added.) Moreover, the trial court appears to have adopted the reasonably foreseeable standard articulated by the district in its written opposition to the motion, and the court cited federal decisions applying that standard, including Hynix II, supra, 645 F.3d 1336.

In any event, we conclude the trial court’s ruling is not supported by the extant record. The trial court noted the district had a special relationship to Doe and other students. Because of that special duty of care, the trial court ruled the district would have been on notice that litigation would arise from an injury to Doe that was allegedly caused by the district’s breach of its heightened duty of care, and such notice triggered the district’s duty to preserve the video. But the mere fact that the district owed a duty of care toward Doe, and Doe was allegedly injured, does not ineluctably lead to the conclusion that, at the time the video was erased, the district was on notice that litigation was probable or likely. At most, the trial court ruled the assistant principal “knew the significance of the video and that it would be important if any further investigation, or eventual litigation, arose from the incident.” (Italics added.)

“`The mere existence of a dispute does not necessarily mean that parties should reasonably anticipate litigation.’ [Citations.] Instead, the duty seems to begin `somewhere between knowledge of the dispute and direct, specific threats of litigation.'” (Steves and Sons, Inc. v. Jeld-Wen, Inc. (E.D. Va. 2018) 327 F.R.D. 96, 106.) “There is no single bright line that definitively marks when litigation reasonably should be anticipated. Instead, courts consider a variety of factors, including the type and seriousness of the injury; how often similar kinds of incidents lead to litigation; the `course of conduct between the parties, including past litigation or threatened litigation’; and what steps both parties took after the incident and before the loss of the evidence, including whether the defendant initiated an investigation into the incident.” (Bistrian v. Levi (E.D. Penn. 2020) 448 F.Supp.3d 454, 468.) “[A] party’s duty to preserve arises when it has notice that the documents might be relevant to a reasonably-defined future litigation. Ultimately, the court’s decision as to when a party was on notice must be guided by the particular facts of each case.” (Zbylski v. Douglas County School District (D. Colo. 2015) 154 F.Supp.3d 1146, 1164 (Zbylski); see id. at p. 1163 [factors include “notification received from a potential adversary.”].)

Real parties in interest point to nothing in the record that would necessarily have put the district on notice that the specific incident involving Doe would probably or likely have resulted in litigation. Doe’s father learned of the alleged incident a day later. But, the record before us reflects that, until Doe’s parents filed their government claim some six months later, they did not communicate with the district or with school officials in such a manner that would have reasonably caused the district to foresee litigation.[16] (See, e.g., Hollis v. CEVA Logistics U.S., Inc. (N.D. Ill., May 19, 2022, No. 19 CV 50135) ___ F.Supp.3d ___ [2022 U.S.Dist. Lexis 90234, *12] [plaintiff’s “letter that he referred to as a `formal letter of complaint against CEVA Logistics for workplace race discrimination,’ alerted CEVA both to the nature of his allegations and the relevance of any video recording of the incident” and “triggered a duty to preserve video of the incident.”]; Federal Trade Commission v. F&G International Group Holdings, LLC (S.D. Ga. 2021) 339 F.R.D. 325, 330 [defendant’s duty to preserve evidence arose when it was “put on notice” of an investigation by the Federal Trade Commission and when it was instructed to suspend normal document destruction practices].)

Nor would the mere fact of the alleged sexual assault have necessarily caused the district to immediately foresee litigation. (See Archer v. York City School District (M.D. Penn. 2016) 227 F.Supp.3d 361, 380 [rejecting argument that school district’s decision not to renew charter school, which resulted in “`the disruption of 700-800 children” and the loss of “tens of millions of dollars,” would undoubtedly have put the district on notice of probable litigation and triggered its duty to preserve an e-mail outlining the reasons to not renew the charter school].) Certain types of incidents, such as slip and fall accidents or prison assaults, predictably result in litigation. “That is not to say that the mere fact of a slip-and-fall or a prison assault is always enough to put defendants on notice of potential litigation and trigger a duty to preserve. But such an event combined with other circumstances may often be enough that defendants should reasonably anticipate litigation beginning soon after the incident itself.” (Bistrian v. Levi, supra, 448 F.Supp.3d at p. 469, italics added.) For example, a store is placed on notice that litigation is reasonably foreseeable when a customer submits a “guest incident report” stating he or she slipped and fell on a puddle. (Freidig v. Target Corp., supra, 329 F.R.D. at p. 207.) In addition, a party will be on notice that litigation arising from an injury is reasonably foreseeable when, among other things, it learns the injured persons have retained counsel. (See In re New Canyonlands by Night, LLC (D. Utah 2019) 415 F.Supp.3d 1020, 1024-1025.) Nothing similar occurred in this case.

Moreover, the mere fact that a party has conducted an internal investigation of an incident and produced a report about it does not necessarily mean the party was on notice of potential litigation. The assistant principal’s half-page narrative report merely set forth what he observed on the video, the statements he had received from school personnel, and some of the changes that had been made to “restroom protocols to enhance bathroom supervision.” Although the assistant principal prepared his report at the request of the district’s human resources department, nothing in the record indicates the district anticipated the report would be used to defend against reasonably foreseeable litigation. At most, the record demonstrates that preparation of such a report is a routine practice of the district’s risk management department for use to defend against a claim, if one is made. Without more, the report did not place the district “on ample notice of future litigation.” (Black v. Costco Wholesale Corporation (M.D. Tenn. 2021) 542 F.Supp.3d 750, 753, italics added [noting that some courts have ruled a party has a duty to preserve evidence when an internal report puts the party on notice of litigation].)

Finally, we disagree with real parties in interest’s belated assertion that the district’s invocation of the attorney-client privilege and attorney work product protection—when it opposed real parties in interest’s request for production of an unredacted copy of the assistant principal’s report—necessarily demonstrates the district was objectively aware that litigation was reasonably foreseeable before the video was erased.[17] For instance, the assistant principal’s narrative report and his e-mail transmitting the report to the district did not state the contents of the report were protected by the attorney-client privilege. (See, e.g., Zubulake v. UBS Warburg LLC (S.D. N.Y. 2003) 220 F.R.D. 212, 216-217 [ruling defendant reasonably anticipated litigation because internal company e-mails about the plaintiff were labeled attorney-client privilege and most people in the company who were associated with the plaintiff recognized the possibility she might sue].)

When a party asserts the attorney-client privilege and/or attorney work product protection over a document that had been previously entered in a privilege log, courts may consider the act of entry as evidence the party had already identified a potential claim and had reasonably anticipated it would result in litigation. (See Oracle America, Inc. v. Hewlett Packard Enterprise Company (N.D. Cal. 2018) 328 F.R.D. 543, 550-551.) In contrast, the district’s claim of attorney-client privilege made during this lawsuit, without more, “can hardly be read as an admission” that it had reasonably anticipated litigation would commence before the evidence was destroyed. (Edifecs, Inc. v. Welltok, Inc. (W.D. Wash., Nov. 8, 2019, No. C18-1086JLR) [2019 U.S.Dist. Lexis 194858, *12]; see Moore v. Lowe’s Home Centers, LLC (W.D. Wash., June 24, 2016, No. 2:14-cv-01459-RJB) [2016 U.S.Dist. Lexis 82652, *9-*10] [rejecting the plaintiff’s claim that defendant reasonably anticipated litigation and had the duty to preserve e-mails because, among other things, the defendant asserted the attorney-client privilege and attorney work product protection during the litigation].)

In short, we conclude the extant record does not support the trial court’s ruling that the district had a duty to preserve the video because litigation was reasonably foreseeable at the time the video was erased. Therefore, we grant the petition and direct the trial court to vacate its sanctions order and reconsider its ruling. The court may, in its discretion, permit the parties to introduce additional evidence that is relevant to determining whether the district was under a duty to preserve evidence at the time the video was erased.

D. If the Trial Court Once More Concludes the District Should Be Sanctioned for the Spoliation of Evidence, the Court Must Consider Whether Lesser Sanctions Are Appropriate.

Because we now direct the trial court to vacate its sanctions order and reconsider its ruling, we need not decide whether the issue and evidentiary sanctions it imposed were excessive.[18] However, if on remand the trial court once more concludes the district was under a duty to preserve the video before its erasure, the court must consider whether some lesser form of sanction is warranted.

“`The trial court has broad discretion in selecting discovery sanctions, subject to reversal only for abuse. [Citations.] The trial court should consider both the conduct being sanctioned and its effect on the party seeking discovery and, in choosing a sanction, should “`attempt[] to tailor the sanction to the harm caused by the withheld discovery.'” [Citation.] The trial court cannot impose sanctions for misuse of the discovery process as a punishment. [Citation.] [¶] The discovery statutes evince an incremental approach to discovery sanctions, starting with monetary sanctions and ending with the ultimate sanction of termination. “Discovery sanctions `should be appropriate to the dereliction, and should not exceed that which is required to protect the interests of the party entitled to but denied discovery.'” [Citation.] If a lesser sanction fails to curb misuse, a greater sanction is warranted: continuing misuses of the discovery process warrant incrementally harsher sanctions until the sanction is reached that will curb the abuse.'” (Padron v. Watchtower Bible & Tract Society of New York, Inc. (2017) 16 Cal.App.5th 1246, 1259-1260, quoting Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 992.)

“A discovery order, though not in the form of a default or dismissal, is justifiably treated as such where the effect of the order is to preclude proof of essential elements of each cause of action.” (Puritan Ins. Co. v. Superior Court (1985) 171 Cal.App.3d 877, 884, citing Karz v Karl (1982) 137 Cal.App.3d 637, 648.) “The sanction of dismissal or the rendition of a default judgment against the disobedient party is ordinarily a drastic measure which should be employed with caution. [Citation.] The sanction of dismissal, where properly employed, is justified on the theory the party’s refusal to reveal material evidence tacitly admits his claim or defense is without merit.” (Puritan Ins. Co., at p. 885.) Except for in cases of extreme misconduct and when other viable options are unavailable, a trial court abuses its discretion when a sanctions order deprives a party “of any right to defend the action upon its merits” and was “designed not to accomplish the purposes of discovery but designed to punish” the party for not fully complying with its discovery obligations. (Caryl Richards, Inc. v. Superior Court (1961) 188 Cal.App.2d 300, 305; accord, Newland v. Superior Court (1995) 40 Cal.App.4th 608, 613-616 [party’s failure to timely pay monetary sanctions did not warrant terminating sanctions].)

Although the trial court ruled the erasure of the video was not intentional and denied real parties in interest’s request for terminating sanctions, the sanctions it imposed were tantamount to terminating sanctions. The district was precluded from introducing evidence—on the sole remaining cause of action for negligence—to prove that it did not breach a duty of care to Doe or that Doe was contributorily negligent. If, on reconsideration, the court once more concludes the district should be sanctioned for the spoliation of evidence, the court must consider whether some lesser form of sanction will remedy the discovery violation before it imposes the same or similar issue and evidence sanctions that it did before. We express no opinion here about what sanctions would be appropriate.

III.
DISPOSITION

The petition for writ of mandate is granted. Let a writ of mandate issue, directing the superior court to vacate its February 23, 2022 sanction order and to reconsider its ruling. The stay of proceedings issued by this court on March 25, 2022, is hereby lifted.

Petitioner shall recover its costs. (Cal. Rules of Court, rule 8.493(a)(1)(A).)

Petitioner is directed to prepare and have a writ of mandate issued, copies served, and the original filed with the clerk of this court, together with proofs of service on all parties.

RAMIREZ, P. J., Concur.

RAPHAEL, J., Dissenting.

A 14-year-old special-needs student alleges in this lawsuit that he was sexually assaulted by other students in a school bathroom. Investigating before the lawsuit, school officials viewed a monitoring camera video, taken from outside the bathroom that day, that showed employees had violated a school policy of permitting only one student at a time in the bathroom by letting two boys in with the plaintiff. The district allowed the video to be overwritten a couple of weeks after the incident, so it no longer exists. Unlike the majority, I conclude that the trial court correctly found that school officials had a duty to preserve the video because litigation about the sexual assault crime was reasonably foreseeable when the district neglected to preserve it. I therefore respectfully dissent from today’s holding.

I

On March 8, 2018, a special education teacher reported to an assistant principal employed by Victor Valley Union High School District (the defendant and petitioner) that students were discussing John Doe (the plaintiff and real party in interest) and another student engaging in a sex act in the cafeteria restroom the previous day. At that time, the school had a policy where a student needing to use the locked lunch restroom would “notify the instructional assistant” who would “open the door for the student and let them in one at a time.”

By the next school day, the assistant principal, Rafael Navarro, reviewed videos from school monitoring cameras with a security official and wrote a report about one from March 7. That video showed that Doe and another boy entered the restroom together as another boy exited, and then an instructional aide let a third boy into the bathroom. Navarro reviewed the video again when he discussed it with the principal.

Navarro testified that he assumed that the security official had saved the video, as they typically recorded such incidents. Navarro discovered, however, that the video was overwritten by new footage after about two weeks.

Doe filed a motion for terminating, issue, and evidentiary sanctions due to the loss of the video, claiming various ways his case was harmed, including identifying the students involved; “the location of individuals charged with supervising the special education students”; “which student or students instigated the activity”; and whether “coercion or force” was used to lure Doe into the bathroom.

The trial court found that the District knew “as early as March 9, 2018—the day Doe’s parents were notified of the incident—that it was reasonably foreseeable the incident might result in litigation because of the School’s special duty to Doe.” At that time, the district “should have known the video would be relevant to that potential future litigation.” Because of the statute of limitations, the district “would have known within six months” if Doe or his parents would sue, and preserving the video “would not have been burdensome.” To address the district’s “negligent failure to preserve important evidence,” the court applied significant issue and evidentiary sanctions against it.

II

Our Code of Civil Procedure has no section addressing a duty to preserve evidence where a lawsuit has not yet been filed, and our Supreme Court has never articulated a standard for judicial consideration of such a duty as the basis for civil sanctions.

Under federal law, however, the duty to preserve evidence applies “when a party reasonably should know that the evidence may be relevant to anticipated litigation.” (Silvestri v. General Motors Corp. (4th Cir. 2001) 271 F.3d 583, 591.) The majority adopts the federal test as California law and holds that the trial court applied “the correct legal standard of reasonable foreseeability.” (Maj. opn., ante, at p. 33.)

The majority also identifies case law that usefully explains what it means for litigation to be reasonably foreseeable. In particular, the majority cites a test for foreseeability our Supreme Court applied in another context: “`foreseeability is not to be measured by what is more probable than not, but includes whatever is likely enough in the setting of modern life that a reasonably thoughtful person would take account of it in guiding practical conduct.'” (Maj. opn., ante, at p. 27 [cleaned up] [quoting Kesner v. Superior Ct. (2016) 1 Cal.5th 1132, 1145 (Kesner)].)

The majority also applies a case stating that “no single bright line . . . definitively marks when litigation reasonably should be anticipated” and courts consider “a variety of factors” to determine the matter. (Maj. opn., ante, at p. 35 [quoting Bistrian v. Levi (E.D. Pa. 2020) 448 F. Supp. 3d 454, 468].) The question is when the evidence “might be relevant to a reasonably-defined future litigation” and a court “`must be guided by the particular facts of each case.'” (Maj. opn., ante, at p. 35 [quoting Zbylski v. Douglas County School District (D. Colo. 2015) 154 F. Supp. 3d 1146, 1164].)[1]

I agree with the majority on this much and join its conclusion that the trial court applied the correct legal standard when it determined that the school district had a duty to preserve the video containing evidence bearing on the alleged bathroom assault.

III

As the trial court applied the correct standard, the majority recognizes that its duty “`begins and ends with the determination as to whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the determination'” of the trial court. (Maj. opn., ante, at p. 9 [quoting Los Defensores, Inc. v. Gomez (2014) 223 Cal.App.4th 377, 390-391].) Despite that highly deferential test, the majority holds that no substantial evidence supports the trial court’s finding that litigation was reasonably foreseeable. (Maj. opn., ante, at pp. 33-40.)

Contrary to the majority, I would conclude that ample evidence supports the trial court. In general, a “reasonably thoughtful” school official “`”in the setting of modern life”‘” would consider the possibility of litigation when aware of evidence bearing on whether and how a child’s sexual assault in a school bathroom occurred. (Kesner, supra, 1 Cal.5th at pp. 1144-1145.) School officials cannot not be expected to know detailed legal requirements. But they are professionals trained for their positions, receive communications within their industry, and are accountable to a school board for protecting public interests. Upon learning of a child’s sexual assault at school, reasonable administrators would consider that the matter might end up in court.

Our Supreme Court recognized in 1970 that school districts can be liable for student-on-student assaults through a tort action for negligently supervising the children. (Dailey v. Los Angeles School District (1970) 2 Cal.3d 741, 749-751.) The court later recognized that “a school district and its employees have a special relationship with the district’s pupils” imposing duties “beyond what each person generally owes others.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 869-870 .) That “duty of care owed by school personnel” includes an obligation to take “reasonable measures to protect students from foreseeable injury at the hands of third parties acting negligently or intentionally.” (Id. at p. 870.) The failure to take such measures thus leads to “cases of employees’ alleged negligence resulting in injury to a student by another student.” (Ibid.) School districts thus can face lawsuits that allege student sexual assaults resulted from school personnel’s failure to adequately supervise student perpetrators. (See J.H. v. Los Angeles Unified School Dist. (2010) 183 Cal.App.4th 123 [liability for negligent supervision in student-on-student sexual assault and battery]; Jennifer C. v. Los Angeles Unified School District (2008) 168 Cal.App.4th 1320 [liability for negligent supervision in sexual assault on special needs student in an alcove].) Some federal courts in other states have found litigation reasonably foreseeable to school officials simply because a student has been sexually assaulted.[2]

In California, this matter has been spotlighted for school leaders, as teachers and administrators are “mandated reporters” of child sexual assault (among other types of abuse), subject to misdemeanor prosecution if they do not within 36 hours report the assault to the police, sheriff, or county welfare department. (Pen. Code §§ 11165.1, 11165.7, 11165.9, 11166.) The Department of Justice has developed a form (Form SS 8572) for the mandated reports, and local law enforcement is required to investigate a mandated report. (Pen. Code §§ 11165.14, 11166, subd. (d)(3)(C), 11169.)[3] School districts must provide annual training to mandated reporters, through an online training module developed by the state Department of Social Services or a substitute for it. (Ed. Code § 44691.)[4] District officials would thus know that sexual battery means mandatory expulsion for a student perpetrator, giving the accused student a right to an administrative hearing and a court challenge to it. (See M.N. v. Morgan Hill Unified School Dist. (2018) 20 Cal.App.5th 607, 611, 621, fn. 9; Ed. Code §§ 48900, 48918.)

From these laws and this training, school officials would know that the video could be relevant to civil litigation; to a criminal or juvenile court proceeding; or to expulsion litigation against the alleged perpetrator. This cumulation makes it obvious that evidence about whether a sexual assault occurred and who is responsible should be preserved for litigation, such that a reasonable administrator would not need to parse out the precise likelihood of a particular claim in determining whether to preserve the video. The majority recognizes that some types of incidents “predictably result in litigation,” such as “slip and fall accidents.” (Maj. opn., ante, at p. 37.) A sexual assault of a student at school is such an incident. Reasonably thoughtful people whose profession is to govern schools, charged with a special duty of care, would consider the possibility of litigation when they possess evidence about a sexual assault of a student in their keeping.

Beyond the general and obvious need to preserve evidence of student sexual assaults, however, evidence in our record about this sexual assault provides two compelling justifications for the trial court’s determination that litigation was reasonably foreseeable once the school district reviewed the video.

First, school officials would have realized that the video may contain evidence of the district’s own negligence. The vice principal, Navarro, reviewed the video at least twice and observed evidence that supervisors failed to enforce the rule that they were to unlock the bathroom for only one student at a time, as two boys ended up inside with Doe. The school district was thereby aware that the incident may have resulted in part from a violation of a student-safety procedure by its employees. (See, e.g., Jimenez v. Roseville City School Dist. (2016) 247 Cal.App.4th 594, 602 [reversing grant of summary judgment in a negligent supervision case, in part because the “[d]istrict did not take adequate steps to disseminate and enforce” a policy increased the risk to students].) Such a rule violation would be glaring to a reasonable school administrator, even without legal training, and it distinguishes this case from some other event that the district would have no reason to think might serve as the basis for a negligent supervision lawsuit.

Second, the district recognized that it should act to obtain and preserve information about this sexual assault for future litigation, and it did so. According to a declaration from the district’s risk manager, who received Navarro’s report of the video shortly after it was drafted, and who works with school administrators and attorneys, the district “instructed me and other employees of the District to obtain confidential statements and reports immediately after an incident” such as the sexual assault “and forward them to my department.” This was done so that, when a claim is later filed against the district, “I then forward those statements and reports to any adjuster administering a potential claim and/or to attorneys assigned to assist the District in defending litigation.” Indeed, at the district’s urging, the trial court found that Navarro’s unredacted report of the incident was subject to attorney-client privilege because “the dominant purpose of the report is to communicate to attorneys the nature of the incident,” where the district asserted that the “report was, in fact, prepared in order to communicate with defense counsel effectively.” The trial court’s determination that litigation about the sexual assault was reasonably foreseeable when Navarro reviewed the video is supported by the district’s having acted at that time to prepare and preserve for litigation Navarro’s report about the video.[5] That is, the conclusion that litigation was foreseeable to the district is supported because the district actually prepared for it.[6]

Today’s opinion finds no duty to preserve evidence for litigation where all indications are that the district acted in accordance with a belief that there was a reasonable probability of litigation. The district had an established policy of preserving documentary evidence for litigation through its risk manager, and it preserved that evidence here when Navarro created and shared a written report about the video. Reflecting that intention to maintain evidence, Navarro assumed that video had been preserved by the security official who reviewed it with him, but it was not saved due to a “misunderstanding.” This simple mistake should simply burden the district with sanctions meant to compensate the plaintiff at trial for the loss of the video. Instead, it saddles the state with today’s unfortunate holding that a school district has no duty to preserve evidence that may bear on whether a sexual assault of a student was committed, how, and by whom — even when the evidence appeared to indicate the district bore some responsibility for the assault, and even when the district actually preserved some evidence about it for possible future litigation.

IV

The “safe harbor” provision found in Code of Civil Procedure section 2031.060 would sometimes prohibit sanctions for the failure to produce electronically stored information (ESI). But it has no bearing on the issue before us.

The provision prohibits sanctions for ESI “that has been lost, damaged, altered, or overwritten as the result of the routine, good faith operation of an electronic information system.” (§ 2031.060, subd. (i)(1).) The safe harbor provision, however, “shall not be construed to alter any obligation to preserve discoverable information.” (§ 2031.060, subd. (i)(2).) Here, before the video was overwritten, the school identified it, reviewed it, and determined that it contained content relevant to the district’s civil liability for negligently supervising students. At that time, there was a duty to preserve it for reasonably foreseeable litigation, just as there might be to preserve (for example) a piece of physical evidence that might indicate an assault occurred, such as an item of clothing. Nothing about the nature of ESI made preserving the video onerous. A person just had to “save” the video. The video was lost because of that failure to save it, not as the result of the district’s electronic system. Had the video been downloaded into an electronic file, it would have been preserved even if routine video overwriting continued regularly at the school.

Cases have held even more broadly that a party must suspend the routine destruction of electronic evidence when litigation is foreseeable. “Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and . . . ensure the preservation of relevant documents.” (Zubulake v. UBS Warburg LLC (S.D.N.Y. 2003) 220 F.R.D. 212, 218; see Apple Inc. v. Samsung Elecs. Co., Ltd. (N.D. Cal. 2012) 881 F.Supp.2d 1132, 1146-1147 [adverse inference jury instruction was appropriate when the defendant kept an auto-delete email policy in place even though litigation was reasonably foreseeable]; Zubulake v. UBS Warburg LLC, supra, 220 F.R.D. at p. 218 [“Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a `litigation hold’ to ensure the preservation of relevant documents”]). As the legislative history of the safe harbor provision recognized, “this provision would not otherwise relieve parties of their obligations to preserve discoverable information. When a party is under a duty to preserve information because of pending or reasonably anticipated litigation, a party would still be required to modify or suspend features of the routine operation of a computer system to prevent loss of information.” (Sen. Judiciary Comm., Bill Analysis dated 4/30/12, SB 1574 (2011-2012) Leg. Session.) This case presents an even stronger case for preserving evidence. The district’s routine overwriting of video did not have to be suspended; the district simply had to save a particular video it had identified.

The safe harbor provision might protect the school district where, acting in good faith, it did not identify ESI before it was overwritten. The situation we have, though, is a piece of identified evidence in the hands of school officials that should have been copied or downloaded, as the vice principal in fact intended.

V

The vexing question here, in my view, is identified in the last section of the majority opinion. (Maj. opn., ante, at pp. 40-42.) What sanctions are appropriate where a school has negligently failed to preserve, rather than intentionally destroyed, evidence like the video here?

As discussed above, I would hold that the trial court properly found that sanctions applied. Having decided that issue differently than the majority, I would grant the petition to order the trial court to reconsider the heavy-handed sanctions to craft them as primarily curative rather than punitive. (See Fed. R. Evid., rule 37(e)(1) [failure to take reasonable steps to preserve information requires “measures no greater than necessary to cure the prejudice”]; Fed. R. Evid., rule 37 advisory committee’s note [“curative measures” should not be so severe as would be ordered for intentional destruction]; Silvestri v. General Motors Corp., supra, 271 F.3d at p. 590 [sanctions for lost evidence should be molded to reflect prophylactic, punitive, and remedial purposes].)

That the school district here received harsh sanctions where it meant to preserve the video (but accidentally did not) obscures the potentially pernicious effect of today’s holding. Had the Victor Valley Union High School District—realizing that it might bear some culpability for a child’s sexual assault in the bathroom—decided to erase the video and shred memos about it, the majority’s holding means that no sanctions could be imposed for that destruction. Today’s opinion appears less ignominious because the school district, responsibly, intended to preserve the video. Where we hold there is no duty to preserve evidence about a school sexual assault, though, that means that there is nothing wrong with a less-responsible entity destroying it.

[1] All undesignated statutory references are to the Code of Civil Procedure.

[2] The trial court subsequently granted judgment on the pleadings for the district and dismissed the cause of action for sexual harassment without leave to amend, and the court granted a request from real parties in interest to dismiss their cause of action for negligent infliction of emotional distress.

[3] The issue sanctions were as follows: “1. District’s employees were negligent in supervising . . . students in the School’s cafeteria during lunch. [¶] 2. District and its employees did not comply with the policies and procedures for the supervision of . . . students during lunch in the cafeteria. [¶] 3. Doe was not responsible for, and did not contribute to, his alleged harm. [¶] 4. District negligently allowed the destruction of video surveillance footage of the moments immediately before and after the March 8, 2018 incident, despite having knowledge that the video evidence was relevant and needed to be preserved as evidence in potential litigation that was reasonably foreseeable.”

The evidence sanctions were as follows: “1. District is precluded from offering any evidence or argument that it did not have knowledge that School’s restrooms were being used for sexual assaults by . . . students. [¶] 2. District is precluded from offering any evidence, argument, or cross-examination that Doe was comparatively at fault for the subject incident. [¶] 3. District is precluded from offering any evidence, argument, or cross-examination that it complied with its policies and procedures relating to the supervision of students.”

[4] Section 2023.010 provides a “nonexhaustive list” of conduct that constitutes a “`misuse of the discovery process.'” (Kwan Software Engineering, Inc. v. Hennings (2020) 58 Cal.App.5th 57, 74.)

[5] “`Electronically stored information’ means information that is stored in an electronic medium.” (§ 2016.020, subd. (e).) “`Electronic’ means relating to technology having electrical, digital, magnetic, wireless optical, electromagnetic, or similar capabilities.” (Id., subd. (d).)

[6] Although the parties to this proceeding have discussed some of the legislative history materials recounted in this opinion, neither party has moved that we take judicial notice of those materials. (See Cal. Rules of Court, rules 8.252(a), 8.485(a).) We do so now on our own motion. (Evid. Code, §§ 452, 459; PGA West Residential Assn., Inc. v. Hulven Internat., Inc. (2017) 14 Cal.App.5th 156, 174, fn. 11.)

[7] Available at (as of Dec. 22, 2022).

[8] Available at (as of Dec. 22, 2022).

[9] Available at (as of Dec. 22, 2022).

[10] In its petition, the district cites two nonpublished Court of Appeal decisions that did address when the duty to preserve evidence for future litigation arises. Except for in limited circumstances, nonpublished decisions of the Court of Appeal may not be cited or relied upon by a party or a court. (Cal. Rules of Court, rule 8.1115(a).) Because we find no applicable exception to that rule (id., rule 8.1115(b)), we will ignore the cited decisions.

[11] Accord, Pettit v. Smith (D. Ariz. 2014) 45 F.Supp.3d 1099, 1106 [ruling nonparty “had a duty to preserve evidence relevant to this case once it knew that litigation was reasonably likely.”]; Bruno v. Bozzuto’s, Inc. (M.D. Penn. 2012) 850 F.Supp.2d 462, 470 [“Plaintiffs had a duty to preserve evidence once litigation became likely.”]; Philips Electronics North America Corp. v. BC Technical (D. Utah 2010) 773 F.Supp.2d 1149, 1195 [“In most cases, the duty to preserve is triggered by the filing of a lawsuit, but that duty may arise even before a lawsuit is filed if a party has notice that future litigation is likely.”]; John B. v. Goetz (M.D. Tenn. 2010) 879 F.Supp.2d 787, 867 [“A duty to preserve may also arise before the filing of the complaint, if a party has notice that litigation of a matter is likely to be filed.”]; Macneil Automotive Products, Ltd. v. Cannon Automotive, Ltd. (N.D. Ill. 2010) 715 F.Supp.2d 786, 801 [party has a duty to preserve evidence “even prior to the filing of a complaint as long as it is known that litigation is likely to commence”; ruling plaintiff would not “have known that litigation between itself and [the defendant] was probable” when it disposed of evidence at issue in later litigation]; Kounelis v. Sherrer (D. N.J. 2008) 529 F.Supp.2d 503, 518 [“An independent duty to preserve relevant evidence arises when the party in possession of the evidence knows that litigation by the party seeking the evidence is pending or probable. . .”]; Cache La Poudre Feeds, LLC v. Land O’Lakes Farmland Feed, Inc. (D. Colo. 2007) 244 F.R.D. 614, 621 [“[T]he obligation to preserve evidence may arise even earlier [than the filing of a complaint] if a party has notice that future litigation is likely.”]; Creative Resources Group of New Jersey, Inc. v. Creative Resources Group, Inc. (E.D. N.Y. 2002) 212 F.R.D. 94, 106 [“[T]he duty to preserve may arise even prior to the filing of a complaint where a party is on notice that litigation is likely to be commenced.”]; Larison v. City of Trenton (D. N.J. 1998) 180 F.R.D. 261, 267 [ruling plaintiff could not prove cause of action for the spoliation of evidence because videotape of his arrest was destroyed before litigation was “pending or probable”]; Baliotis v. McNeil (M.D. Penn. 1994) 870 F.Supp. 1285, 1290 [duty to preserve evidence arises when party becomes reasonably aware of “`pending or probable litigation,'” italics omitted].)

“Unlike in the federal courts of appeals (see, e.g., U.S. Cir. Ct. Rules (9th Cir.), rules 36-1 to 36-5), in the federal district courts there is no formal provision to certify decisions for publication. District court orders that are included in reports such as the Federal Supplement are only `unofficially reported.'” (Barriga v. 99 Cents Only Stores LLC (2020) 51 Cal.App.5th 299, 316, fn. 8 (Barriga).) However, the prohibition on citing nonpublished California decisions (cited ante, fn. 10), does not apply to decisions of the lower federal courts. (Ibid.)

[12] Other circuit U.S. Courts of Appeals require that future litigation be “imminent” before a party is held to a duty to preserve relevant evidence. (See, e.g., Norman-Nunnery v. Madison Area Technical College (7th Cir. 2010) 625 F.3d 422, 428-429; Turner v. Public Service Co. of Colorado (10th Cir. 2009) 563 F.3d 1136, 1149.) We will follow the federal circuit and decline to impose such an imminence requirement on the “`reasonably foreseeable'” standard. (Micron, supra, 645 F.3d at p. 1320; see Hynix II, supra, 645 F.3d at pp. 1345, 1347.)

[13] Rule 37(e) of the Federal Rules of Civil Procedure states in full: “Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court: [¶] (1) upon finding prejudice to another party from loss of the information, may order measures no greater than necessary to cure the prejudice; or [¶] (2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation may: [¶] (A) presume that the lost information was unfavorable to the party; [¶] (B) instruct the jury that it may or must presume the information was unfavorable to the party; or [¶] (C) dismiss the action or enter a default judgment.”

[14] The trial court did not address a statutory duty to preserve evidence.

[15] “[R]outine video monitoring’ means video recording by a video or electronic imaging system designed to record the regular and ongoing operations of the special district, including mobile in-car video systems, jail observation and monitoring systems, and building security recording systems.” (Gov. Code, § 53160, subd. (c).) “`[S]pecial district'” has the same meaning as “`public agency'” in section 53050 (§ 53160, subd. (d)), to wit, “a district, public authority, public agency, and any other political subdivision or public corporation in the state, but does not include the state or a county, city and county, or city.” (§ 53050.) For the limited purpose of this proceeding, we will assume a public school district is a “special district” as contemplated in section 53160.

[16] Real parties in interest’s reliance on J.K. v. Bellevue School Dist. No. 5 (2021) 20 Wash.App.2d 291 is misplaced. In that case, the defendant school district failed to preserve video footage that likely captured sexual assaults of a student “despite having received requests to do so—before the evidence was destroyed—from both the plaintiff and the defendant’s own counsel.” (Carroll v. Akebono Brake Corp. (2022) 22 Wn.App.2d 845, 878 [distinguishing J.K.].) No such requests to preserve the video were made in this case.

Likewise, Zbylski, supra, 154 F.Supp.3d 1146 is distinguishable. In that case, the district court ruled a school district had a duty to preserve evidence about the alleged sexual assault of a student by a teacher even before the student’s parents threatened litigation. (Id. at p. 1165.) We assume without deciding that an alleged sexual assault of a student by a teacher or adult school staff member is more likely to result in litigation than an alleged assault by a fellow student. Moreover, in Zyblski, the school district was aware of rumors of inappropriate relationships between the teacher and two other female students well before the incident alleged in the lawsuit, the school expressly promised parents that it would investigate the rumors but never conducted such an investigation, and the school placed the teacher on administrative leave. (Id. at pp. 1164-1167.)

[17] Real parties in interest did not make this argument in support of their sanctions motion and the trial court did not rely on the district’s invocation of the attorney-client privilege and attorney work product protection when it ruled the district was under a duty to preserve the video before it was erased.

[18] Nor need we decide whether the district forfeited any challenge to the severity of the sanctions by not fully articulating such a claim in its petition. (See Magana v. Superior Court (2018) 22 Cal.App.5th 840, 854, fn. 2 [finding argument petitioner had made in the trial court but did repeat in his petition was forfeited “despite his belated attempt to resurrect it in his reply brief.”]; County of Los Angeles v. Superior Court (2013) 222 Cal.App.4th 434, 452, fn. 14 [disregarding petitioner’s argument “made for the first time in its reply to opposition to petition for writ of mandate”].)

[1] Though employing these expressive descriptions of the “reasonably foreseeable” test, the majority insists upon the unenlightening “gloss” that reasonably foreseeable means “probable or likely.” (Maj. opn., ante, at p. 27.) Probable, in this context, simply “has been held to mean `more than a possibility.'” (In re Napster, Inc. Copyright Litig. (N.D. Cal. 2006) 462 F.Supp.2d 1060, 1068; RealNetworks, Inc. v. DVD Copy Control Assn, Inc. (N.D. Cal. 2009) 264 F.R.D. 517, 524 [“The future litigation must be `probable,’ which has been held to mean `more than a possibility'”].) The tests quoted in the text above are more informative.

[2] See Doe v. Fairfax County School Board (E.D. Va. June 28, 2019, No. 1:18-cv-00614-LO-MSN) [2019 U.S. Dist.LEXIS 231371, *14] [“duty to preserve started on [the date] when Oakton administrators were informed of a potential sexual assault” by a student telling persons who communicated to school officials]; Zbylski v. Douglas County School District (D. Colo. 2015) 154 F.Supp.3d 1146, 1164 (Zbylski) [“duty to preserve was triggered no later than [the date] when the School District placed [a teacher] on administrative leave” due to concerns about inappropriate conduct with children].

The majority distinguishes Zbylski partly by “assum[ing] without deciding” that teacher sexual assaults result in litigation more often than student-on-student ones. (Maj. opn., ante, at p. 36, fn.16.) That method purportedly distinguishes the case whether or not the assumed fact is incorrect. Litigation in the two situations, however, is similar in that each requires negligence by school employees apart from the perpetrator’s actions. A teacher’s abuse of a student falls “outside the scope of her employment,” so a plaintiff cannot base a claim against a district directly on the acts but instead must base it on the negligence of personnel who knew, or should have known, of the employee’s propensities but “nevertheless hired, retained, and inadequately supervised her.” (C.A. v. William S. Hart Union High School Dist., supra, 53 Cal.4th 861 at p. 865.) Contrary to the majority, I would assume that with equivalent evidence of school officials’ negligence in supervising a person, a lawsuit is equally likely whether a sexual assault perpetrator is a teacher or student.

[3] The district here had previously provided video of incidents to law enforcement, but the police did not request the video in this case until after it had been overwritten.

[4] At present, the mandated reporting website associated with the State Department of Social Services contains a four-hour general training that is a required precursor for a three-hour training for school personnel. (See [accessed Dec. 19, 2022].)

[5] The district claims that its invocation of attorney-client privilege over Navarro’s report “at best, indicates the mere distant possibility of litigation” when drafted, which it views as insufficient to trigger a duty to preserve evidence. District employees surely would provide evidence to the risk manager in situations where a skilled lawyer would deem the possibility of litigation “distant,” as well as those where a lawsuit would be more certain. But adopting the district’s view here means that litigation can be foreseeable enough that a party can choose to preserve as privileged some evidence in case of litigation (Navarro’s report of the video), but not foreseeable enough to create a duty to preserve similar evidence about the same matter (the video itself). At the least, under our deferential review standard, the privilege invocation provides substantial evidence in support of the trial court’s determination that litigation was reasonably foreseeable.

[6] It should be of no moment that the district did not receive notification of a lawsuit until well after the video was lost. One thing that is not foreseeable is that Doe’s parents—presumably concerned with dealing with a child who had been sexually assaulted, finding out the facts, and perhaps proceeding to consult a lawyer—would threaten a lawsuit within the fourteen days before the video was overwritten.

Artus v. Gramercy Towers Condominium Assn.

Summary by Pejman D. Kharrazian, Esq.:

Homeowner Dr. Artus and the association were warring parties. This was the fourth lawsuit between them, this one regarding the association’s election rules and sale/leasing guidelines. Artus alleged five causes of action in her complaint against the association. Multiple claims were disposed of in different ways, including that the association fixed issues raised by Artus by amending its election rules and sale/leasing guidelines—but not exactly the way Artus wanted the association to do so. The association also brought a motion for summary judgment on the remaining causes of action that resulted in a stipulation between the parties. Both sides claimed they prevailed in the lawsuit and both sought recovery of their attorneys’ fees. The court awarded neither side attorneys’ fees. The court noted that the test for who prevailed in a lawsuit is a holistic and pragmatic test, left to the court’s discretion. The test focuses on who prevailed on a practical level by achieving its main litigation objectives.

TAKEAWAY: Don’t be unreasonably and overly litigious because courts will not look kindly upon you. In this case, the court noted that the parties had a long history of disputes and litigation and in denying both sides their attorneys’ fees the court was trying to send a message; as the court put it: “I’m trying to send a message here. And that message is, don’t run to court. Run to try to work things out. Both sides.”

***End Summary***

76 Cal.App.5th 1043 (2022)

No. A161265.

Court of Appeals of California, First District, Division Two.

Appeal from the San Francisco County, Superior Court No. CGC-17-561765. Honorable Harold Kahn, Judge.

Millstein & Associates, David J. Millstein and Owais Bari for Plaintiff and Appellant.

Angius & Terry, Cang N. Le, Joshua D. Mendelsohn; Tinnelly Law Group, Cang N. Le and Joshua D. Mendelsohn for Defendant and Appellant.

1046*1046 OPINION

RICHMAN, Acting P. J.—

A condominium owner sued her homeowners association alleging five causes of action, seeking injunctive and declaratory relief as to election and voting rules and sale and leasing guidelines. One cause of action fell to a demurrer, another to an anti-SLAPP motion to strike, and the parties stipulated that the last three were mooted when the association amended its rules and guidelines. Both sides moved for attorney fees as the prevailing party under the Davis-Stirling Common Interest Development Act (Civ. Code, § 4000 et seq.); the homeowner also sought fees as the successful party under Code of Civil Procedure section 1021.5. Following lengthy hearings, the trial court denied attorney fees to both sides, in a comprehensive and thoughtful order. Both sides appeal. We affirm.

BACKGROUND

The General Setting

Gramercy Towers is a residential condominium development in San Francisco. It is managed by Gramercy Towers Condominium Association (GTCA or the Association), a nonprofit mutual benefit corporation founded under the Davis-Stirling Common Interest Development Act (Davis-Stirling Act), at Civil Code section 4000 et seq. Management of GTCA is centralized in a seven-member board of directors, which retains or employs nonboard and nonmember agents and employees, including a general manager.

The governing documents of the GTCA consist of: (a) first restated articles of incorporation filed March 20, 2008, as amended in 2010; (b) first restated 1047*1047 bylaws executed March 11, 2008, and various amendments; and (c) declaration of covenants, conditions and restrictions executed February 29, 2008. GTCA also has operating rules and guidelines adopted by the board of directors.

Kazuko K. Artus, Ph.D., J.D., (Dr. Artus), owned three units at Gramercy Towers, and as such is a member of the GTCA. Over the years Dr. Artus has had various disputes with GTCA, which generated three prior lawsuits by her, one of which led to a published opinion by Division One of this court affirming a ruling by the San Francisco Superior Court that denied Dr. Artus injunctive and declaratory relief and her claim to attorney fees: Artus v. Gramercy Towers Condominium Assn. (2018) 19 Cal.App.5th 923 [228 Cal.Rptr.3d 496] (Artus I).

The Lawsuit Here

On October 10, 2017, Dr. Artus filed a complaint against GTCA, followed soon thereafter by the operative first amended complaint. It alleged five causes of action, styled as follows: “(1) Injunctive Relief and Appointment of Monitor; (2) Injunctive Relief Against Enforcement of the `Restated Election and Voting Rules’; (3) Injunctive Relief Against Enforcement of the `Sale and Leasing Guidelines’; (4) Declaratory Relief Against Enforcement of the `Restated Election and Voting Rules’ Adopted November 22, 2016; and (5) Breach of Contract and Covenant of Good Faith and Fair Dealing.”

In late December, Dr. Artus sought a preliminary injunction. Following numerous pleadings, on January 23, 2018, the Honorable Harold Kahn granted it, preliminarily enjoining GTCA from enforcing the alternative election rules during the pendency of the lawsuit. As will be seen, it was Judge Kahn, a most experienced Superior Court judge, who presided over the case through its conclusion—a vigorously contested case, it must be noted, that generated a 32-page register of actions.

In response to the complaint, GTCA had filed a demurrer and a special motion to strike (anti-SLAPP). Dr. Artus filed oppositions, GTCA replies and the matters came on for hearing on March 15. On March 27, Judge Kahn entered his order, sustaining the demurrer without leave to amend as to the first cause of action; granting the anti-SLAPP motion as to the fifth cause of action; and overruling the demurrer as to the second, third, and fourth causes of action. With only the three causes of action remaining, the case was limited to the election rules and the rules for listing condominium units for sale, narrowing significantly the focus of the litigation. As Dr. Artus would later acknowledge, “My counsel and I chose not to appeal the March 27 and 28 orders [demurrer and anti-SLAPP ruling], and thereby to narrow the scope of the instant litigation.”

10481048 GTCA Amends the Rules and Moves for Summary Judgment*

In 2018, the GTCA revoked the 2016 alternative election rules, and in their place adopted restated and amended election rules. At the same time the board rescinded the sale and leasing guidelines that had been in place (usually referred to as the Alotte Guidelines) and adopted a new set of “Sale and Leasing Guidelines.”

GTCA brought a motion for summary judgment/adjudication on grounds that, the earlier election rules and guidelines having been rescinded, there was no longer a controversy upon which effective relief could be granted to Dr. Artus, that the case was moot. And on August 6, 2019, Dr. Artus and GTCA stipulated that the remaining causes of action were moot.

The Motions for Attorney Fees

Civil Code section 5975, subdivision (c), part of the Davis-Stirling Act, provides as follows: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” And the declaration to the act provides as follows: “12.12 COSTS AND ATTORNEY’S FEES. The party who prevails in an arbitration, civil action, or other proceeding to enforce or interpret the Governing Documents shall be entitled to recover all costs and expenses, including reasonable attorney’s fees, but the arbitrator, judge or other decision maker shall have final discretion to allocate such costs and expenses between the parties in a manner that will accomplish substantial justice.”

In September 2019, both sides filed motions for attorney fees based on Civil Code section 5975, arguing that it was the prevailing party. Dr. Artus also sought attorney fees based on Civil Code section 5145, subdivision (b) and Code of Civil Procedure section 1021.5 (section 1021.5), the private attorney general doctrine.

Both sides sought over $300,000 in attorney fees, in pleadings and documents that can only be described as voluminous: from September 2 through October 18, the motions, memoranda, declarations, and exhibits in support of and opposition to the motions totaled 1,867 pages!

The motions first came on for hearing on October 8, 2019, prior to which Judge Kahn had issued a tentative ruling denying attorney fees to both sides. Both sides contested, and a lengthy hearing ensued, in the course of which it was determined that the parties would prepare charts setting forth their respective positions, with the motions to be set for further hearing.

1049*1049 Both sides filed their charts and their further positions based on those charts, adding an additional 217 pages of material filed between May 19 and June 5, 2020. So, over 2,000 pages of material had been presented to Judge Kahn when the motions came on for hearing on June 5, a lengthy hearing that generated a reporter’s transcript of 58 pages. And one reading that transcript —with Judge Kahn’s questions, his comments, and his colloquy with counsel—cannot but be impressed by the depth and breadth of Judge Kahn’s understanding of the litigation.

On September 2, Judge Kahn issued a 20-page order denying fees to both sides, with an analysis that will be discussed in more detail below in connection with the particular issue to which it pertains. Suffice to say here that Judge Kahn concluded that Dr. Artus had four main litigation objectives and that she “achieved only one of her four main litigation objectives,” limited to a procedural victory under the second objective when GTCA “changed its ways of providing notice of proposed rules changes” in amending its election rules. And even as to this, he added that Dr. Artus did not obtain any substantive victory on this second objective, and it was “the least consequential for her since, while it requires GTCA to provide better paperwork when it proposes changes to its rules, Dr. Artus'[s] success on her second main litigation objective does not significantly constrain GTCA’s ability to change its rules or what it includes in its rules.”

Judge Kahn also denied Dr. Artus’s request for fees under section 1021.5, concluding that she did not meet the “successful party” standard under that section. He further found that Dr. Artus failed to show that her lawsuit resulted in “significant benefit” to the “general public or large classes of persons.”

As to GTCA’s claim for fees, Judge Kahn “reject[ed] GTCA’s argument that it prevailed in this lawsuit because it remained free of court restrictions to change its rules.” As he saw it, GTCA’s main litigation objective “was to reduce, and hopefully end, the wasteful use of its resources in fighting Dr. Artus, particularly litigation expenses and the time of its volunteers and employees.” Given the possibility of another lawsuit over the rules amended by GTCA and “over the vehement and repeated objections of Dr. Artus [GTCA has not] reduced, much less eliminated, the governance disputes between GTCA and Dr. Artus and their attendant costs and staff and volunteer time.” Finally, Judge Kahn added, “it would be strange indeed for a defendant, as a result of his own unilateral conduct taken without a court order or other indicia of court approval, to be considered a litigation winner. If this were the case, surely defendants would frequently take such unilateral actions, declare victory, and ask for fees.”

1050*1050 On October 22, Dr. Artus filed her appeal, and on October 30, GTCA filed its cross-appeal.

DISCUSSION: Dr. Artus’s Appeal

Dr. Artus asserts two fundamental arguments on appeal, that: (1) Judge Kahn erred in finding she was not a prevailing party, and (2) she was entitled to attorney fees under Code of Civil Procedure section 1021.5.^[1] Both arguments are based on a claimed standard of review that is wrong, and we thus begin with the standard of review.

The Standard of Review

Dr. Artus asserts that the standard of review is de novo, on the claimed basis that “entitlement to attorney fees under [Civil Code, former section] 1354, subdivision (f) is a question of law.”^[2] The two cases she cites—Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.App.4th 1158 [121 Cal.Rptr.2d 79] and Salawy v. Ocean Towers Housing Corp. (2004) 121 Cal.App.4th 664 [17 Cal.Rptr.3d 427]—are not relevant.

The relevant cases hold that the standard of review is abuse of discretion. Rancho Santa Fe Assn. v. Dolan-King (2004) 115 Cal.App.4th 28 [8 Cal.Rptr.3d 614] is illustrative, a case involving the predecessor to the very statute involved here: “Ordinarily, an award of attorney fees under a statutory provision, such as [Civil Code, former] section 1354, subdivision (f), is reviewed for abuse of discretion.” (Rancho Santa Fe, at p. 46.) As an earlier case put it, a court’s ruling on who is the prevailing party “should be affirmed on appeal absent an abuse of discretion.” (Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574 [26 Cal.Rptr.2d 758] (Heather Farms).) As we ourselves have put it, “[t]he trial court `”`is given wide discretion in determining which party has prevailed. …'” [Citation.]'” (Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1158 [70 Cal.Rptr.2d 769].)

The same standard of review applies to Civil Code section 5145. (Rancho Mirage Country Club Homeowners Assn. v. Hazelbaker (2016) 2 Cal.App.5th 252, 260 [206 Cal.Rptr.3d 233] [suggesting that the prevailing 1051*1051 party inquiry is the same for all Davis-Stirling Act fee provisions]; see generally Artus I, supra, 19 Cal.App.5th at p. 944.) And also for fee orders in section 1021.5 cases. (Karuk Tribe of Northern California v. California Regional Water Quality Control Bd., North Coast Region (2010) 183 Cal.App.4th 330, 363 [108 Cal.Rptr.3d 40] (Karuk) [“`”normal standard of review is abuse of discretion”‘”].)

Not only do the cases demonstrate the discretionary nature of the trial court’s analysis, but other principles also come into play in a court’s discretion, two of which were in fact quoted by Judge Kahn in his order here:

(1) “`The analysis of who is a prevailing party under the fee-shifting provisions of the [Davis-Stirling] Act focuses on who prevailed “on a practical level” by achieving its main litigation objectives.’ (Rancho Mirage Country Club Homeowners [Assn.] v. Hazelbaker, supra, 2 Cal.App.5th at p. 260, quoting Heather Farms, supra, 21 Cal.App.4th 1568)”; and

(2) “`[T]he test for prevailing party is a pragmatic one, namely whether a party prevailed on a practical level by achieving its main litigation objectives.’ (Almanor Lakeside Villas Owners [Assn.] v. Carson (2016) 246 Cal.App.4th 761, 773 [201 Cal.Rptr.3d 268].)”

And on top of all that is the observation by our Supreme Court, that “in determining litigation success, courts should respect substance rather than form, and to this extent should be guided by `equitable considerations.'” (Hsu v. Abbara (1995) 9 Cal.4th 863, 877 [39 Cal.Rptr.2d 824, 891 P.2d 804].) In short, abuse of discretion it is—along with practicality and equity.

Dr. Artus has not shown any impracticality in Judge Kahn’s ruling. Nor any inequity. And most fundamentally, she has shown no abuse of discretion. As to what such showing requires, it has been described in terms of a decision that “exceeds the bounds of reason” (People v. Beames (2007) 40 Cal.4th 907, 920 [55 Cal.Rptr.3d 865, 153 P.3d 955]), or one that is arbitrary, capricious, patently absurd, or even whimsical. (See, e.g., People v. Bryant, Smith and Wheeler (2014) 60 Cal.4th 335, 390 [178 Cal.Rptr.3d 185, 334 P.3d 573] [“`”arbitrary, capricious, or patently absurd”‘”]; People v. Benavides (2005) 35 Cal.4th 69, 88 [24 Cal.Rptr.3d 507, 105 P.3d 1099] [ruling “`”fall[s] `outside the bounds of reason'”‘”]; People v. Linkenauger (1995) 32 Cal.App.4th 1603, 1614 [38 Cal.Rptr.2d 868] [“arbitrary, whimsical, or capricious”].) In its most recent observation on the subject, our Supreme Court said that “A ruling that constitutes an abuse of discretion has been described as one that is `so irrational or arbitrary that no reasonable person could agree with it.'” (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 773 [149 Cal.Rptr.3d 614, 288 P.3d 1237].) Those adjectives hardly describe Judge Kahn’s ruling here.

10521052 Dr. Artus Has Not Demonstrated an Abuse of Discretion*

Dr. Artus’s first argument, that Judge Kahn erred in not finding her a prevailing party, asserts she “prevailed” in three particulars: (a) “on her election-rule challenge to force the Association to adhere to Civil Code [section] 4360’s rule-making procedure”; (b) “on causing major substantive revisions to the election rules”; and (c) “on her challenge to the sales and leasing guidelines by forcing the Association to adhere to proper rule making procedures.” She also argues that, even if she did not achieve all her objectives, a victory as to election rules requires attorney fees award under the Davis-Stirling Act.

Passing over the fact that Dr. Artus’s brief misrepresents the record in many respects, her arguments fall way short, as they do little, if anything, more than regurgitate and reassert the same arguments thoroughly analyzed— and rejected—by Judge Kahn in his analysis.

As indicated above, Judge Kahn determined that Dr. Artus had four main objectives in her lawsuit, which he described as follows, giving appropriate record references:

“(1) To obtain redress for `both current substantive and historical violations’ of the [Davis-Stirling Act] by GTCA and its `systematic and habitual mismanagement’ by the appointment of a `monitor’ to ensure that GTCA is in full compliance with its obligations under the [Davis-Stirling Act] and its governing documents. (Dr. Artus'[s] memorandum in opposition to GTCA’s anti-SLAPP motion filed February 15, 2018 pp. 9-10 (referring to this objective as the `gravamen’ of the complaint); see also the first cause of action in Dr. Artus'[s] first amended complaint and Dr. Artus'[s] application for approval of complex designation filed October 10, 2017 pp. 2-3 (explaining that this objective makes this case suitable for complex treatment)).

“(2) To enjoin the enforcement of the 2016 election rules. (Dr. Artus'[s] application and supporting papers for an order to show cause for why the court should not issue a preliminary injunction to enjoin enforcement of the `restated election and voting rules’ filed December 26, 2017; see also the second and fourth causes of action in Dr. Artus'[s] first amended complaint).

“(3) For a determination that GTCA is required to use the 2007 election rules as amended in 2014 unless Dr. Artus consents and the court permits because those rules were enshrined in the 2013 settlement agreement and the 2014 stipulated order. (Deposition of Dr. Artus taken on August 22, 2018 pp. 63 and 65; Dr. Artus'[s] August 2, 2018 email to Ms. Bires section (2); Dr. Artus'[s] September 4, 2018 email to Ms. Bires pp 5-7; Dr. Artus'[s] first amended complaint pars. 48 and 56-57).

1053*1053 “(4) For a determination that GTCA may not impose any restrictions on members and their real estate agents that Dr. Artus believes `unreasonably interfere [with] alienation rights, including but not limited to limitations on advertising, limitations on the use of the “Gramercy Towers” name and address on listing and photos of the building for marketing purposes.’ (Dr. Artus'[s] August 2, 2018 email to Ms. Bires section (7); see also the third cause of action in Dr. Artus'[s] first amended complaint and Dr. Artus'[s] September 4, 2018 email to Ms. Bires pp. 7-11 (`I can see no reason why GTCA can be allowed to seek information regarding real estate agents its members retain’)).”

Having defined the four main litigation objectives, Judge Kahn then went on to analyze them, one by one, to conclude that Dr. Artus had prevailed in only one, holding as follows: “Dr. Artus achieved only one of her four main litigation objectives. If on a practical level that one objective was equal to or greater than the other three, [Davis-Stirling Act] fees case law might support an award of fees to Dr. Artus. In my estimation, however, Dr. Artus'[s] procedural win on her second main litigation objective is nowhere close in value to the wins she failed to achieve on her first, third and fourth main litigation objectives. Indeed, of her four main litigation objectives, the second one is the least consequential for her since, while it requires GTCA to provide better paperwork when it proposes to change its rules, Dr. Artus'[s] success on her second main litigation objective does not significantly constrain GTCA’s ability to change its rules or what it includes in its rules. Accordingly, per the above pragmatic analysis of Dr. Artus'[s] main litigation objectives, I find that Dr. Artus is not entitled to an award of fees per either [Civil Code section] 5145[, subdivision] (b) or [Civil Code section] 5975[, subdivision] (c) because she only achieved a very modest portion of her main litigation objectives. (Accord Declaration of Plaintiff Kazuko K. Artus, Ph.D., J.D., in Support of Plaintiff’s Motion for Attorney’s Fees filed September 12, 2019, par. 54 (Dr. Artus acknowledged that she has `yet to accomplish my objective of having [Gramercy] comply with rules regulating it’)).”

Dr. Artus’s arguments, however lengthy they be, demonstrate nothing to the contrary. Dr. Artus’s opening brief is 44 pages long, with the arguments quoted above, arguments that fundamentally make three points: (1) she achieved her primary litigation objective when GTCA amended its election rules and guidelines effectively revoking the prior versions; (2) GTCA mooted the case once she achieved her objectives; and (3) the preliminary injunction order supports her position that she prevailed. None of these arguments is persuasive—not to mention all were rejected by Judge Kahn.

Contrary to her argument that she obtained her primary litigation objective when GTCA properly adopted new election rules by informing the 1054*1054 “purpose and effect” of those rules, the record shows that her primary objective was to compel GTCA to use only the election procedures. Dr. Artus alleged that she sought to require “GTCA to follow the Election Procedures” and to conduct elections and all other related activities under the Election Procedures; her testimony was similar: that GTCA should be only using the election procedures and “no other election rules.”

As to Dr. Artus’s claim of mootness, that she “had no choice but to agree with GTCA’s position” on mootness, Judge Kahn concluded otherwise: “Dr. Artus could have stood her ground and continued to litigate. The 2018 rules and guidelines included several provisions from the prior rules and guidelines that Dr. Artus contended were invalid in the first amended complaint. As but two examples, the 2018 election rules did not place any limits on inspector compensation and the 2018 sales and leasing guidelines contained significant restrictions on advertising members’ units. Dr. Artus'[s] claims regarding those provisions did not become moot merely because those provisions were now included in new sets of rules and guidelines. Nor, as discussed previously, did her claim—one of her main litigation objectives— that GTCA lacked authority to adopt any election rules other than the 2007/2014 rules without her consent and permission of the court become moot merely because GTCA adopted yet another set of election rules at variance from the 2007/2014 rules she contended that `GTCA cannot touch.’ (Dr. Artus'[s] May 21, 2018 email to John Zappettini.”

And Dr. Artus’s reliance on the preliminary injunction is not only unavailing, it is premised on a gross overstatement of the record. That is, Dr. Artus’s brief asserts that the preliminary injunction enjoined “GTCA from using the alternative election rules during the pendency of this lawsuit.” In fact, Judge Kahn’s preliminary injunction was limited to the one election, in early 2018, and four procedural requirements on that election under the Election Procedures: (1) the appointment of three inspectors; (2) those inspectors would appoint and oversee ballot counters; (3) abide by the communications provision of the Election Procedures; (4) and abide by the ballot retention procedures of the Election Procedures.

Dr. Artus’s attempted recharacterization of the preliminary injunction order was in fact contradicted by Judge Kahn’s order which stated: “Yet it must be kept in mind that the preliminary injunction order was a preliminary, not a final, order and only applied to a single election. As Dr. Artus knows from the 2014 lawsuit she filed against GTCA, a later trial can eviscerate an earlier preliminary injunction victory and deprive her of the ability to receive fees.”

10551055 Dr. Artus Has Not Demonstrated the Right to Attorney Fees Under Code of Civil Procedure Section 1021.5*

As noted, Dr. Artus also sought attorney fees based on section 1021.5. Judge Kahn rejected it, concluding that Dr. Artus was not a “successful party” under that section, and for the “further reason [that she] failed to show, as required for a [section] 1021.5 fees award, that this lawsuit resulted in a `significant benefit’ to the `general public or a large class of persons.'” As he went on to explain, “Her one real win—which requires GTCA to incur greater effort in preparing its notice materials for proposed rules changes—is of questionable significance to the vast majority of GTCA members and will likely result in higher assessments to GTCA members to pay for the increased costs to `dot every i and cross every t’ in the notice materials to avoid disputes from Dr. Artus. Indeed, crediting the declarations of GTCA’s staff and volunteers it appears that few of the governance disputes raised by Dr. Artus are of concern to other GTCA members. Dr. Artus has made no contrary showing.”

Dr. Artus’s argument that she is “entitled” to attorney fees under section 1021.5, has six subparts: (1) she “obtained some benefit on a significant issue in the litigation”; (2) “interim and partial success is sufficient under [section] 1021.5”; (3) Judge Kahn “did not apply the correct test”; (4) the ruling “that the action did not confer a significant benefit on the general public, or a large class of persons was incorrect as a matter of law”; (5) “necessity and financial burden of private enforcement make [an] award appropriate”; and (6) “there was no monetary recovery.” The argument is not persuasive.

Section 1021.5 provides in pertinent part: “Upon motion, a court may award attorneys’ fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest if: (a) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement, or of enforcement by one public entity against another public entity, are such as to make the award appropriate, and (c) such fees should not in the interest of justice be paid out of the recovery, if any. …”

In Karuk, supra, 183 Cal.App.4th 330, we discussed at length section 1021.5 and its operation, included within which was this explanation how an award made pursuant to this statute is reviewed: “`”The Legislature adopted section 1021.5 as a codification of the private attorney general doctrine of attorney fees developed in prior judicial decisions. … [T]he private attorney general doctrine `rests upon the recognition that privately initiated lawsuits are often essential to the effectuation of the fundamental public policies 1056*1056 embodied in constitutional or statutory provisions, and that, without some mechanism authorizing the award of attorney fees, private actions to enforce such important public policies will as a practical matter frequently be infeasible.’ Thus, the fundamental objective of the doctrine is to encourage suits enforcing important public policies by providing substantial attorney fees to successful litigants in such cases.” [Citation.]'” (Karuk, supra, 183 Cal.App.4th at p. 362.)

“Put another way, courts check to see whether the lawsuit initiated by the plaintiff was `demonstrably influential’ in overturning, remedying, or prompting a change in the state of affairs challenged by the lawsuit. (E.g., Folsom v. Butte County Assn. of Governments (1982) 32 Cal.3d 668, 687 [186 Cal.Rptr. 589, 652 P.2d 437]; RiverWatch v. County of San Diego Dept. of Environmental Health (2009) 175 Cal.App.4th 768, 783 [96 Cal.Rptr.3d 362]; Lyons v. Chinese Hospital Assn. (2006) 136 Cal.App.4th 1331, 1346, fn. 9 [39 Cal.Rptr.3d 550].) `”Entitlement to fees under [section] 1021.5 is based on the impact of the case as a whole.”‘ (Punsly v. Ho (2003) 105 Cal.App.4th 102, 114 [129 Cal.Rptr.2d 89], quoting what is now Pearl, Cal. Attorney Fee Awards (Cont.Ed.Bar 2d ed. 2008) § 4.11, p. 100.) As for what constitutes a `significant benefit,’ it `may be conceptual or doctrinal, and need not be actual and concrete, so long as the public is primarily benefited.’ (Planned Parenthood v. Aakhus (1993) 14 Cal.App.4th 162, 171 [17 Cal.Rptr.2d 510].)

“Thus, a trial court which grants an application for attorney fees under section 1021.5 has made a practical and realistic assessment of the litigation and determined that (1) the applicant was a successful party, (2) in an action that resulted in (a) enforcement of an important right affecting the public interest and (b) a significant benefit to the general public or a large class of persons, and (3) the necessity and financial burden of private enforcement of the important right make an award of fees appropriate. `”On review of an award of attorney fees … the normal standard of review is abuse of discretion. However, de novo review of such a trial court order is warranted where the determination of whether the criteria for an award of attorney fees … have been satisfied amounts to statutory construction and a question of law.”‘ (Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1175 [39 Cal.Rptr.3d 788, 129 P.3d 1], quoting Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142 [118 Cal.Rptr.2d 569].)” (Karuk, supra, 183 Cal.App.4th at p. 363. fn. omitted.)

Applying those rules, we went on in Karuk to reverse an award of $138,000 in attorney fees, concluding that three of the statutory requisites to an award under section 1021.5 were absent. (Karuk, supra, 183 Cal.App.4th at p. 364.) Likewise here.

1057*1057 It is perhaps enough to note that Dr. Artus does not specifically address the threshold requisite of demonstrating she was a “successful party.” Nor does she demonstrate any significant benefit to the general public or a large class of persons.

Bowman v. City of Berkeley (2005) 131 Cal.App.4th 173, 175-176 [31 Cal.Rptr.3d 447] (Bowman), cited by Dr. Artus in claimed support of her argument she achieved a significant benefit, is not to the contrary. The facts there included a petition by a group of owners to overturn the city’s approval of a housing project for seniors, which succeeded in overturning the initial approval. The project was ultimately reapproved and the trial court denied the remainder of the groups’ claims. (Id. at p. 177.) The trial court thereafter granted attorney fees in connection with the due process achievement. Division Four of this court affirmed. Doing so, the court noted the redo of the approval by the city, in light of the plaintiffs’ petition, “resulted in a great deal of additional public input on the project, including substantial new written submissions, and oral statements to the city council, from city staff as well as proponents and opponents of the project”; and the trial court determined “`both parties used the opportunity to supplement the administrative record to provide additional evidence intended to sway findings made by the council members.'” (Id. at p. 180.) The setting here is a far cry.

Here, only Dr. Artus filed suit to challenge GTCA’s governance. She did not show that other members objected to GTCA’s ways or its rules. And she did not achieve any significant benefit to other members when GTCA undertook to amend its election rules and sales guidelines, let alone benefit to the public.

Likewise unavailing is La Mirada Avenue Neighborhood Assn. of Hollywood v. City of Los Angeles (2018) 22 Cal.App.5th 1149 [232 Cal.Rptr.3d 338] (La Mirada), where the plaintiffs filed writ petitions to invalidate variances granted by the city in approving a Target retail store and obtained a judgment “invalidating six of the eight municipal code variances, enjoining any actions `in furtherance of’ those variances, and `immediately… restrain[ing] … all construction activities’ [and] also authorized plaintiffs to seek attorney’s fees.” Both parties appealed, and during the appeal, per Target’s urging, the city amended its zoning which mooted the appeal. (Id. at p. 1154.) The court dismissed the appeals as moot but left the judgment intact and ultimately awarded the plaintiff attorneys fees. (Id. at p. 1155.) The significant benefit was an order requiring the city to comply with the legal requirements to grant the variance. (Id. at pp. 1158-1159.)

Unlike in La Mirada, Dr. Artus did not obtain a judgment invalidating any of GTCA’s governance that she challenged; the mootness of this action was 1058*1058 not found by Judge Kahn but by Dr. Artus’s stipulation; and GTCA did not take any action to change its rules because of Dr. Artus’s urgings.

Dr. Artus argues that partial or interim success is enough for an award of attorneys fees under section 1021.5, citing to Bowman, supra, 131 Cal.App.4th at page 178 and La Mirada, supra, 22 Cal.App.5th at page 1160. To the contrary, as Dr. Artus herself knows, she has already failed on a similar argument in Artus I, supra, 19 Cal.App.5th at page 927, where Division One noted the “well-established principles that fees and costs are ordinarily not granted for interim success, and that the prevailing party is determined, and fees and costs awarded, at the conclusion of the litigation.”

As indicated, Dr. Artus makes two other arguments, numbered six and seven: (6) “Trial court abused its discretion in denying fees to [Dr. Artus] because she stopped litigating after the controversy was mooted by GTCA,” and (7) “The Court of Appeal should reconsider or reformulate the interim attorney’s fees rules as it applies to associations that moot controversies.” Neither argument merits discussion. The third argument, all of five lines, has no support. And the fourth argument essentially asks us to change some language in the earlier opinion by our colleagues in Division One. It is most inappropriate.

DISCUSSION: GTCA’s Appeal

GTCA Has Not Shown an Abuse of Discretion

Cross-appealing Judge Kahn’s denial of attorney fees to it, GTCA has filed a 22-page opening brief that has an introduction, a statement of facts and procedural history, and fewer than 12 pages described as “discussion,” fewer than two pages of which could even be considered argument.

The discussion begins with this assertion: “GTCA’s issue on appeal is the trial court erred in ruling that its litigation objective was to reduce its resources and end the fighting with Dr. Artus; rather, GTCA’s litigation objective was to prevent Dr. Artus from dictating how GTCA should operate and what rules it should adopt. To that end, it prevailed and should be awarded attorneys’ fees per Civil Code section 5975, subdivision (c) and its Declaration.”

And what might be called the argument that follows consists of these three brief paragraphs:

“The trial court’s basis for determining GTCA’s litigation objective drew from `GTCA’s memorandum in support of its anti-SLAPP motion to strike 1059*1059 filed January 16, 2018′ and declarations in support. The trial court found these declarations `replete with extremely high costs that GTCA has incurred in both its in-court and out-of-court disputes with Dr. Artus.’ The arguments and declarations from the anti-SLAPP motion on the use of GTCA’s resources and costs fighting Dr. Artus'[s] continuing disputes with the board were made in the context of the Association’s argument that the matter was of public interest to the community to warrant protection of the anti-SLAPP statute. See [Code of Civil Procedure] [section] 425.16. Anti-SLAPP public interest arguments do not equate to GTCA’s primary goal in this litigation was merely to reduce the use of the community’s resources to fight Dr. Artus. If that was the goal, GTCA would have capitulated early in the litigation without any strategic motion practice on a demurrer, anti-SLAPP motion, discovery, or summary judgment motion; or GTCA would have sought early settlement.

“Instead, GTCA’s stance and objective throughout the litigation was to not give into Dr. Artus'[s] demands or desires for GTCA to be governed by her terms and her rules, and for Dr. Artus to not obtain any relief on her claims that GTCA was operating improperly. As stated by GTCA’s president: `It has been the Board’s objective in this litigation to not allow a single owner to dictate how the Board should function or bully its decision-making.’

“Thus, even under an abuse of discretion standard, the trial court’s determination of GTCA’s litigation objective and that it did not prevail on that objective cannot stand.”

That is essentially it. It is unpersuasive, as it utterly fails to come to grips with Judge Kahn’s detailed analysis, which includes the following: “Because this lawsuit ended as a result of GTCA’s unilateral decision to adopt revised election rules and sales and leasing guidelines, which GTCA could have done at any point in the lawsuit and for which it needed no order or approval from the court, on a pragmatic and practical level GTCA did not achieve its litigation objectives. It would be strange indeed for a defendant, as a result of its own unilateral conduct taken without a court order or other indicia of court approval, to be considered a litigation winner. If this were the case, surely defendants would frequently take such unilateral actions, declare victory, and ask for fees. In my almost 40 years as a civil litigator and a judge handling civil cases, I have never seen anyone do this before. And, despite my extensive efforts to find such a case, I could not locate any published California decision which holds or suggests that a defendant can be a prevailing party for purposes of a fees award as a result of its own unilateral actions that moot the plaintiff’s claims. I therefore reject GTCA’s argument that it prevailed in this lawsuit because it remained free of court restrictions to change its rules. Cutting to the chase, the fatal defect in GTCA’s argument 1060*1060 is that it remains free of court restrictions because it took unilateral action to avoid rulings on court restrictions and, in doing so, simply `kicked the can down the road’ as to whether a court would place restrictions on its rule changes.

“The three cases cited by GTCA to support its position that it prevailed in this lawsuit are readily distinguishable. In Almanor [Lakeside Villas Owners Assn. v. Carson[, supra,] 246 Cal.App.4th 761 …] the determination that a homeowners’ association was the prevailing party came after a trial where the parties fully litigated the claims and cross-claims of both parties. In Salehi v. Surfside III Condominium [Owners Assn.] (2011) 200 Cal.App.4th 1146 [132 Cal.Rptr.3d 886] the court held that the defendant homeowners’ association was a prevailing party because the plaintiff dismissed his claims on the eve of trial due to the unavailability of a witness without seeking a continuance. In Villa De La Palmas Homeowners [Assn. v. Terifaj] (2004) 33 Cal.4th 73 [14 Cal.Rptr.3d 67, 90 P.3d 1223] a plaintiff homeowners’ association was the prevailing party because it obtained an injunction which achieved its main litigation objective. Unlike this lawsuit, in none of the cases relied on by GTCA did the prevailing party association take any action outside the lawsuit, unilateral or otherwise, that precipitated dismissal of its member’s claims based on mootness or any similar ground.[^[3]]

“In all events, viewed on a pragmatic and practical level GTCA’s main litigation objective in this lawsuit, as it appears to have been in most or all of its dealings with Dr. Artus on governance issues, was to reduce, and hopefully end, the wasteful use of its resources in fighting Dr. Artus, particularly litigation expenses and the time of its volunteers and employees. (See GTCA’s memorandum in support of its anti-SLAPP motion to strike filed January 16, 2018 p. 4 (in two years GTCA received over 400 emails from Dr. Artus with complaints about GTCA’s governance. `Nine out of ten complaints the Association [GTCA] receives from its members are from [Dr. Artus]. … Considerable time and community resources are expended to ensure each of [Dr. Atrus’s] requests are addressed out of fear that any issue, no matter how trivial, may result in litigation.’)) The declarations of GTCA’s representatives are replete with the extremely high costs that GTCA has incurred in both its in-court and out-of-court disputes with Dr. Artus. As the August and September 2018 emails by Dr. Artus to Ms. Bires and the many declarations of Dr. Artus filed in this lawsuit reveal, neither this lawsuit nor GTCA’s unilateral adoption of revised election rules and sales and leasing guidelines in 2018 over the vehement and repeated objections of Dr. Artus has reduced, much less eliminated, the governance disputes between GTCA and Dr. Artus and their attendant costs and staff and volunteer time. In this 1061*1061 lawsuit, GTCA turned tail, instead of addressing Dr. Artus'[s] claims on the merits. It should not be rewarded for doing so by an award of fees.”

We end our opinion quoting the concern, the counsel, of Judge Kahn: “Sad to say, unless the past is a poor predictor of the future or the parties are no longer able or willing to devote the huge resources they have devoted previously, it is likely that there will be a fifth Artus v. GTCA lawsuit. This fourth lawsuit, especially the way it concluded, accomplished little or nothing to prevent that from occurring. In that regard, I conclude this order by repeating a statement I made almost three years ago at the final hearing in the third Artus v. GTCA lawsuit: `I’m aware that there has been a long history of disputes between Dr. Artus and this association, I’m trying to send a message here. And that message is, don’t run to court. Run to try to work things out. Both sides.” To that we say “Amen.”

DISPOSITION

The order denying attorney fees is affirmed. Each side shall bear its own costs.

Stewart, J., and Mayfield, J.,^[*] concurred.

[1] As briefly noted below, Dr. Artus also makes two other arguments, one of which has no support, the other of which requires little discussion.

[2] We note that Dr. Artus mentions only Civil Code, former section 1354, subdivision (f) in her argument for a de novo standard of review and fails to mention any other statute under which she sought fees. We also find quizzical her reference to “section 1354,” as effective January 1, 2014, as part of the renumbering and reorganization of the Davis-Stirling Act, Civil Code section 1354 was renumbered as 5975.

[3] Salehi and Almanor are the two cases GTCA relies on here.

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

Leonard SPORN, et al., Plaintiffs, v. OCEAN COLONY CONDOMINIUM ASSOCIATION, et al., Defendants.

173 F.Supp.2d 244 (2001)

Leonard SPORN, et al., Plaintiffs,
v.
OCEAN COLONY CONDOMINIUM ASSOCIATION, et al., Defendants.

No. 00-1179 (JEI).United States District Court, D. New Jersey.October 29, 2001.245*245 246*246 247*247 Taylor, Boguski & Greenberg, by Robert Aaron Greenberg, Larchmont Law & Professional Center, Mount Laurel, NJ, for Plaintiffs.

Stark & Stark by David J. Byrne, Princeton, NJ, for Defendants.

OPINION

IRENAS, District Judge.

Presently before the Court is the Motion for Summary Judgment of Defendants Ocean Colony Condominium Association, Carol Ramchandani, Charles Haines, Betsy Beaver, Fred Shoyer and Frank Pisaturo. For the reasons set forth below, Defendants’ motion is granted.

I.

Plaintiffs Leonard Sporn (“Mr.Sporn”), Dolores Sporn (“Mrs.Sporn”), Amelia Thomas (“A.Thomas”) and Rosemarie Thomas (“R.Thomas”) were unit owners at the Ocean Colony Condominium in Ocean City, New Jersey. The dispute out of which this action arose began in January 1998 when Defendant Ocean Colony Condominium Association (“the Association”), through its Board of Trustees, a number of whom are named as defendants in this case, issued a regulation in which an “Adult Lounge”, inaccessible to children, was created at Ocean Colony. (Compl.¶ 15). In response to this regulation, Plaintiffs filed, in January 1999, a petition with the United States Department of Housing and Urban Development (“HUD”) seeking a ruling on whether the exclusion of children from the adult lounge violated the provisions of the Fair Housing Act (“FHA”), 42 U.S.C. § 3601, et seq. According to Plaintiffs, Defendants allegedly responded to this complaint by engaging in “a campaign to discredit the plaintiffs with other unit owners” and “shunning” and “ostracizing” Plaintiffs. (Compl. at ¶ 17).

In March 2000, Plaintiffs filed the instant action against the Association and several individual members of the Board of Trustees, alleging that the creation of the adult lounge violated the FHA and that Defendants’ “retaliatory” actions constituted 248*248 unlawful interference with the exercise and enjoyment of Plaintiffs’ FHA rights. (Compl.¶¶ 28, 31).

In addition, Plaintiffs assert a number of claims related to the Defendants’ treatment of Leonard Sporn. Mr. Sporn suffers from severe spinal stenosis and is confined to a wheelchair. Plaintiffs assert that Defendants failed, in a number of ways, to comply with their obligations under the FHA and New Jersey law to “reasonably accommodate” Mr. Sporn’s handicap. Specifically, Plaintiffs claim that Defendants refused to honor Mr. Sporn’s request that he be provided with a handicapped parking space adjacent to a wheelchair-accessible entrance to the Condominium, and failed, in connection with renovations to the Condominium made in 1999, to provide handicapped access to the building and to the common area restrooms. (Compl.¶¶ 22-26).

Plaintiffs’ final claim is that the actions of the Defendants constitute intentional and negligent infliction of emotional distress.

This Court has jurisdiction over the matter pursuant to 28 U.S.C. § 1331, 1367.

II.

“[S]ummary judgment is proper `if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)).

III.

A.

The Fair Housing Act, 42 U.S.C. § 3601, et seq., passed as Title VIII of the Civil Rights Act of 1968 and amended by the Fair Housing Amendments Act (FHAA) of 1988 to protect handicapped persons, provides that it is unlawful “to discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services in connection with such a dwelling, because of the handicap of that person….” 42 U.S.C. § 3604(f)(2). The relevant provisions of the FHA’s definition of “discrimination” make unlawful:

(B) A refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling; [and]

(C) in connection with the design and construction of covered multifamily dwellings for first occupancy after the date that is 30 months after September 13, 1988, a failure to design and construct those dwellings in such a manner that the public use and common use portions of such dwellings are readily accessible to and usable by handicapped persons [and] all the doors designed to allow passage into and within all premises within such dwellings are sufficiently wide to allow passage by handicapped persons in wheelchairs.

42 U.S.C. §§ 3604(f)(3)(B), (C). Although Plaintiffs fail to cite to any specific provisions FHA in their complaint and cite to inapplicable provisions of the Act in the single paragraph discussing the issue in their response to the instant motion, it appears from their references to the denial of a “lawful accommodation” and their use of language identical to that in § 3604(f)(3)(C) that their claims are properly regarded as brought under the sections cited above.

249*249 The evidence offered by Plaintiffs relating to the inadequacy of Defendants’ renovations under 3604(f)(3)(C) is wholly insufficient to survive a motion for summary judgment. Even assuming that the subsection’s requirements relating to the design and construction of “covered multifamily dwellings for first occupancy” apply to renovations such as those alleged here (a proposition for which Plaintiffs cite no legal authority), Plaintiffs have not offered a single shred of evidence relating to the nature of renovations undertaken, the condition of the facilities at issue prior to the renovations or the alleged inadequacies of the Condominium after the renovations. As the Supreme Court has noted, “a party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of his pleading, but … must set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citation omitted). Here, Plaintiffs have failed entirely to meet this requirement.^[1]

Plaintiffs claim of denial of reasonable accommodations under § 3604(f)(3)(B) is similarly without merit. While it is true that the FHA’s reasonable accommodation requirement “can and often will” involve the imposition of some costs upon a landlord, Shapiro v. Cadman Towers, Inc., 51 F.3d 328, 334-335 (2d Cir.1995); see also, Assisted Living Associates of Moorestown v. Moorestown Township, 996 F.Supp. 409, 434-435 (D.N.J.1998), accommodation is required only where such measures “may be necessary to afford such a [handicapped] person equal opportunity to use and enjoy a dwelling” and need only be “reasonable.” 42 U.S.C. § 3604(f)(3)(B); see also, Gavin v. Spring Ridge Conservancy, Inc., 934 F.Supp. 685, 687 (D.Md. 1995) (emphasizing that FHA does not require accommodation wherever convenient or desired, but only where necessary). Given the dearth of evidence offered by Plaintiffs relating to necessity of Leonard Sporn’s requested accommodations and the rather extensive evidence offered by the Defendants relating to the reasonableness of their efforts to accommodate Mr. Sporn, Plaintiffs claim cannot survive the instant motion.

As mentioned, Plaintiffs have offered no evidence whatsoever regarding the 1999 renovations to the Condominium or Plaintiff’s claims relating thereto. Therefore, those claims cannot stand, regardless of the theory offered to support them. Accordingly, the only remaining issue in this area relates to Mr. Sporn’s claim of entitlement to a handicapped parking space.

It has been recognized on numerous occasions that the FHA may, in certain cases, entitle a handicapped tenant to a reserved parking space adjacent to the tenant’s dwelling. See, e.g., Jankowski Lee & Associates v. Cisneros, 91 F.3d 891, 895-896 (7th Cir.1996); Shapiro, 51 F.3d at 335; Hubbard v. Samson Management Corporation, 994 F.Supp. 187, 192 (S.D.N.Y.1998); Trovato v. City of Manchester, 992 F.Supp. 493, 498 (D.N.H. 1997); see also, 24 C.F.R. § 100.204, Example (2) (2001). Although Plaintiffs have not offered any evidence of the specific 250*250 nature of Mr. Sporn’s handicap, or of the inadequacy of the parking arrangements that pre-existed his request for accommodation, Defendants do not appear to challenge the necessity of Plaintiff’s accommodation, but instead focus on the reasonableness of the accommodations they attempted to provide. (See Def. Br. at 26).

“The reasonable accommodation inquiry is highly fact-specific, requiring a case-by-case determination.” Hovsons, Inc. v. Township of Brick, 89 F.3d 1096, 1104 (3d cir.1996) (quoting United States v. California Mobile Home Park Management Co., 29 F.3d 1413, 1418 (9th Cir. 1994)). Here, while Plaintiffs have provided no evidence relating to Mr. Sporn’s request for a handicapped parking space, Defendants have demonstrated that they did, in fact, take significant steps to provide Mr. Sporn with an acceptable accommodation and never “refused” to permit such accommodations.

The FHA entitles a handicapped individual to “equal opportunity to use and enjoy a dwelling.” 42 U.S.C. § 3604(f)(3). Accordingly, “an accommodation should not `extend a preference to handicapped residents [relative to other residents], as opposed to affording them equal opportunity'” and “accommodations that go beyond affording a handicapped tenant `an equal opportunity to use and enjoy a dwelling’ are not required by the Act.” Hubbard, 994 F.Supp. at 190 (citing United States v. California Mobile Home Park, 29 F.3d 1413, 1418 (9th Cir.1994) and Bryant Woods Inn, Inc. v. Howard Cty. 124 F.3d 597, 605 (4th Cir.1997)). In this case, in response to Leonard Sporn’s requests for a handicapped parking, the Association adopted a “Handicapped Parking Policy” in December 1999. (Beaver Cert. ¶ 25). This policy provided that “handicapped parking spaces [defined as spaces closer to the Condominium entrance] shall be provided to residents” provided that any resident seeking such a space “trade in their deeded parking space for an Association owned space closer to the building entrance.” (Id., Ex. D) On its face, this policy grants the same rights to handicapped tenants as it does non-handicapped residents. In order to prevail on his discrimination claim, therefore, Mr. Sporn must demonstrate that the Association’s actions toward him individually constituted a refusal to reasonably accommodate his handicap. This he cannot do. According to his own testimony, the problems that arose between the Association and Mr. Sporn began when Sporn demanded that he be provided a handicapped space (a proposal to which Defendants agreed) but refused to give up his non-handicapped, deeded space as required by the Handicapped Parking Policy. (L. Sporn Dep. at 58-59). When asked why he needed two spaces, Sporn did not offer any explanation related to his handicap, but instead responded, “because during the summertime we couldn’t get any parking for any of our family that came down.” (Id.). These comments reveal that Sporn’s request for “reasonable accommodation” was really a request for accommodation coupled with a demand for special treatment. Thus, Sporn’s refusal to accept the Association’s proposed accommodation cannot provide the basis for an FHA discrimination claim. As the Seventh Circuit noted in Jankowski, the FHA only creates a right to a “reasonable accommodation,” it “does not create a right to an assigned handicapped space.” 91 F.3d at 896. Accordingly, the Court determines that the actions of the Association in negotiating with Mr. Sporn and his attorneys about the creation of a handicapped space (see Beaver Cert. at ¶¶ 11-24), promulgating non-discriminatory handicapped parking regulations and 251*251 offering a handicapped space to Mr. Sporn several times even after he had rejected the Association’s proposal (see letters of Steven Scherzer to Carl Bowman, Beaver Cert., Ex. F) constitute a “reasonable accommodation” within the meaning of § 3604 of the Fair Housing Act and that Defendants’ Motion for Summary Judgment as to the claims contained in Count III of Plaintiffs’ Complaint should therefore be granted.

B.

The primary contention involved in Plaintiffs’ claim of unlawful interference with FHA rights appears to be that Defendants’ actions in “shunning” them, allegedly in retaliation for Plaintiffs’ filing of their HUD complaint, constituted a violation of the FHA, 42 U.S.C. § 3617. Section 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 encourage any other person in the exercise or enjoyment of, any right granted or protected by section 3603, 3604, 3605 or 3606 of this title.

42 U.S.C. § 3617.

As one district court has noted, a plaintiff’s “subjective beliefs of intentional discrimination and retaliation” are “of course insufficient to show an intentional discriminatory animus.” Gavin, 934 F.Supp. at 687. In their brief, Plaintiffs point to the deposition testimony of a number of unit owners (including Plaintiffs) and to statements made by Board member Carol Ramchandani as evidence of the retaliatory actions taken by Defendants. This evidence, even when viewed in the light most favorable to Plaintiffs, amounts to nothing more than repeated statements of Plaintiffs’ subjective beliefs of discrimination and is therefore insufficient to survive summary judgment.^[2]

Even if there were sufficient evidence to support an inference that Plaintiffs were “shunned” in response to their HUD complaints, such actions simply do not constitute “coercion, intimidation, threats or interference” within the meaning of § 3617. The Fair Housing Act is remedial legislation designed to address the very important goal of providing accessibility to housing without regard to race, color, religion, sex, familial status, national origin or disability. See generally, 42 U.S.C. §§ 3601, 3604. Consistent with this goal, the prohibitions of § 3617 operate to ensure that situations that need to remedied can be brought to the attention of those with the power to effectuate the necessary changes. Section 3617 does not, however, purport to impose a code of civility on those dealing with individuals who have exercised their FHA rights. Simply put, § 3617 does not require that neighbors smile, say hello or hold the door for each other. To hold otherwise would be to extend § 3617 to conduct it was never intended to address and would have the effect of demeaning 252*252 the aims of the Act and the legitimate claims of plaintiffs who have been subjected to invidious and hurtful discrimination and retaliation in the housing market.

While “the language `interfere with’ has been broadly applied to `reach all practices which have the effect of interfering with the exercise of rights’ under the federal fair housing laws”, Michigan Advocacy Serv. v. Babin, 18 F.3d 337, 347 (6th Cir.1994), a brief look at the cases in which § 3617 violations have been found demonstrates that “shunning” is not the kind of behavior that interferes with FHA rights. See, e.g., Fowler v. Borough of Westville, 97 F.Supp.2d 602 (D.N.J.2000) (use of building code and police harassment to drive handicapped plaintiffs out of their special residences); Byrd v. Brandeburg, 922 F.Supp. 60 (N.D.Ohio 1996) (tossing of Molotov cocktail onto porch of African-American residents); United States v. Sea Winds of Marco, Inc., 893 F.Supp. 1051 (M.D.Fla.1995) (requiring Hispanic tenants to wear special wrist bands and subjecting them to excessive monitoring and racially-derogatory remarks); Johnson v. Smith, 878 F.Supp. 1150 (N.D.Ill.1995) (cross burned in front yard of African-American family and brick thrown through their window); People Helpers v. City of Richmond, 789 F.Supp. 725 (E.D.Va.1992) (police “bullied” their way into and selectively searched handicapped and African-American plaintiffs’ apartments). While this Court has, as Plaintiffs note, recognized that “violence or physical coercion is not a prerequisite to a claim under § 3617,” Fowler v. Borough of Westville, 97 F.Supp.2d 602 (D.N.J.2000), the conduct complained of must nevertheless be of sufficient magnitude to permit a finding of intimidation, coercion, threats or interference. See, e.g., Babin, 18 F.3d at 347, 348 (holding that actions of defendants in engaging in economic competition did not “rise to the level of interference with the rights of plaintiffs” and that actions of neighbors, while interfering with plaintiff’s negotiations, were not “direct enough” to state a claim for violation of § 3617). That said, the actions allegedly taken by Defendants do not, even if taken for the reasons that Plaintiffs suggest, constitute interference with any rights protected by § 3617.^[3]

C.

Plaintiffs’ final FHA claim is based on the designation of part of the common area of the Condominium as an “adult lounge.” Plaintiffs seek an injunction “prohibiting the defendant from prohibiting reasonable access to all person in common areas regardless of age.” (Compl.¶ 51(a)). However, it is undisputed that the former Adult Lounge was made accessible to all residents by the Board on July 10, 1999, some eight months prior to the filing of the instant suit. Accordingly, there is no justiciable case or controversy on this issue and Defendants’ Motion for Summary Judgment will be granted. See City of Los Angeles v. Lyons, 461 U.S. 95, 111, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983) (“The equitable remedy is unavailable absent a showing of irreparable injury, a requirement that cannot be met where there is no showing of any real or immediate threat that the plaintiff will be wronged again.”); Anderson v. Davila, 125 F.3d 148, 163 (3d Cir.1997) (“A party seeking injunctive relief 253*253 must demonstrate that there exists some cognizable danger of recurrent violation of its legal rights.”) (citation omitted). Further, to the extent that Plaintiffs are seeking damages on their claim regarding the adult lounge (it is unclear whether they are doing so), their claim fails as they have not demonstrated that they suffered any injuries as a result of the Association’s policy. (See A. Thomas Dep. at 24, 31-34; R. Thomas Dep. at 16, 21; L. Sporn Dep. at 15-17; D. Sporn Dep. at 20).

IV.

Plaintiffs also assert a number of state law claims related to their dispute with the Association. Although Plaintiffs do not cite to any specific provisions of New Jersey law to support their contentions, they appear to argue that Defendants’ actions violated the provisions of the New Jersey Law Against Discrimination (“LAD”), N.J.S.A. 10:5-1, et seq. Since Plaintiffs in their brief focus exclusively on their Fair Housing Act claims and do not clarify the vague assertions made in their Complaint, Defendants (and the Court) are forced to speculate as to the specific claims asserted under the LAD. While Defendants point to a number of provisions of the LAD on which Plaintiffs claims could be based, Plaintiffs do not address these arguments in their response. Accordingly, the Court will assume that Defendants have correctly identified the specific LAD provisions implicated by Plaintiffs’ claims.

The provision of the LAD which deals specifically with the accommodation of handicapped persons in housing is N.J.S.A. 10:5-12.4, which states that “a failure to design and construct any multi-family dwelling of four units or more in accordance with barrier free standards promulgated by the Commissioner of Community Affairs … shall be an unlawful discrimination.” As with Plaintiffs’ FHA claims, there has been offered no evidence whatsoever regarding the legal obligations of Defendants to comply with 10:5-12.4 or the actions that Defendants did or did not take with regard to the 1999 renovations. Accordingly, any claims that Plaintiffs intended to assert in this area cannot survive the instant motion.

Plaintiffs also contend that the filing of their HUD complaint was protected by the LAD and that Defendants’ actions interfered with that protected conduct. Like the FHA, the LAD contains an anti-retaliation provision that makes it unlawful to “take reprisals against any person because that person has opposed any practices or acts forbidden under this act … or to coerce, intimidate, threaten or interfere with any person in the exercise or enjoyment of … any right granted or protected by this act.” N.J.S.A. 10:5-12. Although “it is well-established that the LAD is intended to be New Jersey’s remedy for unacceptable discrimination and is to be construed liberally,” Franek v. Tomahawk Lake Resort, 333 N.J.Super. 206, 217, 754 A.2d 1237 (App.Div.2000); see also, Cedeno v. Montclair State Univ., 163 N.J. 473, 478, 750 A.2d 73 (2000), the Court would simply be stretching the definition of “interference” too far if it were to hold that a lack of friendliness and civility between neighbors caused by a dispute over the use of their Condominium constitutes a violation of the LAD.^[4] While there 254*254 are, no doubt, a variety of ways that these Defendants could have unlawfully retaliated against Plaintiffs under the LAD, mere “shunning”, without more, is not one of them.

Finally, Plaintiffs assert claims for intentional and negligent infliction of emotional distress against Defendants. To state a claim for intentional infliction of emotional distress under New Jersey Law, a plaintiff must demonstrate severe emotional distress resulting from conduct that is “so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.” Buckley v. Trenton Saving Fund Society, 111 N.J. 355, 367, 544 A.2d 857 (citing Restatement (Second) of Torts, § 46). In this case, Defendants’ actions in response to what they perceived as unnecessary antagonism and meritless and expensive litigation created by Plaintiffs simply cannot be said to rise to the level of outrageous conduct required before a recovery for intentional infliction of emotional distress is permitted. Thus, summary judgment on this claim is appropriate.

As to Plaintiffs’ claim for negligent infliction of emotional distress, it should be noted that New Jersey recognizes two types of claims in this area. The first group of claims encompasses cases “in which a person who is the direct object of a tortfeasor’s negligence experiences severe emotional trauma as a result of the tortfeasor’s negligent act or omission.” Gendek v. Poblete, 139 N.J. 291, 296, 654 A.2d 970 (1995). Second, a plaintiff may prevail on a so-called “indirect claim” for negligent infliction of emotional distress where “a person, not otherwise a direct object of a tortfeasor’s negligence, experiences severe emotional distress when another person suffers serious or fatal injuries as a result of that negligence.” Id. As there are no “serious or fatal” injuries involved in this case, Plaintiffs’ claims must treated as “direct”.

The analysis of direct claims of negligent infliction of emotional distress “involves traditional concepts of duty, breach and causation” and “determining defendant’s negligence depends on whether defendant owed a duty of care to the plaintiff, which is analyzed in terms of foreseeability.” Williamson v. Waldman, 150 N.J. 232, 239, 696 A.2d 14 (1997). In this case, it cannot be said that Defendants conduct breached any duty of care owed to Plaintiffs. Plaintiffs allege, in essence, that Defendants were obligated to be as friendly to Plaintiffs after the filing of the HUD complaints and the instant lawsuit as they were before. This contention simply has no basis in the law of negligence. Any duty of care that exists between neighbors simply does not extend to the niceties of day-to-day interactions. In this case, Plaintiffs and Defendants were involved in a dispute over the regulations and policies of the Association at Ocean Colony. This dispute had dragged on for a number of years and had cost each side thousands of dollars in legal fees. Given that context, it cannot be said that the Defendants’s conduct in ignoring Plaintiffs or failing to say hello in the hallways gives rise to a claim for negligent infliction of emotional distress. Defendants neither owed Plaintiffs a duty of civility, nor would they, under the circumstances, be considered to have breached any such duty were one to exist. Accordingly, Plaintiff claim for negligent 255*255 infliction of emotional distress must be dismissed.

V.

In conjunction with their response to the instant motion, Plaintiffs filed a request that, rather than deciding the case against them on the merits, the Court permit Plaintiffs to voluntarily dismiss their case without prejudice under Rule 41 of the Federal Rules of Civil Procedure. Rule 41(a)(2) provides that once a defendant files an answer or motion for summary judgment, a plaintiff may not voluntarily dismiss its action “save upon order to the court.” Generally, a motion for dismissal “should not be denied absent substantial prejudice to the defendant.” Johnston Development Group, Inc. v. Carpenters Local Union No. 1578, 728 F.Supp. 1142, 1146 (D.N.J.1990) (Brotman, J.) (quoting Andes v. Versant Corp., 788 F.2d 1033, 1036 (4th Cir.1986)); see also, 9 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2364 (2d ed.1995). In determining whether a voluntary dismissal is likely to result in prejudice to the defendant, the factors to be considered include “the expense of a second litigation, the effort and expense incurred by a defendant in preparing for trial in the current case, the extent to which the current case has progressed, and plaintiff’s diligence in bringing the motion to dismiss.” Palmer v. Security National Bank, 2001 WL 877584, at * 1 (E.D.Pa. June 13, 2001)(citing Maleski v. DP Realty Trust, 162 F.R.D. 496, 498 (E.D.Pa.1995)). An examination of these factors as they relate to this case leads to the conclusion that Plaintiffs’ motion should be denied. This case was originally filed in March 2000 and the dispute underlying it has been going on for almost four years. In addition, the instant motion has, due in large part to the disappearance of Plaintiffs’ former attorney, been pending for nearly four months. Further, significant discovery has already been conducted, the merits of the legal issues involved are determinable and Defendants have incurred substantial expense both in defending the merits of the case and in simply attempting to keep this case moving along toward resolution. Finally, while it is indeed unfortunate that Plaintiffs appear to have gotten a raw deal from their former attorney, they have known since May 2001 that that attorney would no longer be representing them but did not retain new counsel or seek to dismiss their action until now. Accordingly, because Defendants would suffer substantial prejudice as a result of voluntary dismissal without prejudice and because the merits of the instant motion can be readily reached, Plaintiffs motion for voluntary dismissal pursuant to Fed.R.Civ.P. 41(a)(2) shall be denied.

VI.

For the reasons set forth above, Defendants’ Motion for Summary Judgment will be granted and Plaintiffs’ Motion to Voluntarily Dismiss will be denied. The Court will enter an appropriate order.

[1] It should be further noted that there are some vague allusions in Plaintiffs’ papers to the requirements of § 3604(f)(3)(A), which require that a landlord permit a tenant to modify the existing premises so as to make them handicapped accessible where such modifications would help the handicapped tenant attain “full enjoyment” of the premises. However, such modifications need only be permitted “at the expense of the handicapped person” and, as Defendants point out, there is no evidence that Plaintiffs ever offered to pay for the modifications to the restrooms and the facility entrance.

[2] Plaintiffs rely heavily on a statement made by Carol Ramchandani to the effect that the other unit owners should “shun the people that create the disturbance.” While Plaintiffs contend that this statement was targeted at Plaintiffs, the overwhelming evidence suggests that it instead referred to problems caused by another unit owner who had allegedly threatened Defendants with violence in response to the handling of the community room issue. Thus, even viewing the facts and inferences in a light most favorable to the non-moving party, Pollock v. American Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986), the Court determines that no reasonable finder of fact could, after considering Ramchandani’s statements in their proper context, draw the inferences that Plaintiffs suggest.

[3] Plaintiffs also point to Leonard Sporn’s testimony that he believed that the installation of a new front door at the Condominium was delayed because of the filing of his complaints. However, the evidence offered (which consists of a statement made to Sporn by a city inspector based on a conversation between the inspector and the contractor charged with the installation of the new door) is insufficient to permit an inference of a retaliatory motive for this alleged foot-dragging.

[4] Relevant to the Court’s interpretation of this provision is that N.J.S.A. 10:5-12 was amended in 1992 to add reference to coercion, intimidation, threats and interference and that this additional language is identical to that incorporated into the Fair Housing Act. Therefore, given that New Jersey courts have often looked to federal standards in interpreting the LAD, see, e.g., Grigoletti v. Ortho Pharmaceutical Corp., 118 N.J. 89, 97, 570 A.2d 903 (1990) (“The substantive and procedural standards that we have developed under the State’s LAD have been markedly influenced by the federal experience.”), the Court considers those cases interpreting the provisions of § 3617 of the FHA discussed above instructive in determining the proper scope of the LAD’s anti-retaliation provision.

CORONADO CAYS HOMEOWNERS ASSOCIATION, Plaintiff and Respondent, v. CITY OF CORONADO, Defendant and Appellant.

CORONADO CAYS HOMEOWNERS ASSOCIATION, Plaintiff and Respondent,
v.
CITY OF CORONADO, Defendant and Appellant.

193 Cal.App.4th 602 (2011)
123 Cal.Rptr.3d 90

Court of Appeal of California, Fourth District, Division One.
February 28, 2011.

604*604 McDougal, Love, Eckis, Boehmer & Foley, Steven E. Boehmer, David M. Stotland and Randall R. Sjoblom for Defendant and Appellant.

Epsten Grinnell & Howell, Rian W. Jones, Vincent J. Sincek and Carrie M. Timko for Plaintiff and Respondent.

605*605 OPINION

McCONNELL, P. J. —

City of Coronado (the City) appeals a judgment in which the court determined the City, rather than Coronado Cays Homeowners Association (the Association),^[1] is responsible for maintaining a berm that laterally supports bulkheads located on property within the Coronado Cays subdivision. The bulkheads are adjacent to and act as a retaining wall for a waterway that belongs to the City, over which the Association has an easement. The City contends the court erred by granting the Association declaratory relief as there was no actual controversy between the parties; misinterpreting the operative documents, a special use permit and an assessor’s parcel map; and not including in the judgment certain information included in the statement of decision. We find all contentions lack merit and affirm the judgment.

FACTUAL AND PROCEDURAL HISTORY

In 1967 the City sold property to Atlantic Richfield Company and Cedric Sanders (together the developer) for the development of a “marina type residential planned community … development” called Coronado Cays. The contract required the developer to obtain a special use permit (SUP).

Under the 1968 SUP, the developer installed concrete bulkheads along “Lot 90” of the development to act as a retainer for a 200-foot-wide waterway to be dredged on the adjacent “Lot C.” The bulkheads, which are connected by tongue-and-groove construction, consist of concrete sheet piles that were “jetted” into place in native soil. Lot C was then dredged into a trapezoidal waterway, leaving a slope, called a “berm,” to provide passive lateral support for the toes of the bulkheads. The tops of the bulkheads are “restrained by a tie-back” system that “goes underneath the residence[s], about 25 feet back.”

Under the SUP, the developer dedicated Lot C to the City for public recreational use, reserving a 55-foot-wide easement for docks and related structures for the private use of Coronado Cays residents. The reserved area of Lot C is referred to as “Lot 90-A and 90-B.”

The Association eventually succeeded to the developer’s or its assignee’s interest in the project. It is agreed that the Association must maintain the bulkheads and the City must maintain the waterway. In around 1985, 606*606 however, a question arose as to whether the City or the Association is responsible for maintaining the berm in which the bulkheads are imbedded.

In 1986, a bulkhead elsewhere in Coronado Cays failed because of erosion of the supporting berm. In response, the City passed a resolution to implement a periodic inspection program and to perform required maintenance. Between 1974 and 2006, the City had surveys conducted of the condition of the berm at issue in this litigation.

In February 2008 the Association brought this declaratory relief action against the City. In March 2008 it filed a first amended complaint. The Association sought a judicial determination the City is required to maintain the berm since it is located in the waterway.

At trial, the Association cited section S.W.—109.2 of the SUP, which provides in relevant part: “The [C]ity shall accept interior waterways as fee lands for dedication and maintenance, including maintenance of the easement and right-of-way areas reserved by the developer. Maintenance shall include any redredging necessary in the future to maintain original dredged depths.”^[2]

The City denied any responsibility, arguing the following language from Map No. 6181 pertaining to dedications and reservations trumped section S.W.—109.2 of the SUP: “We also accept on behalf of the public all of lot C …, not including bulkheads, for use as public and navigable waterways … reserving however unto Coronado Cay Company, … the following severable and assignable easements and rights of way;… as to Lot 90-A and 90-B, easements and rights of way in, over, across, upon and through all of said Lots for the purpose of locating, constructing and maintaining, using and operating thereon, free of any rental charged by the City …, docks, wharfs, slips, ramps, rafts, beaches, navigational aids, piers, floats, landings, decks …, footings, pilings and ancillary structures for bulkheads and similar or related wharfage facilities.” (Italics added, some 607*607 capitalization omitted.) The City argued the berm falls within the definition of “ancillary structures” the Association must maintain.

Evidence was presented that the mud line of the berm had dropped at a rate of about one foot per 10 years. Material eroding from the berm reduced the slope and raised the depth of the waterway, and the City had not maintained the waterway at its originally dredged depth. The Association argued the City should redredge the waterway to its original depth “and put[] the tailings back up where they came from,” meaning on the top of the sloped berm. There was also testimony that the berm is currently stable and the bulkheads are not in jeopardy of failing.

In a statement of decision, the court concluded the City is responsible for maintaining the berm. The court relied on section S.W.—109.2 of the SUP, and rejected the argument the berm is an “ancillary structure” under Map No. 6181. Judgment was entered on December 3, 2009.

DISCUSSION

I

Propriety of Declaratory Relief

Preliminarily, we dispose of the City’s contention the court erred by granting declaratory relief because the evidence showed the berm is currently stable and needs no maintenance, and thus there was no actual controversy between the parties.

Declaratory relief is available “in cases of actual controversy relating to the legal rights and duties of the respective parties.” (Code Civ. Proc., § 1060.) “`Whether a claim presents an “actual controversy” within the meaning of Code of Civil Procedure section 1060 is a question of law that we review de novo.’ [Citation.] When an actual controversy does exist, Code of Civil Procedure section 1061 gives the trial court discretion to determine whether it is `necessary’ and `proper’ to exercise the power to provide declaratory relief. (Code Civ. Proc., § 1061.) A trial court’s decision to exercise that power is reviewed under an abuse of discretion standard of review.” (American Meat Institute v. Leeman (2009) 180 Cal.App.4th 728, 741 [102 Cal.Rptr.3d 759].) Doubts about the propriety of the court’s decision are generally resolved in favor of granting relief. (Filarsky v. Superior Court (2002) 28 Cal.4th 419, 433 [121 Cal.Rptr.2d 844, 49 P.3d 194].)

608*608 (1) “One purpose of declaratory relief is `”`to liquidate doubts with respect to uncertainties or controversies which might otherwise result in subsequent litigation.'”‘ [Citation.] `”`One test of the right to institute proceedings for declaratory judgment is the necessity of present adjudication as a guide for plaintiff’s future conduct… to preserve his legal rights.'”‘” (American Meat Institute v. Leeman, supra, 180 Cal.App.4th at pp. 741-742.) “`The “actual controversy” referred to in [Code of Civil Procedure section 1060] is one which admits of definitive and conclusive relief by judgment within the field of judicial administration, as distinguished from an advisory opinion upon a particular or hypothetical state of facts. The judgment must decree, not suggest, what the parties may or may not do.'” (Id. at p. 741.)

(2) We conclude the dispute as to whether the Association or the City is responsible for maintaining the berm presented an “actual controversy” within the meaning of Code of Civil Procedure section 1060. While the berm does not currently need maintenance, the party with the maintenance responsibility will be required to monitor the situation. It was in the parties’ interest for the Association to take action now to determine the matter, as without the court’s guidance the parties’ roles would be unclear. The judgment is based on documents controlling the parties’ relationship; it is not merely an advisory opinion based on hypothetical facts. Further, the court properly exercised its discretion by not declining to entertain the declaratory relief claim under Code of Civil Procedure section 1061.

(3) Contrary to the City’s position, the Association was not required to show a declaration of the parties’ rights would altogether avoid future litigation. In Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 647 [88 Cal.Rptr.3d 859, 200 P.3d 295], the court explained that one purpose of declaratory relief is the avoidance of future litigation. Further, the court’s ruling here may actually avoid future litigation. The court expressly rejected the City’s “argument regarding its concern over a multiplicity of lawsuits.”

II

Merits of Ruling

A

(4) “California courts have long recognized that the interpretation of a written instrument is a judicial function unless the interpretation turns upon the credibility of extrinsic evidence….” (The Lundin/Weber Co. v. Brea Oil Co., Inc. (2004) 117 Cal.App.4th 427, 433 [11 Cal.Rptr.3d 768].) The parties 609*609 presented no extrinsic evidence on the meaning of section S.W.—109.2 of the SUP. It unambiguously provides: “The [C]ity shall accept interior waterways as fee lands for dedication and maintenance, including maintenance of the easement and right-of-way areas reserved by the developer. Maintenance shall include any redredging necessary in the future to maintain original dredged depths.” As a matter of law, this provision requires the City to maintain the berm, as it is located within the waterway dedicated to the City (Lot C) and within the portion of Lot C reserved by the developer (Lot 90-A and 90-B).

(5) The City cites the general rule that an easement owner is presumed to be responsible for its maintenance. The City relies on Rose v. Peters (1943) 59 Cal.App.2d 833, 835 [139 P.2d 983], which explains, “it [is] settled that ordinarily the owner of an easement is required to keep it in repair, but it is a monotonous truism that the parties may alter their legal obligations by contract.” Here, however, section S.W.—109.2 of the SUP rebuts any arguable presumption the developer or its successor assumed the responsibility for maintaining the berm.

B

The City’s argument is primarily based on language in Map No. 6181 pertaining to the developer’s responsibility to maintain in the reserved easement, Lot 90-A and 90-B, such things as docks, ramps, decks, landings and “ancillary structures for bulkheads and similar or related wharfage facilities.” The City asserts the term “ancillary structures” is ambiguous and the court erred by not construing it in favor of the City to include the berm.

(6) “[P]arol evidence is properly admitted to construe a written instrument when its language is ambiguous. The test of whether parol evidence is admissible to construe an ambiguity is not whether the language appears to the court to be unambiguous, but whether the evidence presented is relevant to prove a meaning to which the language is `reasonably susceptible.'” (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165 [6 Cal.Rptr.2d 554].) “The decision whether to admit parol evidence involves a two-step process. First, the court provisionally receives (without actually admitting) all credible evidence concerning the parties’ intentions to determine `ambiguity,’ i.e., whether the language is `reasonably susceptible’ to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is `reasonably susceptible’ to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step—interpreting the [document].” (Ibid.)

Based on the extrinsic evidence presented, the court found Map No. 6181 is not reasonably susceptible of the interpretation that the berm is an 610*610 “ancillary structure” whose maintenance was relegated to the developer.^[3] The court explained: “The berm was not added and was not constructed. The berm existed before the bulkheads. The berm consists of native soil that was graded. This was probably of some significance in the terms of what was in the minds of the drafters of the [SUP] and the dedication and acceptance language in Map [No.] 6181.” The court also noted the term “berm” is not used anywhere in Map No. 6181.

The threshold determination on the question of ambiguity is a question of law we review independently. (Winet v. Price, supra, 4 Cal.App.4th at p. 1165.) We agree with the court’s assessment. Contrary to the City’s position, Map No. 6181 is not ambiguous merely because it does not define the term “ancillary structures.” (Aerojet-General Corp. v. Commercial Union Ins. Co. (2007) 155 Cal.App.4th 132, 140 [65 Cal.Rptr.3d 803].) The adjective “ancillary” modifies the noun “structures,” and thus if the berm is not a structure it cannot be an ancillary structure. The term “structure” commonly means “something (as a building) that is constructed.” (Merriam-Webster’s Collegiate Dict. (11th ed. 2006) p. 1238.) The court found the berm is “not a structure.” The berm consists of native soil into which the bulkheads were imbedded before the waterway was dredged. While the berm is situated against the bulkheads and passively holds them in place, it is not a structure within the common meaning of the term.

Alternatively, the City asserts the berm meets the SUP’s definition of the term “structure” as “[a]nything constructed or erected, the use of which requires more or less permanent location on the ground or attachment to the ground or attachment to something having a fixed location on the ground.” To any extent this definition applies to Map No. 6181, we are unpersuaded. Rather than being located on or attached to the ground, the berm itself was the ground when the bulkheads were constructed. We conclude Map No. 6181 is unavailing to the City.

We also agree with the court’s finding the term “bulkheads” in the phrase “ancillary structures for bulkheads and similar or related wharfage facilities” cannot reasonably be interpreted to mean the bulkheads that are located on Lot 90. The court’s statement of decision explains: “If the map language was given to someone who did not know what the context was, the reading of the plain English would say that the ancillary structures refer to bulkheads related to wharfage, and not related to the berm or the bulkheads, which are the subject of this dispute.” In the City’s interpretation, the words “and similar or related wharfage facilities” are ignored. Map No. 6181 states the City accepted “all of Lot C …, not including bulkheads, for use as public and 611*611 navigable waterways,” and since the bulkheads in question are on Lot 90 rather than Lot C, the map must be referring to any bulkheads and ancillary structures that could be constructed in the developer’s reserved area of the waterway (on Lot 90-A and 90-B) for wharfage purposes.

(7) The City argues the court was required to construe the language in Map No. 6181 in its favor under Civil Code section 1069, which provides: “A grant is to be interpreted in favor of the grantee, except that a reservation in any grant, and every grant by a public officer or body, as such, to a private party, is to be interpreted in favor of the grantor.” The statute’s directive, however, applies only if there is an ambiguity in the grant or reservation. (Red Mountain, LLC v. Fallbrook Public Utility Dist. (2006) 143 Cal.App.4th 333, 344 [48 Cal.Rptr.3d 875].) We have affirmed the court’s ruling that the map language is not reasonably susceptible of the interpretation the City urges. Civil Code section 1069 does not stand for the proposition that unambiguous grant or reservation language must be construed in a municipality’s favor. When no ambiguity exists, no construction is required.

III

Judgment Language

The City also requests that we modify the judgment to conform to the statement of decision. The judgment provides: “The … City … has the responsibility for maintaining the berm located on lot C of Coronado Cays Two, as shown on Map No. 6181, … and the … Association is to maintain the bulkheads located adjacent thereto on Lot 90 of … Coronado Cays Two.” The City complains that the judgment does not include the following paragraph included in the statement of decision: “The Court’s ruling is limited to the determination of the responsibilities of the respective parties as to the maintenance of the berm on Lot C. While there was uncontradicted expert testimony that the berms have stabilized and are not in risk of failure, the Court makes no finding about what if any maintenance needs to be done now. Also, the Court makes no determination whether this ruling is limited to the [SUP] and thus makes no ruling about what happens in 2016 when the [SUP] expires.”

(8) The City forfeited the issue by approving the judgment as to form. In any event, the judgment is proper because it sets forth the declaratory relief the court gave. A judgment should not include issues not decided. “That only is deemed to have been adjudged in a former judgment which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto.” (Code Civ. Proc., § 1911.)

612*612 DISPOSITION

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

Nares, J., and Irion, J., concurred.

[1] The Association was originally named Coronado Cay Homeowners Association; the name was changed to Coronado Cays Homeowners Association.

[2] The record indicates that in 2001 the City, at the Association’s request, adopted a specific plan for Coronado Cays to supplant the SUP, with the exception of section S.W.—109.2. The City also adopted a resolution to amend S.W.—109.2 of the SUP to define the term “waterway” as a “navigable body of water from the face of the bulkhead to the face of any other bulkhead.” The amended version also requires the City to maintain the waterway including “any re-dredging necessary in the future to maintain original dredged depths.” At trial, the court questioned whether the City could unilaterally amend section S.W.—109.2 of the SUP, and the City conceded that the operative documents were the original section S.W.—109.2 of the SUP and the assessor’s parcel map (Map No. 6181). Our holding would be the same under either the original or amended version of the provision.

[3] The court’s statement of decision states: “The map language can be read the way the City reads it, but the City’s interpretation is not reasonable and is contradicted by other facts.”

PV LITTLE ITALY, LLC, Cross-complainant and Appellant, v. METROWORK CONDOMINIUM ASSOCIATION et al., Cross-defendants and Respondents.

PV LITTLE ITALY, LLC, Cross-complainant and Appellant,
v.
METROWORK CONDOMINIUM ASSOCIATION et al., Cross-defendants and Respondents.

210 Cal.App.4th 132 (2012)
148 Cal.Rptr.3d 168

Court of Appeals of California, Fourth District, Division One.

September 26, 2012.
134*134 Vantage Law Group and Michael H. Riney for Cross-complainant and Appellant.

Epsten Grinnel & Howell, Joyce J. Kapsal, Rian W. Jones and Lori F. Chotiner for Cross-defendant and Respondent MetroWork Condominium Association.

English & Gloven, Donald A. English, Christy I. Yee and Rebecca A. Kurtz for Cross-defendants and Respondents India Street Venture and Howard Berkson.

OPINION
AARON, J. —

I.
INTRODUCTION
This appeal is from an order of the trial court resolving a dispute between PV Little Italy, LLC (PV Little Italy), and India Street Venture, LLC (India 135*135 Street), over their respective rights in a mixed office and retail condominium development in downtown San Diego, known as MetroWork. India Street was the original owner and developer of MetroWork, the centerpiece of which is the retail space that ultimately became the live music and dining venue called “Anthology.” For India Street, Anthology was the most important feature of the development, and was the focal point of India Street’s efforts in bringing the MetroWork project to fruition. To protect its investment, and in particular, its interest in the retail space, India Street drafted a Declaration of Covenants, Conditions and Restrictions (CC&R’s) that grants to the “Declarant” (defined as, initially, India Street) certain rights to control the development and management of the property. Among those rights is a special membership in the MetroWork Condominium Association (Association) that entitles the Declarant to exercise enhanced “Class B” voting rights with respect to any units it owns. Those enhanced voting rights are at the center of the parties’ dispute.

To finance MetroWork, India Street obtained a $21.5 million construction loan from KeyBank, N.A. (KeyBank). In connection with that loan, India Street entered into a Construction Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (Trust Deed) with KeyBank, pursuant to which it conveyed to KeyBank a security interest in the entire MetroWork project. The Trust Deed explicitly covered not only the real and personal property, but also India Street’s rights as Declarant under the CC&R’s, including the Class B voting rights.

As construction neared completion, India Street was able to repay a portion of the loan, with the assistance of another loan provided by Pacific Western Bank (Pacific Western). In exchange for India Street’s satisfaction of a portion of its debt, KeyBank executed a Substitution of Trustee and Deed of Partial Reconveyance (Reconveyance Deed), releasing to India Street KeyBank’s security interest in the retail units of MetroWork, which housed Anthology. By its terms, however, the Reconveyance Deed covered only the retail units themselves and the common areas and personal property associated with those units. Unlike the original Trust Deed, the Reconveyance Deed did not mention the Declarant’s rights associated with the retail units.

When India Street defaulted on the balance of the KeyBank loan, the trustee under the Trust Deed conveyed the remaining 16 unsold condominium units in MetroWork to Oreo Corp. (Oreo), an entity related to KeyBank, in a foreclosure sale. KeyBank specifically conveyed to Oreo any and all interest that it had in the Declarant’s rights. Oreo subsequently conveyed the remaining condominium units to PV Little Italy. At the same time, Oreo assigned to PV Little Italy all of the Declarant’s rights, “if any,” that Oreo possessed at that time, “without representation or warranty of any kind as to the existence of same.”

136*136 After acquiring the property and rights in MetroWork, PV Little Italy informed the Association by letter that it was now the Declarant, and as such, held the right to exercise Class B voting rights. In its letter, PV Little Italy nominated its own slate of candidates for election to the Association’s board at the upcoming annual meeting. India Street also claimed to hold Declarant’s rights by virtue of the reconveyance from KeyBank, and in particular, maintained that it possessed the Class B voting rights as to the retail units. The Inspectors of Election, LLC (Inspectors), determined that in view of the dispute as to which entity held the Class B voting rights, neither party would be permitted to exercise the enhanced Class B voting rights in the upcoming election. Instead, both would have to vote as regular “Class A” members. In the election, two of PV Little Italy’s representatives were elected to the board, and India Street’s representative lost his position as president of the board.

India Street sued, in part under Corporations Code section 7616 (section 7616),[1] seeking, among other things, a judicial declaration that it holds Class B voting rights as to the retail units. PV Little Italy intervened and cross-complained, contending that India Street had lost all of its Declarant’s rights in the foreclosure, and seeking a declaration that PV Little Italy obtained those rights, including the Class B voting rights, from Oreo. After a section 7616-mandated hearing, the trial court ruled that India Street held Class B voting rights as to the retail units, by virtue of the Reconveyance Deed. The court also determined that PV Little Italy acquired no Declarant’s rights upon its purchase of the remaining office units after India Street’s default because PV Little Italy had not acquired any rights by direct assignment from India Street, and instead, was an “unaffiliated owner.” Based on these findings, the trial court voided the 2010 board election results, and directed that the former board of directors be reinstated and a new election be held. PV Little Italy appealed.

We are required in this appeal to interpret a number of different provisions in several written instruments, and how they interrelate, to determine which rights are held by whom, and in particular, which entity, if any, has the right to exercise Class B voting rights as the Declarant. Hewing closely to basic tenets that govern the interpretation of written instruments, and based on a straightforward reading of the documents before us, we conclude that India Street conveyed a security interest in all of its Declarant’s rights, including its Class B voting rights, to KeyBank in the Trust Deed, and that India Street did 137*137 not obtain release of KeyBank’s interest in any of those rights upon the partial reconveyance. Additionally, each of the conveyances after India Street’s default included all of the grantor’s right, title and interest in MetroWork, including the Declarant’s rights, as the CC&R’s expressly authorize. PV Little Italy thus simultaneously acquired the status of Declarant as well as any Declarant’s rights that were still in existence at the time of the conveyance from Oreo to PV Little Italy, including the Class B voting rights as to the remaining unsold condominium units. PV Little Italy therefore was not an “unaffiliated owner” within the meaning of the CC&R’s.

Accordingly, we reverse the trial court’s order in its entirety.

II.
FACTUAL AND PROCEDURAL BACKGROUND
A. The MetroWork CC&R’s and India Street’s rights thereunder
MetroWork is a commercial common interest condominium development located in downtown San Diego. India Street purchased the property on which MetroWork was built in 1998, and was the original developer of that property. Berkson Realty, LLC (Berkson Realty), is the managing member of India Street, and Howard Berkson (Berkson) is the managing member of Berkson Realty. The nine-story MetroWork building consists of retail and office condominiums. The first and second floors currently house Anthology — a dining and live music venue (the Retail Units).[2]

For India Street, the Anthology space represented the “crown jewel” of this development. To protect its planned substantial investment in the Retail Units, and to address the interrelationship between the Retail Units and the office units in the project, India Street drafted the CC&R’s in 2005 for the Association, a nonprofit corporation formed pursuant to California’s Nonprofit Mutual Benefit Corporation Law. (§ 7110 et seq.) The Association adopted an amended and restated version of the CC&R’s in 2007.

Under the CC&R’s, the “Declarant” has a special status. The CC&R’s define “Declarant” in full, as follows: “`Declarant’ shall initially mean India Street Venture, LLC …, its successors, and any person to which it shall have assigned its rights hereunder, in whole or in part, by an express written assignment.” As the Declarant, India Street retained ownership of the Retail 138*138 Units. It also initially reserved ownership of units on the ninth floor for uses related to Anthology’s operations. In its capacity as Declarant, India Street was granted certain rights to control the development and management of MetroWork, until such time as all of the units in the project were sold. For example, India Street had the right to appoint and remove members of the Development Committee, which oversaw the plans, specifications and construction progress of MetroWork, until such time as all of the units were sold. (CC&R’s, §4.01.) It also reserved for itself certain rights of easement and entry which passed upon the last close of escrow for the sale of a unit from Declarant. (CC&R’s, § 6.01.) Finally, it possessed the right to develop the property only for as “long as any Condominium in the Project remains unsold.” (CC&R’s, § 7.01.) India Street acknowledged in the trial court that pursuant to the scheme created by the CC&R’s, once all of the units in the building were sold, the Declarant’s rights and privileges in the property would cease to exist, at least as to all units not owned by the Declarant (and it was anticipated that India Street or a related entity would continue to own the Retail Units).

Section 1.28 of the CC&R’s defines an “[o]wner” of a unit as: “[T]he record Owner, whether one or more persons or entities, of a fee simple interest in a Condominium, including Declarant with respect to each Condominium owned by Declarant, and including sellers under executory contracts of sale, but excluding those persons holding title as security for the performance of an obligation.” Every unit owner automatically becomes a member of the Association, and remains a member until its ownership ceases. Additionally, the CC&R’s specify that “[a]ll memberships shall be appurtenant to the Condominium conveyed.” “There shall be no severance by sale, conveyance, encumbrance or hypothecation of an interest in any Unit from the concomitant membership in the Association,” as long as the CC&R’s remain in effect.

The CC&R’s divide membership in the Association into different classes, the first two of which are relevant to this appeal. Class A members include “all Owners,” each of whom “shall be entitled to one (1) vote for each 1,000 Square Feet of floor area in such Owner’s Unit, rounded to the nearest thousand.” Most significantly for present purposes, the CC&R’s provide for a special Association membership with enhanced voting rights for the Declarant. Specifically, the CC&R’s state: “The Class B member shall be Declarant,” who is entitled to “ten (10) votes for each 1,000 Square Feet of floor area in any Units owned by Declarant.” The Declarant’s Class B membership would terminate “upon the date the Declarant no longer owns any Units in the Property.” Additionally, the CC&R’s provided that “[u]pon the sale of a Unit owned by Declarant to an unaffiliated third party, the Class B membership for that Unit shall be converted to a Class A Membership.”

139*139 B. The KeyBank loan and India Street’s default
Construction began on the MetroWork site in 2005. During the early phases of the project, Berkson negotiated with KeyBank to provide a construction loan to fund the project. India Street provided KeyBank a copy of the CC&R’s and the Association’s bylaws. The parties finalized the loan in January 2006. KeyBank promptly recorded the Trust Deed, as well as a “UCC Financing Statement” detailing the personal property that was part of the collateral for the loan. As security for the $21.5 million loan, India Street made the following conveyance, in pertinent part, to KeyBank as beneficiary under the Trust Deed:

“1.1 Grant. For the purpose of securing payment and performance of the Secured Obligations defined [in the deed of trust], [India Street] hereby irrevocably and unconditionally grants, bargains, sells, conveys, mortgages and warrants to Trustee, in trust for the benefit of Beneficiary, with power of sale and with right of entry and possession, all estate, right, title and interest which Trustor now has or may later acquire in and to the following property (all or any part of such property, or any interest in all or any part of it, as the context may require, the `Property’):
“(a) The real property … (the `Premises’); together with
“(b) All buildings, structures and improvements now located or later to be constructed on the Premises (the `Improvements’); together with … [¶] … [¶]
“(g) All of Trustor’s rights, title, interest and privileges whatsoever, as `Developer’; `Declarant’; `Subdivider’ or similar position or title pursuant to any `condominium declaration,’ `declaration of covenants, conditions and restrictions,’ or similar document recorded in the Official Records of the County in which the Premises is located….”
The construction loan set forth the circumstances under which India Street could obtain a partial reconveyance “releasing from the lien of the Deed of Trust the applicable Condominium Units,” defined elsewhere in the loan as a “commercial condominium unit or units and all common areas associated therewith.” The loan specified as follows: “Releases of Condominium Units shall not affect or impair the lien of [Trust Deed] and Lender’s lien and security interests created by the other Loan Documents as to Condominium Units and other property encumbered by the [Trust Deed] and the other Loan Documents not previously released, and said liens and security interests shall continue in full force and effect as to the unreleased Condominium Units and other such property.”

140*140 Construction of the MetroWork project was completed by June 15, 2007, when the notice of completion was recorded. The CC&R’s were recorded on July 3, 2007. India Street had closed escrow on approximately half of the office condominium units by the end of 2008. As the development neared completion, India Street began to take steps to obtain release of the Retail Units from KeyBank’s security interest. To that end, India Street negotiated the “Third Modification Agreement” with KeyBank, dated September 1, 2007, which extended the maturity date of the loan upon satisfaction of several conditions, including various payments for the release of the Retail Units, and India Street’s securing a Small Business Administration (SBA) loan in connection with the release of those units from the lien of the Trust Deed. India Street successfully obtained that SBA loan from Pacific Western. To perfect its new security interest in the Retail Units, Pacific Western recorded two deeds of trust and a UCC Financing Statement in October 2007, none of which explicitly mentions the Declarant’s rights, but all of which purport to cover, effectively, all of India Street’s “right, title and interest” in the Retail Units, including its “development rights.”[3]

India Street successfully obtained release of the Retail Units from KeyBank’s security interest in December 2007, and the Reconveyance Deed was recorded in February 2008. That document substituted KeyBank as the trustee under the Trust Deed, and reconveyed “WITHOUT WARRANTY TO THE PERSONS LEGALLY ENTITLED THERETO A PORTION OF the estate” held by KeyBank, namely, “Units U-100 and U-200” (the Retail Units), together with the common area use rights associated with those units. There is no mention of Declarant’s rights or voting rights in that document. An amended UCC Financing Statement was also recorded at that time, and it, too, contained no mention of the Declarant’s rights.

As of January 2008, India Street had defaulted on the balance of its loan from KeyBank. Negotiations for a forbearance agreement were unsuccessful, and KeyBank ultimately directed the trustee to foreclose on the Trust Deed as to the remaining unsold units in the MetroWork project. At the foreclosure sale in March 2009, the trustee conveyed to Oreo, an affiliate of KeyBank, “all of its right, title and interest in and to” the 16 remaining office units and related common areas, “[t]ogether with all of the property set forth on” the attached exhibit C, which included a description of the Declarant’s rights. Oreo conveyed the foreclosed units to PV Little Italy on November 9, 2009. On that same day, Oreo recorded an assignment and assumption of Declarant’s rights (the PVLI Assignment Agreement), by which Oreo conveyed to PV Little Italy, and the latter assumed, Oreo’s “right, title, and interest, if any, as the Declarant under the [CC&R’s] and all other documents, agreements and materials creating or governing the [MetroWork project], effective 141*141 from and after the date hereof, but without representation or warranty of any kind as to the existence of same.” The grant deed to PV Little Italy and the PVLI Assignment Agreement were both recorded on November 13, 2009.[4]

C. The voting rights dispute and ensuing litigation
At the annual Association meeting scheduled for July 7, 2009, the Association’s board of directors agreed to postpone the election of directors to January 2010, in order to coordinate with the Association’s budgeting activities. By letter dated November 23, 2009, PV Little Italy informed the Association that it had obtained the Declarant’s rights under the CC&R’s for the MetroWork project, and that India Street’s interest in those rights had been extinguished by the foreclosure sale. PV Little Italy announced its intention to seek the removal of the entire existing board of directors for the Association and to nominate a new slate of directors at the January meeting. On January 27, 2010, the Association informed its members that Inspectors had been retained to conduct the recall election and that there was “currently a dispute between two (2) owners … as to who is the Declarant of the [Association] project and therefore [sic] Class B voting rights.” The Association also notified members that Inspectors had determined that this dispute would have to be settled by arbitration or in the courts, and that to fulfill its statutory obligations, it would conduct the recall election on March 1, 2010, with “all members being considered as Class A members with the voting power” attendant to that class. The March election, at which neither PV Little Italy nor India Street was permitted to exercise the Class B voting rights, resulted in the election of two of PV Little Italy’s representatives, and the removal of Berkson as president of the Association’s board. Berkson remained a director.

India Street filed its initial complaint in February 2010, and unsuccessfully sought a temporary restraining order to block the March recall election. On April 8, 2010, it filed its verified first amended complaint alleging five causes of action and requesting various forms of relief, including, under section 7616, a determination that India Street retained the Declarant’s voting rights under the CC&R’s. PV Little Italy intervened and promptly filed a cross-complaint, in which it also sought relief under section 7616.

142*142 The trial court held the statutory section 7616 hearing on May 7, 2010. (See § 7616, subd. (c).) On May 18, 2010, the court issued a minute order in which it concluded that India Street “retained its `Declarant’ class B voting rights, and conversely cross-complainant [(PV Little Italy)] never obtained such rights.” With respect to the Retail Units, the essence of the trial court’s ruling was that the Class B voting rights were an inherent component of ownership of those units. The trial court concluded that despite the fact that the Reconveyance Deed did not mention the Class B voting rights, those rights were “within the penumbra of assets that were conveyed back to” India Street once KeyBank’s security interest in those units was terminated. The court thus concluded that Oreo obtained no such rights upon the foreclosure, and therefore, could have conveyed no such rights to PV Little Italy. Specifically, with respect to the office units on which India Street had defaulted, the trial court found that Oreo had obtained those units through a nonjudicial foreclosure sale and had subsequently sold them to PV Little Italy. The court concluded that because “PV Little Italy did not acquire its ownership rights via direct assignment” from India Street, pursuant to the CC&R’s, PV Little Italy was an “unaffiliated owner” with no Class B voting rights. (See CC&R’s, § 1.15, 2.05, subd. (b).) Consistent with this ruling, the trial court invalidated the March 1, 2010 election, ordered that a new election be held within 60 days, and reinstated the officers and board that existed prior to the March 1, 2010 election.

III.
DISCUSSION
A. The trial court’s order is appealable as an injunction
We first consider whether the trial court’s May 18, 2010 order — which on its face is not a “judgment” and did not purport to resolve all issues between the parties — is appealable. At our direction, the parties submitted supplemental briefing on this issue. We conclude that the order is appealable under Code of Civil Procedure section 904.1, subdivision (a)(6), in that it granted injunctive relief.

(1) “A trial court’s order is appealable when it is made so by statute.” (Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 696 [107 Cal.Rptr.2d 149, 23 P.3d 43] (Griset).) The “one final judgment” rule, codified in Code of Civil Procedure section 904.1, subdivision (a)(6) allows appeals in a civil case to be taken not only from a “judgment,” but also from various types of orders, including orders granting or refusing to grant an injunction. Whether a particular order constitutes an appealable injunction depends not on its title or the form of the order, but on “`the substance and 143*143 effect of the adjudication.'” (In re The Clergy Cases I (2010) 188 Cal.App.4th 1224, 1234 [116 Cal.Rptr.3d 360] (Clergy Cases I).) An injunction is defined as “a writ or order requiring a person to refrain from a particular act.” (Code Civ. Proc., § 525.) Injunctions also may command a person to perform a particular act. (Luckett v. Panos (2008) 161 Cal.App.4th 77, 84 [73 Cal.Rptr.3d 745] (Luckett).)

In its May 18, 2010 order, after finding that India Street retained the Class B voting rights and that PV Little Italy had never acquired those rights, the trial court ruled that the March 2010 election was void, and entered the following order: “[A] new election must be forthcoming within 60 days of the date of this order. The officers and board for the MetroWork Condominium Association that existed immediately prior to the March 1, 2010 election will immediately retake interim control of the Association pending the new election.” The plain language of this order constitutes a mandatory injunction, since it required the immediate turnover of control of the Association to the prior board and officers, and the holding of a new election. India Street disingenuously argues that the order is not appealable as an injunction because it “does not expressly grant an injunction.” (Italics added.) As noted, however, it is not the form, but the substance of an order that determines its appealability.[5]

(2) Another key indicator of whether an order is final and appealable is that “`no issues in the action remain for further consideration….'” (Clergy Cases I, supra, 188 Cal.App.4th at p. 1234; see Canandaigua Wine Co., Inc. v. County of Madera (2009) 177 Cal.App.4th 298, 303 [99 Cal.Rptr.3d 264] [“[A]n order constitutes a final judgment despite other causes of action remaining if the order effectively disposes of the entire case. For example, an order is appealable if it resolves an allegation that is essential to all of the causes of action.”].) The May 18, 2010 order resolved the core conflict between the parties by determining on the merits which party possesses the Declarant’s rights, and in particular, the Class B voting rights. India Street’s complaint sought declaratory and injunctive relief, specific performance, and reformation of the CC&R’s. The gist of the action was India Street’s effort to have itself declared the party that held the right to exercise the Class B voting rights attached to the Retail Units. PV Little Italy intervened for the express 144*144 purpose of resolving whether it, and not India Street, is the Declarant and holds Class B voting rights. PV Little Italy therefore sought a judicial determination of the voting rights of the parties and the related issues of the validity of the March 2010 board election. Like India Street, PV Little Italy requested relief under section 7616 to resolve these issues.

The order appealed from accomplished that goal, and neither party has indicated that anything more of substance remains to be done in the litigation, except entry of judgment. Indeed, as India Street acknowledges, it has since voluntarily dismissed its causes of action pertaining to issues other than those raised pursuant to section 7616. (See Griset, supra, 25 Cal.4th at p. 698 [a decree generally may be considered final “where no issue is left for future consideration”]; see also Abatti v. Imperial Irrigation Dist. (2012) 205 Cal.App.4th 650, 667 [140 Cal.Rptr.3d 647] [holding that appellate jurisdiction exists even where claims have been dismissed without prejudice to enable entry of judgment, unless the parties also have stipulated to facilitating future litigation of the dismissed claims].)

For the foregoing reasons, the trial court’s May 18, 2010 order is appealable. We turn now to the merits of PV Little Italy’s appeal.[6]

B. Applicable standard of review
This appeal presents two issues. First, did the Reconveyance Deed release KeyBank’s security interest not only in the Retail Units themselves, but also in all of the Declarant’s rights, including the Class B voting rights as to Retail Units? Second, did PV Little Italy become the Declarant upon its purchase of the 16 units from Oreo, and thus gain Class B voting rights as to those units? The trial court’s determination of these questions turned primarily on the court’s review and interpretation of various written documents — in particular, the CC&R’s, the Trust Deed, and the Reconveyance Deed.

“The interpretation of a written instrument, even though it involves what might properly be called questions of fact… is essentially a judicial function to be exercised according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect.” (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865 [44 Cal.Rptr. 767, 402 P.2d 839], citation omitted (Parsons).) An appellate court reviews such instruments independently, “unless the interpretation turns upon the credibility of extrinsic evidence.” (Ibid.; see Harvey v. The Landing Homeowners Assn. (2008) 162 Cal.App.4th 809, 817 [76 Cal.Rptr.3d 41] (Harvey) [“Where, as 145*145 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.”].)

Although India Street submitted some extrinsic evidence to aid in the trial court’s interpretation of the relevant documents, the trial court did not rest its ruling on any of the extrinsic evidence. Moreover, while PV Little Italy attempted to impeach the credibility of India Street’s witnesses, it offered no directly conflicting extrinsic evidence of the parties’ intent or of their understanding of the documents under consideration. Instead, PV Little Italy argued that the documents speak for themselves. Because the trial court did not rely on extrinsic evidence, and because the extrinsic evidence that the parties presented was not in conflict, in this appeal “we must make an independent determination of the meaning of” the written instruments before us. (Parsons, supra, 62 Cal.2d at p. 866; see Home Federal Savings & Loan Assn. v. Ramos (1991) 229 Cal.App.3d 1609, 1613 [284 Cal.Rptr. 1] [“Here, because the parties presented little relevant and no conflicting extrinsic evidence [citation], the trial court properly refused to submit the interpretation of the written guaranty to the jury. [Citation.] Likewise, however, we as the reviewing court consider the evidence and interpret the guaranty de novo.”].)

C. The trial court erred in finding that India Street, as owner of the Retail Units, retained the Declarant’s Class B voting rights
1. The plain language of the CC&R’s, the Trust Deed, and the Reconveyance Deed, all indicate that the Class B voting rights associated with the Retail Units were not reconveyed to India Street.
(3) In determining whether the Reconveyance Deed released KeyBank’s security interest in India Street’s Declarant’s rights and the Class B voting membership, we are guided by familiar rules that govern the interpretation of written instruments. “The fundamental goal of contract interpretation is to give effect to the mutual intention of the parties as it existed at the time they entered into the contract.” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1385 [137 Cal.Rptr.3d 293] (Klein).) “When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible….” (Civ. Code, § 1639; see Klein, supra, at p. 1385; see also Starlight Ridge South Homeowners Assn. v. Hunter-Bloor (2009) 177 Cal.App.4th 440, 447 [99 Cal.Rptr.3d 20] (Starlight Ridge).) (4) “`We consider the contract as a whole and construe the language in context, rather than interpret a provision in isolation.'” (Starlight Ridge, supra, at p. 447.) When the language of the instrument is unambiguous, we 146*146 determine the parties’ intent solely by reference to that language. (Ibid.; Klein, supra, 202 Cal.App.4th at p. 1385; see Civ. Code, § 1638 [“language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity”].)

We begin our analysis with the CC&R’s, the key document that defines the scope of the Declarant’s rights, the nature of Class B Association membership, the ability of the Declarant to transfer its rights, and the consequences of doing so. At the time the CC&R’s were created, India Street was the original Declarant, and as such, initially possessed Class B voting rights as to the entire MetroWork project. (See CC&R’s, § 1.15, stating “Declarant shall initially mean [India Street].”) In addition to the Class B voting rights, as Declarant, India Street also possessed a number of rights under the CC&R’s that enabled it to control management of the project during development, and to protect its investment in Anthology, including the enhanced Class B voting rights. (See CC&R’s, §§ 2.05, 4.01, 7.01-7.04, 8.02.) Importantly, India Street had the power to assign its rights under the CC&R’s to another person or entity. CC&R’s section 1.15 reads, in full: “`Declarant’ shall initially mean [India Street], its successors, and any person to which it shall have assigned its rights hereunder, in whole or in part, by an express written assignment.” (Italics added; see CC&R’s, § 7.03 [providing that Declarant’s rights “may be assigned by Declarant to any successor in interest to any portion of Declarant’s interest in any portion of the property by a recorded written assignment”].)

There is no dispute that, pursuant to CC&R’s section 1.15, India Street assigned its Declarant’s rights, including the Class B voting rights, in their entirety, to KeyBank, as security for a construction loan to finance the MetroWork project. The Trust Deed of which KeyBank is the beneficiary provided that, as security for the loan, India Street, as trustor, “hereby irrevocably and unconditionally grants, bargains, sells, conveys, mortgages and warrants to Trustee, in trust for the benefit of [KeyBank], with power of sale and with right of entry and possession, all estate, right, title and interest which [India Street] now has or may later acquire” to the MetroWork property. (Trust Deed, § 1.1.) That grant explicitly included “[a]ll of Trustor’s rights, title, interest and privileges whatsoever, as `Developer’, `Declarant’, `Subdivider’ or similar position or title pursuant to any `condominium declaration,’ `declaration of covenants, conditions and restrictions,’ or similar document recorded in the Official Records of the County in which the Premises is located….” (Trust Deed, § 1.1, subd. (g), italics added.)

The parties agree that the effect of this conveyance was to lodge with the trustee, for the benefit of KeyBank, legal title to the property transferred, but that the transfer did not alter India Street’s ability to develop and manage the 147*147 MetroWork project, or to exercise its Declarant’s rights (including Class B voting rights as to any units it owned), as long as there was no default. (See 4 Witkin, Summary of Cal. Law (10th ed. 2005) Security Transactions in Real Property, § 5, p. 795 [with a deed of trust that includes the power of sale, “title passes to the trustee, who holds it until default; then, after sale, it goes from the trustee to the purchaser”]; see also id., § 6, p. 796 [deed of trust “actually gives the trustee only the interest that is necessary to carry out the trust,” taking “legal title for security only, leaving a legal estate and the ordinary rights of ownership in the trustor”].) Thus, up to the time of its default, India Street was able to exercise all of its Declarant’s rights, including voting rights.[7]

In 2008, India Street successfully obtained release of the Retail Units from the lien of the Trust Deed. However, unlike the original deed of trust, the Reconveyance Deed made no reference to the Declarant’s rights. India Street contends that the language of the Reconveyance Deed “completely released KeyBank’s security interest in the `owner’s entire estate’ consisting of the Retail Units.” However, that is not what the document says. Rather, the Reconveyance Deed reconveyed only “A PORTION OF the estate now held by it under the Deed of Trust as specifically described on Exhibit `A’ attached hereto.” (Original capitalization, italics added.) Exhibit A describes only the Retail Units themselves, plus the associated common areas. There is no mention of the Declarant’s rights. In its brief, India Street concedes, albeit implicitly, that there is no express release of the Declarant’s rights in the Reconveyance Deed. In depositions, Berkson could recall no specific discussion about voting rights with KeyBank during negotiations over the reconveyance, and Lorne Polger (Polger), the attorney who negotiated the terms of the reconveyance on behalf of India Street, acknowledged that there had been no such discussions.

Our conclusion that there was no reconveyance of the Declarant’s rights is further buttressed by the language of the original construction loan from KeyBank, which specifically provides that a partial reconveyance “shall not affect or impair the lien of the Deed of Trust and Lender’s Lien and security interests created by the other Loan Documents as to the Condominium Units and other property encumbered by the [Trust Deed] and the other Loan 148*148 Documents not previously released, and said liens and security interests shall continue in full force and effect as to the unreleased Condominium Units and other such property.”[8] Additionally, the trustee’s deed that was recorded after the foreclosure sale evidences that the trustee conveyed to Oreo not only the remaining real and personal property of MetroWork, but also, explicitly, the Declarant’s rights. It is thus clear that KeyBank knew how to reconvey the Declarant’s rights to India Street, if that had been what the parties intended. However, no language of reconveyance or release of the Declarant’s rights, insofar as applicable to the Retail Units, appears in the Reconveyance Deed or in any other document filed in connection therewith.

The trial court acknowledged that the Reconveyance Deed contained no language releasing the Declarant’s rights, but nonetheless held that the reconveyance included the Declarant’s rights. In reaching this conclusion, the court observed that the rights (including the Class B voting rights) granted to the Declarant in the CC&R’s were designed to ensure that India Street, as original owner and operator of the project, could exercise “control over building management,” particularly with respect to the Retail Units. The court reasoned that “it is counter-intuitive to presume that these Declarant’s rights [(including the voting rights)] could be separated from the ownership interest in the retail units.” Accordingly, the court held that although the Reconveyance Deed “did not expressly list Declarant rights, they are within the penumbra of assets that were conveyed back to [India Street].” We disagree, and conclude that the trial court’s interpretation of the Reconveyance Deed is not supported by the express terms of that document, nor by any of the documents that were executed in connection with the KeyBank loan.

The trial court’s fundamental error lay in its misapprehension of the relationship between the Declarant’s Class B voting rights and ownership of the Retail Units. We agree with PV Little Italy that while membership in the Association, in general, is “appurtenant” to ownership of any unit in MetroWork, the Declarant’s enhanced voting rights do not automatically attach to ownership of the Retail Units, nor to any other unit, nor are they inseparable therefrom.

It is true, as India Street contends, that ownership of a unit automatically carries with it membership in the Association, for as long as the unit is owned. Section 2.03 of the CC&R’s states as much, and further provides that “All memberships shall be appurtenant to the Condominium conveyed….” 149*149 The CC&R’s also specify, in section 13.01, that “[t]here shall be no severance by sale, conveyance, encumbrance or hypothecation of an interest in any Unit from the concomitant membership in the Association.” However, these provisions merely illustrate that membership in the Association is solely a function of unit ownership. (See CC&R’s, § 2.03 [“Ownership of a Condominium shall be the sole qualification for membership in the Association.”].)

By contrast, Class B membership is not determined solely by being an owner, but rather, by being a particular owner — i.e., the Declarant. (CC&R’s, §§ 1.15, 2.05, subd. (b), 7.03.) In other words, the unique status and rights of the Declarant do not result from ownership of a condominium, but rather, from specific grants in the CC&R’s to the Declarant. (See, e.g., CC&R’s, art. VII, §§ 7.01, 7.02, 8.02, subd. (b).) The “Declarant” is defined in the CC&R’s not in terms of ownership of a unit, but rather, as “initially” being India Street, its successors, and assignees. (CC&R’s, § 1.15.) Importantly, the Declarant is not necessarily India Street, because the CC&R’s permit the Declarant to assign its rights to another, “in whole or in part,” to any number of assignees. (CC&R’s, § 1.15, italics added; see § 7.03 [“The rights of Declarant hereunder and elsewhere in these Restrictions may be assigned by Declarant to any successor in interest to any portion of Declarant’s interest in any portion of the property by a recorded written assignment.” (italics added)].)

Contrary to India Street’s contentions and the trial court’s conclusions, nothing in the CC&R’s binds the Retail Units irrevocably to the Declarant (whether Declarant is India Street or some other entity) or to the Declarant’s Class B voting rights. Those units are not defined as “units owned by the Declarant” or “units owned by India Street.” Rather, the “Retail Parcel” is defined in the CC&R’s only as “Those units on floors 1-2 as set forth on the Condominium Plan.” Even the so-called “Declarant Units” are not defined as “units owned by the Declarant,” or as “units owned by India Street,” but rather, merely as “those units comprising floors 1, 2 and 9 as described in the Condominium Plan.”[9] (CC&R’s, § 1.16.) India Street identifies no language in the CC&R’s stating that the first and second floors of MetroWork must always be owned by an entity deemed to be the Declarant. Absent such language, nothing in the CC&R’s prevents ownership of the Retail Units from being separated from the status of Declarant and its concomitant voting rights. Indeed, the very provision that grants the enhanced voting rights as to any unit owned by the Declarant anticipates the possibility that those rights 150*150 could be terminated upon sale of the unit to an unaffiliated entity. In that case, the special Class B membership is converted to the standard Class A membership.[10] (CC&R’s, § 2.05.)

For these reasons, the plain language of the CC&R’s belies the trial court’s conclusion that the Class B voting rights cannot be separated from the Retail Units. The combined effect of CC&R’s sections 2.03, 2.05, subd. (b), and 13.01, summarized above, is that Class B voting rights may not be separated from any units owned by the Declarant — but that merely begs the question: which entity is the Declarant? When India Street assigned a security interest in its Declarant’s rights to KeyBank, and did not obtain a release of those rights as to the Retail Units in the reconveyance, upon India Street’s default, the status of Declarant, and the concomitant enhanced voting rights, became separated from ownership of the Retail Units. By operation of the CC&R’s, India Street was no longer the Declarant; it had become just like any other owner, with Class A membership in the Retail Units.

Despite acknowledging that the Declarant’s rights had not been expressly reconveyed to India Street, the trial court reasoned that it was “counter-intuitive to presume that these Declarant’s rights could be separated from the ownership interest in the [Retail Units],” since the CC&R’s had been drafted with the intention of allowing India Street to maintain control over management of those units. The court concluded that those rights therefore must have been “within the penumbra” of assets reconveyed to India Street. We do not disagree with the trial court’s interpretation of what India Street subjectively intended in drafting the provisions in the CC&R’s pertaining to the Declarant’s rights. The record appears to substantiate India Street’s assertions that its focus, from the beginning, was to make Anthology the “crown jewel” 151*151 of MetroWork. India Street undoubtedly envisioned that only it, or a related entity or direct assignee, would be the owner of the Retail Units as Declarant. India Street structured the CC&R’s in a manner that would preserve India Street’s ability to use the Retail Units for Anthology or a similar purpose well into the future. Thus, although many of the Declarant’s powers would terminate once MetroWork was fully developed and all other units of MetroWork were sold, the Declarant’s right to use the Retail Units for a restaurant or nightclub venue was protected in perpetuity, and all other owners purchased their units subject to those uses, for as long as the Declarant owned the space. (Compare CC&R’s, § 7.01 [protecting the right of Declarant to develop MetroWork as it “deems advisable” for “so long as any Condominium in the Project remains unsold”], with § 7.02 [allowing Declarant to use the “Declarant Units” for any use allowed by law, including restaurant and club uses].) Further, pursuant to CC&R’s section 2.05 the enhanced Class B membership survives for as long as Declarant owns a unit.

That said, we are bound to interpret written instruments according to the parties’ intent as manifested in the written instrument, if that language is clear and explicit. (See, e.g., Parsons, supra, 62 Cal.2d at p. 866; Starlight Ridge, supra, 177 Cal.App.4th at p. 447.) While it may have seemed “counter-intuitive” to the trial court that KeyBank would release its security interest in the Retail Units without also releasing the Declarant’s rights associated with those units, India Street drafted the CC&R’s and negotiated the loan agreement and various deeds in a manner that did not foreclose that possibility. It is not for the trial court, or this court, to inject our own “intuition” into the analysis of the parties’ intent when the language of the instruments is clear. (See, e.g., Klein, supra, 202 Cal.App.4th at p. 1385 [the contracting parties’ intent is interpreted according to objective, rather than subjective, criteria].)

Our conclusion that the Reconveyance Deed did not release KeyBank’s security interest in the Declarant’s rights as to the Retail Units is based on the express and unambiguous language of the Reconveyance Deed itself, the CC&R’s, and other instruments. (Harvey, supra, 162 Cal.App.4th at p. 817 [“The language of the CC&R’s governs if it is clear and explicit…. The parties’ intent is to be ascertained from the writing alone if possible.”].) Notwithstanding the manifest intention of the CC&R’s to protect India Street’s investment in the Retail Units, the CC&R’s also expressly permit the Declarant to assign all or a portion of its rights. This right of assignment, together with the original Trust Deed’s express conveyance of a security interest in the Declarant’s rights to KeyBank, and the lack of any language releasing that interest in the Reconveyance Deed, all indicate, under the usual rules of interpretation, an intent to exclude the Declarant’s rights from the reconveyance. (Cf. White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 881-882, fn. 4 [221 Cal.Rptr. 509, 710 P.2d 309] [the familiar maxim, 152*152 expressio unius est exclusio alterius (the inclusion of one thing implies exclusion of others), applies to contract interpretation].)

(5) If the plain language of the instrument is unambiguous, a court may not “read into” the document additional terms in order to conform its meaning to what the court’s “intuition” tells it the parties must have intended. Rather, the court “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….” (Code Civ. Proc., § 1858; see Klein, supra, 202 Cal.App.4th at pp. 1385-1386.) There are, of course, instances when the parties mutually intend one thing, but due to mistake or inadvertence, the written document does not reflect that intent. In that instance, the law permits the court to reform the document consistent with the parties’ intent. (See, e.g., 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, §§ 276 [discussing reformation remedy generally], 279, pp. 306, 309 [noting that a deed may be reformed]; Civ. Code, § 3399 [permitting “revision” of contract that “does not truly express the intention of the parties”].) Although India Street initially included in its complaint a claim for reformation, it voluntarily dismissed that claim after the section 7616 hearing, and it makes no argument on appeal that the absence of an express release of the Declarant’s rights in the Reconveyance Deed was due to mistake or inadvertence.

2. The other documents and extrinsic evidence on which India Street relies are insufficient to demonstrate that KeyBank released the Declarant’s rights as to the Retail Units by means of the Reconveyance Deed.
(6) In determining the meaning of a written instrument, we are permitted to consider not only its language, but also “`the circumstances under which [it] was made and the matter to which it relates.'” (Starlight Ridge, supra, 177 Cal.App.4th at p. 447, citations omitted.) India Street urges us to look at the broader context in which the reconveyance was accomplished, and to consider other evidence indicating that the intention underlying that conveyance was to restore to India Street not only the Retail Units themselves, but all of the Declarant’s rights associated with those units. In our view, however, these other documents and the extrinsic evidence of intent that India Street proffers are unhelpful and fail to demonstrate any intent other than that revealed by the plain language of the CC&R’s and the Reconveyance Deed.

For example, India Street contends that the third modification to the original loan agreement, combined with other documents executed in anticipation of the reconveyance, released all of KeyBank’s interests in the lien on the Retail Units. By definition, this language covered only “Condominium Units 1A and 2A” themselves, and nothing else. India Street points to no language in the Third Modification Agreement that would indicate otherwise.

153*153 As an additional condition of the release of the Retail Units, India Street agreed to execute a second deed of trust that encumbered only the Retail Units, but that was otherwise identical to the original Trust Deed. This second deed was additional consideration for the Third Modification Agreement, was intended to “be subordinate only to the lien of the deed or deeds of trust securing repayment of the [Pacific Western SBA] loan,” and was to be returned to India Street upon the fulfillment of certain conditions, absent any default. In the trial court, India Street maintained that this second deed, which was never recorded, “would have been unnecessary” if the release of the Retail Units was not intended to be a complete release of all of KeyBank’s interest.

The purpose of this second deed is unclear, and in any event, India Street has not explained how the deed demonstrates that the KeyBank reconveyance released the Declarant’s rights. Nothing on the face of the second deed supports India Street’s argument. On the contrary, the second deed serves merely to reinforce that KeyBank held a security interest in the Declarant’s rights associated with the Retail Units. In our view, the absence of specific language in the Reconveyance Deed releasing that interest, notwithstanding the language of the second deed, only reaffirms that there was no release of the Declarant’s rights as to the Retail Units by KeyBank in the Reconveyance Deed.

India Street emphasized in the trial court, and does so again on appeal, the fact that before obtaining the reconveyance, it obtained a second loan on the Retail Units from Pacific Western, and in exchange for that loan, gave Pacific Western a security interest in those Units and in “any and all … rights … relating to … the development or occupancy” of the Retail Units. This presumably demonstrates, in India Street’s view, that it was India Street’s intention to regain the Declarant’s rights as to the Retail Units, unencumbered by any KeyBank interest, so that it could convey a new security interest in those rights to Pacific Western.

There are several flaws in this argument. First, regardless of what India Street may have intended in terms of a reconveyance of Declarant’s rights, as we have explained, the language of the reconveyance does not manifest that intention. Second, the Pacific Western deed makes no explicit reference to “Declarant’s rights,” which are dealt with separately in the CC&R’s, and which, in the original Trust Deed, were listed separately from other “Developer” rights that India Street may have possessed. As such, the Pacific Western deed does not demonstrate that India Street conveyed to that lender any security interest in the Declarant’s rights.

Third, even if the conveyance to Pacific Western of “all of [India Street’s] right, title, and interest in … all other rights … relating to the real 154*154 property,” including “development rights,” could be construed broadly to include the Declarant’s rights, such a conveyance would not necessarily be inconsistent with KeyBank retaining its own security interest in the Declarant’s rights, since two deeds of trust may cover the same property. (See Davidow v. Corporation of America (1936) 16 Cal.App.2d 6 [60 P.2d 132] [upholding validity of foreclosure sale on second deed of trust on property already covered by first deed of trust]; 4 Witkin, Summary of Cal. Law, supra, Security Transactions in Real Property, § 6, pp. 796-797 [noting that, because a deed of trust conveys only an interest sufficient to carry out the trust, and does not vest the trustee with the entire estate in the property, it is possible to have a second deed of trust covering the same property].) India Street can have conveyed to Pacific Western only whatever title it had, subject to the rights of KeyBank, which claimed an interest under the first deed of trust. (Davidow, supra, at p. 12.) Additionally, Pacific Western recorded its deeds of trust on October 31, 2007, before KeyBank had recorded or even executed the reconveyance (on Feb. 19, 2008, and Dec. 10, 2007, respectively). Pacific Western thus presumably took its security interest subject to KeyBank’s interest, which was prior in time. (See, e.g., Trust Deed, § 1.2, subd. (b) [providing that all persons acquiring an interest in the property “will be considered to have notice of, and will be bound by, the … Secured Obligations” created by the KeyBank loan and related documents].)[11]

India Street also references a “Subordination Agreement” pursuant to which KeyBank subordinated the lien of the Trust Deed to the CC&R’s. However, India Street fails to explain the relevance or significance of the Subordination Agreement to the issues before us. To the extent that India Street is suggesting that this agreement essentially “nullified” the conveyance of a security interest in the Declarant’s voting rights under the Trust Deed, we reject that assertion as without foundation and entirely contrary to the explicit intent to convey such an interest to KeyBank by means of that deed. To the extent that India Street is suggesting only that this language required KeyBank to allow India Street to continue to exercise rights as the Declarant, including enhanced voting rights, notwithstanding the security interest created by the Trust Deed, the subordination language adds nothing to our analysis. As noted previously, a deed of trust does not prevent the trustor — in this case, India Street — from continuing to exercise all of the ordinary rights of ownership.[12] (See discussion, ante, at pt. III.C.1.)

155*155 Contrary to the trial court’s conclusion, in our view, none of the UCC Financing Statements included in the record supports the trial court’s conclusion that the reconveyance necessarily included the Class B voting rights. PV Little Italy contends that any mention of the Declarant’s rights in these statements is surplusage, because UCC Financing Statements pertain only to personal property, and the provisions of the CC&R’s are deemed to create equitable servitudes, which are real property rights and obligations. (See Civ. Code, § 1354; CC&R’s, preamble, ¶ D.) Moreover, PV Little Italy argues, UCC Financing Statements do not, in themselves, convey security interests. Rather, they provide notice of the collateral covered by a security agreement. (Compare Cal. U. Com. Code, § 9102, subd. (a)(73) [defining “security agreement” as “an agreement that creates or provides for a security interest”] with Cal. U. Com. Code, § 9310, subd. (a) [“a Financing Statement must be filed to perfect all security interests …”].) India Street does not respond to these arguments.

In any event, the UCC Financing Statements are consistent with the plain language of the Trust Deed and the Reconveyance Deed, as we have interpreted that language. Like the Trust Deed, the original UCC Financing Statement covered all buildings, goods, rents and materials located on the MetroWork property, but also separately and explicitly mentioned “All of Debtor’s rights, title, interest and privileges, whatsoever, as `Developer,’ `Declarant,'” or other position pursuant to the CC&R’s. The amendment to that financing statement recorded at the time of the reconveyance, like the Reconveyance Deed itself, notably does not include that same language in the release of collateral. Rather, it states only: “That portion of the real property described on Attachment 1 hereto [(a description of the Retail Units)] is hereby deleted from the definitions of `Improvements,’ `Premises’ and `Condominium Units’ set forth in the initial Financing Statement and Secured Party’s interest therein is released.” The Declarant’s rights were not included either within the legal description included as attachment 1, or within the defined terms listed in the amendment. Finally, as previously noted, upon the foreclosure sale, the trustee conveyed to Oreo all of its remaining “right, title and interest” in unsold units of MetroWork, as set forth not only in the legal description of the physical property attached to the trustee’s deed of sale, but also as set forth in the initial UCC Financing Statement annexed to that deed, which explicitly mentioned the Declarant’s rights, and which was attached as an exhibit to the trustee’s deed upon sale. This evidences in plain language that the trustee still held a security interest in the Declarant’s rights at the time of foreclosure, and that it intended to include those rights in the conveyance to Oreo after the foreclosure.

156*156 India Street’s reliance on Civil Code section 1358 is misplaced. That statute provides that any “conveyance … of the owner’s entire estate also includes the owner’s membership interest in the association.” (Id., subd. (b).) We agree with PV Little Italy that because India Street did not raise this argument in the trial court, it may not properly raise it for the first time on appeal. (Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2011) ¶ 8.229, p. 8-155 (rev. # 1, 2011), and cases cited therein.) In any event, the argument is unavailing. As we have explained, the CC&R’s were not written in a way that makes Declarant’s enhanced voting rights appurtenant to ownership of the Retail Units. Whether a transferee of a unit obtains Class B membership of the Declarant, or instead, the same Class A membership as any other owner receives, depends solely on whether that transferee is the “Declarant.” When KeyBank released its security interest in the Retail Units without simultaneously releasing its interest in the Declarant’s rights, and India Street subsequently defaulted, India Street lost the status of Declarant and thus could no longer exercise Class B voting rights as to those units — although it could exercise Class A membership. The directive of Civil Code section 1358 is therefore observed: India Street’s ownership of the Retail Units includes membership rights in the Association, albeit not the membership that India Street had perhaps planned to possess.

(7) Because the language of the relevant instruments is clear and unambiguous, resort to extrinsic evidence of the parties’ intent is unnecessary and even inappropriate. (Parsons, supra, 62 Cal.2d at p. 865; see Civ. Code, § 1639; Code Civ. Proc., § 1856, subd. (b).) The trial court thus erred in looking to the Berkson and Polger declarations to bolster its conclusion that India Street possessed Class B voting rights as a function of its ownership of the Retail Units. However, even if the Reconveyance Deed were susceptible of more than one interpretation (and we do not believe that it is), reliance on these declarations as evidence of the parties’ intent would be improper. (See Winet v. Price (1992) 4 Cal.App.4th 1159, 1165 [6 Cal.Rptr.2d 554] (Winet) [court may consider extrinsic evidence of the parties’ intent, as long as that evidence is “relevant to prove a meaning to which the language is `reasonably susceptible.’ [Citation.]”].) The Berkson and Polger declarations merely confirm what the language of the CC&R’s already makes clear — namely, that India Street wanted to protect its “crown jewel” investment in the Retail Units. Moreover, Berkson avers only that it was his “understanding” that the release of the Retail Parcel from the lien of the deed of trust was to be a full release, and states that he would not have entered into the reconveyance “if KeyBank had expressed an intention to reserve any rights related to the Retail Parcel.” Similarly, Polger states that he “understood” that between the Reconveyance Deed and the amended UCC Financing Statement, all real and personal property collateral in the Retail Units would be released, including 157*157 any Declarant’s voting rights “to the extent that such voting rights were attached to the realty” or “were deemed a personal property interest.”

Such subjective statements of “understanding” are irrelevant, however, particularly where there is no evidence that KeyBank had the same understanding. As PV Little Italy notes, the deposition testimony of both Berkson and Polger indicates that they never discussed the Declarant’s rights with KeyBank in connection with the reconveyance. (See, e.g., Reigelsperger v. Siller (2007) 40 Cal.4th 574, 579-580 [53 Cal.Rptr.3d 887, 150 P.3d 764] [the “uncommunicated subjective intent” of one party cannot be used to contradict the objective manifestation of the parties’ intent]; Winet, supra, 4 Cal.App.4th at p. 1166, fn. 3 [evidence of the undisclosed subjective intent of the parties is irrelevant to determining the meaning of contractual language].)[13]

(8) While it is fundamental that the court should avoid interpreting a writing in a manner that results in an absurdity (see Civ. Code, § 1638 [language of instrument controls if it “does not involve an absurdity”; see also Starlight Ridge, supra, 177 Cal.App.4th at p. 447), India Street makes no argument that any interpretation other than the trial court’s would be “absurd,” and our interpretation does not lead to an absurd result. The CC&R’s were evidently drafted with the intention of giving India Street a great deal of flexibility to exercise or assign its Declarant’s rights as it saw fit, and as its business needs required, even if that meant conveying the status of Declarant to another entity. It is not unreasonable to presume, as PV Little Italy contends, that KeyBank would want to retain its security interest in the Declarant’s rights while the substantial balance of its loan to India Street remained outstanding, so that in the event of a default, it would have the greatest possible degree of control over the project’s management pending the sale of the remaining units. Polger, India Street’s attorney, acknowledged as much during his deposition.

For the foregoing reasons, we conclude that the Reconveyance Deed did not release KeyBank’s lien on the Declarant’s rights, including the enhanced voting rights associated with the Retail Units.

158*158 D. Oreo expressly conveyed to PV Little Italy any remaining Declarant’s rights that it may have possessed at the time of the sale; accordingly, PV Little Italy holds Declarant’s rights, including Class B voting rights, as to any units that it still owns
After India Street’s default, KeyBank foreclosed on the remaining 16 unsold units in the MetroWork project, and these units were promptly sold to Oreo at the trustee’s sale. The trustee’s deed upon sale conveyed all the real and personal property covered by the Trust Deed (with the exception of the Retail Units already reconveyed), and specifically identified the Declarant’s rights as among the property conveyed to Oreo. On November 13, 2009, Oreo sold these units to PV Little Italy. On that same day, Oreo entered into an assignment and assumption agreement pursuant to which it transferred to PV Little Italy its “right, title, and interest, if any, as the Declarant” under the CC&R’s, specifying that the transfer was “without representation or warranty of any kind as to the existence of same.” We now address whether, by virtue of this assignment, PV Little Italy became the Declarant and obtained the Declarant’s Class B voting rights as to the units that it purchased from Oreo. Relying once again primarily on the plain language of each of the conveyances after India Street’s default, we conclude that PV Little Italy did acquire those rights. Accordingly, we reverse the trial court’s ruling to the contrary.

The terms of the Trust Deed granted to KeyBank the power, upon India Street’s default, to enter and take possession of the property covered by the Trust Deed, to “manage and operate all or any part of the Property,” and “do any and all other things in connection with those actions that Beneficiary may in its sole discretion consider necessary and appropriate to protect the security of” the Trust Deed. (Trust Deed, § 6.3 subd. (c).) As PV Little Italy contends, the express inclusion of the Declarant’s rights in the conveyance in the Trust Deed demonstrates an intention that, upon any default by India Street, KeyBank would be able to step into India’s Street’s shoes as Declarant and exercise the Declarant’s rights to manage and protect the development, thereby maximizing its recovery on the loan at any future sale. India Street does not dispute this. Upon India Street’s default, and by virtue of the express conveyance in the Trust Deed, title to all the tangible and intangible property covered by the Trust Deed (excluding the Retail Units but including all Declarant’s rights) vested with the trustee, for the benefit of KeyBank. (See CC&R’s, § 1.15; Trust Deed, § 1.1, subd. (g).)[14]

159*159 We next consider whether the trustee had the authority under the CC&R’s to convey the Declarant’s rights to Oreo, and if so, whether Oreo effectively passed those rights on to PV Little Italy. The trial court first found that, by virtue of KeyBank having reconveyed the Declarant’s rights to India Street, Oreo had “no such rights to convey” to PV Little Italy after the foreclosure sale. The trial court did not expressly limit this finding only to those Declarant’s rights associated with the Retail Units, but rather, appears to have concluded that Oreo acquired “no such rights” — even those associated with the units as to which India Street had defaulted. However, as we have explained, the Reconveyance Deed did not transfer back to India Street any of the Declarant’s rights. Thus, even under the trial court’s reasoning, at a minimum, the Declarant’s rights as to the unsold units remained “in play” at the time of the foreclosure sale.[15]

In its briefing in the trial court, India Street acknowledged that upon the foreclosure sale, Oreo acquired those rights because it is affiliated with KeyBank. According to India Street, it was only upon the subsequent sale to PV Little Italy — an “unaffiliated third party” — that the Class B voting rights associated with the foreclosed condominium units were terminated and converted to Class A rights, pursuant to section 2.05, subdivision (b) of the CC&R’s. At the section 7616 hearing, however, India Street shifted its position, arguing that because it was the trustee that held title to all of the property, and there had been no conveyance to KeyBank, the foreclosure sale to Oreo was itself a sale to an “unaffiliated third party,” and thus, Oreo acquired no Declarant’s rights. The trial court adopted the “unaffiliated third party” approach in evaluating the nature of PV Little Italy’s rights, and concluded that because PV Little Italy “did not acquire its ownership rights via direct assignment from [India Street] and was instead an unaffiliated owner,” PV Little Italy acquired no Declarant’s rights. Not surprisingly, on appeal, India Street agrees with the trial court, arguing both that Oreo “did not acquire” India Street’s Class B membership and voting rights upon the foreclosure sale and thus had no rights to convey to PV Little Italy, and also that PV Little Italy, an entity neither affiliated with, nor a direct assignee of, India Street, could not have acquired Class B voting rights as a result of its purchase from Oreo.

160*160 The analytical flaw in the trial court’s and India Street’s reasoning is that it improperly conflates section 1.15 of the CC&R’s with section 2.05, subdivision (b). Section 1.15 defines the term “Declarant.” The reference to PV Little Italy as an “unaffiliated owner” presumably stems from section 2.05, subdivision (b) of the CC&R’s, which provides for the conversion of Class B voting rights to Class A rights upon the sale of a unit owned by Declarant to an “unaffiliated third party.” In order to determine whether the Declarant’s rights — including the Class B voting rights — in the foreclosed units were effectively transferred to Oreo, and in turn to PV Little Italy, we must first determine, under section 1.15 of the CC&R’s, who may become the Declarant, and specifically, whether a Declarant other than India Street may effectively assign the status of Declarant and the Declarant’s rights to another person or entity. The answer to that question determines whether CC&R’s section 2.05’s treatment of the Class B voting rights comes into play at all.

CC&R’s section 1.15 provides that “`Declarant’ shall initially mean [India Street] … its successors, and any person to which it shall have assigned its rights hereunder, in whole or in part, by an express written assignment.” (Italics added.) This sentence arguably may be interpreted in two different ways. Consistent with the narrow interpretation adopted by the trial court and urged by India Street, the definition may be construed to mean the following: “`Declarant’ shall initially mean India Street, and thereafter only its direct successors or assigns.” This approach construes the word “initially” as applying only to India Street. However, there is another reasonable interpretation pursuant to which “initially” modifies the entire remainder of the sentence, such that the definition would have the following meaning: “`Declarant’ shall initially mean India Street, its successors and assigns, but thereafter, `Declarant’ could be other entities as yet unnamed.” This interpretation contemplates a potentially unlimited universe of Declarants in the future, who could exercise the Declarant’s rights as set forth in the CC&R’s for as long as MetroWork remained in its developmental stages, and — specifically with respect to the enhanced voting rights — for as long as the person or entity that has the status of Declarant owns units in the property.

To resolve the arguable ambiguity in this phrase, we consider not just the language of this provision, but the larger context in which it appears, as well as the apparent purposes underlying the designation of “Declarant.” (Starlight Ridge, supra, 177 Cal.App.4th at p. 447 [“`We consider the contract as a whole and construe the language in context, rather than interpret a provision in isolation. [Citation.]'”]; Civ. Code, § 1647 [permitting court to consider circumstances under which contract was made and the matter to which it relates].) We also may consider any extrinsic evidence bearing on the interpretation of this provision, but there is virtually none relevant to this specific issue. (Winet, supra, 4 Cal.App.4th at p. 1165.)

161*161 We conclude that the language and structure of CC&R’s section 1.15 supports the second interpretation, not the more restrictive one that the trial court adopted. First, if the intent of the CC&R’s was to restrict the status of “Declarant” only to India Street or its direct assignees, then the inclusion of the word “initially” would have been superfluous; “Declarant” could simply have been defined as “India Street, its successors and its assignees.” The term “initially” is a specific modifier that was presumably included for a reason. (See, e.g., Civ. Code, § 1641 [contract should be read as whole “so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other”]; Advanced Network, Inc. v. Peerless Ins. Co. (2010) 190 Cal.App.4th 1054, 1063-1064 [119 Cal.Rptr.3d 17] (Advanced Network) [“`We must give significance to every word of a contract, when possible, and avoid an interpretation that renders a word surplusage.’ [Citation.]”].) As written, nothing in the definition limits the application of “initially” only to “India Street.” If the latter was intended, one reasonably might have expected the definition to state, “… initially India Street, and thereafter, its successors, and any person to which it shall have assigned its rights.”

Second, another provision in the CC&R’s clarifies that the status of Declarant may be conveyed to entities other than a direct assignee of India Street. CC&R’s section 7.03 provides that “[t]he rights of Declarant hereunder and elsewhere in these Restrictions may be assigned by Declarant to any successor in interest to any portion of Declarant’s interest in any portion of the property by a recorded written assignment.” (Italics added.) This language, although somewhat dense and cumbersome, specifies that the “Declarant” (and not solely India Street) may assign the Declarant’s rights to any successor in interest. In our view, this provision, read together with CC&R’s, section 1.15, shows that the status of Declarant could be held by direct assignees of India Street, or by assignees of an assignee of India Street. As long as the assignor is itself the Declarant, then the Declarant’s rights may be conveyed consistent with the CC&R’s.

Third, this broader interpretation is consistent with the purposes of the position of Declarant and the role that the person or entity holding that position would play in the successful development of MetroWork. The apparent purpose for initially making India Street the Declarant was to allow it to manage and operate MetroWork during the developmental stages, and to maximize the return on its investment until all of the condominium units were sold to others. It is reasonable that a lender providing financing for the project would want the deed to include the Declarant’s rights so that, in the event of a default, the lender would be in a position to protect, and maximize the value of, its collateral pending the further sale of the foreclosed units. Polger, India Street’s attorney, acknowledged as much. The lender, a bank, is principally concerned with recouping the loan on which the debtor has defaulted, and may not be in a position to manage a large development on a 162*162 day-to-day basis after a default. Accordingly, as happened here, the bank would logically want to sell the collateral as quickly as possible, and for as great a return as possible, perhaps before the development is completed. For these reasons, it is reasonable for the CC&R’s to authorize the transfer of the Declarant’s powers and rights to an entity other than a direct assignee of India Street, to assure that the Declarant’s role is filled for as long as might be necessary to ensure the successful completion of the project.

Having determined that the CC&R’s authorize the assignment of the Declarant’s rights to entities other than a direct assignee of India Street’s, we next address whether PV Little Italy in fact acquired the Declarant’s rights, including Class B voting rights, from Oreo, or whether, as the trial court concluded, PV Little Italy could not have acquired Class B voting rights because it was “an unaffiliated owner.”

PV Little Italy contends that because the transfer from the trustee to Oreo included all of the Declarant’s rights, and Oreo in turn assigned any and all such rights to PV Little Italy, PV Little Italy became the Declarant. In other words, PV Little Italy maintains that the status of Declarant, and all of the Declarant’s rights, including Class B voting rights, were simultaneously transferred to Oreo, and then to PV Little Italy, so there was no sale of any unit by the Declarant to an “unaffiliated” third party. India Street does not address PV Little Italy’s “simultaneous transfer” theory at all. Rather, it simply parrots the trial court’s conclusion that because PV Little Italy is neither affiliated with, nor an express assignee of, India Street, it could not have acquired any Declarant’s rights.

PV Little Italy has the better argument. First, we have concluded that the trustee obtained the Declarant’s rights upon foreclosure after India Street’s default, and that the CC&R’s authorize the assignment of the Declarant’s rights by the Declarant — whichever entity that might be — to future successors in interest. That is precisely what occurred here, in the successive transfers after the foreclosure. At KeyBank’s direction, at the trustee’s sale, the trustee conveyed to Oreo “all of its right, title and interest” in the foreclosed units of MetroWork, “[t]ogether with all of the property set forth” in an attachment to the trustee’s deed upon sale, which specifically included a description of the Declarant’s rights. This conveyance was a “unified sale,” meaning it was intended to include “all real property and personal property” covered by the security interest created by the Trust Deed. (See Cal. U. Com. Code, § 9604, subd. (a)(1)(B) [authorizing unified sale].) Thereafter, Oreo conveyed to PV Little Italy by grant deed all of its rights in the foreclosed units, and separately but simultaneously assigned to PV Little Italy, all of its Declarant’s rights. Consequently, PV Little Italy was not a third party purchaser of the foreclosed units, but rather, an assignee of the Declarant. As such, it acquired rights and property from Oreo as the Declarant.

163*163 As we have explained, the conveyance by the existing Declarant to another entity of all units owned by the Declarant, together with all of the Declarant’s rights, is a transaction that section 7.03 of the CC&R’s expressly authorizes. In our view, this is an entirely different type of transaction from that discussed in CC&R’s section 2.05, which concerns only the sale of a unit owned by Declarant to an “unaffiliated third party.” We must view CC&R’s section 2.05 in the context of the entire agreement, and construe the instrument in a manner that gives effect to all of its provisions. (See Jones v. Jacobson (2011) 195 Cal.App.4th 1, 18 [125 Cal.Rptr.3d 522] [“`We must view the language of a contract as a whole … [and] we should give effect to every provision and avoid rendering any part of an agreement surplusage.'”].) The term “unaffiliated third party” in CC&R’s section 2.05 logically cannot mean “unaffiliated with India Street.” Rather, it must mean “unaffiliated with the Declarant.” Otherwise, the power of assignment in CC&R’s section 7.03 (and § 1.15 as well, as we have interpreted it here) would be rendered a nullity.

For these reasons, CC&R’s section 2.05 does not come into operation when the Declarant is conveying all of the units that it owns to another entity that will itself become the Declarant as a result of the conveyance. If, for example, Oreo had conveyed 12 of the foreclosed units to PV Little Italy, together with the Declarant’s rights, but sold the remaining four foreclosed units to some other entity that had no affiliation to Oreo, no Declarant’s rights, and no Class B voting rights, would attach to those latter four units. Rather, the new owner of those units would have Class A membership in the Association only, pursuant to CC&R’s section 2.05. But PV Little Italy would be the new Declarant, and would possess Class B voting rights, as Declarant, to the 12 units it acquired.

The fatal flaw in India Street’s argument is that it attempts to rewrite the CC&R’s so that only India Street or its direct assignee can be “Declarant.” This is reflected in India Street’s brief on appeal, where it states, “The CC&Rs expressly granted Class B membership voting rights exclusively to India Street (or its affiliate or direct assignee).” (Italics added.) Section 7.03 of the CC&R’s proves that statement to be inaccurate. Similarly, India Street claims that “India Street’s Class B membership voting … rights” would terminate either upon “India Street’s divestiture of its entire ownership in its units or (2) India Street’s sale of a unit to an `unaffiliated third party.'” (Italics added.) However, CC&R’s section 2.05 nowhere mentions the words “India Street.” Rather, it uses the term “Declarant,” and as we have seen, the “Declarant” can be India Street, its direct assignees, or the assignees of its assignees.

(9) Accordingly, when Oreo simultaneously conveyed all of its Declarant’s rights to PV Little Italy, PV Little Italy acquired those rights, 164*164 including the Class B voting rights, pursuant to sections 1.15 and 7.03 of the CC&R’s. The consequences that arise when a Declarant sells a unit to an unaffiliated third party, as set forth in CC&R’s section 2.05, thus never arose on that transaction. For this reason, the trial court’s ruling that PV Little Italy acquired no Declarant’s rights, and no Class B voting rights as the Declarant, was erroneous.

IV. CONCLUSION
The order of the trial court is reversed. PV Little Italy shall recover its costs on appeal.

Huffman, Acting P. J., and Haller, J., concurred.

[1] Further statutory references are to the Corporations Code unless otherwise specified.

Section 7616, subdivision (a) requires that “[u]pon the filing of an action therefor by any director or member or by any person who had the right to vote in the election at issue, the superior court of the proper county shall determine the validity of any election or appointment of any director of any corporation.”

[2] We use the term “Retail Units” to readily distinguish the Anthology units from the office condominium units in the project, and to be consistent with the trial court’s usage of that term. In doing so, we do not attach any particular legal significance to that terminology.

[3] No explanation is given for why two deeds of trust were recorded for this transaction.

[4] The PVLI Assignment Agreement recites that Oreo first entered into a purchase agreement for the foreclosed units with PacVentures, Inc., the managing member of PV Little Italy, which in turn assigned that agreement to PV Little Italy. PV Little Italy denies that this was a two-step sale, and the grant deed to PV Little Italy suggests that whatever transactions may have taken place were intended to be part of a single conveyance from Oreo to PV Little Italy. Since India Street did not raise a legal issue in the trial court based on whether this conveyance occurred in one or two transactions, and does not do so on appeal, we accept on this record PV Little Italy’s representation that it simultaneously acquired both the foreclosed units and assignment of the Declarant’s rights directly from Oreo.

[5] India Street also asserts that the order is not appealable as an injunction because it was merely a “determination as to the rights of parties to exercise Class B voting rights” and did not “prohibit or mandate action by any party.” Plainly, that is not the case. The order required the prior board members to reassume control and directed the Association to hold a new election. India Street further suggests that the order is not an injunction because it did not “prohibit or mandate action on the part of [PV Little Italy].” However, the law defines injunctions as orders requiring “a person” to do or not to do something. (Code Civ. Proc., § 525; Luckett, supra, 161 Cal.App.4th at p. 84.) There is no requirement that the “person” whom the order directs to act be a particular party.

[6] Although the Association was a party defendant in the proceedings in the trial court, it expressly took no position as to whether India Street or PV Little Italy possesses the Declarant’s rights.

[7] For this reason, India Street’s assertion that KeyBank never objected to any exercise by India Street of the Declarant’s rights is not relevant to determining whether those rights were reconveyed. Prior to the foreclosure sale, KeyBank had no basis for objecting to India Street’s exercise of those rights in the normal course of its role as Declarant, as long as doing so did not impair KeyBank’s security interest. (See, e.g., Trust Deed, §§ 2.6, 5.6) Although India Street also claims that KeyBank raised no objection to India Street’s exercise of Class B voting rights or Declarant’s rights after the foreclosure sale, there is no evidence that India Street actually exercised those rights after April 10, 2009, the date on which the trustee’s deed upon sale was recorded.

[8] India Street’s assertion that KeyBank did not expressly “reserve” any security interest in the Declarant’s rights upon reconveyance is, therefore, beside the point. It is undisputed that all of those rights were conveyed to KeyBank in the Trust Deed. Under the terms of the KeyBank loan, any part of that security interest that is not released is retained by KeyBank. No “reservation” of rights was necessary.

[9] The CC&R’s make clear that no particular meaning or significance may be separately attributed to the mere use of the word “Declarant” in the term “Declarant Units.” (See CC&R’s, § 14.03 [“The Article and Section headings, titles and captions have been inserted for convenience only, and shall not be considered or referred to in resolving questions of interpretation or construction.”].)

[10] We have found only two uses of the term “Declarant Units” in the CC&R’s. Both provide, in pertinent part, that “the Declarant” and/or its successors and assigns may utilize the Declarant Units for any use permitted by law, including retail, restaurant and club uses. (CC&R’s, §§ 7.02, 8.02, subd. (b).) It may well be that India Street drafted these provisions intending to preserve for itself the right to use, as Declarant, the Retail Units for Anthology or a similar use in perpetuity, but that is not what these provisions say. Rather, these provisions protect the right of the “the Declarant” — whichever entity that might be — to use the Declarant Units in this manner.

India Street presented no evidence that KeyBank shared India Street’s understanding that Declarant rights always had to attach to the Retail Units, or that ownership of those units was to be reserved solely for India Street and solely in its capacity as Declarant. India Street asserts that KeyBank “agreed that ownership of the Retail Parcel for Anthology’s operations would be reserved solely for India Street or its related entities” (italics added), but points to no language in the CC&R’s, the construction loan, or in the Trust Deed that would substantiate that statement. Even if it is true, nothing in that “agreement” indicates that KeyBank made any representations about the future of the Declarant’s rights, and in any event, the current status of ownership of the Retail Units is consistent with India Street’s assertion: India Street (or an affiliate) owns the Retail Units and is using them for Anthology. However, it does not own them as the Declarant.

[11] Because the issue is not before us, we express no opinion on the nature of any security interest that Pacific Western may have obtained in the Declarant rights, or what may have happened to that interest once India Street defaulted on the KeyBank loan and the latter foreclosed on its remaining security interests.

[12] India Street also points to similar subordination language in the Pacific Western deeds of trust. But the effect of such language would have been no different than the effect of the Subordination Agreement with KeyBank. Until such time as India Street defaulted on the KeyBank loan, India Street was free to exercise its Declarant rights in the MetroWork project, as explained above, without interference by either KeyBank or Pacific Western.

[13] Polger stated in his declaration that he and KeyBank’s representatives discussed the release and “reallocation” of KeyBank’s “collateral,” but he does not state that the release of voting rights was discussed, and in fact, in his deposition testimony, he acknowledged that there was no such specific discussion. He further testified that he “[did not] believe that the bank reconveyed its collateral interest in the declarant rights by virtue of the reconveyance of the deed of trust.”

[14] To be clear, legal title vested not with KeyBank per se, but with the trustee, for the benefit of KeyBank. In a deed of trust, title passes to the trustee “at the time the instrument is originally executed.” (4 Witkin, Summary of Cal. Law, supra, Security Transactions in Real Property, § 169, p. 969.) Thus, the only entity with the power to convey title to a purchaser at a foreclosure sale is the trustee. (1 Bernhardt et al., Cal. Mortgages, Deeds of Trust, and Foreclosure Litigation (Cont.Ed.Bar 4th ed. 2012) § 2.98, p. 133 (rev. 1/12).) Because KeyBank was not substituted as the trustee after the default, as it was for purposes of the reconveyance, and because it did not receive a deed in lieu of foreclosure (id., § 7.2, pp. 516-517 (rev. 1/12)), it remained only the beneficiary under the Trust Deed, with the power to direct the trustee to sell the property. (See Trust Deed, § 6.3, subd. (g).)

[15] The CC&R’s, by their terms, contemplate that there could be more than one Declarant at any given time. Specifically, the CC&R’s permit assignment of the Declarant’s rights “in whole or in part.” (CC&R’s, § 1.15, italics added; see § 7.03 [allowing the Declarant to assign its rights “to any successor in interest to any portion of Declarant’s interest in any portion of the property”].) PV Little Italy does not contend that it gained any Declarant rights as to the Retail Units.

Miller v. Roseville Lodge No. 1293

Summary by Pejman D. Kharrazian, Esq.:

Roseville Lodge No. 1293, Loyal Order of Moose, Inc. (the Lodge) hired contractor Gelatini to move an automated teller machine (ATM) on its premises. Miller worked for Gelatini and performed the work. Miller was injured on the job when he fell from a scaffold that did not have its wheels locked at the time, and he sought to hold the Lodge and its bartender liable for his injuries. Citing the Privette doctrine the Lodge and bartender argued they were not liable, and they moved for summary judgment. The Privette doctrine says: “[g]enerally, when employees of independent contractors are injured in the workplace, they cannot sue the party that hired the contractor to do the work.” Miller argued triable issues of fact existed over whether an exception to the Privette doctrine applied. The trial court granted the Lodge’s summary judgment motion, and Miller appealed. The appellate court found none of the exceptions to the Privette doctrine applied. First, because the alleged hazard in this case was not concealed, but rather was reasonably ascertainable to Gelatini (and Miller), the concealed hazardous condition exception to the Privette doctrine did not apply. Instead, the Lodge delegated to Gelatini any duty it had to protect Miller from hazards associated with using a wheeled scaffold. Second, the court found that the Lodge merely offered the scaffold for use, but did not insist on its use. Therefore, the Lodge did not retain control of Miller’s use of the scaffold. Accordingly, the court of appeal affirmed the trial court’s judgment.

TAKEAWAY: When an independent contractor is hired, the hirer not only delegates to that contractor the responsibility to do the work safely, but also control of the worksite. Whatever reasonable care required of the hirer, then becomes the responsibility of the contractor. If a worker of the contractor becomes injured after that delegation takes place, the contractor alone is presumed to be responsible for any failure to take reasonable precautions. Therefore, do not direct your independent contractors! Retaining control over a jobsite in a manner that contributes to an injury is one of the exceptions to the Privette doctrine that otherwise shields the hirer from liability when an independent contractor or its employees are injured on the job.

A hirer must, however, warn a contractor of any concealed hazardous conditions on its property, and failing to do so is will expose the hirer to liability if a worker becomes injured due to that concealed hazardous condition. Therefore, if your association knows that a component or a portion of the property is hazardous and that hazardous condition is not reasonably ascertainable, then your association must notify any independent contractor it hires (and anyone else for that matter) about that concealed hazardous condition.

***End Summary***

83 Cal.App.5th 825 (2022)
299 Cal. Rptr. 3d 151

No. C090751.

Court of Appeals of California, Third District.

September 2, 2022.Appeal from the Superior Court No. 34-2017-00207092-CU-PO-GDS.

Demas Law Group, John N. Demas, Brad A. Schultz; and C. Athena Roussos for Plaintiff and Appellant.

Lewis Brisbois Bisgaard & Smith, Jeffry A. Miller, Ernest Slome and Joann M. O. Rangel for Defendants and Respondents.

828*828 OPINION

EARL, J.—

This case involves application of the so-called Privette doctrine (Privette v. Superior Court (1993) 5 Cal.4th 689 [21 Cal.Rptr.2d 72, 854 P.2d 721]), which deals with whether an entity that hires an independent contractor can be liable for on-the-job injuries sustained by the independent contractor’s workers. Under the Privette doctrine, the answer is no, unless an exception applies.

829*829 Defendant and respondent Roseville Lodge No. 1293, Loyal Order of Moose, Inc. (the Lodge), hired Charlie Gelatini to move an automated teller machine (ATM) on its premises. Plaintiff and appellant Ricky Lee Miller, Jr., worked for Gelatini and was the person who performed the work. Miller was injured on the job when he fell from a scaffold, and he seeks to hold the Lodge and its bartender John Dickinson liable for his injuries. Citing the Privette doctrine, the Lodge and Dickinson argued they are not liable, and they moved for summary judgment. Miller argued triable issues of fact exist over whether an exception applies. The trial court granted the motion, and Miller appealed. We now affirm.

I

FACTUAL AND PROCEDURAL BACKGROUND

Gelatini owns Tri-Valley Amusement, Inc. (collectively Gelatini). Miller worked part time for Gelatini installing, upgrading, repairing, maintaining, and cleaning ATM’s. Gelatini was the point of contact with the customer, and about 40 percent of the time he would be at the jobsite with Miller. Gelatini would tell Miller what needed to be done, and Miller would complete the work. Miller was working for Gelatini at the time of the incident and considered himself to be Gelatini’s employee.^[1]

Gelatini was hired by the Lodge to relocate an ATM. On the day of the incident, Gelatini and Miller arrived at the Lodge without a ladder. They walked inside the Lodge and saw a scaffold up against one of the walls near the bar area. Dickinson was the only other person present at the Lodge when the incident occurred. He was working as a bartender and was in charge of the area where the scaffold was located.

Miller, Gelatini, and Dickinson offered slightly different accounts of what happened next. Miller states he asked Dickinson for a ladder so he could check where in the ceiling he was going to have to run cables for the ATM. 830*830 Dickinson replied that he did not have a ladder, but that Miller could use the scaffold. Miller states he asked Dickinson if the scaffold was safe, and Dickinson responded that it was and that he used it to change lightbulbs.

According to Gelatini, the scaffold was already in the room where the work would be done. Miller put his hands on the scaffold and yelled to Dickinson, “Hey, is this thing safe?” Dickinson responded, “I don’t know.” Miller then proceeded to climb the scaffold.

According to Dickinson, Gelatini asked him if Miller could use the scaffold. Dickinson replied, “Does he know how to use it?” and Gelatini responded, “Of course he does because he does this for a living.”

The scaffold had four wheels that had to be locked to prevent it from moving while in use. Miller had never used a scaffold before, and did not know that it had wheels or that the wheels had to be locked in order to prevent it from moving. Dickinson did not say anything about the scaffold having wheels or the wheels needing to be locked, and he did not know whether the wheels were locked.

Miller proceeded to climb onto the scaffold. He testified he was not actually moving the ATM while he was on the scaffold, and that he was “just looking at where we can run the line.” While getting down off the scaffold he put his hand on the wall, the scaffold shifted away from the wall, and he fell and hit his head. Immediately after the incident, Dickinson took a picture of the scaffold that showed one of the wheels was unlocked.

Miller sued the Lodge and Dickinson for negligence and respondeat superior.^[2] In support of his negligence claim, Miller alleged the Lodge owned, controlled, and maintained the scaffolding. He also alleged: (1) defendants negligently permitted, encouraged, or instructed him to use the scaffold; (2) they knew or should have known the scaffold was dangerous, or unsecured, or unsafe; and (3) he was not aware the scaffold was dangerous, or unsecured, or unsafe. Finally, he alleged that, as a result of defendants’ negligence, the scaffold moved while he was on it, which caused him to fall to the ground and suffer personal injuries. In support of his respondeat superior claim, Miller alleged Dickinson was an employee of the Lodge, and was acting within the scope of his employment at the time of the incident.

The Lodge and Dickinson moved for summary judgment on the ground that the Privette doctrine provides a complete defense to Miller’s claim for 831*831 negligence and his derivative claim for respondeat superior.^[3] The trial court agreed and granted the motion. Judgment was entered in favor of the Lodge and Dickinson.

Miller timely appealed.

II

DISCUSSION

1. Standard of Review

On appeal from the grant of a motion for summary judgment, “`”`[w]e review the trial court’s decision de novo, considering all the evidence set forth in the moving and opposing papers except that to which objections were made and sustained.'” [Citation.] We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.'” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 717 [68 Cal.Rptr.3d 746, 171 P.3d 1082].) “We accept as true both the facts shown by the losing party’s evidence and reasonable inferences from that evidence.” (Castro-Ramirez v. Dependable Highway Express, Inc. (2016) 2 Cal.App.5th 1028, 1036 [207 Cal.Rptr.3d 120].) “`A trial court properly grants a motion for summary judgment only if no issues of triable fact appear and the moving party is entitled to judgment as a matter of law. [Citations.] The moving party bears the burden of showing the court that the plaintiff “has not established, and cannot reasonably expect to establish,”‘ the elements of his or her cause of action.” (Wilson, at p. 720.)

Because the trial court’s judgment is presumed to be correct, Miller (as appellant) has the burden of affirmatively establishing reversible error. (Jameson v. Desta (2018) 5 Cal.5th 594, 608-609 [234 Cal.Rptr.3d 831, 420 P.3d 746]; Swigart v. Bruno (2017) 13 Cal.App.5th 529, 535 [220 Cal.Rptr.3d 556].) Because “we review `the ruling, not the rationale,'” on this appeal from summary judgment, we may affirm on any basis supported by the record and the law. (Skillin v. Rady Children’s Hospital & Health Center (2017) 18 Cal.App.5th 35, 43 [226 Cal.Rptr.3d 505].)

2. The Privette Doctrine and Its Exceptions

The Privette doctrine takes its name from Privette v. Superior Court, supra, 5 Cal.4th 689 (Privette), which held that a person or entity that hires an 832*832 independent contractor to do work generally is not liable for on-the-job injuries to the independent contractor’s workers. The doctrine has produced a large body of case law, including 10 cases from our Supreme Court alone: Privette, supra, 5 Cal.4th 689; Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253 [74 Cal.Rptr.2d 878, 955 P.2d 504] (Toland); Camargo v. Tjaarda Dairy (2001) 25 Cal.4th 1235 [108 Cal.Rptr.2d 617, 25 P.3d 1096] (Camargo); Hooker v. Department of Transportation (2002) 27 Cal.4th 198 [115 Cal.Rptr.2d 853, 38 P.3d 1081] (Hooker); McKown v. Wal-Mart Stores, Inc. (2002) 27 Cal.4th 219 [115 Cal.Rptr.2d 868, 38 P.3d 1094] (McKown); Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659 [36 Cal.Rptr.3d 495, 123 P.3d 931] (Kinsman); Tverberg v. Fillner Construction, Inc., supra, 49 Cal.4th 518 (Tverberg); SeaBright Ins. Co. v. US Airways, Inc. (2011) 52 Cal.4th 590 [129 Cal.Rptr.3d 601, 258 P.3d 737] (SeaBright); Gonzalez v. Mathis (2021) 12 Cal.5th 29 [282 Cal.Rptr.3d 658, 493 P.3d 212] (Gonzalez); and Sandoval v. Qualcomm Incorporated, supra, 12 Cal.5th 256 (Sandoval). According to our Supreme Court, the rationale for the doctrine is delegation.^[4]

“[A]t common law it was regarded as the norm that when a hirer delegated a task to an independent contractor, it in effect delegated responsibility for performing that task safely, and assignment of liability to the contractor followed that delegation.” (Kinsman, supra, 37 Cal.4th at p. 671; see also Gonzalez, supra, 12 Cal.5th at p. 54 [noting “strong presumption under Privette that a [hirer] delegates all responsibility for workplace safety to the independent contractor”]; SeaBright, supra, 52 Cal.4th at p. 594 [“By hiring an independent contractor, the hirer implicitly delegates to the contractor any tort law duty it owes to the contractor’s employees to ensure the safety of the specific workplace that is the subject of the contract”]; Tverberg, supra, 49 Cal.4th at p. 528 [“When an independent contractor is hired to perform inherently dangerous construction work, that contractor, unlike a mere employee, receives authority to determine how the work is to be performed and assumes a corresponding responsibility to see that the work is performed safely. The independent contractor receives this authority over the manner in which the work is to be performed from the hirer by a process of 833*833 delegation”].) In its most recent Privette case, our high court explained, “When a person or organization hires an independent contractor, the hirer presumptively delegates to the contractor the responsibility to do the work safely. [Citations.] This presumption is grounded in two major principles: first, that independent contractors by definition ordinarily control the manner of their own work; and second, that hirers typically hire independent contractors precisely for their greater ability to perform the contracted work safely and successfully.” (Sandoval, supra, 12 Cal.5th at p. 269.) “A presumptive delegation of tort duties occurs when the hirer turns over control of the worksite to the contractor so that the contractor can perform the contracted work. Our premise is ordinarily that when the hirer delegates control, the hirer simultaneously delegates all tort duties the hirer might otherwise owe the contract workers. [Citations.] Whatever reasonable care would otherwise have demanded of the hirer, that demand lies now only with the contractor. If a contract worker becomes injured after that delegation takes place, we presume that the contractor alone—and not the hirer—was responsible for any failure to take reasonable precautions.” (Id. at p. 271.) In other words, because the hirer delegates to the contractor all tort duties it might otherwise owe to the contractor’s workers, the hirer cannot be held liable if those workers are injured on the job.

Thus, “The Privette doctrine holds that a hirer generally delegates to an independent contractor all responsibility for workplace safety and is not liable for injuries sustained by the contractor or its workers while on the job.” (Gonzalez, supra, 12 Cal.5th at p. 40; see also SeaBright, supra, 52 Cal.4th at p. 594 [“Generally, when employees of independent contractors are injured in the workplace, they cannot sue the party that hired the contractor to do the work”].) In this case, the Lodge is the hirer, Gelatini is the independent contractor, and Miller is the worker who was injured on the job. Under the Privette doctrine, the Lodge is not liable for Miller’s on-the-job injuries because we presume the Lodge delegated to Gelatini “all tort duties [it] might otherwise owe [to] contract workers” like Miller, and that “[w]hatever reasonable care would otherwise have demanded of the [Lodge], that demand lies now only with [Gelatini].” (Sandoval, supra, 12 Cal.5th at p. 271.)

There are, however, two exceptions to the Privette doctrine “that apply where [the hirer’s] delegation is either ineffective or incomplete.” (Sandoval, supra, 12 Cal.5th at p. 271.) The first exception was recognized in Hooker, supra, 27 Cal.4th 198 and is usually referred to as the retained control exception. It applies if: (1) the hirer retains control over the manner in which the contractor performs the work; (2) the hirer actually exercises its retained control by involving itself in the work such that the contractor is not entirely free to do the work in its own manner; and (3) the hirer’s exercise of retained control affirmatively contributes to the worker’s injury. (Sandoval, at pp. 276-277.) Under this exception, the hirer’s delegation of tort duties to the 834*834 independent contractor can be seen as “incomplete” or “only partial[]” because it retains control over some aspect of the work and actually exercises that retained control. (Id. at p. 271.)

The second exception was recognized in Kinsman, supra, 37 Cal.4th 659 and is usually referred to as the concealed hazard exception. It applies if the hirer is also an owner or possessor of land, and if “the landowner knew, or should have known, of a latent or concealed preexisting hazardous condition on its property, the contractor did not know and could not have reasonably discovered this hazardous condition, and the landowner failed to warn the contractor about this condition.” (Id. at p. 664, fn. omitted.) Under this exception, the hirer’s delegation of tort duties can be seen as “ineffective” because the independent contractor cannot protect its workers against a hazard it does not know about and could not reasonably discover. (Sandoval, supra, 12 Cal.5th at p. 271.)

3. The Privette Presumption Applies

The recent case of Alvarez v. Seaside Transportation Services LLC (2017) 13 Cal.App.5th 635 [221 Cal.Rptr.3d 119] explained how the Privette doctrine affects the parties’ respective burdens on a motion for summary judgment. Again, our Supreme Court has held that “[w]hen a person or organization hires an independent contractor, the hirer presumptively delegates to the contractor the responsibility to do the work safely.” (Sandoval, supra, 12 Cal.5th at p. 269, italics added.) The Alvarez court referred to this as the “Privette presumption.” (Alvarez, supra, 13 Cal.App.5th at p. 642.) It held the Privette presumption arises once the defendant establishes the requisite factual foundation—namely, that it hired an independent contractor to perform certain work, and the independent contractor’s worker was injured in the course of that work. (Id. at p. 644.) Once the presumption arises, the burden shifts to the plaintiff to raise a triable issue of fact as to whether one of the exceptions to the Privette doctrine applies, and if it cannot, the defendant is entitled to summary judgment. (Ibid.)

Here, the trial court applied the Alvarez burden shifting analysis, and found (1) the Lodge met its burden of establishing the Privette presumption, and (2) the burden thus shifted to Miller to raise a triable issue of fact as to whether an exception applies. Miller does not challenge this portion of the trial court’s decision. We will thus presume that the Lodge delegated to Gelatini any tort duties it might otherwise have owed to Miller, and that the sole issue on appeal is thus whether Miller has raised a triable issue of fact as to whether an exception to the Privette doctrine applies.

835835 4. There Is No Triable Issue of Fact as to Whether an Exception Applies*

A. The Retained Control Exception

Miller cites McKown, supra, 27 Cal.4th at page 222, for the proposition that “a hirer is liable to an employee of an independent contractor insofar as the hirer’s provision of unsafe equipment affirmatively contributes to the employee’s injury.” He contends McKown “is on all fours with the present case” and “directly on point” because Dickinson supplied him with a scaffold that was unsafe unless the wheels were locked, but negligently failed to either check that the wheels were locked or tell Miller to do so.

McKown is a short decision, and the facts are quite simple. Wal-Mart Stores, Inc. (Wal-Mart), hired an independent contractor to install a sound system in one of its stores, and the plaintiff was an employee of the independent contractor. Installing the sound system involved running wires and installing speakers in the store’s ceiling. Wal-Mart requested—but did not direct—that the contractor use Wal-Mart’s forklift when performing the work, and the contractor complied with the request. The forklift was missing a chain that secured a work platform to the forklift, and the plaintiff was injured when the platform disengaged and fell to the floor. A jury found Wal-Mart was negligent in providing unsafe equipment and allocated it 23 percent of the responsibility for the plaintiff’s injuries. (McKown, supra, 27 Cal.4th at p. 223.) Wal-Mart appealed, arguing it was immune from liability under the Privette doctrine, and our Supreme Court affirmed.

The McKown court began by summarizing its decision in Hooker, which recognized the retained control exception to the Privette doctrine and which held a hirer could be liable for injuries to an independent contractor’s employee if the “hirer’s exercise of retained control affirmatively contributed to the employee’s injuries.” (McKown, supra, 27 Cal.4th at p. 225, italics added.) The McKown court then noted, “Imposing tort liability on a hirer of an independent contractor when the hirer’s conduct has affirmatively contributed to the injuries of the contractor’s employee is consistent with the rationale of our decisions in Privette, Toland and Camargo, because the liability of the hirer in such a case is not in essence vicarious or derivative in the sense that it derives from the act or omission of the hired contractor. `To the contrary, the liability of the hirer in such a case is direct in a much stronger sense of that term.’ (Hooker, supra, 27 Cal.4th at p. 212.)” (McKown, supra, 27 Cal.4th at p. 225, italics omitted.) Finally, it held, “For the same reason, when a hirer of an independent contractor, by negligently furnishing unsafe equipment to the contractor, affirmatively contributes to the injury of an employee of the contractor, the hirer should be liable to the employee for 836*836 the consequences of the hirer’s own negligence.” (Ibid., italics added.) The McKown court thus appears to have viewed the negligent furnishing of unsafe equipment as one way a hirer can exercise retained control over a contractor’s work, and later cases have made that clear.

In Gonzalez, supra, 12 Cal.5th 29, for example, our Supreme Court recently explained its holding in McKown as follows: “[W]e did find that the hirer in Hooker‘s companion case, McKown[, supra,] (2002) 27 Cal.4th 219 …, exercised its retained control in a manner that affirmatively contributed to the injury where it required the independent contractor to use the hirer’s own defective equipment in performing the work.” (Id. at p. 42, italics added.) It also explained: “In the nearly two decades following our opinion in Hooker, courts have consistently reaffirmed that `[a] hirer’s failure to correct an unsafe condition’ is insufficient, by itself, to establish liability under Hooker‘s exception to the Privette doctrine. [Citations.] To be liable, a hirer must instead exercise its retained control over any part of the contracted-for work—such as by directing the manner or methods in which the contractor performs the work; interfering with the contractor’s decisions regarding the appropriate safety measures to adopt; requesting the contractor to use the hirer’s own defective equipment in performing the work; contractually prohibiting the contractor from implementing a necessary safety precaution; or reneging on a promise to remedy a known hazard—in a manner that affirmatively contributes to the injury. (See Hooker, at pp. 212, fn. 3, 215; McKown, supra, 27 Cal.4th at p. 225; [citations].)” (Gonzalez, supra, 12 Cal.5th at pp. 46-47, italics added.) Even more recently, in Sandoval, supra, 12 Cal.5th 256 the Supreme Court cited McKown as an example of a retained control case where “affirmative contribution” was found because the “hirer `requested’ that contractor use faulty equipment, thus at least in part inducing the contractor’s decision to use it.” (Id. at p. 277.) Thus, furnishing unsafe equipment is simply one example of exercising retained control, rather than its own separate exception to the Privette doctrine.^[5]

Miller argues McKown is directly on point. Miller contends that there are triable issues of fact as to whether Dickinson, the Lodge’s agent, negligently provided him with unsafe equipment. The unsafe equipment in this case is the scaffold, and Miller concedes that what made the scaffold unsafe was the fact that the wheels were not locked.^[6] (He acknowledges in his briefs, for example: “While Miller was on the scaffold, it moved because at least one of 837*837 the wheels was not locked, causing him to fall and sustain a significant head injury”; “The scaffold here was dangerous to use unless the wheels were locked”; “Dickinson knew the scaffold was not safe to use unless the wheels were locked, yet he said nothing about the wheels and failed to check them”; “The scaffold is clearly unsafe to use if the wheels are unlocked”; and “The failure to ensure that the wheels were locked, or to even tell Miller to check the wheels, … created an unreasonable risk of danger and was precisely why Miller was injured.”) We find Miller fails to raise a triable issue of fact as to whether the retained control exception applies.

The trial court found McKown was distinguishable because the hirer in that case “specifically requested the contractor to use [the] hirer’s own forklift.” We agree. Here, and in contrast to McKown, Dickinson did not ask Miller or Gelatini to use the scaffold. At best, he offered the scaffold for use, thereby permitting its use because Miller and Gelatini apparently had no equipment that would allow the necessary access, and “passively permitting an unsafe condition to occur … does not constitute affirmative contribution” within the meaning of the retained control exception. (Tverberg v. Fillner Construction, Inc. (2012) 202 Cal.App.4th 1439, 1446 [136 Cal.Rptr.3d 521].)

Miller argues this attempt to distinguish McKown is unpersuasive. He contends the evidence shows Dickinson offered him the scaffold in lieu of a ladder, and he analogizes this to Wal-Mart’s request in McKown that the contractor use its forklift. We find the analogy to be inapt. There is a difference between asking a contractor to use your equipment and allowing a contractor to use your equipment. Again, “a hirer is not liable under Privette where it merely permits a dangerous work condition or practice to exist. [Citation.] This is true even where the hirer knows of the danger and has the authority and ability to remedy it.” (Gonzalez, supra, 12 Cal.5th at p. 46.) At best, the evidence in this case would support a finding that Dickinson knew the scaffold was unsafe unless the wheels were locked and had the ability to either advise Miller of that fact or make sure the wheels were locked, but that he failed to do so. This is insufficient to hold the Lodge liable for Miller’s injuries. Instead, “Something more is required, such as `”inducing injurious action or inaction through actual direction”‘ [citation]; directing `”the contracted work be done by use of a certain mode”‘ [citation]; or interfering with `”the means and methods by which the work is to be accomplished”‘ [citation].” (Id. at p. 42.) Here, that “[s]omething more” is lacking because 838*838 Dickinson did not direct Miller to use the scaffold, he did not direct that the work be done by use of a certain mode, and he did not interfere with the means and methods by which the work was done.

“A hirer `retains control’ where it retains a sufficient degree of authority over the manner of performance of the work entrusted to the contractor,” and it “`actually exercise[s]'” its retained control “when it involves itself in the contracted work `such that the contractor is not entirely free to do the work in the contractor’s own manner.’ [Citations.]'” (Sandoval, supra, 12 Cal.5th at pp. 274, 276.) In McKown, Wal-Mart involved itself in the work when it asked the contractor to use its forklift such that the contractor was not entirely free to do the work in its own manner. Here, in contrast, Dickinson did not ask Gelatini and Miller to use the scaffold or otherwise involve himself (or the Lodge) in the work of moving the ATM, and Gelatini and Miller were free to do the work as they saw fit.

SeaBright, supra, 52 Cal.4th 590, is instructive. There, the defendant was an airline that hired an independent contractor to maintain and repair a conveyor that it used to move luggage at an airport. An employee of the independent contractor was inspecting the conveyor and was injured when his arm got caught in its moving parts. The employee sued the airline, alleging causes of action for negligence and premises liability.^[7] The airline moved for summary judgment based on Privette and Hooker, arguing it was not liable for the employee’s injuries because it did not retain control over the independent contractor’s work or exercise the control it retained in a way that affirmatively contributed to the employee’s injury. The employee opposed the motion with a declaration from an expert who stated the conveyor’s lack of safety guards violated Cal-OSHA regulations and the safety guards would have prevented the employee’s injury. The trial court granted the motion, and the appellate court reversed, holding that, under the Cal-OSHA regulations, the airline had a nondelegable duty to ensure that the conveyor had safety guards and that there was a triable issue of fact as to whether the airline’s failure to perform this duty affirmatively contributed to the employee’s injury. (SeaBright, supra, 52 Cal.4th at pp. 594-595.)

Our Supreme Court reversed, holding the airline “presumptively delegated to [the independent contractor] any tort law duty of care the airline had under Cal-OSHA and its regulations to ensure workplace safety for the benefit of [the independent contractor’s] employees. The delegation … included a duty to identify the absence of the safety guards required by Cal-OSHA regulations 839*839 and to take reasonable steps to address that hazard.” (SeaBright, supra, 52 Cal.4th at p. 601, italics added.) Thus, even though the employee was injured because the conveyor lacked guardrails that were required by Cal-OSHA regulations, the airline was not liable.

This case is similar. In SeaBright, the employee was injured because the equipment he was working on lacked safety guards required by Cal-OSHA regulations. Here, Miller was injured because the equipment he was using to perform the work (i.e., the scaffold) was unsafe unless its wheels were locked. Just as in SeaBright the airline delegated to the independent contractor the duty to identify the absence of the safety guards and to take reasonable steps to address the hazard, here, the Lodge delegated to Gelatini the duty to identify the fact that the scaffold had wheels and was unsafe to use unless the wheels were locked or the scaffold was steadied in some manner, and to take reasonable steps to address that hazard.

We thus agree with the trial court that the retained control exception does not apply.

B. The Concealed Hazardous Condition Exception

Miller also argues the Lodge is liable for his injuries because it failed to warn him of a concealed hazardous condition on its property (i.e., the unsafe scaffold). We disagree.

The concealed hazardous condition exception applies when the hirer is also an owner or occupier of land. In that case, “the hirer as landowner may be independently liable to the contractor’s employee, even if it does not retain control over the work, if: (1) it knows or reasonably should know of a concealed, preexisting hazardous condition on its premises; (2) the contractor does not know and could not reasonably ascertain the condition; and (3) the landowner fails to warn the contractor.” (Kinsman, supra, 37 Cal.4th at p. 675.) Here, the undisputed facts demonstrate the hazardous condition was not concealed, and the exception thus does not apply even if we assume Dickinson knew of the hazardous condition, and Dickinson failed to warn Gelatini and Miller.

“[A] `concealed’ hazard means something specific: a hazard that the hirer either knows or reasonably should know exists, and that the contractor does not know exists and could not reasonably discover without the hirer’s disclosure.” (Sandoval, supra, 12 Cal.5th at p. 272, italics added; see also Kinsman, supra, 37 Cal.4th at p. 664 [describing concealed hazard as one that is hidden].) If the hazard is “reasonably ascertainable” to the independent contractor, the hazard is not concealed and the hirer is not liable. (Kinsman, at p. 682.)

840*840 Here, the fact that the scaffold had wheels was not concealed. Gelatini and Miller could have discovered their existence had they simply inspected the scaffold before Miller climbed onto it. Miller argues that whether a condition is concealed is an issue of fact that cannot be decided on summary judgment. Given the evidence in this case, we disagree.

To create an issue of fact, Miller contends, “It was dark inside the room” where the accident occurred. Presumably his point is that it was so dark the wheels on the scaffold were not visible. Again, a concealed hazard is a hazard “that the contractor does not know exists and could not reasonably discover without the hirer’s disclosure.” (Sandoval, supra, 12 Cal.5th at p. 272, italics added.) That the room may have been dark does not establish that Gelatini and Miller could not reasonably discover that the scaffold had wheels unless Dickinson pointed that out—all they had to do to discover the wheels was simply to look at the scaffold deploying adequate lighting.

Moreover, and more importantly, the evidence cited by Miller does not actually support his contention that the room was so dark the wheels were not visible. He cites deposition testimony from Gelatini and Dickinson. Gelatini was shown a photograph (marked as exhibit No. 2) of a scaffold that was taken at an inspection that occurred sometime after the accident, and he was asked, “Does that appear to be the scaffold that was involved?” He responded, “I can’t tell because it’s light out—dark in that room.” It is unclear whether Gelatini was referring to the room depicted in the photograph or the room where the accident occurred. Even if we assume he was referring to the room where the accident occurred, however, at best his testimony might prove the room was too dark to tell whether the scaffold depicted in a photograph was the same scaffold that Miller used. Gelatini’s testimony does not create a triable issue as to whether the wheels on the scaffold were visible when Miller used it.

Dickinson’s testimony is even less helpful to Miller. Dickinson was asked whether it was “bright or dark” inside the Lodge on the day of the incident, and he responded there “probably would have been lights on. But I don’t remember.” Dickinson’s testimony that he doesn’t remember whether the lights were on is insufficient to create a triable issue of fact as to whether Gelatini and Miller could not reasonably discover the scaffold had wheels without Dickinson’s disclosure. (See, e.g., Johnson v. Tosco Corp. (1991) 1 Cal.App.4th 123, 140 [1 Cal.Rptr.2d 747] [“It cannot seriously be argued that a partially assembled and unstable scaffold placed over a hard and uneven surface constitutes a concealed danger”].)

Miller also contends the fact that the wheels needed to be locked to safely use the scaffold was not something he and Gelatini could discover without 841*841 Dickinson’s disclosure.^[8] Again, we disagree. Upon simple inspection, including checking whether the scaffold would move before Miller climbed on it, Gelatini (and Miller) reasonably should have known that the scaffold could move while Miller was on it if the wheels were not locked or the scaffold was not otherwise steadied in some manner. Again, they failed to inspect the scaffold.

Because the alleged hazard in this case was not concealed and was reasonably ascertainable to Gelatini (and Miller), the concealed hazardous condition exception does not apply. Instead, the Privette presumption remains unrebutted, and the Lodge delegated to Gelatini any duty it had to protect Miller from hazards associated with using a wheeled scaffold.

DISPOSITION

The judgment is affirmed and the Lodge shall recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)

Mauro, Acting P. J., and Duarte, J., concurred.

[1] There is a hint in Miller’s brief that there may be a dispute over whether he was Gelatini’s employee or was an independent contractor. However, neither party directly addresses this issue in their briefs, and assuming there is such a dispute, we find it to be immaterial because the Privette doctrine applies whether the injured worker is an employee or is himself an independent contractor, and Miller does not suggest otherwise. (See, e.g., Sandoval v. Qualcomm Incorporated (2021) 12 Cal.5th 256, 270 & fn. 2 [283 Cal.Rptr.3d 519, 494 P.3d 487] [doctrine applies when “`contract worker'” is injured on the job, and “`contract worker'” includes “the independent contractor personally, the independent contractor’s employees, the independent contractor’s subcontractors personally, the subcontractors’ employees, and so on”]; Tverberg v. Fillner Construction, Inc. (2010) 49 Cal.4th 518, 528 [110 Cal.Rptr.3d 665, 232 P.3d 656] [“It would be anomalous to allow an independent contractor … to recover against the hirer … while denying such recovery to an independent contractor’s employee“].)

[2] He also sued Gelatini and Tri-Valley Amusement, Inc. Although they are also defendants in the underlying action, they are not parties to the underlying summary judgment motion or to this appeal.

[3] The Lodge also argued the respondeat superior claim failed for an additional reason because Dickinson was not acting as its agent or employee when he interacted with Miller. The trial court did not address this argument, and neither do we.

[4] In Privette itself, and in earlier cases discussing the doctrine, our Supreme Court explained the rationale in terms of the injured employee’s entitlement to workers’ compensation benefits, and the fact that workers’ compensation is the exclusive remedy against an employer for injuries arising in the course and scope of employment. (See Privette, supra, 5 Cal.4th at pp. 696-702; Toland, supra, 18 Cal.4th at pp. 261, 266-67; Camargo, supra, 25 Cal.4th at pp. 1238-1240, 1244-1245; Hooker, supra, 27 Cal.4th at pp. 204-206.) Starting with Kinsman, supra, 37 Cal.4th 659, our Supreme Court began explaining the doctrine “in terms of delegation rather than workers’ compensation.” (Sandoval, supra, 12 Cal.5th at p. 270.) It has also made clear that the doctrine applies “to a solo independent contractor who has no employees and who has declined to obtain workers’ compensation insurance, such that the contractor will receive no coverage for his or her injuries.” (Gonzalez, supra, 12 Cal.5th at p. 42.)

[5] In a footnote, Miller suggests that the negligent exercise of retained control is one exception to the Privette doctrine, and the negligent provision of unsafe equipment is an entirely separate exception. For the reasons just stated, we disagree, and find the provision of unsafe equipment is simply one way a hirer can exercise retained control over the worksite.

[6] Miller also argues the trial court erred in overruling his objection to a defense expert’s declaration that the expert inspected the scaffold about seven months after the accident, and “[a]ll component parts were in serviceable condition. To my knowledge, no portion of the scaffold had been repaired or replaced.” Miller objected on the grounds that the statement lacked foundation and personal knowledge. Assuming for the sake of argument that the objection should have been sustained, we find the error to be harmless. The Lodge proffered the expert’s declaration to refute any argument that the scaffold was defective, but Miller did not make such an argument in opposition to the motion. Instead, he contended that the scaffold was unsafe to use unless the wheels were locked, not that it was unsafe because it was not in serviceable condition or was otherwise defective in some way.

[7] The lawsuit was initially filed by the independent contractor’s workers’ compensation insurer, which claimed the airline had caused the employee’s injury and which sought to recover the workers’ compensation benefits it had paid; the employee intervened in that lawsuit. (SeaBright, supra, 52 Cal.4th at pp. 594-595.)

[8] In other words, even if the wheels themselves were visible, the concealed hazard was the fact that the wheels needed to be locked.

Rick Fowler v. Golden Pacific Bancorp, Inc.

RICK FOWLER, Plaintiff and Respondent, v. GOLDEN PACIFIC BANCORP, INC., Defendant and Appellant.

Facts

A corporate director petitioned the court to compel an inspection of corporate books and records pursuant to Corporations Code §§ 1600, et seq. The corporation opposed the petition arguing that because the director was involved in ongoing litigation with the corporation, the court should curtail his inspection rights because the director could use the information against the corporation in the ongoing litigation. The trial court granted the director’s petition and the corporation appealed.

Holding

The court of appeal, in upholding the trial court’s ruling, found that the mere possibility that information could be used adversely to the corporation is not by itself sufficient to defeat a director’s inspection rights found in Corporations Code § 1602. Rather, any exception to the general rule favoring unfettered access must be limited to extreme cases, where enforcing an ‘absolute right of inspection would produce an absurd result, such as when the evidence establishes the director’s clear intent to use the information to breach fiduciary duties or otherwise commit a tort against the corporation.

California has a strong public policy favoring a broad right of access to corporate records to assist directors in performing their duties in an intelligent and fully informed manner. The statutory scheme gives every director the absolute right to inspect and copy all books, records and documents of every kind, and imposes no “proper purpose” requirement. (Citation omitted.) Because the denial of access to corporate records may operate to deny a director the ability meaningfully to participate in management, any exception to the policy of “absolute” access must be construed narrowly, limited to the most extreme cases where applying the literal meaning of the words would frustrate the manifest purpose of the law.

***End Summary*

No. C092179.Court of Appeals of California, Third District, Sacramento.Filed June 23, 2022.

APPEAL from a judgment of the Superior Court of Sacramento County, Super. Ct. No. 34-2019-80003150-CU-WM-GDS, James P. Arguelles, Judge. Reversed with directions.

Law Office of Stephanie J. Finelli and Stephanie J. Finelli for Defendant and Appellant.

Tisdale & Nicholson and Michael D. Stein for Plaintiff and Respondent.

CERTIFIED FOR PUBLICATION

KRAUSE, J.

This is an action to compel an inspection of books and records pursuant to Corporations Code section 1600 et seq.^[1] Plaintiff Rick Fowler (Fowler) sought a writ of mandate against defendant Golden Pacific Bancorp, Inc. (Bancorp), to enforce his statutory rights as a director and majority shareholder to inspect corporate books and records. Bancorp opposed the petition, arguing that the trial court should curtail Fowler’s inspection rights because he is involved in ongoing litigation with Bancorp and could use the information to undermine Bancorp’s position in the lawsuit. Unpersuaded that Bancorp met the heavy burden necessary to curtail Fowler’s inspection rights, the trial court granted Fowler’s writ petition.

Bancorp appealed, contending that the trial court erred by (1) allowing Fowler to submit additional evidence on reply without permitting Bancorp an adequate opportunity to respond; and (2) granting the writ petition and permitting Fowler to have unfettered access to Bancorp’s corporate books and records.

After we issued an oral argument waiver notice, Bancorp moved to dismiss the appeal as moot. Bancorp asserted that due to the recent acquisition of Bancorp by Social Finance, Inc., Fowler is no longer a Bancorp board member, and therefore it is impossible for this court to grant effective relief. Fowler requested oral argument. We deferred ruling on the motion until after oral argument.

We shall conclude that the primary issue raised in this appeal is moot because Fowler is no longer a member of Bancorp’s board of directors and therefore has no director’s inspection rights. Nevertheless, we exercise our discretion to reach the merits because it presents an issue of substantial and continuing public interest: whether a director’s “absolute” right of inspection under section 1602 may be curtailed because the director and corporation are involved in litigation and there is a possibility the documents could be used to harm the corporation.

We shall conclude the mere possibility that information could be used adversely to the corporation is not by itself sufficient to defeat a director’s inspection rights. Rather, any exception to the general rule favoring unfettered access must be limited to extreme cases, where enforcing an “absolute” right of inspection would produce an absurd result, such as when the evidence establishes the director’s clear intent to use the information to breach fiduciary duties or otherwise commit a tort against the corporation.

We decline to reach the other question referenced in the parties’ briefs concerning Fowler’s inspection rights as a shareholder, because that issue was not resolved by the trial court and the record is insufficiently developed for us to determine whether it is moot. Thus, we shall remand this matter for the trial court to consider whether that issue is moot and, if not, to resolve any remaining disputes in the first instance.

FACTUAL AND PROCEDURAL BACKGROUND

Bancorp was a bank holding company conducting business through its wholly owned subsidiary, Golden Pacific Bank, N.A. Fowler was a member of Bancorp’s board of directors and its largest individual shareholder, holding over 19 percent of the outstanding stock. Fowler also is the chief operating officer of a law firm, Kronick, Moskovitz, Tiedemann & Girard (KMTG).

In July 2018, Bancorp filed a lawsuit in the Sacramento County Superior Court (case No. 34-2018-00236905) against KMTG, an individual attorney at KMTG, and Fowler (the malpractice lawsuit). The lawsuit arose out of KMTG’s representation of Bancorp in prior litigation against a company called BillFloat, Inc. (the BillFloat litigation). Bancorp’s amended complaint alleges claims against KMTG and its attorney for breach of contract, breach of professional duties, professional negligence, and breach of fiduciary duties in connection with the prosecution and eventual settlement of the BillFloat litigation. Among other things, the complaint alleges that KMTG and the attorney overbilled for services, negligently failed to evaluate and prepare the case for trial, and caused Bancorp to accept a grossly inadequate settlement amount.

The complaint also alleges claims against Fowler for negligence, breach of fiduciary duty, concealment, and fraud based on his actions as a Bancorp director. Specifically, it asserts that Fowler breached his fiduciary duties by persuading Bancorp to hire KMTG for the BillFloat litigation despite knowing that KMTG was not competent to handle the litigation. It further alleges that Fowler used his position as director to persuade Bancorp to settle the BillFloat litigation for a grossly inadequate amount because Fowler knew KMTG had failed to conduct sufficient discovery and investigation to prepare the case for trial.

In September 2018, two months after Bancorp filed the malpractice lawsuit, Fowler delivered to Bancorp a written demand to inspect and copy the following books and records pursuant to section 1600 et seq.:
1. A list of the names, addresses, e-mail addresses, and holdings of all Bancorp shareholders;

2. A breakdown of the expense and income balance sheet items labeled “Other” for Bancorp and its wholly owned subsidiary bank;

3. A breakdown of where on the 2017 and 2018 consolidated financial statements the BillFloat settlement payment was booked, and where KMTG’s legal fees for 2016, 2017, and 2018 were booked;
4. Any change in control/severance/golden parachute agreements for Bancorp-affiliated parties;

5. Any resolutions approving change in control agreements or an increase in director fees and/or bonuses for 2016, 2017, and 2018;

6. Any documents evidencing payment of the personal legal fees of Bancorp president and chief executive officer, Virginia Varela, in 2016, 2017, and 2018;

7. The loan file pertaining to the Axis Energy SBA loan; and

8. The bank’s accounting books and records, and meeting minutes for its board and committees from September 2017 through the date of the request.

Fowler asserted that, as a director, he had an “absolute right” to inspect the records under section 1602. Bancorp, however, refused to permit inspection, citing conflicts of interest and concerns that Fowler was seeking the records for an improper purpose, namely, to undermine Bancorp’s position in the malpractice lawsuit.

Fowler did not immediately seek a peremptory writ to enforce his statutory inspection right. Instead, in November 2018, Fowler served Bancorp with a request for production of documents in the malpractice lawsuit seeking records substantially similar to those sought in his inspection demand letter.

When Bancorp refused to produce the requested documents, Fowler filed a motion to compel. In support of his motion, Fowler argued that the requested documents were relevant to Bancorp’s claims and his defenses in the malpractice lawsuit. Bancorp opposed the motion, asserting, inter alia, that most of the records Fowler requested were irrelevant to the lawsuit and would only be of interest in his capacity as a “disgruntled shareholder/director.” The court agreed with Bancorp. It denied the motion to compel, concluding that the document requests were overbroad, invaded third party privacy rights, and sought information that was not relevant.

Shortly thereafter, Fowler filed this action for a peremptory writ of mandate to enforce his statutory right to inspect Bancorp’s books and records. His amended petition alleges that he has an “absolute right” as a director and shareholder to inspect and copy the records pursuant to sections 1600 and 1602. In a supporting declaration, Fowler stated that he requested the inspection to protect his interests as Bancorp’s single largest shareholder and to fulfill his fiduciary duty as a director to stay informed about Bancorp’s financial condition and operations.

Bancorp opposed the writ petition, asserting that inspection should be denied because Fowler is not a disinterested director and his only motive in requesting the records is to “dismantle and undermine” Bancorp’s lawsuit against him and the law firm for which he works. Bancorp characterized the petition as an attempted “end-run” around the adverse discovery ruling in the malpractice lawsuit.

To support its claim that Fowler was requesting the documents for an improper purpose, Bancorp submitted a declaration from Bancorp board member David Roche.^[2] Roche declared, inter alia, that (1) Fowler is a party to ongoing litigation with Bancorp in which it is alleged Fowler breached his fiduciary duties; (2) Fowler repeatedly stated his desire to have the litigation dismissed; (3) Bancorp’s board believes that allowing Fowler to inspect and copy the requested records would “severely undermine” its position in the litigation; (4) Fowler previously sought to compel discovery of the same records in the lawsuit, but his request was denied; (5) it was only after the adverse discovery ruling that Fowler filed the writ petition; and (6) Fowler never previously made a demand to inspect Bancorp’s corporate records.

In reply, Fowler filed a supplemental declaration responding to the factual assertions made in Bancorp’s opposition papers. Fowler declared, “Contrary to [Bancorp’s] supposition about my purpose in filing the Petition, I want to inspect the subject corporate records, especially the financial statements and working papers for these records, among other things, to learn how certain expenses and income items were calculated and what certain large numbers consist of, as well as how the compensation for [Bancorp’s] Chief Executive Officer and its directors is being determined and the basis for and calculations of certain stock transactions with [Bancorp’s] preferred shareholder.”

In his supplemental declaration, Fowler also addressed why he never previously invoked his statutory right to inspect Bancorp’s corporate records. He explained that before July 2017, he regularly received reports, had frequent exchanges with the chief executive officer and committee chairs, and had unrestricted access to most corporate documents through an online platform. It was only when Bancorp “cut off” his ability to contact employees and access corporate records online that it became necessary for him to invoke his statutory inspection rights.

The writ petition was heard on March 6, 2019. On the morning of the hearing, Bancorp filed a declaration of Virginia Varela, Bancorp’s president and chief executive officer, which sought to refute various statements in Fowler’s supplemental declaration, including his assertions that (1) he previously had online access to the records discussed in his September 2018 demand; and (2) he was wrongfully denied access to the basic financial information necessary for him to carry out his duties as a board member. The court agreed to consider the Varela declaration to the extent it responded to the factual assertions in Fowler’s supplemental declaration, but refused to consider any new grounds for denying inspection.

After a hearing, the trial court granted the writ petition. In its ruling, the court agreed with Bancorp that Fowler’s statutory inspection rights are not “absolute.” However, the court ruled that a director’s inspection rights can be curtailed only in “`extreme circumstances'” in which the corporation establishes by a preponderance of the evidence the director’s intent to commit an irremediable tort against the corporation. The court ruled that, notwithstanding the inherent conflict raised by the malpractice lawsuit, “[t]he preponderance of the evidence in this action does not establish Fowler’s intent to commit a tort against [Bancorp], much less one that is irremediable in damages.” The court thus enforced Fowler’s right to inspect the corporate books and records under section 1602.

Judgment was entered on March 17, 2020. Bancorp filed a timely notice of appeal.

While the appeal was pending, Bancorp was acquired by Social Finance, Inc. (SoFi), by and through a merger with Gemini Merger Sub, Inc. (Gemini), a temporary subsidiary of SoFi formed solely for that purpose. Pursuant to the terms of the agreement, Gemini was merged into Bancorp, with Bancorp as the surviving corporation. Further, under the agreement, the directors of Gemini became the directors of the surviving corporation. SoFi completed the acquisition of Bancorp on or about February 2, 2022.

DISCUSSION

I

Mootness

As a threshold issue, we consider whether the appeal is moot due to SoFi’s acquisition of Bancorp.

An appeal becomes moot when the occurrence of an event makes it impossible for the appellate court to grant any effective relief. (Newsom v. Superior Court (2021) 63 Cal.App.5th 1099, 1109.) “`[A]n action which originally was based upon a justiciable controversy cannot be maintained on appeal if the questions raised therein have become moot by subsequent acts or events.'” (Id. at p. 1110.)

Bancorp argues that this appeal is moot and must be dismissed because, as a result of the acquisition, Fowler is no longer a shareholder or member of Bancorp’s board of directors, and therefore no longer has standing to assert any inspection rights.

Fowler opposes Bancorp’s motion to dismiss. He argues the case is not moot for several reasons, including that he filed a “dissenter’s right” lawsuit challenging SoFi’s acquisition of Bancorp and seeking a determination of the fair market value of his shares. Further, even if the case has been rendered technically moot, Fowler argues the appeal still should be decided because it concerns an issue of public importance that is likely to recur.

We agree with Bancorp that the issue of Fowler’s inspection rights as a director is now moot. It is well established that a director’s right to inspect corporate books and records ends upon his or her removal from office. (Chantiles v. Lake Forrest II Master Homeowners Assn. (1995) 37 Cal.App.4th 914, 920 (Chantiles).) A former director has no right to an ongoing and enforceable right to inspect corporate records. (Wolf v. CDS Devco (2010) 185 Cal.App.4th 903, 919 (Wolf).) Here, it is undisputed that, as a result of SoFi’s acquisition, Fowler is no longer a Bancorp director. Thus, Fowler can no longer assert rights as a director to inspect Bancorp’s books and records, rendering the issue moot. (Chantiles, supra, at p. 920; Wolf, supra, at p. 919.)

Nevertheless, we may exercise our discretion to retain and decide an issue which is technically moot where the issue is of substantial and continuing public interest. (Chantiles, supra, 37 Cal.App.4th at p. 921; accord, La Jolla Cove Motel & Hotel Apartments, Inc. v. Superior Court (2004) 121 Cal.App.4th 773, 781-782.) We do so here. The scope of a director’s inspection rights is one of public importance which we should decide, even if it is technically moot.

We reach a different conclusion, however, regarding Fowler’s claim to shareholder inspection rights under section 1600, subdivision (a). This issue was not resolved by the trial court and the additional facts before us are inadequate for us to determine whether subsequent events have rendered the issue moot. Accordingly, we shall remand this matter for the trial court to consider whether subsequent events have rendered this issue moot and, if not, to resolve any remaining disputes in the first instance.

II

Bancorp’s Request for Additional Briefing

Turning to the merits, we first address Bancorp’s argument that the trial court erred by allowing Fowler to provide additional evidence in his reply papers while denying Bancorp a fair opportunity to respond.

As described above, in reply to Bancorp’s opposition, Fowler submitted a supplemental declaration giving his reasons for demanding an inspection and explaining why he had not made similar demands in the past. Bancorp objected to the additional evidence and, in the alternative, requested additional time to file a sur-reply brief addressing Fowler’s new evidence. The court overruled Bancorp’s objections and denied its request to file a sur-reply brief.

We review the trial court’s ruling for an abuse of discretion (Alliant Ins. Services, Inc. v. Gaddy (2008) 159 Cal.App.4th 1292, 1299), and find no abuse here. As the trial court held, “Although Fowler is the petitioner in this proceeding, it was not his initial burden to provide reasons for the inspection.” Unlike director inspection rights in other states, “[t]he California statutory scheme does not impose a `proper purpose’ requirement. . . .” (Havlicek v. Coast-to-Coast Analytical Services, Inc. (1995) 39 Cal.App.4th 1844, 1851 (Havlicek); cf. Del. Code Ann. tit. 8, § 220.) Thus, Fowler was not required in his moving papers to articulate a proper purpose for the inspection reasonably related to his interests as a director. He merely needed to show that he was a director and that he made a demand for inspection, which was refused. (§§ 1602, 1603.)

When Fowler made that showing, the burden shifted to Bancorp to show why the inspection should be curtailed by “just and proper conditions.” (§ 1603; Havlicek, supra, 39 Cal.App.4th at p. 1856; Saline v. Superior Court (2002) 100 Cal.App.4th 909, 915 (Saline).) In attempting to meet that burden, Bancorp presented evidence to show that Fowler was seeking the documents for an improper purpose. The trial court correctly ruled that Fowler was entitled to respond with countervailing evidence in his reply.

Bancorp argues that because the court allowed Fowler to refute the evidence presented in the opposition, the court was obliged to give Bancorp the same opportunity. But Bancorp was given an opportunity to refute the additional evidence presented in the reply. On the morning of the hearing, Bancorp filed the Varela declaration to “refute many of the misstatements and omissions” in Fowler’s supplemental declaration. The court considered that declaration to the extent it responded to the factual assertions in the supplemental declaration. The record shows that Bancorp had a fair opportunity to respond. Bancorp has failed to demonstrate that the trial court abused its discretion in refusing to allow it additional time to file a sur-reply, much less that it was prejudiced by the refusal.

III

Fowler’s Right to Inspect Corporate Records

Bancorp next argues that the trial court erred in granting the petition to enforce Fowler’s right to inspect corporate books and records under section 1602. We disagree.

A. The scope of a director’s inspection rights

In reviewing the trial court’s judgment granting a petition for writ of mandate, we apply the substantial evidence test to the trial court’s factual findings. (Vasquez v. Happy Valley Union School Dist. (2008) 159 Cal.App.4th 969, 980.) Legal issues, such as statutory interpretation, are reviewed de novo. (Ibid.) The scope of a director’s right to inspect corporate documents is a question of law subject to de novo review. (Saline, supra, 100 Cal.App.4th at p. 913.)

In construing section 1602, as with any statute, our task is to ascertain the intent of the lawmakers so as to effectuate the purpose of the law. (Sierra Club v. Superior Court (2013) 57 Cal.4th 157, 165.) We begin “with the words of the statute because they generally provide the most reliable indicator of legislative intent.” (Hsu v. Abbara (1995) 9 Cal.4th 863, 871.) If the language contains no ambiguity, we generally presume the Legislature meant what it said, and the plain meaning controls. (Garcetti v. Superior Court (2000) 85 Cal.App.4th 1113, 1119.)

Section 1602, which governs the right of inspection, provides in relevant part: “Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation of which such person is a director and also of its subsidiary corporations, domestic or foreign.” (§ 1602.) By its plain terms, section 1602 establishes a broad right of inspection. (Havlicek, supra, 39 Cal.App.4th at p. 1852.) The Legislature’s choice of the word “absolute” suggests a right “having no restriction, exception, or qualification.” (Merriam-Webster Unabridged Dict. Online (2022) [as of June 10, 2022], archived at .) This “absolute” right reflects a legislative judgment that directors are better able to discharge their fiduciary duties to the corporation and its shareholders “if they have free access to information concerning the corporation.” (Havlicek, at p. 1852; Hartman v. Hollingsworth (1967) 255 Cal.App.2d 579, 581-582.)

Nevertheless, decisional authority establishes that a director’s right to inspect documents is subject to exceptions. (Havlicek, supra, 39 Cal.App.4th at p. 1855.) While the “absolute right” to inspect documents is the general rule in California, courts have held that the literal meaning of the words of the statute may be disregarded where necessary to avoid absurd results. (Havlicek, at p. 1856; see also Anderson Union High School Dist. v. Shasta Secondary Home School (2016) 4 Cal.App.5th 262, 279 [the language of a statute should not be given a literal meaning if doing so would result in absurd consequences].) Thus, a trial court may impose “just and proper conditions” upon a director’s inspection rights in appropriate cases. (§ 1603, subd. (a);^[3] Havlicek, at p. 1856; Saline, supra, 100 Cal.App.4th at p. 914.)

The full scope of exceptions to a director’s “absolute” inspection rights remains unsettled. But our colleagues in other appellate districts have identified certain circumstances in which inspection rights may be curtailed.

In Chantiles, supra, 37 Cal.App.4th 914, the Fourth Appellate District, Division Three, held that the “absolute” right of a homeowners association director to access records may be limited to preserve the constitutional rights of members to keep their voting decisions private. (Id. at pp. 918, 926.) In Chantiles, a director who believed that he had been shortchanged in the tabulation of proxy votes, filed a petition to inspect and copy all the ballots cast in the association’s annual election. (Id. at p. 919.) But the trial court refused to permit the director unfettered access to the ballots. Instead, the court established a procedure whereby the director’s attorney could inspect the ballots while preserving the secrecy of how each individual member voted. (Id. at pp. 920, 926.) The appellate court affirmed. It held that the trial court had properly balanced the competing interests and determined that the director’s statutory right to an unqualified inspection must yield to the members’ constitutional right of privacy. (Id. at pp. 925-926; but see conc. opn. of Crosby, J. at pp. 927-929 [concluding damages, rather than a rejection of inspection rights, is the appropriate remedy for misapplication of corporate records].)

In Havlicek, the Second Appellate District, Division Six, considered whether the trial court properly denied inspection of corporate books and records by two dissident directors who were opposed to a corporation’s pending merger. (Havlicek, supra, 39 Cal.App.4th at pp. 1848-1850.) The directors asserted an absolute right to inspect the records, but the corporation refused to permit access because it suspected the directors might use the documents to establish a competing business. (Id. at pp. 1849-1850.) The directors filed a lawsuit to enforce their inspection rights, which the trial court denied. (Id. at p. 1850.) The appellate court reversed and remanded. (Id. at pp. 1856-1857.) It concluded that the trial court erred in refusing to grant the directors, “at the very least, an `inspection with just and proper conditions.'” (Id. at p. 1848.)

For guidance on remand, the court explained that because the right of inspection arises out of a director’s fiduciary duty—a duty to act with honesty, loyalty, and good faith in the best interests of the corporation (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1037)—courts may limit inspection rights when a director intends to misuse those rights to harm the corporation. (Havlicek, supra, at pp. 1852, 1855-1856.) The court offered the following hypothetical to illustrate the point: “A disgruntled director unambiguously announces his or her intention to violate his or her fiduciary duties to the corporation and the shareholders by using inspection rights to learn trade secrets, gain access to confidential customer lists, and compete with the corporation. In this situation, does the Legislature want the judiciary to come to the aid of the disgruntled director, enforce the `absolute right’ to inspect and help the director commit a tort against the corporation? No.” (Id. at pp. 1855-1856.) Thus, the court concluded, when the evidence shows an unfettered inspection will result in a tort against the corporation, the trial court may “exercise its broad discretion under section 1603, subdivision (a) to fashion a protective order imposing just and proper conditions on the inspection.” (Id. at p. 1856.)

In Saline, supra, 100 Cal.App.4th 909, the Fourth Appellate District, Division Three, followed Havlicek in concluding that a court may place restrictions on a director’s access to corporate records when there is evidence the director intends to use the documents to commit a tort against the corporation. (Saline, at p. 914.) However, the court clarified that this principle should “only be applied in extreme circumstances where a preponderance of the evidence establishes the director’s clear intent to use the documents to commit an egregious tort—one that cannot be easily remedied by subsequent monetary damages—against the corporation.” (Id. at p. 915.)

The Saline court refused to limit the inspection rights of a director despite evidence that the director had a conflict of interest, breached fiduciary duties, breached a confidentiality agreement, and publicly defamed management, because there was no evidence to show the director intended to use the documents obtained to “disclose trade secrets, compete with or otherwise harm” the corporation.^[4] (Saline, supra, 100 Cal.App.4th at pp. 912, 914.) The court reasoned: “Only issues related to the prevention of a tort resulting from [the director’s] inspection of the documents—not the entirety of his conduct as a director—are relevant to the question of whether limiting [his] access to corporate documents was appropriate.” (Id. at p. 914.) Without evidence that the director intended to use the documents to commit a tort against the corporation, the court held it was improper to limit the director’s access. (Id. at pp. 914-915.)

In Tritek Telecom, Inc. v. Superior Court (2009) 169 Cal.App.4th 1385 (Tritek), a different division of the Fourth District (Division One) considered a related question: whether a director’s right to inspect corporate records should include attorney-client communications generated in defense of the director’s own suit for damages against the corporation. (Id. at p. 1387.) The court decided it should not. (Id. at pp. 1391-1392.) In that case, a disgruntled director sought to enforce his inspection rights after suing the corporation to vindicate his individual rights as a shareholder. (Id. at pp. 1387-1388.) The corporation did not dispute the director’s right to inspect corporate documents generally, but objected that the right of inspection should not include documents protected by the attorney-client privilege. (Id. at p. 1391.) The Court of Appeal agreed, concluding that a director’s inspection rights may be restricted when the director intends to misuse those rights to access privileged documents that were generated in defense of a suit for damages that the director filed against the corporation. (Id. at pp. 1391-1392.)

Here, in ruling on Fowler’s petition, the trial court followed Saline, supra, 100 Cal.App.4th 909, and concluded that a director’s right to inspect corporate records generally may be curtailed only in “extreme circumstances” in which the corporation establishes by a preponderance of the evidence the director’s intent to use the information to commit a tort against the corporation that cannot easily be remedied in a damages action. The trial court rejected Bancorp’s claim that the mere fact Fowler was involved in litigation with the corporation should defeat his inspection rights.

Bancorp argues that the trial court interpreted the scope of a director’s inspection rights too broadly. Bancorp argues that a court may deny access to corporate records whenever the director has a conflict of interest and there is a mere possibility the documents could be used to harm the corporation. We disagree.

Like the trial court, we conclude that exceptions to the general rule favoring unfettered access should only be applied in “extreme” cases where enforcing the “absolute” right of inspection would otherwise produce an absurd result. (Saline, supra, 100 Cal.App.4th at p. 915; Havlicek, supra, 39 Cal.App.4th at p. 1856.) We reach this conclusion for several reasons.

California has adopted a strong public policy favoring a broad right of access to assist directors in performing their duties in an intelligent and fully informed manner. (Saline, supra, 100 Cal.App.4th at p. 914; see also Chantiles, supra, 37 Cal.App.4th at p. 929 (conc. opn. of Crosby, J.).) The statutory scheme gives “`[e]very director . . . the absolute right . . . to inspect and copy all books, records and documents of every kind,’ “and imposes no “`proper purpose'” requirement. (Havlicek, supra, 39 Cal.App.4th at p. 1851; § 1602.) Because the denial of access to corporate records may operate to deny a director the ability meaningfully to participate in management, any exception to the policy of “absolute” access must be construed narrowly, limited to the most extreme cases where applying the literal meaning of the words would frustrate the manifest purpose of the law. (Havlicek, at pp. 1855-1856; see also Anderson Union High School Dist. v. Shasta Secondary Home School, supra, 4 Cal.App.5th at p. 279 [absurdity exception should be used only in extreme cases].)

Second, to construe the exception broadly would risk allowing the exception to swallow the rule. Differences of opinion invariably will arise among corporate directors. If a minority director can lose access to corporate records merely because the director is deemed hostile or adverse to management, the exception could remove the very protections that the “absolute right” of inspection was intended to supply. This invariably would impede inspections pursued for indisputably proper purposes, such as ascertaining the condition of corporate affairs or investigating possible mismanagement. (See, e.g., Henshaw v. American Cement Corp. (Del.Ch. 1969) 252 A.2d 125, 129.)

Third, applying the exception narrowly does not generally leave the corporation unprotected. If a director abuses a right of inspection to the detriment of the corporation, the corporation normally will have an adequate remedy in the form of an action against the director for breach of fiduciary duty. (Saline, supra, 100 Cal.App.4th at p. 916; Chantiles, supra, 37 Cal.App.4th at p. 929 (conc. opn. of Crosby, J.).)

We therefore agree with the Court of Appeal in Saline that the mere possibility that the information could be used to harm the corporation is not sufficient to defeat a director’s otherwise “absolute” inspection rights. (Saline, supra, 100 Cal.App.4th at p. 914.) While inspection rights may be curtailed when the corporation adduces evidence that a director intends to use those rights to violate his or her fiduciary duties or otherwise commit a tort against the corporation, we are not persuaded that a director’s right of inspection must be denied solely because the director has a conflict of interest or is embroiled in litigation with the corporation. Allowing a director to inspect records under such circumstances does not necessarily lead to an absurd result. To conclude otherwise would defeat the purpose of section 1602.

The cases on which Bancorp relies, Wolf, supra, 185 Cal.App.4th 903, and Tritek, supra, 169 Cal.App.4th 1385, are easily distinguishable. Wolf involved an inspection demand by a plaintiff who formerly served as a director of the defendant corporation. (Wolf, at pp. 906-907, 919.) Because the plaintiff was no longer a director, the appellate court held that the plaintiff did not have standing to enforce any inspection rights.^[5] (Id. at p. 919.) The language in Wolf stating that the plaintiff’s threat to sue the corporation “severely undermined” his inspection rights was unsupported dictum, which we find neither compelling nor persuasive. (Ibid.)

Bancorp similarly points to a statement in Tritek suggesting that a court may limit a director’s inspection rights whenever “the director’s loyalties are divided and documents obtained by a director in his or her capacity as a director could be used to advance the director’s personal interest in obtaining damages against the corporation.” (Tritek, supra, 169 Cal.App.4th at p. 1391.) But Bancorp’s argument takes this language out of context and ignores the holding of the case, which is that a director does not have the right to access privileged documents generated in defense of a suit for damages that the director filed against the corporation. (Id. at pp. 1391-1392.) In such a scenario, the director’s intent to misuse the information to harm the corporation is self-evident. Therefore, consistent with the holdings in Havlicek, supra, 39 Cal.App.4th at pages 1855-1856, and Saline, supra, 100 Cal.App.4th at pages 914-915, it was proper to limit the director’s inspection rights to exclude the privileged documents. There has been no similar showing here—that Fowler is seeking access to documents protected by the attorney-client privilege. Thus, Tritek‘s holding simply does not apply under the facts of this case.

Bancorp also argues the trial court interpreted Fowler’s inspection rights too broadly by requiring Bancorp to show Fowler intended to use the information to commit “irremediable” harm. It contends that a threatened “irremediable” tort against the corporation is merely an “example of when a director’s inspection may be curtailed,” and not a requirement to curtail a director’s inspection rights. Bancorp argues the court should have asked only whether Fowler intended to use the information to harm the corporation.

We find it unnecessary to reach this issue because the trial court expressly found that the “preponderance of the evidence in this action does not establish Fowler’s intent to commit a tort against [Bancorp,] much less one that is irremediable in damages.” Thus, even under a more lenient standard, Bancorp failed to carry its burden.

In sum, this is not a case in which the director’s right to inspect corporate records was alleged to conflict with constitutional or other statutory protections, as in Chantiles, supra, 37 Cal.App.4th 914. Nor is it a case involving access to privileged documents generated in defense of a suit for damages that the director filed against the corporation, as in Tritek, supra, 169 Cal.App.4th 1385. The only accusation in this case was that Fowler intended to breach his fiduciary duties in some fashion by using the records sought adversely to the corporation in the malpractice lawsuit. Under these circumstances, the trial court properly considered whether Bancorp showed by a preponderance of the evidence that a protective order was necessary to prevent Fowler from breaching his fiduciary duties or otherwise committing a tort against the corporation. (Saline, supra, 100 Cal.App.4th at p. 915; Havlicek, supra, 39 Cal.App.4th at p. 1856.)

B. Sufficiency of the evidence for the trial court’s ruling

We next consider the trial court’s finding that Bancorp failed to make a sufficient evidentiary showing to justify restrictions in this case. This presents a question of fact. (Saline, supra, 100 Cal.App.4th at p. 913; Hall v. Regents of University of California (1996) 43 Cal.App.4th 1580, 1586; Hartman v. Bandini Petroleum Co. (1930) 107 Cal.App. 659, 661.)

Bancorp argues that it submitted significant evidence demonstrating Fowler intended to harm the corporation by using the documents to undermine the claims against him in the malpractice litigation. The trial court disagreed, finding that Bancorp failed to carry its burden. Although the court acknowledged the divergence of interests between Fowler and Bancorp with respect to the malpractice lawsuit,^[6] the court was not persuaded that Fowler’s inspection was motivated by an improper purpose or that he intended to breach fiduciary duties or otherwise commit a tort against the corporation.

It is not our function on appeal to reexamine whether a preponderance of the evidence supports Bancorp’s position. We are bound by the fundamental appellate rule that the judgment of the lower court is presumed correct and that all intendments and presumptions will be indulged in favor of its correctness. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.) The appellant has the burden to overcome that presumption and show reversible error. (State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600, 610.) Where, as here, the issue on appeal turns on a failure of proof, the question for a reviewing court is whether the evidence compels a finding in favor of the appellant as a matter of law, i.e., whether the evidence was “`”of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.”‘” (Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 466; accord, Almanor Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th 761, 769.) Bancorp falls well short of that standard.

In opposing the petition, Bancorp relied primarily on evidence that Fowler (1) previously breached his fiduciary duties in connection with the BillFloat litigation; and (2) unsuccessfully sought to obtain the same corporate records as part of his discovery in the malpractice lawsuit. The first category of “evidence,” consisting largely of unsupported allegations, had little persuasive value on the question whether Fowler was likely to use the requested corporate records to breach his fiduciary duties or otherwise commit a tort against the corporation. (Saline, supra, 100 Cal.App.4th at p. 914 [only the director’s likely use of the information is relevant, not the entirety of his or her conduct as a director].)

As to the second category of evidence, Bancorp argues that it proved Fowler’s intent to harm the corporation by using the information to undermine Bancorp’s lawsuit. The trial court, however, found otherwise. It credited Fowler’s declarations that the purpose of the inspection was related to his continuing duties as a member of Bancorp’s board of directors.”[W]e must defer to the trial court’s determinations of credibility.” (Harris v. Stampolis (2016) 248 Cal.App.4th 484, 498.)

Moreover, even if we were to find that Fowler had an ulterior motive, Bancorp argued, and the trial court in the malpractice lawsuit agreed in its discovery ruling, that the documents Fowler sought were irrelevant to the litigation. Thus, regardless of Fowler’s motives, there is no support for Bancorp’s vague assertion that allowing Fowler access to the records would “severely undermine” its position in the lawsuit. (See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 357 [doctrine of judicial estoppel prohibits a party from asserting a position that is contrary to a position successfully asserted in the same or some earlier proceeding].)

On this record, we conclude the trial court did not err in finding Bancorp’s evidence insufficient to curtail Fowler’s “absolute” right to inspect corporate records.

DISPOSITION

Bancorp’s request for judicial notice is granted. Bancorp’s motion to dismiss is denied. The judgment is reversed as moot. This reversal does not imply that the judgment was erroneous on the merits, but is solely for the purpose of returning jurisdiction over the case to the trial court by vacating the otherwise final judgment solely on the ground of mootness. On remand, the trial court is directed to dismiss Fowler’s claim to a director’s right of inspection under section 1602 as moot. The trial court is directed to consider whether Fowler’s claim to a shareholder’s right of inspection under section 1600, subdivision (a) is also moot and, if not, to resolve any remaining disputes between the parties relating to that issue. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)

ROBIE, Acting P. J. and HULL, J., concurs.

[1] Undesignated statutory references are to the Corporations Code.

[2] The trial court sustained evidentiary objections to the Roche declaration. The rulings on those objections are not challenged in this appeal.

[3] Section 1603, subdivision (a) provides, in part: “Upon refusal of a lawful demand for inspection, the superior court of the proper county, may enforce the right of inspection with just and proper conditions or may, for good cause shown, appoint one or more competent inspectors or accountants to audit the books and records kept in this state and investigate the property, funds and affairs of any domestic corporation or any foreign corporation keeping records in this state . . . and to report thereon in such manner as the court may direct.”

[4] The trial court’s order refused the director access to documents protected by the attorney-client privilege and work product doctrine, and the director did not challenge that condition. (Saline, supra, 100 Cal.App.4th at pp. 912-913.)

[5] In the course of explaining the plaintiff’s lack of standing, the court in Wolf suggested that a director’s inspection rights may be denied if the director is not “disinterested.” (Wolf, supra, 185 Cal.App.4th at p. 919.) We find this language to be erroneous dictum to the extent it suggests a director’s inspection rights may be denied based merely on the existence of a conflict of interest or adversarial relationship between the director and the corporation.

[6] We grant Bancorp’s request to take judicial notice that on September 21, 2021, Fowler filed a lawsuit against Bancorp challenging the proposed SoFi merger/acquisition, but we take notice of it only for purposes of the mootness claim, and not for purposes of judging the sufficiency of the evidence. (California School Bds. Assn. v. State of California (2011) 192 Cal.App.4th 770, 803; Duronslet v. Kamps (2012) 203 Cal.App.4th 717, 737.)

Fowler v. Golden Pacific Bancorp

Summary by Pejman D. Kharrazian, Esq.:

Fowler, a corporate director (not of a common interest development), petitioned the court to compel an inspection of corporate books and records pursuant to the Corporations Code. The corporation opposed the petition arguing that because the director was involved in ongoing litigation with the corporation, the court should curtail the director’s inspection rights because the director could use the information obtained during inspection against the corporation in the ongoing litigation. The trial court granted the director’s petition and the corporation appealed.
The court of appeal, in upholding the trial court’s ruling, found that the mere possibility that information could be used adversely against the corporation is not by itself sufficient to defeat a director’s inspection rights. Rather, any exception to the general rule favoring access to corporate records by directors must only be limited to extreme cases, e.g., where enforcing an absolute right of inspection would produce an absurd result, such as when the evidence establishes the director’s clear intent to use the information to breach fiduciary duties or otherwise commit a tort against the corporation

TAKEAWAY: Consult with legal counsel before restricting a director’s access to corporate records. California has a strong public policy favoring a broad right of access to corporate records to assist directors in performing their duties in an intelligent and fully informed manner. The statutory scheme gives every director the right to inspect and copy all books, records and documents, but there are several California cases (see e.g., Chantiles v. Lake Forest II Master Homeowners Assn.; Tritek Telecom, Inc. v. Superior Court; and Havlicek v. Coast-to-Coast Analytical Services, Inc.) that limit that right in certain specific limited circumstances. Because the denial of access to corporate records may operate to deny a director the ability meaningfully to participate in corporate governance, any exception to the policy of “absolute” access must be construed narrowly.

***End Summary***

80 Cal.App.5th 205 (2022)

No. C092179.

Court of Appeals of California, Third District.

June 23, 2022.APPEAL from a judgment of the Superior Court of Sacramento County, Super. Ct. No. 34-2019-80003150-CU-WM-GDS, James P. Arguelles, Judge. Reversed with directions.

Law Office of Stephanie J. Finelli and Stephanie J. Finelli for Defendant and Appellant.

Tisdale & Nicholson and Michael D. Stein for Plaintiff and Respondent.

OPINION

KRAUSE, J.—

After we issued an oral argument waiver notice, Bancorp moved to dismiss the appeal as moot. Bancorp asserted that due to the recent acquisition of 211*211 Bancorp by Social Finance, Inc., Fowler is no longer a Bancorp board member, and therefore it is impossible for this court to grant effective relief. Fowler requested oral argument. We deferred ruling on the motion until after oral argument.

FACTUAL AND PROCEDURAL BACKGROUND

In July 2018, Bancorp filed a lawsuit in the Sacramento County Superior Court (Golden Pacific Bancorp, Inc. v. Kronick, Moskovich, Tiedemann & Girard (Super. Ct. Sacramento County, No. 34-2018-00236905)) against KMTG, an individual attorney at KMTG, and Fowler (the malpractice lawsuit). The lawsuit arose out of KMTG’s representation of Bancorp in prior litigation against a company called BillFloat, Inc. (the BillFloat litigation). Bancorp’s amended complaint alleges claims against KMTG and its attorney 212*212 for breach of contract, breach of professional duties, professional negligence, and breach of fiduciary duties in connection with the prosecution and eventual settlement of the BillFloat litigation. Among other things, the complaint alleges that KMTG and the attorney overbilled for services, negligently failed to evaluate and prepare the case for trial, and caused Bancorp to accept a grossly inadequate settlement amount.

1. A list of the names, addresses, e-mail addresses, and holdings of all Bancorp shareholders;

2. A breakdown of the expense and income balance sheet items labeled “Other” for Bancorp and its wholly owned subsidiary bank;

3. A breakdown of where on the 2017 and 2018 consolidated financial statements the BillFloat settlement payment was booked, and where KMTG’s legal fees for 2016, 2017, and 2018 were booked;

4. Any change in control/severance/golden parachute agreements for Bancorp-affiliated parties;

5. Any resolutions approving change in control agreements or an increase in director fees and/or bonuses for 2016, 2017, and 2018;

6. Any documents evidencing payment of the personal legal fees of Bancorp president and chief executive officer, Virginia Varela, in 2016, 2017, and 2018;

7. The loan file pertaining to the Axis Energy SBA loan; and

8. The bank’s accounting books and records, and meeting minutes for its board and committees from September 2017 through the date of the request.

213*213 Fowler asserted that, as a director, he had an “absolute right” to inspect the records under section 1602. Bancorp, however, refused to permit inspection, citing conflicts of interest and concerns that Fowler was seeking the records for an improper purpose, namely, to undermine Bancorp’s position in the malpractice lawsuit.

To support its claim that Fowler was requesting the documents for an improper purpose, Bancorp submitted a declaration from Bancorp board member David Roche.^[2] Roche declared, inter alia, that (1) Fowler is a party to ongoing litigation with Bancorp in which it is alleged Fowler breached his 214*214 fiduciary duties; (2) Fowler repeatedly stated his desire to have the litigation dismissed; (3) Bancorp’s board believes that allowing Fowler to inspect and copy the requested records would “severely undermine” its position in the litigation; (4) Fowler previously sought to compel discovery of the same records in the lawsuit, but his request was denied; (5) it was only after the adverse discovery ruling that Fowler filed the writ petition; and (6) Fowler never previously made a demand to inspect Bancorp’s corporate records.

After a hearing, the trial court granted the writ petition. In its ruling, the court agreed with Bancorp that Fowler’s statutory inspection rights are not “absolute.” However, the court ruled that a director’s inspection rights can be curtailed only in “`extreme circumstances'” in which the corporation establishes by a preponderance of the evidence the director’s intent to commit an 215*215 irremediable tort against the corporation. The court ruled that, notwithstanding the inherent conflict raised by the malpractice lawsuit, “[t]he preponderance of the evidence in this action does not establish Fowler’s intent to commit a tort against [Bancorp], much less one that is irremediable in damages.” The court thus enforced Fowler’s right to inspect the corporate books and records under section 1602.

Judgment was entered on March 17, 2020. Bancorp filed a timely notice of appeal.

DISCUSSION

I

Mootness

As a threshold issue, we consider whether the appeal is moot due to SoFi’s acquisition of Bancorp.

An appeal becomes moot when the occurrence of an event makes it impossible for the appellate court to grant any effective relief. (Newsom v. Superior Court (2021) 63 Cal.App.5th 1099, 1109 [278 Cal.Rptr.3d 397].) “`[A]n action which originally was based upon a justiciable controversy cannot be maintained on appeal if the questions raised therein have become moot by subsequent acts or events.'” (Id. at p. 1110.)

Fowler opposes Bancorp’s motion to dismiss. He argues the case is not moot for several reasons, including that he filed a “dissenter’s right” lawsuit challenging SoFi’s acquisition of Bancorp and seeking a determination of the fair market value of his shares. Further, even if the case has been rendered 216*216 technically moot, Fowler argues the appeal still should be decided because it concerns an issue of public importance that is likely to recur.

We agree with Bancorp that the issue of Fowler’s inspection rights as a director is now moot. It is well established that a director’s right to inspect corporate books and records ends upon his or her removal from office. (Chantiles v. Lake Forrest II Master Homeowners Assn. (1995) 37 Cal.App.4th 914, 920 [45 Cal.Rptr.2d 1] (Chantiles).) A former director has no right to an ongoing and enforceable right to inspect corporate records. (Wolf v. CDS Devco (2010) 185 Cal.App.4th 903, 919 [110 Cal.Rptr.3d 850] (Wolf).) Here, it is undisputed that, as a result of SoFi’s acquisition, Fowler is no longer a Bancorp director. Thus, Fowler can no longer assert rights as a director to inspect Bancorp’s books and records, rendering the issue moot. (Chantiles, supra, at p. 920; Wolf, supra, at p. 919.)

Nevertheless, we may exercise our discretion to retain and decide an issue which is technically moot where the issue is of substantial and continuing public interest. (Chantiles, supra, 37 Cal.App.4th at p. 921; accord, La Jolla Cove Motel & Hotel Apartments, Inc. v. Superior Court (2004) 121 Cal.App.4th 773, 781-782 [17 Cal.Rptr.3d 467].) We do so here. The scope of a director’s inspection rights is one of public importance which we should decide, even if it is technically moot.

II

Bancorp’s Request for Additional Briefing

217*217 We review the trial court’s ruling for an abuse of discretion (Alliant Ins. Services, Inc. v. Gaddy (2008) 159 Cal.App.4th 1292, 1299 [72 Cal.Rptr.3d 259]), and find no abuse here. As the trial court held, “Although Fowler is the petitioner in this proceeding, it was not his initial burden to provide reasons for the inspection.” Unlike director inspection rights in other states, “[t]he California statutory scheme does not impose a `proper purpose’ requirement….” (Havlicek v. Coast-to-Coast Analytical Services, Inc. (1995) 39 Cal.App.4th 1844, 1851 [46 Cal.Rptr.2d 696] (Havlicek); cf. Del. Code Ann., tit. 8, § 220.) Thus, Fowler was not required in his moving papers to articulate a proper purpose for the inspection reasonably related to his interests as a director. He merely needed to show that he was a director and that he made a demand for inspection, which was refused. (§§ 1602, 1603.)

When Fowler made that showing, the burden shifted to Bancorp to show why the inspection should be curtailed by “just and proper conditions.” (§ 1603; Havlicek, supra, 39 Cal.App.4th at p. 1856; see Saline v. Superior Court (2002) 100 Cal.App.4th 909, 915 [122 Cal.Rptr.2d 813] (Saline).) In attempting to meet that burden, Bancorp presented evidence to show that Fowler was seeking the documents for an improper purpose. The trial court correctly ruled that Fowler was entitled to respond with countervailing evidence in his reply.

III

Fowler’s Right To Inspect Corporate Records

Bancorp next argues that the trial court erred in granting the petition to enforce Fowler’s right to inspect corporate books and records under section 1602. We disagree.

218218 A. The scope of a director’s inspection rights*

In reviewing the trial court’s judgment granting a petition for writ of mandate, we apply the substantial evidence test to the trial court’s factual findings. (Vasquez v. Happy Valley Union School Dist. (2008) 159 Cal.App.4th 969, 980 [72 Cal.Rptr.3d 15].) Legal issues, such as statutory interpretation, are reviewed de novo. (Ibid.) The scope of a director’s right to inspect corporate documents is a question of law subject to de novo review. (Saline, supra, 100 Cal.App.4th at p. 913.)

In construing section 1602, as with any statute, our task is to ascertain the intent of the lawmakers so as to effectuate the purpose of the law. (Sierra Club v. Superior Court (2013) 57 Cal.4th 157, 165 [158 Cal.Rptr.3d 639, 302 P.3d 1026].) We begin “with the words of the statute, because they generally provide the most reliable indicator of legislative intent.” (Hsu v. Abbara (1995) 9 Cal.4th 863, 871 [39 Cal.Rptr.2d 824, 891 P.2d 804].) If the language contains no ambiguity, we generally presume the Legislature meant what it said, and the plain meaning controls. (Garcetti v. Superior Court (2000) 85 Cal.App.4th 1113, 1119 [102 Cal.Rptr.2d 703].)

Section 1602, which governs the right of inspection, provides in relevant part: “Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation of which such person is a director and also of its subsidiary corporations, domestic or foreign.” (§ 1602.) By its plain terms, section 1602 establishes a broad right of inspection. (Havlicek, supra, 39 Cal.App.4th at p. 1852.) The Legislature’s choice of the word “absolute” suggests a right “having no restriction, exception, or qualification.” (Merriam-Webster Unabridged Dict. Online (2022) [as of June 23, 2022], archived at .) This “absolute” right reflects a legislative judgment that directors are better able to discharge their fiduciary duties to the corporation and its shareholders “if they have free access to information concerning the corporation.” (Havlicek, at p. 1852; see Hartman v. Hollingsworth (1967) 255 Cal.App.2d 579, 581-582 [63 Cal.Rptr. 563].)

Nevertheless, decisional authority establishes that a director’s right to inspect documents is subject to exceptions. (Havlicek, supra, 39 Cal.App.4th at p. 1855.) While the “absolute right” to inspect documents is the general rule in California, courts have held that the literal meaning of the words of the statute may be disregarded where necessary to avoid absurd results. (Havlicek, at p. 1856; see also Anderson Union High School Dist. v. Shasta Secondary Home School (2016) 4 Cal.App.5th 262, 279 [208 Cal.Rptr.3d 564] 219*219 [the language of a statute should not be given a literal meaning if doing so would result in absurd consequences].) Thus, a trial court may impose “just and proper conditions” upon a director’s inspection rights in appropriate cases. (§ 1603, subd. (a);^[3] Havlicek, at p. 1856; see Saline, supra, 100 Cal.App.4th at p. 914.)

In Chantiles, supra, 37 Cal.App.4th 914, the Fourth Appellate District, Division Three, held that the “absolute” right of a homeowners association director to access records may be limited to preserve the constitutional rights of members to keep their voting decisions private. (Id. at pp. 918, 926.) In Chantiles, a director who believed that he had been shortchanged in the tabulation of proxy votes, filed a petition to inspect and copy all the ballots cast in the association’s annual election. (Id. at p. 919.) But the trial court refused to permit the director unfettered access to the ballots. Instead, the court established a procedure whereby the director’s attorney could inspect the ballots while preserving the secrecy of how each individual member voted. (Id. at pp. 920, 926.) The appellate court affirmed. It held that the trial court had properly balanced the competing interests and determined that the director’s statutory right to an unqualified inspection must yield to the members’ constitutional right of privacy. (Id. at pp. 925-926; but see conc. opn. of Crosby, J., at pp. 927-929 [concluding damages, rather than a rejection of inspection rights, is the appropriate remedy for misapplication of corporate records].)

In Havlicek, the Second Appellate District, Division Six, considered whether the trial court properly denied inspection of corporate books and records by two dissident directors who were opposed to a corporation’s pending merger. (Havlicek, supra, 39 Cal.App.4th at pp. 1848-1850.) The directors asserted an absolute right to inspect the records, but the corporation refused to permit access because it suspected the directors might use the documents to establish a competing business. (Id. at pp. 1849-1850.) The directors filed a lawsuit to enforce their inspection rights, which the trial court denied. (Id. at p. 1850.) The appellate court reversed and remanded. (Id. at 220*220 pp. 1856-1857.) It concluded that the trial court erred in refusing to grant the directors, “at the very least, an `inspection with just and proper conditions.'” (Id. at p. 1848.)

For guidance on remand, the court explained that because the right of inspection arises out of a director’s fiduciary duty—a duty to act with honesty, loyalty, and good faith in the best interests of the corporation (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1037 [100 Cal.Rptr.3d 875])—courts may limit inspection rights when a director intends to misuse those rights to harm the corporation. (Havlicek, supra, at pp. 1852, 1855-1856.) The court offered the following hypothetical to illustrate the point: “A disgruntled director unambiguously announces his or her intention to violate his or her fiduciary duties to the corporation and the shareholders by using inspection rights to learn trade secrets, gain access to confidential customer lists, and compete with the corporation. In this situation, does the Legislature want the judiciary to come to the aid of the disgruntled director, enforce the `absolute right’ to inspect and help the director commit a tort against the corporation? No.” (Id. at pp. 1855-1856.) Thus, the court concluded, when the evidence shows an unfettered inspection will result in a tort against the corporation, the trial court may “exercise its broad discretion under section 1603, subdivision (a) to fashion a protective order imposing just and proper conditions on the inspection.” (Id. at p. 1856.)

The Saline court refused to limit the inspection rights of a director despite evidence that the director had a conflict of interest, breached fiduciary duties, breached a confidentiality agreement, and publicly defamed management, because there was no evidence to show the director intended to use the documents obtained to “disclose trade secrets, compete with or otherwise harm” the corporation.^[4] (Saline, supra, 100 Cal.App.4th at pp. 912, 914.) The court reasoned: “Only the issues related to the prevention of a tort resulting from [the director’s] inspection of the documents—not the entirety of his 221*221 conduct as a director—are relevant to the question of whether limiting [his] access to corporate documents was appropriate.” (Id. at p. 914.) Without evidence that the director intended to use the documents to commit a tort against the corporation, the court held it was improper to limit the director’s access. (Id. at pp. 914-915.)

In Tritek Telecom, Inc. v. Superior Court (2009) 169 Cal.App.4th 1385 [87 Cal.Rptr.3d 455] (Tritek), a different division of the Fourth District (Division One) considered a related question: whether a director’s right to inspect corporate records should include attorney-client communications generated in defense of the director’s own suit for damages against the corporation. (Id. at p. 1387.) The court decided it should not. (Id. at pp. 1391-1392.) In that case, a disgruntled director sought to enforce his inspection rights after suing the corporation to vindicate his individual rights as a shareholder. (Id. at pp. 1387-1388.) The corporation did not dispute the director’s right to inspect corporate documents generally, but objected that the right of inspection should not include documents protected by the attorney-client privilege. (Id. at p. 1391.) The Court of Appeal agreed, concluding that a director’s inspection rights may be restricted when the director intends to misuse those rights to access privileged documents that were generated in defense of a suit for damages that the director filed against the corporation. (Id. at pp. 1391-1392.)

222*222 California has adopted a strong public policy favoring a broad right of access to assist directors in performing their duties in an intelligent and fully informed manner. (Saline, supra, 100 Cal.App.4th at p. 914; see also Chantiles, supra, 37 Cal.App.4th at p. 929 (conc. opn. of Crosby, J.).) The statutory scheme gives “`[e]very director … the absolute right … to inspect and copy all books, records and documents of every kind,'” and imposes no “`proper purpose'” requirement. (Havlicek, supra, 39 Cal.App.4th at p. 1851; see § 1602.) Because the denial of access to corporate records may operate to deny a director the ability meaningfully to participate in management, any exception to the policy of “absolute” access must be construed narrowly, limited to the most extreme cases where applying the literal meaning of the words would frustrate the manifest purpose of the law. (Havlicek, at pp. 1855-1856; see also Anderson Union High School Dist. v. Shasta Secondary Home School, supra, 4 Cal.App.5th at p. 279 [absurdity exception should be used only in extreme cases].)

223*223 The cases on which Bancorp relies, Wolf, supra, 185 Cal.App.4th 903, and Tritek, supra, 169 Cal.App.4th 1385, are easily distinguishable. Wolf involved an inspection demand by a plaintiff who formerly served as a director of the defendant corporation. (Wolf, at pp. 906-907, 919.) Because the plaintiff was no longer a director, the appellate court held that the plaintiff did not have standing to enforce any inspection rights.^[5] (Wolf, at p. 919.) The language in Wolf stating that the plaintiff’s threat to sue the corporation “severely undermined” his inspection rights was unsupported dictum, which we find neither compelling nor persuasive. (Ibid.)

Bancorp similarly points to a statement in Tritek suggesting that a court may limit a director’s inspection rights whenever “the director’s loyalties are divided and documents obtained by a director in his or her capacity as a director could be used to advance the director’s personal interest in obtaining damages against the corporation.” (Tritek, supra, 169 Cal.App.4th at p. 1391.) But Bancorp’s argument takes this language out of context and ignores the holding of the case, which is that a director does not have the right to access privileged documents generated in defense of a suit for damages that the director filed against the corporation. (Id. at pp. 1391-1392.) In such a scenario, the director’s intent to misuse the information to harm the corporation is self-evident. Therefore, consistent with the holdings in Havlicek, supra, 39 Cal.App.4th at pages 1855-1856, and Saline, supra, 100 Cal.App.4th at pages 914-915, it was proper to limit the director’s inspection rights to exclude the privileged documents. There has been no similar showing here—that Fowler is seeking access to documents protected by the attorney-client privilege. Thus, Tritek‘s holding simply does not apply under the facts of this case.

We find it unnecessary to reach this issue because the trial court expressly found that the “preponderance of the evidence in this action does not establish Fowler’s intent to commit a tort against [Bancorp,] much less one 224*224 that is irremediable in damages.” Thus, even under a more lenient standard, Bancorp failed to carry its burden.

B. Sufficiency of the evidence for the trial court’s ruling

We next consider the trial court’s finding that Bancorp failed to make a sufficient evidentiary showing to justify restrictions in this case. This presents a question of fact. (Saline, supra, 100 Cal.App.4th at p. 913; Hall v. Regents of University of California (1996) 43 Cal.App.4th 1580, 1586 [51 Cal.Rptr.2d 387]; Hartman v. Bandini Petroleum Co. (1930) 107 Cal.App. 659, 661 [290 P. 900].)

It is not our function on appeal to reexamine whether a preponderance of the evidence supports Bancorp’s position. We are bound by the fundamental appellate rule that the judgment of the lower court is presumed 225*225 correct and that all intendments and presumptions will be indulged in favor of its correctness. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133 [275 Cal.Rptr. 797, 800 P.2d 1227].) The appellant has the burden to overcome that presumption and show reversible error. (State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600, 610 [109 Cal.Rptr.2d 256].) Where, as here, the issue on appeal turns on a failure of proof, the question for a reviewing court is whether the evidence compels a finding in favor of the appellant as a matter of law, i.e., whether the evidence was “`”of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.”‘” (Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 466 [126 Cal.Rptr.3d 301]; accord, Almanor Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th 761, 769 [201 Cal.Rptr.3d 268].) Bancorp falls well short of that standard.

As to the second category of evidence, Bancorp argues that it proved Fowler’s intent to harm the corporation by using the information to undermine Bancorp’s lawsuit. The trial court, however, found otherwise. It credited Fowler’s declarations that the purpose of the inspection was related to his continuing duties as a member of Bancorp’s board of directors. “[W]e must defer to the trial court’s determinations of credibility.” (Harris v. Stampolis (2016) 248 Cal.App.4th 484, 498 [204 Cal.Rptr.3d 1].)

Moreover, even if we were to find that Fowler had an ulterior motive, Bancorp argued, and the trial court in the malpractice lawsuit agreed in its discovery ruling, that the documents Fowler sought were irrelevant to the litigation. Thus, regardless of Fowler’s motives, there is no support for Bancorp’s vague assertion that allowing Fowler access to the records would “severely undermine” its position in the lawsuit. (See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 357 [260 Cal.Rptr.3d 1] [doctrine of judicial estoppel prohibits a party from asserting a position that is contrary to a position successfully asserted in the same or some earlier proceeding].)

226*226 On this record, we conclude the trial court did not err in finding Bancorp’s evidence insufficient to curtail Fowler’s “absolute” right to inspect corporate records.

DISPOSITION

Robie, Acting P. J., and Hull, J., concurred.

[1] Undesignated statutory references are to the Corporations Code.

[2] The trial court sustained evidentiary objections to the Roche declaration. The rulings on those objections are not challenged in this appeal.

[3] Section 1603, subdivision (a) provides, in part: “Upon refusal of a lawful demand for inspection, the superior court of the proper county, may enforce the right of inspection with just and proper conditions or may, for good cause shown, appoint one or more competent inspectors or accountants to audit the books and records kept in this state and investigate the property, funds and affairs of any domestic corporation or any foreign corporation keeping records in this state … and to report thereon in such manner as the court may direct.”

[6] We grant Bancorp’s request to take judicial notice that on September 21, 2021, Fowler filed a lawsuit against Bancorp challenging the proposed SoFi merger/acquisition, but we take notice of it only for purposes of the mootness claim, and not for purposes of judging the sufficiency of the evidence. (California School Bds. Assn. v. State of California (2011) 192 Cal.App.4th 770, 803 [121 Cal.Rptr.3d 696]; Duronslet v. Kamps (2012) 203 Cal.App.4th 717, 737 [137 Cal.Rptr.3d 756].)

Orangecrest Country Cmty. Ass’n v. Burns

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Pejman D. Kharrazian, Esq.

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Homeowner Burns submitted an architectural request for various improvements to her property, one of which was the construction of six-foot high stucco walls in her front yard. The association’s architectural guidelines restrict owners from constructing walls or fences in their front yards. The association sent Burns a letter approving her proposed improvements with the following condition: “The stucco walls in the front yard have been denied.” Burns began constructing the walls anyway resulting in the association demanding that she immediately stop. Burns instead constructed non-stucco walls. When Burns failed to respond to the association’s mediation request, the association sued. At trial, Burns argued the “partial approval” letter denied her stucco walls, but did not deny her from building non-stucco walls. She also argued that the association allowed other owners to build walls in their front yards. The association argued that its intent to deny Burns’ proposed walls (stucco or not) is clear from its letter, but admitted that on occasion the association had allowed short walls no taller than three feet to be constructed in front yards. The trial court found in the association’s favor and issued a mandatory injunction ordering Burns to remove the walls. Burns appealed relying on the doctrine of equitable estoppel and arguing selective enforcement. The appellate court found Burn’s arguments unpersuasive. For equitable estoppel to exist, one party must be intentionally misled by another into doing something injurious to themselves that they would not have otherwise done. The appellate court found that the association made it abundantly clear in its letter that it had flatly denied Burns’ request to build the walls contemplated in her architectural request. As to Burns’ selective enforcement argument, the appellate court held that she failed to provide evidence that the association allowed other walls similar to hers to be built.

TAKEAWAY: Make sure your association’s architectural improvement approval or denial letters are abundantly clear and leave no room for other reasonable interpretations as to the association’s decision regarding those improvements. Additionally, if your association has allowed other violations of a particular restriction to stand, then it has effectively given up its right to enforce that same restriction against another owner for the same or similar violation.

***End Summary***

June 9, 2022, No. E074445) 2022 Cal. App. Unpub. LEXIS 3563; 2022 WL 2072063.*

No. E074445.

Court of Appeals of California, Fourth District, Division Two.

Filed June 9, 2022.

APPEAL from the Superior Court of Riverside County, Super. Ct. No. RIC1813722, Steven G. Cornelis, Judge. Affirmed.

Sandra Burns, in pro per.; Keiter Appellate Law and Mitchell Keiter for Defendant and Appellant.

Tinnelly Law Group and Sarah A. Kyriakedes, for Plaintiff 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

SLOUGH, J.

Defendant Sandra Burns sought approval to build a wall across her front yard, and when her homeowners association said no, she built it anyway. After multiple attempts to get her to stop construction (and later to mediate the issue) failed, the association sued Burns, seeking a permanent injunction requiring her to remove the wall. Following a two-day bench trial, the judge found Burns had willfully violated her community’s declaration of covenants, conditions, restrictions and reservations (CC&R’s) and issued the injunction.

On appeal, Burns asserts two grounds for reversal. She argues the trial judge erred by failing to find that: (1) the affirmative defense of equitable estoppel applied to justify her construction of the wall, and (2) the association acted unfairly and discriminatorily because they have allowed other homeowners to build walls in their front yards. We conclude these contentions lack merit and affirm.

I

FACTS

Burns owns a home in Orangecrest Country, a residential community managed by Orangecrest Country Community Association (the association). She purchased the home subject to the association’s governing documents, which include the community’s CC&R’s and Architectural Guidelines.

Under Article VII, section 7.18 of the CC&R’s, a homeowner may not alter the exterior appearance of their lot without prior approval from the association’s Architectural Committee (the committee). Among other criteria, before approving an alteration, the committee must find that it “will not be detrimental to the appearance of the surrounding area” and “will be in harmony with the surrounding structures.” (CC&R, Art. VIII, § 8.4.1.) Certain structures, however, are flatly prohibited. As relevant here, section 4.11 of the Architectural Guidelines restricts homeowners from installing any walls or fences in the front “setback,” which is the area from the property line located in the center of the street to the front of the home. In practical terms, the setback is the front yard.

On April 27, 2017, Burns submitted an application requesting approval for six modifications to her property—front yard landscaping, painting, a patio cover for the backyard, new rain gutters, and stucco walls in the side yard and front yard. On May 9, the association sent Burns a “partial approval” letter informing her that her plans submitted on April 27 “for installation of front yard landscape, rear yard patio cover, painting and rain gutters . . . have been approved by the Architectural Committee with the following conditions: The stucco walls in the front yard have been denied.” (Emphasis in original.)

On June 30, the association learned that contractors had begun construction on a wall in Burns’s front yard. That same day, the association reached out to Burns by mail, email, and telephone. Elmorabit sent Burns an email and left her a voice message informing her that she lacked approval for the wall she was building on her property and asking her to stop construction immediately. The association sent Burns a cease and desist letter saying the wall being built on her property had not been approved, pointing her to the approval requirement in Article VII, section 7.18 of the CC&R’s, and asking her to “cease work immediately.” The following day, Burns called Elmorabit and “made some remark about not having time for this.”

On July 2, Etienne Caroline, the president of the association’s board of directors, spoke with the construction workers at Burns’s property, told them to check to see if Burns had approval to build the wall, and left his telephone number for her to call him. Burns called Caroline later that day and hung up on him after a brief, contentious conversation.

About a week later, on July 10, the association gave Burns notice they would hold a disciplinary hearing on her noncompliance on August 10. Construction was completed on Burns’s wall sometime later that month.

On August 8, Burns submitted a new application for a wall in her front yard on which she wrote, “no stucco!! Per approval with conditions letter dated 5/9/2017.” On August 9, the association sent Burns a denial letter stating the committee had never approved her wall and demanding she remove it.

At the disciplinary hearing the following day, Burns told the association’s board of directors she had “nothing to say” to them. On August 15, the association sent her a Hearing Decision letter informing her that she had until September 1 to remove the unapproved wall from her front yard.

When Burns failed to remove the wall or respond to their attempts to mediate the dispute, the association filed this lawsuit. In the parties’ joint pretrial statement, Burns informed the court she would not be offering any affirmative defenses at trial. She stipulated that she had received the partial approval letter denying the stucco walls in the front yard and that she had instructed her contractors to build “a wall without stucco” across the front of her property sometime in June or July 2017. She also stipulated that the association had sent her a cease and desist letter and that the wall was still present on her property.

Riverside County Superior Court Judge Steven Counelis presided over the two-day bench trial. The association called four witnesses—Elmorabit, Caroline, Jeff Smith (the association’s architecture expert), and committee member Dennis Friedman. The first two witness described their interactions with Burns about her wall and the association’s attempts to resolve the issue. Smith explained the purpose of the setback rule was twofold—to maintain a consistent open and expansive design and to prevent interference with utility easements. He said Burns’s wall, which was seven feet tall at its highest point, clearly violated the setback rule. Not only was it located in the setback area (or front yard), but Burns had it installed only seven feet beyond her property line, which was immediately adjacent to the sidewalk and interfered with the public’s right-of-way. Smith explained that under the applicable city zoning ordinance, any wall located in the setback area cannot exceed three feet in height, except semitransparent parts of the wall can be as high as four feet tall. Friedman said that during his four years serving on the committee they had never approved a “full size” front yard wall. He said the committee would approve short retaining, landscaping, or decorative walls in the front yard, but nothing taller than three feet. The association also presented evidence that they had recently enforced the setback rule against another resident with a tall front wall similar to the one Burns erected, resulting in the wall’s removal.

Burns, who represented herself at trial as she does on appeal, cross-examined the association’s witnesses but called no witnesses of her own and did not testify on her own behalf. During her cross-examination of Friedman, Burns attempted to impeach his testimony that the committee had never approved a full-size front yard wall by showing him photographs of three other properties in the community that had walls in the front yard. The first photograph depicted a short retaining wall covered by landscaping. The second depicted a short wall on the side of the front yard that ran perpendicular to the side walk and separate that homeowner’s yard from their neighbor’s. And the third depicted an even shorter wall running across a portion of the front yard located several feet behind the sidewalk. Friedman said he wasn’t familiar with the second and third walls because he wasn’t on the committee when they were approved but said the first wall was a permissible retaining wall that didn’t violate the setback rule.

During closing statements, Burns argued she did in fact have approval to build the wall. She argued the phrase “[t]he stucco walls in the front yard are denied” in the May 9 partial approval letter constituted a “conditional approval” to build a wall, so long as it wasn’t made of stucco. She said, “You just don’t put the term conditional approval not relating to anything. So I don’t have a reading comprehension problem. I have a Ph.D. I think I can read, and I think I can articulate what I’m reading. . . . I spent $10,000 on that wall. I wouldn’t be sitting here [having] dedicated 28 months to this case if I truly believed I don’t have in my possession a conditional approval for the wall. That’s it, Your Honor.”

The judge rejected Burns’s claim of conditional approval, finding that even if she had initially (and unreasonably) read the May 9 letter as a conditional approval, the association disabused her of that interpretation when construction began. The judge found Burns “was put on notice, that there was no approval . . . [and] willfully violated the CC&R’s [and] chose to proceed with construction of the wall in opposition to communications from the homeowners association.” He found Burns “led herself to believe that she may establish her own loophole and proceed with construction.”

The judge entered judgment in the association’s favor and issued a mandatory injunction ordering Burns to remove the wall and to submit an application to restore the landscaping that had been removed to construct the wall. Burns filed this appeal.

II

ANALYSIS

A. Equitable Estoppel

For the first time on appeal, Burns argues that the doctrine of equitable estoppel justifies her construction of the wall. Based on principles of fairness, we do not consider factual theories not raised during trial. (Ghazarian v. Magellan Health, Inc. (2020) 53 Cal.App.5th 171, 191; see also Mattco Forge, Inc. v. Arthur Young & Co. (1997) 52 Cal.App.4th 820, 847 [permitting a party to “`adopt a new and different theory on appeal . . . would not only be unfair to the trial court, but manifestly unjust to the opposing litigant'”].) But even if we were to consider this newly raised defense, we would conclude it doesn’t apply.

“`The doctrine of equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the existence of a state of facts if he intentionally led another to believe a particular circumstance to be true and to rely upon such belief to his detriment. The elements of the doctrine are that (1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel has a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.'” (City of Goleta v. Superior Court (2006) 40 Cal.4th 270, 279.)

The crux of estoppel is that one party has intentionally misled another to do something injurious to themselves that they otherwise would not have done. (Brown v. Chiang (2011) 198 Cal.App.4th 1203, 1227.) But “simple reliance on a false statement or conduct is not enough.” (Ibid.) To invoke the doctrine of equitable estoppel, “the reliance must be reasonable.” (Ibid.)

According to Burns, the association intentionally misled her to believe she had been given conditional approval for the wall by stating in the May 9 letter that “[t]he stucco walls in the front yard have been denied.” She claims she believed she could install the wall on the condition she not use stucco. The problem with this argument is that Burns’s claimed reliance was not reasonable. To begin with, there is no basis for her interpretation of the May 9 letter. The association couldn’t have been more clear. The letter was entitled a “partial approval” is because everything in Burns’s application except the wall had been approved; nothing about the direct assertion “[t]he stucco walls in the front yard have been denied” suggests a condition or the opportunity for negotiation. But even more importantly, even if there were two ways to interpret the May 9 letter, the association made it abundantly clear that it had flatly denied the walls on June 30, when they contacted Burns through multiple media to ask her to stop construction and reiterate that she did not have approval for the wall. Thus, if Burns had raised an equitable estoppel defense at trial, the defense would have failed.

B. Evidence of Other Walls

Next, Burns claims she presented evidence the association acted unfairly and unreasonably by allowing other homeowners within the community to construct walls in their front yards, and she argues the judge should have afforded that evidence more weight. We conclude the judge properly afforded little significance to the existence of the other walls because they bore no similarity to Burns’s wall.

When a homeowners association seeks to enforce its CC&R’s, the association bears the burden of demonstrating “that it has followed its own standards and procedures prior to pursuing such a remedy, that those procedures were fair and reasonable and that its substantive decision was made in good faith, and is reasonable, not arbitrary or capricious.” (Pacific Hills Homeowners Assn. v. Prun (2008) 160 Cal.App.4th 1557, 1565-1566.) The homeowner, however, bears the burden of proving the affirmative defense of waiver—that is, that the association has allowed so many violations of a particular restriction to stand that it has effectively given up its right to enforce the rule. (E.g., Id. at p. 1567 [homeowner bears the burden of producing “evidence of another homeowner’s violation” of the CC&R’s to “support their waiver argument”].)

Here, the association demonstrated they followed their own standards and procedures, but Burns failed to provide evidence that the association had allowed another wall like hers to stand. According to the testimony of Elmorabit and Friedman, the committee reviewed Burns’s application under the rules and criteria contained in the CC&R’s and Architectural Guidelines and denied her wall proposal based on the setback rule in section 4.11 of the Architectural Guidelines. They communicated this decision in their May 9 letter to Burns; sent letters, emails, and made phone calls demanding that Burns comply with the decision once they found out she was moving forward with construction; held a disciplinary hearing and informed her of the outcome; invited her to participate in alternative dispute resolution; and—when none of those responses worked—finally filed suit. They also presented evidence of a similar wall they successfully had removed for violating the same setback rule. This evidence supports a finding that the association followed their ordinary procedures in reviewing and partially denying Burns’s application and in attempting to enforce their decision.

Burns, on the other hand, did not present any evidence the association had allowed other homeowners to build similar nonconforming walls. As we’ve noted, none of the three walls Burns relies on are higher than three feet, and none abut (and run parallel to) the sidewalk. Because of these differences, the judge’s determination that he was “not persuaded by that argument at all” is entirely reasonable. We are unpersuaded by Burns’s claim the judge committed legal error by ignoring the evidence of the other walls she presented during trial. Rather, our review of the judge’s ruling satisfies us that he considered the evidence Burns presented but simply found it insufficient to prove the other walls were in any way similar to hers or even in violation of the setback rule. It was Burns’s burden (not the association’s) to demonstrate the association had let residents erect walls like hers in the community, and she failed to carry that burden.

We conclude Burns’s claims of error fail and uphold the order granting the injunction.

III

DISPOSITION

We affirm the judgment. Respondent shall recover their costs on appeal.

RAMIREZ, P. J. and FIELDS, J., concurs.

Summary by Mary M. Howell Esq.,CCAL, & Pejman D. Kharrazian, Esq.

LAKE LINDERO HOMEOWNERS ASSOCIATION, INC., et al., Plaintiffs and Respondents, v. CHRISTOPHER T. BARONE, Defendant and Appellant.

OPINION

FACTS AND PROCEDURAL HISTORY

1. The Recall and Full Board Election

2. The Complaint

3. The Statement of Decision

DISCUSSION

1. The Appeal Is Not Moot: Material Questions Remain Regarding the Construction of the Bylaws and Statutes Governing the Vote Required To Remove the Association’s Board of Directors

2. The Trial Court Correctly Determined the Former Board Was Validly Recalled Under the Association’s Bylaws and Statutory Law

3. Section 7616 Authorized the Order Validating the December 2019 Recall Election

DISPOSITION

VICTOR VALLEY UNION HIGH SCHOOL DISTRICT, Petitioner, v. THE SUPERIOR COURT OF SAN BERNARDINO COUNTY, Respondent; JOHN DOE, Real Party in Interest.

CERTIFIED FOR PUBLICATION

OPINION

I. FACTS AND PROCEDURAL BACKGROUND

II. DISCUSSION

A. Standard of Review.

1. The plain language of section 2023.030(f) tethers the application of the safe-harbor provision to the loss of evidence before the party to be sanctioned had a duty to preserve it.

2. The relevant legislative history demonstrates the safe-harbor provision of section 2023.030(f) was not intended to relieve a party of its duty to preserve evidence when future litigation is reasonably anticipated.

3. Under persuasive federal caselaw about the spoliation of evidence, a duty to preserve evidence arises when the party to be sanctioned was objectively aware that future litigation was reasonably foreseeable, meaning the litigation was probable or likely to arise from an incident.

4. A breach of the district’s statutory duty to preserve evidence, assuming such a breach occurred, does not support the trial court’s sanctions order.

C. The Trial Court Appears To Have Applied the Correct Legal Standard of Reasonable Foreseeability, but the Record Does Not Support its Ruling That the District Was Under a Duty To Preserve Evidence When the Video Was Erased.

D. If the Trial Court Once More Concludes the District Should Be Sanctioned for the Spoliation of Evidence, the Court Must Consider Whether Lesser Sanctions Are Appropriate.

III. DISPOSITION

I

II

III

IV

V

Summary by Pejman D. Kharrazian, Esq.:

1046*1046 OPINION

BACKGROUND

The General Setting

The Lawsuit Here

1048*1048 GTCA Amends the Rules and Moves for Summary Judgment

The Motions for Attorney Fees

DISCUSSION: Dr. Artus’s Appeal

The Standard of Review

1052*1052 Dr. Artus Has Not Demonstrated an Abuse of Discretion

1055*1055 Dr. Artus Has Not Demonstrated the Right to Attorney Fees Under Code of Civil Procedure Section 1021.5

DISCUSSION: GTCA’s Appeal

GTCA Has Not Shown an Abuse of Discretion

DISPOSITION

Leonard SPORN, et al., Plaintiffs, v. OCEAN COLONY CONDOMINIUM ASSOCIATION, et al., Defendants.

OPINION

I.

II.

III.

A.

B.

C.

IV.

V.

VI.

CORONADO CAYS HOMEOWNERS ASSOCIATION, Plaintiff and Respondent, v. CITY OF CORONADO, Defendant and Appellant.

605*605 OPINION

FACTUAL AND PROCEDURAL HISTORY

DISCUSSION

I

Propriety of Declaratory Relief

II

Merits of Ruling

A

B

III

Judgment Language

612*612 DISPOSITION

PV LITTLE ITALY, LLC, Cross-complainant and Appellant, v. METROWORK CONDOMINIUM ASSOCIATION et al., Cross-defendants and Respondents.

210 Cal.App.4th 132 (2012) 148 Cal.Rptr.3d 168

Summary by Pejman D. Kharrazian, Esq.:

828*828 OPINION

I

FACTUAL AND PROCEDURAL BACKGROUND

II

DISCUSSION

1. Standard of Review

2. The Privette Doctrine and Its Exceptions

3. The Privette Presumption Applies

835*835 4. There Is No Triable Issue of Fact as to Whether an Exception Applies

LAKE LINDERO HOMEOWNERS ASSOCIATION, INC., et al., Plaintiffs and Respondents,
v.
CHRISTOPHER T. BARONE, Defendant and Appellant.

VICTOR VALLEY UNION HIGH SCHOOL DISTRICT, Petitioner,
v.
THE SUPERIOR COURT OF SAN BERNARDINO COUNTY, Respondent;
JOHN DOE, Real Party in Interest.

I.
FACTS AND PROCEDURAL BACKGROUND

II.
DISCUSSION

III.
DISPOSITION

10481048 GTCA Amends the Rules and Moves for Summary Judgment*

10521052 Dr. Artus Has Not Demonstrated an Abuse of Discretion*

10551055 Dr. Artus Has Not Demonstrated the Right to Attorney Fees Under Code of Civil Procedure Section 1021.5*

Leonard SPORN, et al., Plaintiffs,
v.
OCEAN COLONY CONDOMINIUM ASSOCIATION, et al., Defendants.

CORONADO CAYS HOMEOWNERS ASSOCIATION, Plaintiff and Respondent,
v.
CITY OF CORONADO, Defendant and Appellant.

PV LITTLE ITALY, LLC, Cross-complainant and Appellant,
v.
METROWORK CONDOMINIUM ASSOCIATION et al., Cross-defendants and Respondents.

210 Cal.App.4th 132 (2012)
148 Cal.Rptr.3d 168

835835 4. There Is No Triable Issue of Fact as to Whether an Exception Applies*

218218 A. The scope of a director’s inspection rights*